<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 4, 1997
REGISTRATION NO. 333-37395
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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TRANSTECHNOLOGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
95-4062211
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
150 ALLEN ROAD
LIBERTY CORNER, NEW JERSEY 07938
(908) 903-1600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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GERALD C. HARVEY, ESQ.
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
TRANSTECHNOLOGY CORPORATION
150 ALLEN ROAD
LIBERTY CORNER, NEW JERSEY 07938
(908) 903-1600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------
COPIES TO:
<TABLE>
<S> <C>
F. RONALD O'KEEFE, ESQ. GARY T. JOHNSON, ESQ.
HAHN LOESER & PARKS LLP JONES, DAY, REAVIS & POGUE
3300 BP AMERICA BUILDING 77 WEST WACKER
200 PUBLIC SQUARE CHICAGO, ILLINOIS 60601-1692
CLEVELAND, OHIO 44114-2301 (312) 782-3939
(216) 621-0150
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
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If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") check the following box. [ ]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11 (a)(1)
of this form, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
[ ] ____________________ .
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________________ .
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________________ .
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
============================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF SHARES TO TO BE OFFERING PRICE AGGREGATE AMOUNT OF
BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 1,265,000 $26.8125 $33,917,812.50 $10,278.13(3)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 165,000 shares of Common Stock the Underwriters have the option to
purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee and
calculated in accordance with Rule 457(c) of the Securities Act, using the
average of the high and low sales prices for the Common Stock as reported on
the New York Stock Exchange on OCTOBER 3, 1997.
(3) A registration fee of $10,278.13 was paid by the Registrant on October 8,
1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 4, 1997
PROSPECTUS
1,100,000 SHARES
TRANSTECHNOLOGY CORPORATION LOGO
COMMON STOCK
Of the 1,100,000 shares of common stock ("Common Stock") offered hereby,
1,000,000 shares are being sold by TransTechnology Corporation (the "Company")
and 100,000 shares are being sold by certain stockholders of the Company (the
"Selling Stockholders"). The Company will not receive any of the proceeds from
the sale of shares by the Selling Stockholders. See "Principal and Selling
Stockholders."
The Common Stock is traded on the New York Stock Exchange under the symbol
"TT." On November 3, 1997, the closing sale price of the Common Stock on the New
York Stock Exchange was $27.75 per share. See "Price Range of Common Stock and
Dividend Policy."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2) PROCEEDS TO SELLING
STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share $ $ $ $
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Total (3) $ $ $ $
============================================================================================
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities arising
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $500,000.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 165,000 shares of Common Stock at the Price to Public
less the Underwriting Discount solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discount, Proceeds to Company and Proceeds to Selling Stockholders will be
$ , $ , $ and $ , respectively. See
"Underwriting."
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The shares of Common Stock are offered severally by the Underwriters
specified herein, subject to receipt and acceptance by them and subject to the
right to reject any order, in whole or in part. It is expected that delivery of
the shares of Common Stock will be made against payment therefor in Chicago,
Illinois on or about November , 1997.
ABN AMRO CHICAGO CORPORATION EVEREN SECURITIES, INC.
November , 1997
<PAGE> 3
[Inside front cover -- photos to be supplied]
[6 Photos displaying Company's Products]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING TRANSACTIONS
AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and consolidated financial
statements, including the related notes thereto, appearing elsewhere and
incorporated by reference in this Prospectus. The Company's fiscal year ends
March 31; the fiscal years ended March 31, 1995, 1996, 1997 and 1998 are
referred to herein as "fiscal 1995," "fiscal 1996," "fiscal 1997" and "fiscal
1998," respectively. Unless otherwise indicated, all information in this
Prospectus assumes that the over-allotment option granted to the Underwriters
will not be exercised. See "Underwriting." All references in this Prospectus to
the "Company" include its consolidated subsidiaries unless the context otherwise
indicates.
THE COMPANY
The Company is a leading worldwide designer and manufacturer of engineered
specialty fastener products for niche applications serving a wide range of
industrial markets, including automotive and truck, off-highway heavy machinery,
machine tools and consumer durables. The Company targets fastener applications
that require substantial design and engineering resources. Specialty fastener
products include retaining rings, gear-driven band fasteners, assembly fasteners
and custom cold-formed parts. In addition, through its Breeze-Eastern division,
the Company operates the world's largest manufacturer of performance-critical
rescue hoists and cargo hooks used primarily for helicopter rescue and transport
applications.
In fiscal 1997, the Company's specialty fastener segment accounted for
approximately 81% of its net sales. Over five years ago, the Company's current
management identified the engineered specialty fastener market as a core
business and began repositioning the Company to achieve significant growth in
this sector. From fiscal 1993 through fiscal 1997, the Company committed its
management and financial resources to successfully acquire and integrate five
specialty fastener companies while it divested various unrelated businesses. As
a result of these acquisitions and internal growth, net sales and operating
income for the specialty fastener segment have grown at a compound annual growth
rate of 49% and 44%, respectively, from fiscal 1993 through fiscal 1997.
Significant investments in manufacturing efficiency, product development,
systems and management have better positioned the Company to take advantage of
future growth opportunities.
The Company believes that it is the world's largest manufacturer of
retaining rings, with operations in the United States ("U.S."), Germany, the
United Kingdom ("U.K.") and Brazil. Retaining rings are produced for both the
U.S. and international transportation equipment and industrial markets under
established trade names such as Seeger(R), Anderton(TM) and Industrial Retaining
Ring(TM). Retaining rings are typically engineered to a customer's exacting
specifications or industry-wide standards, and are used primarily in
transmissions and drive train and braking systems on automobiles, trucks and
off-highway equipment. The Company's retaining rings are also used in industrial
equipment, computers, photographic equipment, marine equipment and other
applications where movement on a shaft must be restricted.
The Company believes that its Breeze Industrial Products division ("Breeze
Industrial") has one of the broadest lines of gear-driven band fasteners in the
world. Under the trade name Breeze(R), the Company markets fastener products for
diesel engine, heavy truck, marine and off-highway equipment applications
throughout the world. Breeze Industrial is a certified supplier to Caterpillar
Inc., Navistar International Corporation and other heavy equipment
manufacturers. Breeze Industrial also markets fasteners to retail outlets for
use in repair, maintenance and overhaul applications under the trade names
Aero-Seal(R), Euro-Seal(R) and Power-Seal(R).
The Company believes that its Palnut division ("Palnut") is one of the
leading U.S. manufacturers of assembly fasteners. Palnut supplies engineered
custom fastening devices, including lock nuts, push-nuts, u-nuts and a variety
of single and multi-threaded stainless and high-carbon steel fasteners,
primarily to the automotive industry. In addition, assembly fasteners are also
used in a broad range of other applications such as in appliances, toys,
electronics, lighting, mining and construction equipment.
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<PAGE> 5
TCR Corporation ("TCR"), which the Company acquired on April 17, 1997,
designs and manufactures sophisticated externally threaded fastening devices and
custom industrial components, utilizing its expertise in cold forming, machining
technologies and friction welding. TCR products are used by industrial customers
worldwide, primarily in automotive, hydraulic and recreational applications.
The Company's Breeze-Eastern division ("Breeze-Eastern") is the world's
leading designer and manufacturer of sophisticated helicopter rescue hoists,
cargo winches and cargo hooks. These complex engineered systems add
significantly to the versatility of an aircraft for a relatively small cost and
are used worldwide by military and civilian agencies to complete rescue
operations and mission profiles as well as transport cargo. Many of the leading
aerospace and defense prime contractors, including Agusta SpA, Bell Helicopter
Textron, Boeing Co., Lockheed Martin Corp., McDonnell Douglas Corp., Raytheon
Company and Sikorsky Aircraft Corporation, specify the Company's systems as
standard equipment on their platforms. Breeze-Eastern also manufactures
fixed-wing aircraft cargo winches, weapons handling systems for ground defense
platforms, tie-down equipment and tow hook assemblies utilized by helicopters
employed in U.S. Navy minesweeping operations.
The Company's objectives are to become a premier manufacturer of specialty
fastener products and other industrial components used by other manufacturers in
the production of their finished goods and to sustain long-term profitable
growth. In order to accomplish these objectives, the Company is implementing the
following strategies: (i) focus on niche markets which demand proprietary design
and engineering, (ii) increase market share in each of its product lines, (iii)
develop new proprietary products meeting customer needs, (iv) integrate
marketing capabilities to capitalize on cross-marketing opportunities, (v)
strive to constantly improve the efficiency and productivity of its operations
and (vi) pursue strategic acquisitions to complement existing products,
distribution and production capabilities.
The Company is incorporated in Delaware. The Company's executive offices
are located at 150 Allen Road, Liberty Corner, New Jersey 07938 and its
telephone number is (908) 903-1600.
THE OFFERING
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Common Stock offered by the Company............................... 1,000,000 shares
Common Stock offered by the Selling Stockholders.................. 100,000 shares(1)
Common Stock to be outstanding after this offering................ 6,189,759 shares(2)
Use of proceeds................................................... To repay bank indebtedness.
New York Stock Exchange symbol.................................... TT
</TABLE>
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(1) Includes 90,000 shares to be issued upon the exercise of options by the
Selling Stockholders at the time of the Offering.
(2) Excludes, as of October 26, 1997, 380,498 shares issuable upon exercise of
outstanding director and employee stock options, of which 200,497 options
for shares were immediately exercisable and includes the 90,000 shares to be
issued upon the exercise of options by the Selling Stockholders at the time
of the Offering.
4
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED MARCH 31, ENDED
----------------------------------------------------------------- -------------------
1997 JUNE 30, JUNE 29,
1993(1) 1994(1) 1995 1996 1997 PRO FORMA(2) 1996 1997
------- ------- -------- -------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales................. $63,999 $81,873 $101,122 $158,024 $178,684 $202,026 $ 44,640 $ 49,923
Operating income.......... 4,160 9,013 12,103 18,786 20,895 25,038 5,140 5,777
Income from continuing
operations.............. 3,323 5,800 7,385 8,508 9,722 10,071 2,097 2,367
Net income................ 5,133 6,884 2,533 7,374 8,788 9,137 1,828 2,265
Earnings per common share:
Income from continuing
operations............ $ 0.65 $ 1.13 $ 1.45 $ 1.67 $ 1.92 $ 1.99 $ 0.41 $ 0.46
Earnings per common
share................. $ 1.01 $ 1.34 $ 0.50 $ 1.45 $ 1.74 $ 1.80 $ 0.36 $ 0.44
Weighted average number of
common shares and common
share equivalents
outstanding............. 5,095 5,143 5,109 5,093 5,064 5,064 5,104 5,186
Dividends per common
share................... $ 1.56 $ 0.24 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.07 $ 0.07
Supplemental earnings per
common share(3):
Income from continuing
operations............ $ 1.84 $ 1.90 $ 0.40 $ 0.44
Earnings per common
share................. $ 1.68 $ 1.74 $ 0.35 $ 0.42
Supplemental shares used
in computing
supplemental earnings
per common share........ 5,741 5,741 5,781 5,863
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, JUNE 29, 1997
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1997
1997 PRO FORMA(2) ACTUAL AS ADJUSTED(4)
-------- ------------ -------- ----------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital....................................... $ 59,107 $ 58,609 $ 59,464 $ 60,592
Total assets.......................................... 199,136 241,064 234,677 235,805
Total debt............................................ 73,423 107,579 105,382 79,797
Stockholders' equity.................................. 77,444 77,444 79,140 105,853
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED MARCH 31, ENDED
----------------------------------------------------------------- -------------------
1997 JUNE 30, JUNE 29,
1993(1) 1994(1) 1995 1996 1997 PRO FORMA(2) 1996 1997
------- ------- -------- -------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(5)................. $ 7,529 $13,518 $ 17,452 $ 24,813 $ 28,301 $ 32,892 $ 7,060 $ 7,929
Depreciation and
amortization............ 3,369 4,505 5,349 6,027 7,406 7,854 1,920 2,152
Capital expenditures...... 5,514 4,973 5,033 6,471 5,477 5,974 1,307 1,748
</TABLE>
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(1) Certain amounts have been reclassified to conform to 1997 presentation.
(2) Pro forma data gives effect to the April 17, 1997, acquisition of TCR as if
it had occurred on April 1, 1996.
(3) Supplemental earnings per share data reflect the historical and pro forma
results for the year ended March 31, 1997, and the three months ended June
29, 1997 and June 30, 1996, adjusted to reflect (i) the sale by the Company
of 1,000,000 shares of Common Stock offered hereby at an assumed offering
price of $27.75 per share and (ii) the application of approximately $17.3
million of the anticipated net proceeds to the reduction of certain bank
term indebtedness of the Company as if such debt reduction occurred on April
1, 1996. See "Use of Proceeds."
(4) As adjusted to reflect (i) the sale by the Company of 1,000,000 shares of
Common Stock offered hereby at an assumed offering price of $27.75 per
share, (ii) the proceeds from the 90,000 shares to be issued upon the
exercise of options by the Selling Stockholders at the time of the Offering
and (iii) the application of approximately $25.6 million of the anticipated
net proceeds from the sale of shares by the Company to the reduction of
certain bank indebtedness of the Company. See "Use of Proceeds."
(5) EBITDA is defined as earnings before interest, income taxes, depreciation
and amortization and is not a substitute for net income or cash flow as
determined in accordance with generally accepted accounting principles.
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<PAGE> 7
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in this Prospectus or incorporated herein by
reference, such as those concerning the Company's business strategy and other
statements regarding matters that are not historical facts, are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"). Because such forward-looking statements include
risks and uncertainties, actual results may differ materially from those
expressed in or implied by such forward-looking statements. Factors that could
cause actual results to differ materially include, but are not limited to, those
discussed below and those set forth herein under the captions "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," as well as matters contained elsewhere in this Prospectus and in the
documents incorporated by reference herein. The Company undertakes no obligation
to release publicly the results of any revisions to such forward-looking
statements that may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES CERTAIN RISKS.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE RISK FACTORS SET FORTH
BELOW, AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS OR
INCORPORATED HEREIN BY REFERENCE, PRIOR TO MAKING ANY INVESTMENT IN THE COMMON
STOCK.
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
One of the Company's strategies is to expand its operations through
acquisitions which may be integrated into or complement existing businesses. In
considering candidates for acquisition, after first considering the strategic
fit of the target's products or manufacturing processes with those of the
Company's existing operations, the Company expects such a target to add to
earnings and cash flow, possess a strong management team, present opportunities
for profitability improvement through productivity enhancements, expand channels
of distribution and offer cross-marketing opportunities. There can be no
assurance that the Company will find attractive acquisition candidates. If the
Company is unable to make acquisitions, the Company's ability to grow its
business could be adversely affected. See "Business -- Acquisition History."
In addition, acquisitions involve a number of risks that could adversely
affect the Company's business, financial condition, results of operations and
cash flow including the diversion of management's attention, the assimilation of
the operations and personnel of the acquired companies and the potential loss of
key employees. The inability of the Company to successfully integrate acquired
businesses into its existing business could have a material adverse effect on
the Company's business, financial condition, results of operations and cash
flow.
MANAGEMENT OF GROWTH
The Company has experienced rapid growth of its business. Management's
ability to support and manage this growth is dependent upon, among other things,
the ability to hire, train, motivate and retain personnel, and the quality and
flexibility of its internal controls and automated production and reporting
systems. The inability to manage its growth effectively could have a material
adverse effect on the Company's business, financial condition, results of
operations and cash flow.
INDUSTRY CYCLICALITY
The markets in which the Company's products and its customers compete are
cyclical and dependent on general economic conditions, prevailing interest
rates, consumer confidence and patterns of consumer spending. Economic factors
adversely affecting the markets in which the Company's products and its
customers compete could have a material adverse effect on the Company's
business, financial condition, results of operations and cash flow.
6
<PAGE> 8
PRODUCT LIFE CYCLES
Many products sold by the Company, including its automotive, heavy truck
and off-highway products, are application specific and, therefore, have life
cycles generally ranging from three to 15 years. Product development cycles of
12 to 18 months requiring substantial design and qualification requirements are
customary in the sourcing decisions of original equipment manufacturers
("OEMs"). The inability of the Company to develop new products to replace
products whose life cycles come to an end could have a material adverse effect
on the Company's business, financial condition, results of operations and cash
flow.
INDUSTRY CONSOLIDATION
The automotive, heavy truck and off-highway component supply industries
have undergone, and are likely to continue to experience, consolidation, as OEMs
seek to reduce costs and reduce their respective supplier and distribution
bases. This trend has gained considerable momentum within the automotive
industry and many of the Company's commercial and defense customers have also
begun to adopt this strategy. As a result, OEMs utilize a smaller number of
full-service suppliers than in prior years, each of which supply more content
for the platforms or products with which they are associated. The inability of
the Company to meet the increasing demands of its customers could have a
material adverse effect on the Company's business, financial condition, results
of operations and cash flow.
MAINTAINING QUALIFIED SUPPLIER STATUS
The Company has been designated a qualified supplier by certain of its OEM
customers with respect to certain of the products that the Company provides
them. From time to time, other suppliers in the markets in which the Company
competes have lost their qualified supplier status. Loss of qualified supplier
status is generally based upon, among other things, problems with delivery,
product quality, manufacturing processes or documentation. One of the
manufacturing facilities at which a division of the Company produces specialty
fasteners was placed on probation on August 5, 1997 for a maximum of 180 days by
one of its customers due to delivery issues and no new business will be sourced
to the division until such facility regains full qualified supplier status with
its customer. The Company has met with the customer and has implemented
procedures which it believes will enable it to regain full qualified supplier
status. Net sales of products to this customer represented less than 5% of the
Company's net sales for fiscal 1997. Although the Company has no reason to
believe that it will be placed on probation or lose its qualified supplier
status with respect to any other product or customer, there can be no assurance
that such an event will not occur. The termination by one or more customers of
the Company's qualified supplier status with respect to one or more of the
Company's products, which, in the aggregate, accounted for a material portion of
the Company's net sales could have a material adverse effect on the Company's
business, financial condition, results of operations and cash flow.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
International sales represented approximately 32% of the Company's net
sales in fiscal 1997 and international assets accounted for approximately 36% of
the Company's assets as of March 31, 1997. International sales are subject to
numerous risks, including political and economic conditions, restrictive trade
policies of foreign governments and compliance with and changes in foreign and
U.S. laws regarding trade and investment.
In addition, a significant portion of the Company's revenues and expenses
are denominated in currencies other than U.S. dollars. Changes in currency
exchange rates and the imposition of restrictions on repatriation of foreign
earnings could, therefore, have a material adverse effect on the Company's
business, financial condition, results of operations and cash flow. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Foreign Operations."
POSSIBLE ENVIRONMENTAL LIABILITIES
The Company has commenced environmental site assessments and clean-up
feasibility studies to determine the presence, extent and sources of any
environmental contamination at a site in Pennsylvania that
7
<PAGE> 9
continues to be owned by the Company although the related business has been
sold. Although no governmental action requiring remediation has been taken at
this time, the Company is working in cooperation with the relevant state
authority and any remedial work required to be performed would be subject to the
approval of such authority. A design report for implementation of a portion of a
remedy at the Pennsylvania site has been prepared and submitted to the
Commonwealth of Pennsylvania. At June 29, 1997, the balance of the Company's
clean-up reserve was $2.0 million, which amount is payable over the next several
years. In addition, the Company is pursuing recovery of a portion of clean-up
costs in litigation with several of its insurance carriers. The Company expects
that remediation work at the Pennsylvania site will not be completed before
fiscal 2000.
The Company also continues to participate in environmental assessments and
remediation work at 13 other locations, which include operating facilities,
facilities for sale and previously-owned facilities. The Company estimates that
its potential cost for corrective action at these sites will not exceed $1.0
million, which amount is payable over the next several years, and has provided
for the estimated costs in its accrual for environmental liabilities.
In addition, the Company has been named as a potentially responsible party
in six environmental proceedings pending in several other states in which it is
alleged that the Company was a generator of waste that was sent to landfills and
other treatment facilities and, as to several sites, it is alleged that the
Company was an owner or operator. Such properties generally relate to businesses
that have been sold or discontinued. It is not possible to reliably estimate the
costs associated with any remedial work to be performed until studies at these
sites have been completed, the scope of work defined and a method of remediation
approved by the relevant state authorities, and the costs allocated among the
potentially responsible parties. See "Business -- Environmental Matters."
REDUCED GOVERNMENT PURCHASES; GOVERNMENT REGULATION
The Company, through Breeze-Eastern, is a direct supplier and subcontractor
to several manufacturers of products used by the defense industry. Direct sales
to the U.S. government constituted approximately 9% of the Company's fiscal 1997
net sales. Direct purchase orders from the government typically are for spare
parts or repair needs. In such cases, funding is generally available at the time
the purchase order is placed, and the products are delivered on an "as soon as
possible" time frame. Many of the Company's other customers are also government
contractors and subcontractors who may use the Company's products for military
applications. As a result, future reductions in defense budgets or military
helicopter procurement could adversely affect the Company.
In addition, as a supplier and subcontractor to the U.S. government, the
Company is directly and indirectly subject to various federal rules, regulations
and orders applicable to government contracts. Although the Company believes
that it is in material compliance with all such laws, any future violation could
result in civil liability, cancellation or suspension of existing contracts or
ineligibility for future contracts or subcontracts funded in whole or in part
with federal funds. A violation by the Company of any laws applicable to
government contracts could have a material adverse effect on the Company's
business, financial condition, results of operations and cash flow.
COMPETITION
The markets in which the Company's businesses compete are highly
competitive. Some of the Company's competitors are companies, or divisions or
subsidiaries of companies, that are larger and have substantially greater
financial, technical and other resources than the Company. Competitive factors
generally include design capabilities, product performance, delivery and price.
There can be no assurance that the Company's products will be able to
successfully compete with the products of such other companies. See
"Business -- Products."
SHARES ELIGIBLE FOR FUTURE SALE
The sale, or availability for sale, of substantial amounts of Common Stock
in the public market subsequent to the Offering could adversely affect the
prevailing market price of the Common Stock. The Company will have 6,189,759
shares of Common Stock outstanding upon the completion of the Offering, of
8
<PAGE> 10
which 484,549 shares, or 7.6%, will be beneficially owned by executive officers
and directors of the Company, including the Selling Stockholders. See "Principal
and Selling Stockholders." The Company, each of its executive officers and
directors and each Selling Stockholder have agreed for a period of 90 days after
the date of this Prospectus not to register for sale, sell, offer, contract to
sell, grant an option for sale or otherwise dispose of or transfer any capital
stock of the Company or any securities convertible into or exchangeable or
exercisable for capital stock of the Company, without the prior written consent
of ABN AMRO Chicago Corporation, except (i) in the case of the Company,
issuances pursuant to the exercise of employee stock options granted under the
Company's existing incentive plans and, (ii) in the case of the executive
officers and directors and each Selling Stockholder, permitted transfers, gifts
and pledges of shares where the donees or pledgees, as the case may be, agree in
writing to be bound by the terms of such agreement. Upon the expiration of this
period, however, the shares of Common Stock held by the Company's executive
officers and directors, including the Selling Stockholders, may be eligible for
sale in the public market, subject to compliance with the volume, holding period
and other applicable limitations of Rule 144 promulgated under the Securities
Act ("Rule 144").
In addition, Dr. Arch C. Scurlock, former Chairman of the Company (who is
77 years old), beneficially owns 1,146,740 shares of Common Stock, and will have
the power to vote 18.5% of the shares of the outstanding Common Stock upon
completion of the Offering. Dr. Scurlock may have the ability to sell all of
such shares of Common Stock in the public market without registration under the
Securities Act and without regard to any of the limitations of Rule 144. The
shares of Common Stock that Dr. Scurlock beneficially owns are not subject to
any agreements with the Underwriters or the Company restricting their sale.
PRODUCT LIABILITY EXPOSURE
The Company faces an inherent risk of exposure to product liability claims
in the event that the failure of its products results in personal injury or
death, and there can be no assurance that the Company will not experience any
material product liability losses in the future. In addition, if any of the
Company's products proves to be defective, the Company may be required to
participate in a recall involving such products. Although the Company maintains
various types of insurance coverage with respect to various products and
applications, there can be no assurance that such coverage will be adequate for
liabilities ultimately incurred or that it will continue to be available on
terms acceptable to the Company. A successful claim in excess of available
insurance coverage, or a requirement to participate in any product recall, could
have a material adverse effect on the Company's business, financial condition,
results of operations and cash flow.
LABOR RELATIONS
Approximately 35% of the Company's employees in North America are covered
by collective bargaining or similar agreements that expire at various times over
the next several years. In addition, approximately 40% of the Company's
employees overseas are members of trade unions or the local equivalent. A
significant portion of the hourly employees of North American OEMs and the
employees of other customers of the Company who sell to OEMs, are represented by
the United Automotive, Aerospace and Agricultural Implement Workers of America
under collective bargaining agreements. A prolonged work stoppage or strike at
any of the Company's U.S. or foreign manufacturing facilities or any of the
Company's significant customers could have a material adverse effect on the
Company's business, financial condition, results of operations and cash flow.
See "Business -- Employees."
9
<PAGE> 11
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Common
Stock offered hereby (excluding the $1.1 million proceeds from the sale of
90,000 shares to be issued upon the exercise of options by the Selling
Stockholders at the time of the Offering) are estimated to be $25.6 million
($29.9 million if the Underwriters' over-allotment option is exercised in full),
assuming a sale price of $25.59 per share after deducting the underwriting
discount and estimated offering expenses payable by the Company. The Company
will not receive any of the net proceeds from the sale of the Common Stock
offered hereby by the Selling Stockholders. The Company will use the net
proceeds to repay certain outstanding indebtedness under its senior secured bank
credit facility (the "Credit Facility"). As of October 26, 1997, the Company had
(i) $8.6 million of indebtedness outstanding under the revolving credit line of
the Credit Facility maturing on March 31, 2002 (the "Revolver"), (ii) $9.7
million of indebtedness under the international credit lines of the Credit
Facility maturing on March 31, 2002 (the "International Lines of Credit"), (iii)
$55.5 million of indebtedness outstanding under the term loan of the Credit
Facility maturing on March 31, 2002 ("Term Loan A") and (iv) $24.0 million of
indebtedness outstanding under the term loan of the Credit Facility maturing on
June 30, 2002 ("Term Loan B"). The allocation of the net proceeds for repayment
of outstanding indebtedness under the Credit Facility is subject to approval of
the lenders as to priority; however, the Company currently intends to use the
net proceeds to repay $8.3 million, $8.6 million and $8.7 million of
indebtedness outstanding under the Revolver, Term Loan A and Term Loan B,
respectively. Under the terms of the Credit Facility, the holders of Term Loan B
can refuse prepayment. If such prepayment is refused, the allocation of the $8.7
million that the Company currently intends to use to repay indebtedness
outstanding under Term Loan B will be applied to repayment of indebtedness
outstanding under the Credit Facility pursuant to the terms thereof. As of
October 26, 1997, the interest rate on indebtedness under the Revolver, the
International Lines of Credit, Term Loan A and Term Loan B was 8.0%, 8.5%, 7.5%
and 8.9%, respectively. Borrowings under the Credit Facility during fiscal 1998
have been used to fund the acquisition of TCR and for general working capital
purposes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
10
<PAGE> 12
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is listed on the New York Stock Exchange under the symbol
"TT." The table below sets forth the quarterly high and low sale prices of the
Common Stock on the New York Stock Exchange Composite Tape:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDED MARCH 31, 1996:
First Quarter................................................... $13 1/2 $10 3/4
Second Quarter.................................................. 14 7/8 12
Third Quarter................................................... 15 1/8 11 7/8
Fourth Quarter.................................................. 15 12 1/2
FISCAL YEAR ENDED MARCH 31, 1997:
First Quarter................................................... $19 3/4 $14 7/8
Second Quarter.................................................. 18 5/8 17 3/8
Third Quarter................................................... 19 7/8 18
Fourth Quarter.................................................. 22 7/8 19 5/8
FISCAL YEAR ENDING MARCH 31, 1998:
First Quarter................................................... $21 3/8 $19 5/8
Second Quarter.................................................. 26 1/2 22 3/4
Third Quarter (through November 3, 1997)........................ 29 26 3/8
</TABLE>
On November 3, 1997, the closing sale price of the Common Stock on the New
York Stock Exchange was $27.75 per share. At the close of business on October
26, 1997, there were approximately 2,119 holders of record of Common Stock.
During each of the fiscal quarters referenced in the above table, through and
including the second quarter of fiscal 1998, the Company has paid a cash
dividend of $0.065 per share.
The Credit Facility permits quarterly dividend payments which cannot exceed
25% of the Company's cumulative net income in each fiscal year. The Company has
paid quarterly cash dividends on the Common Stock since December 1992. Any
future determination as to the payment of dividends, subject to Credit Facility
restrictions, will be made at the discretion of the Company's Board of Directors
and will depend upon the Company's results of operations, financial condition,
capital requirements, general business conditions and such other factors as the
Board of Directors deem relevant. It is the intention of the Board of Directors
that the Company will pay quarterly cash dividends on the Common Stock. However,
there can be no assurance that any such dividends will be paid by the Company or
that such dividends will not be reduced or eliminated in the future.
11
<PAGE> 13
CAPITALIZATION
The following table sets forth the consolidated short-term debt and
capitalization of the Company at June 29, 1997, and as adjusted to reflect the
sale of the Common Stock offered hereby and the application of the net proceeds
therefrom. See "Use of Proceeds." The capitalization table should be read in
conjunction with the Company's Consolidated Financial Statements, the related
notes thereto and other financial information included in this Prospectus and
incorporated by reference herein.
<TABLE>
<CAPTION>
JUNE 29, 1997
---------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt, including current maturities of long-term debt.... $ 10,004 $ 10,004
======== ========
Long-term debt, less current maturities............................ $ 95,378 $ 69,793
-------- --------
Stockholders' equity:
Preferred stock -- authorized, 300,000 shares; none issued....... -- --
Common stock -- authorized, 14,700,000 shares of $.01 par value;
5,319,759 shares issued and outstanding; and 6,409,759 shares
issued and outstanding, as adjusted........................... 54 65
Additional paid-in capital......................................... 46,800 73,502
Retained earnings.................................................. 38,876 38,876
Other stockholders' equity(2)...................................... (2,602) (2,602)
-------- --------
83,128 109,841
Less treasury stock, at cost (291,719 shares)...................... (3,988) (3,988)
-------- --------
Total stockholders' equity............................... 79,140 105,853
-------- --------
Total capitalization............................................... $174,518 $175,646
======== ========
</TABLE>
- ---------------
(1) As adjusted to reflect (i) the sale by the Company of 1,000,000 shares of
Common Stock offered hereby at an assumed offering price of $27.75 per
share, (ii) the proceeds from the 90,000 shares to be issued upon the
exercise of options by the Selling Stockholders at the time of the Offering
and (iii) the application of approximately $25.6 million of the anticipated
net proceeds from the sale of shares by the Company to reduce certain bank
indebtedness of the Company. See "Use of Proceeds."
(2) Primarily consists of cumulative foreign currency translation adjustment and
unrealized investment holding losses.
12
<PAGE> 14
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below as of March 31,
1997 and 1996 and for each of the three years in the period ended March 31,
1997, are derived from the Company's Consolidated Financial Statements, which
have been audited by Deloitte & Touche LLP, independent certified public
accountants. The selected consolidated financial data set forth below at June
30, 1996 and June 29, 1997 and for the three month periods then ended are
derived from the unaudited Condensed Consolidated Financial Statements of the
Company. The unaudited Condensed Consolidated Financial Statements have been
prepared on a consistent basis with the audited Consolidated Financial
Statements and in the opinion of management include all adjustments necessary
for a fair presentation of the financial position and results of operations of
the Company for the periods covered thereby. The pro forma financial data set
forth below for fiscal 1997 is derived from the audited Consolidated Financial
Statements of the Company and adjusted to reflect the April 17, 1997 acquisition
of TCR as if it had been consummated on April 1, 1996. The selected consolidated
financial data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Consolidated Financial Statements and the related notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31, THREE MONTHS ENDED
----------------------------------------------------------------- -------------------------
1997 JUNE 30, JUNE 29,
1993(1) 1994(1) 1995 1996 1997 PRO FORMA(2) 1996 1997
------- ------- -------- -------- -------- ------------ -------- --------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales:
Specialty fastener products... $28,998 $52,319 $ 71,103 $127,487 $144,197 $ 167,539 $ 35,499 $ 41,155
Rescue hoist and cargo hook
products.................... 35,001 29,554 30,019 30,537 34,487 34,487 9,141 8,768
------- -------- -------- -------- -------- -------- -------- -------
Total net sales................. 63,999 81,873 101,122 158,024 178,684 202,026 44,640 49,923
Cost of sales................... 44,676 57,887 71,968 107,426 122,480 138,362 30,939 34,575
------- -------- -------- -------- -------- -------- -------- -------
Gross profit.................... 19,323 23,986 29,154 50,598 56,204 63,664 13,701 15,348
General, administrative and
selling expenses.............. 15,163 14,973 17,051 31,812 35,309 38,626 8,561 9,571
------- -------- -------- -------- -------- -------- -------- -------
Operating income................ 4,160 9,013 12,103 18,786 20,895 25,038 5,140 5,777
Interest (income) expense,
net........................... (435) 448 2,071 5,306 5,595 8,696 1,541 1,733
Royalty and other (income)
expense....................... 310 (295) (810) (820) (1,320) (1,340) (17) (3)
------- -------- -------- -------- -------- -------- -------- -------
Income from continuing
operations before income
taxes......................... 4,285 8,860 10,842 14,300 16,620 17,682 3,616 4,047
Income taxes.................... 962 3,060 3,457 5,792 6,898 7,611 1,519 1,680
------- -------- -------- -------- -------- -------- -------- -------
Income from continuing
operations.................... 3,323 5,800 7,385 8,508 9,722 10,071 2,097 2,367
Gain/(loss) from discontinued
operations.................... 1,810 1,084 (4,852) (1,134) (934) (934) (269) (102)
------- -------- -------- -------- -------- -------- -------- -------
Net income...................... $ 5,133 $ 6,884 $ 2,533 $ 7,374 $ 8,788 $ 9,137 $ 1,828 $ 2,265
======= ======== ======== ======== ======== ======== ======== =======
Earnings per common share:
Income from continuing
operations.................. $ 0.65 $ 1.13 $ 1.45 $ 1.67 $ 1.92 $ 1.99 $ 0.41 $ 0.46
Income (loss) from
discontinued operations..... 0.36 0.21 (0.95) (0.22) (0.18) (0.18) (0.05) (0.02)
------- -------- -------- -------- -------- -------- -------- -------
Earnings per common share..... $ 1.01 $ 1.34 $ 0.50 $ 1.45 $ 1.74 $ 1.80 $ 0.36 $ 0.44
======= ======== ======== ======== ======== ======== ======== =======
Weighted average number of
common shares and common share
equivalents outstanding....... 5,095 5,143 5,109 5,093 5,064 5,064 5,104 5,186
Dividends per common share...... $ 1.56 $ 0.24 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.07 $ 0.07
Supplemental earnings per common
share(3):
Income from continuing
operations.................. $ 1.84 $ 1.90 $ 0.40 $ 0.44
Earnings per common share..... $ 1.68 $ 1.74 $ 0.35 $ 0.42
Supplemental shares used in
computing supplemental
earnings per common share..... 5,741 5,741 5,781 5,863
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
MARCH 31,
----------------------------------------------------------------- JUNE 29, 1997
1997 -------------------------
1993(1) 1994(1) 1995 1996 1997 PRO FORMA(2) ACTUAL AS ADJUSTED(4)
------- ------- -------- -------- -------- ------------ -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................. $43,488 $53,846 $ 53,062 $ 57,348 $ 59,107 $ 58,609 $ 59,464 $ 60,592
Total assets.................... 97,763 125,857 129,396 199,367 199,136 241,064 234,677 235,805
Total debt...................... 12,425 34,634 40,377 78,591 73,423 107,579 105,382 79,797
Stockholders' equity............ 61,214 65,953 64,502 72,470 77,444 77,444 79,140 105,853
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31, THREE MONTHS ENDED
----------------------------------------------------------------- -------------------------
1997 JUNE 30, JUNE 29,
1993 1994 1995 1996 1997 PRO FORMA(2) 1996 1997
------- ------- -------- -------- -------- ------------ -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA (5)...................... $ 7,529 $13,518 $ 17,452 $ 24,813 $ 28,301 $ 32,892 $ 7,060 $ 7,929
Depreciation and amortization... 3,369 4,505 5,349 6,027 7,406 7,854 1,920 2,152
Capital expenditures............ 5,514 4,973 5,033 6,471 5,477 5,974 1,307 1,748
</TABLE>
- ---------------
(1) Certain amounts have been reclassified to conform to 1997 presentation.
(2) Pro forma data gives effect to the April 17, 1997 acquisition of TCR as if
it had occurred on April 1, 1996.
(3) Supplemental earnings per share data reflect the historical and pro forma
values for fiscal 1997 and the three months ended June 29, 1997 and June 30,
1996 adjusted to reflect (i) the sale by the Company of 1,000,000 shares of
Common Stock offered hereby at an assumed offering price of $27.75 per share
and (ii) the application of approximately $17.3 million of the anticipated
net proceeds to the reduction of certain bank term indebtedness of the
Company as if such debt reductions occurred on April 1, 1996. See "Use of
Proceeds."
(4) As adjusted to reflect (i) the sale by the Company of 1,000,000 shares of
Common Stock offered hereby at an assumed offering price of $27.75 per
share, (ii) the proceeds from options exercisable into 90,000 shares by the
Selling Stockholders and (iii) the application of approximately $25.6
million of the anticipated net proceeds to the reduction of certain bank
indebtedness of the Company. See "Use of Proceeds."
(5) EBITDA is defined as earnings before interest, income taxes, depreciation
and amortization and is not a substitute for net income or cash flow as
determined in accordance with generally accepted accounting principles.
14
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Consolidated Financial Data" and the Company's Consolidated Financial
Statements, including the related notes thereto, appearing elsewhere in this
Prospectus. All statements other than statements of historical facts included in
the following discussion regarding the Company's financial position, business
strategy, and plans of management for future operations are forward-looking
statements within the meaning of Section 27A of the Securities Act. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct.
GENERAL
The Company is a leading worldwide designer and manufacturer of engineered
specialty fastener products for niche applications serving a wide range of
industrial markets, including automotive and truck, off-highway heavy machinery,
machine tools and consumer durables. The Company targets fastener applications
that require substantial design and engineering resources. Specialty fastener
products include retaining rings, gear-driven band fasteners, assembly fasteners
and custom cold-formed parts. In addition, through Breeze-Eastern, the Company
operates the world's largest manufacturer of performance-critical rescue hoists
and cargo hooks used primarily for helicopter rescue and transport applications.
Since 1992, the Company has followed a strategy to be the market leader in
providing engineered specialty fastener products for niche applications in
markets such as automotive, heavy truck and industrial machinery. During this
period of time, the Company has completed five acquisitions of specialty
fastener businesses while simultaneously divesting unrelated businesses. The
Company has accounted for each of its acquisitions under the purchase method of
accounting and, accordingly, the operating results of each acquired entity have
been included in the Company's results of operations since the date of each
acquisition. Due to the magnitude of these acquisitions, results of operations
for prior periods are not necessarily comparable with, or indicative of, results
of operations for current or future periods.
ACQUISITIONS
In August 1993, the Company acquired the assets and business of the Palnut
division of TRW, Inc. for $20.5 million in cash. Palnut is a manufacturer of
stamped fasteners and for the twelve months ended June 30, 1993, had sales of
approximately $26.1 million.
In August 1994, the Company acquired all of the capital stock of Industrial
Retaining Ring Company and its affiliated companies ("IRR") for $15.3 million in
cash. IRR is a manufacturer of retaining rings and circlips used primarily in
the heavy equipment and industrial machinery industries and for the twelve
months ended June 30, 1994, had sales of approximately $8.3 million.
In June 1995, the Company acquired the Seeger Group of companies ("Seeger")
from a unit of AB SKF of Goteborg, Sweden for $46.8 million, including the
assumption of trade debt and accrued expenses. Seeger is a manufacturer of
circlips, snap rings and retaining rings primarily used in the production of
automobiles, trucks, industrial equipment and appliances. For the twelve months
ended December 31, 1994, Seeger had sales of approximately $59.1 million.
In June 1996, the Company acquired the Pebra hose clamp business ("Pebra")
from Pebra GmbH Paul Braun i.K for $3.0 million in cash. Pebra is a manufacturer
of hose clamps primarily for use in the production of heavy trucks in Europe.
For the twelve months ended December 31, 1995, Pebra had sales of approximately
$6.9 million.
On April 17, 1997, the Company acquired all of the outstanding stock of TCR
for $32.6 million in cash, plus other contingent consideration. TCR designs and
manufactures externally threaded, cold-formed fasteners and related products for
the automotive, heavy vehicle, marine and industrial markets. For the twelve
months ended December 31, 1996, TCR had sales of approximately $23.3 million.
15
<PAGE> 17
The Company continues to seek out acquisitions in industries complementary
to those where the Company already operates. In considering candidates for
acquisition, after first considering the strategic fit of the target's products
or manufacturing processes with those of the Company's existing operations, the
Company expects such a target to add to earnings and cash flow, possess a strong
management team, present opportunities for profitability improvement through
productivity enhancements, expand channels of distribution and offer
cross-marketing opportunities.
DISCONTINUED OPERATIONS
In fiscal 1996, the Company sold the U.S. and European units of its
computer graphics service operations in two separate transactions to separate
buyers. These businesses operated under the name TransTechnology Systems &
Services and were classified as discontinued operations in fiscal 1995. The sale
of the U.S. portion for approximately $700,000 in cash and $565,000 in notes
receivable was approximately equal to book value. The sale of the European unit
for $100,000 in cash and $155,000 in notes receivable resulted in an after-tax
gain on disposal of approximately $144,000. Additional after-tax disposal costs
of $174,000 were recorded in fiscal 1997 in connection with these sales.
Also during fiscal 1996, the Company sold its electronics division for
approximately $4.4 million in cash and $9.6 million in notes receivable. The
sale of this operation resulted in an after-tax gain on disposal of
approximately $185,000.
During fiscal 1995, the Company sold substantially all of the assets of its
chaff products operation for approximately $6.7 million in cash. The sale of
this operation resulted in an after-tax loss on disposal of approximately
$387,000. Additional after-tax disposal costs of approximately $202,000 were
recorded in fiscal 1996 in connection with this sale. The Company retained the
chaff avionics product line and negotiated its sale separately in fiscal 1996
for approximately $300,000 in cash and $700,000 in notes receivable, resulting
in an after-tax gain on disposal of approximately $427,000. During the fourth
quarter of fiscal 1996, the Company recorded an after-tax charge of $409,000 to
record the anticipated loss on the sale of the facility formerly used by this
operation and which was subsequently sold in the first quarter of fiscal 1997.
Additional after-tax disposal costs of $99,000 were recorded in fiscal 1997
related to the final sale of this facility.
Additional after-tax costs of $100,000, $641,000, $743,000 and $1.9 million
were recorded in the first quarter of fiscal 1998 and the fiscal years 1997,
1996 and 1995, respectively. These charges were in connection with previously
sold businesses and discontinued operations. These additional costs primarily
represent environmental and legal matters.
FOREIGN OPERATIONS
Net sales produced by the Company's non-U.S. businesses for the three
months ended June 29, 1997 and the fiscal years 1997 and 1996 were $14.6
million, $58.0 million and $45.2 million, respectively. These net sales
represented 29.3%, 32.5% and 28.6% of total net sales, respectively. The
Company's foreign operations are located in Europe and Brazil. Prior to fiscal
1996, the Company had no significant foreign operations. Additionally, the U.S.
operations had net export sales for the three months ended June 29, 1997 and the
fiscal years 1997, 1996 and 1995 of $5.8 million, $19.8 million, $16.9 million
and $15.4 million, respectively. The Company enters into contracts to hedge
foreign currency denominated debt instruments and certain foreign currency
purchase commitments. These contracts are used to minimize exposure and to
reduce risk from exchange rate fluctuations in the regular course of the
Company's worldwide business. The Company does not, however, hedge the
translation of foreign currency based financial statements to the U.S. dollar
equivalents.
16
<PAGE> 18
RESULTS OF OPERATIONS
The following table is derived from the Company's Statement of Consolidated
Operations for the periods indicated and represents the results of operations as
a percentage of total net sales and percentage increase or decrease from the
prior period:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
FROM PRIOR PERIOD
PERCENTAGE OF TOTAL NET SALES --------------------------------
---------------------------------------------------
FISCAL YEARS
FISCAL YEAR ENDED MARCH THREE MONTHS ENDED ENDED THREE MONTHS
31, --------------------- MARCH 31, ENDED
------------------------- JUNE 30, JUNE 29, --------------- JUNE 29,
1995 1996 1997 1996 1997 1996 1997 1997
----- ----- ----- -------- -------- ----- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales:
Specialty fastener products....... 70.3% 80.7% 80.7% 79.5% 82.4% 79.3% 13.1% 15.9%
Rescue hoist and cargo hook
products........................ 29.7 19.3 19.3 20.5 17.6 1.7 12.9 (4.1)
----- ----- ----- ----- ----- ----- ----- -----
Total net sales..................... 100.0 100.0 100.0 100.0 100.0 56.3 13.1 11.8
Cost of sales....................... 71.2 68.0 68.5 69.3 69.3 49.3 14.0 11.8
----- ----- ----- ----- ----- ----- ----- -----
Gross profit........................ 28.8 32.0 31.5 30.7 30.7 73.6 11.1 12.0
General, administrative and selling
expenses.......................... 16.9 20.1 19.8 19.2 19.2 86.6 11.0 11.8
----- ----- ----- ----- ----- ----- ----- -----
Operating income.................... 12.0 11.9 11.7 11.5 11.6 55.2 11.2 12.4
Interest expense.................... 2.8 4.0 3.8 4.1 4.0 123.1 7.6 9.2
Interest income..................... (0.8) (0.6) (0.7) (0.6) (0.5) 32.9 19.0 (9.7)
Royalty and other income............ (0.8) (0.5) (0.7) (0.0) (0.0) 1.2 61.0 (82.4)
----- ----- ----- ----- ----- ----- ----- -----
Income from continuing operations
before income taxes............... 10.7 9.0 9.3 8.1 8.1 31.9 16.2 11.9
Income taxes........................ 3.4 3.7 3.9 3.4 3.4 67.5 19.1 10.6
----- ----- ----- ----- ----- ----- ----- -----
Income from continuing operations... 7.3 5.4 5.4 4.7 4.7 15.2 14.3 12.9
Loss from discontinued operations... 4.8 0.7 0.5 0.6 0.2 (76.6) (17.6) (62.1)
----- ----- ----- ----- ----- ----- ----- -----
Net income.......................... 2.5% 4.7% 4.9% 4.1% 4.5% 191.1% 19.2% 23.9%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
RECENT DEVELOPMENTS
The Company reported preliminary unaudited results of operations for the
three months and six months ended September 28, 1997. Net sales for the three
months ended September 28, 1997 increased by $6.4 million, or 14.8%, to $50.0
million from $43.6 million for the three months ended September 29, 1996.
Specialty fastener products net sales for the three months ended September 28,
1997 increased $5.9 million, or 16.7%, to $41.5 million from $35.6 million for
the three months ended September 29, 1996. Rescue hoists and cargo hook products
net sales for the three months ended September 28, 1997 increased $497,000, or
6.2%, to $8.5 million from $8.0 million for the three months ended September 29,
1996.
Operating income for the three months ended September 28, 1997 increased
$1.3 million, or 28.8%, to $5.7 million from $4.4 million for the three months
ended September 29, 1996. Specialty fastener products operating income for the
three months ended September 28, 1997 increased $1.3 million, or 24.9%, to $6.3
million from $5.1 million for the three months ended September 29, 1996. Rescue
hoists and cargo hook products operating income for the three months ended
September 28, 1997 increased $384,000, or 27.8%, to $1.8 million from $1.4
million for the three months ended September 29, 1996. Other corporate expenses
for the three months ended September 28, 1997 increased $382,000, or 18.5%, to
$2.4 million from $2.1 million for the three months ended September 29, 1996.
Income from continuing operations for the three months ended September 28,
1997 increased $660,000, or 38.2%, to $2.4 million from $1.7 million for the
three months ended September 29, 1996. Net income for the three months ended
September 28, 1997 increased $741,000, or 48.7%, to $2.3 million from $1.5
million for the three months ended September 29, 1996.
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Earnings per share from continuing operations for the three months ended
September 28, 1997 increased $0.11, or 32.4%, to $0.45 from $0.34 for the three
months ended September 29, 1996. Earnings per share for the three months ended
September 28, 1997 increased $0.13, or 43.3%, to $0.43 from $0.30 for the three
months ended September 29, 1996.
Net sales for the six months ended September 28, 1997 increased by $11.7
million, or 13.3%, to $99.9 million from $88.2 million for the six months ended
September 29, 1996. Specialty fastener products net sales for the six months
ended September 28, 1997 increased $11.6 million, or 16.3%, to $82.7 million
from $71.1 million for the six months ended September 29, 1996. Rescue hoists
and cargo hook products net sales for the six months ended September 28, 1997
increased $124,000, or 0.7%, to $17.2 million from $17.1 million for the six
months ended September 29, 1996.
Operating income for the six months ended September 28, 1997 increased $1.9
million, or 20.0%, to $11.4 million from $9.5 million for the six months ended
September 29, 1996. Specialty fastener products operating income for the six
months ended September 28, 1997 increased $1.7 million, or 15.3%, to $12.4
million from $10.8 million for the six months ended September 29, 1996. Rescue
hoists and cargo hook products operating income for the six months ended
September 28, 1997 increased $440,000, or 13.3%, to $3.7 million from $3.3
million for the six months ended September 29, 1996. Other corporate expenses
for the six months ended September 28, 1997 increased $191,000, or 4.2%, to $4.7
million from $4.5 million for the six months ended September 29, 1996.
Income from continuing operations for the six months ended September 28,
1997 increased $930,000, or 24.3%, to $4.8 million from $3.8 million for the six
months ended September 29, 1996. Net income for the six months ended September
28, 1997 increased $1.2 million, or 35.2%, to $4.5 million from $3.3 million for
the six months ended September 29, 1996.
Earnings per share from continuing operations for the six months ended
September 28, 1997 increased $0.16, or 21.3%, to $0.91 from $0.75 for the six
months ended September 29, 1996. Earnings per share for the six months ended
September 28, 1997 increased $0.21, or 31.8%, to $0.87 from $0.66 for the six
months ended September 29, 1996.
At September 28, 1997 the Company had total assets of $231.0 million
compared to $199.1 million at March 31, 1997. At September 28, 1997 the Company
had working capital of $55.5 million compared to $59.1 million at March 31,
1997. At September 28, 1997 the Company had total debt of $96.9 million compared
to $73.4 million from March 31, 1997. At September 28, 1997 the Company had
stockholders' equity of $81.8 million compared to $77.4 million at March 31,
1997.
On October 22, 1997, the Company received service of a complaint filed by
CAE Electronics, Inc. in the United States District Court, Northern District of
California, San Jose Division, naming the Company as a potentially responsible
party in an environmental proceeding in which it is alleged that the Company was
a generator of waste and an operator of a site involving groundwater
contamination. To the best of the Company's knowledge, based on a preliminary
review of the allegations set forth in the complaint, this action relates to a
site at which a division of the Company was a subtenant in the early 1970's. It
is not possible to reliably estimate the costs, if any, which may be associated
with any remedial work to be performed at this site until (i) a study at this
site has been completed, (ii) a determination has been made as to whether the
Company has any liability with respect to the site, (iii) the scope of work
defined and (iv) a method of remediation approved by the relevant state
authorities, and the costs allocated among all potentially responsible parties.
THREE MONTHS ENDED JUNE 29, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996.
Net Sales. Net sales for the three months ended June 29, 1997 increased by
$5.3 million, or 11.8%, to $49.9 million from $44.6 million for the three months
ended June 30, 1996. Specialty fastener products net sales for the three months
ended June 29, 1997 increased $5.7 million, or 15.9%, to $41.2 million from
$35.5 million for the three months ended June 30, 1996. The increase in net
sales was primarily due to the inclusion of the financial results of TCR and
Pebra for the three months ended June 29, 1997 and increased gear-driven band
fastener demand to the heavy-duty truck market. This increase was offset
partially by a
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decrease in U.S. and European retaining ring net sales due to the consolidation
of the marketing and customer service operations of the U.S. businesses and the
stronger U.S. dollar relative to the Deutsche Mark for the European businesses.
Rescue hoist and cargo hook products net sales for the three months ended June
29, 1997 decreased $373,000, or 4.1%, to $8.8 million from $9.1 million for the
three months ended June 30, 1996. The decrease was primarily due to the timing
of new orders and delivery of products to customers.
Gross Profit. Gross profit for the three months ended June 29, 1997
increased $1.6 million, or 12.0%, to $15.4 million from $13.7 million for the
three months ended June 30, 1996. The primary factors contributing to the
increased gross profit were the same as those noted in the preceding paragraph
concerning net sales.
General, Administrative and Selling Expenses. General, administrative and
selling expenses for the three months ended June 29, 1997 increased $1.0
million, or 11.8%, to $9.6 million from $8.6 million for the three months ended
June 30, 1996. This increase is primarily due to the inclusion of the financial
results of TCR in the three months ended June 29, 1997.
Operating Income. Operating income for the three months ended June 29,
1997 increased $637,000, or 12.4%, to $5.8 million from $5.1 million for the
three months ended June 30, 1996. Specialty fastener products operating income
for the three months ended June 29, 1997 increased $390,000, or 6.8%, to $6.1
million from $5.7 million for the three months ended June 30, 1996. The increase
was primarily due to the inclusion of the financial results of TCR and Pebra for
the three months ended June 29, 1997 and increased net sales volume of
gear-driven band fasteners. This increase was partially offset by the decrease
in U.S. and European retaining ring net sales and the stronger U.S. dollar
relative to the Deutsche Mark for the European businesses. Rescue hoist and
cargo hook products operating income for the three months ended June 29, 1997
increased $56,000, or 2.9%, to $2.0 million from $1.9 million for the three
months ended June 30, 1996. The primary factors contributing to the increase
were the product sales mix and a slight decrease in engineering expense. Other
corporate expenses for the three months ended June 29, 1997 decreased $191,000,
or 7.7%, to $2.3 million from $2.5 million for the three months ended June 30,
1996.
Interest Expense. Interest expense for the three months ended June 29,
1997 increased $166,000, or 9.2%, to $2.0 million from $1.8 million for the
three months ended June 30, 1996. The increase is attributable to the increased
bank borrowings incurred in the acquisition of TCR on April 17, 1997.
Interest Income. Interest income for the three months ended June 29, 1997
decreased $26,000, or 9.7%, to $243,000 from $269,000 for the three months ended
June 30, 1996. Interest income is derived from notes received from the sale of
former operations and properties.
Royalty and Other Income. Royalty and other income for the three months
ended June 29, 1997 decreased $14,000, or 82.4%, to $3,000 from $17,000 for the
three months ended June 30, 1996.
Income Taxes. Income taxes from continuing operations for the three months
ended June 29, 1997 increased $161,000, or 10.6%, to $1.7 million from $1.5
million for the three months ended June 30, 1996. This increase is attributable
to increased income before income taxes and partially offset by a reduction in
the effective income tax rate to 41.5% from 42.0%.
Net Income. Income from continuing operations for the three months ended
June 29, 1997 increased $270,000, or 12.9%, to $2.4 million from $2.1 million
for the three months ended June 30, 1996. The increase is primarily attributable
to the inclusion of the financial results of TCR and Pebra. Loss from
discontinued operations for the three months ended June 29, 1997 decreased
$167,000, or 62.1%, to $102,000 from $269,000 for the three months ended June
30, 1996. Net income for the three months ended June 29, 1997 increased
$437,000, or 23.9%, to $2.3 million from $1.8 million for the three months ended
June 30, 1996.
Backlog. Speciality fastener products new orders for the three months
ended June 29, 1997 increased $6.4 million, or 18.0%, to $42.5 million from
$36.1 million for the three months ended June 30, 1996. The increase was
primarily due to the inclusion of the financial results of TCR and Pebra in the
three months ended June 29, 1997. Backlog of unfilled orders at June 29, 1997
was approximately $40.7 million compared to approximately $36.1 million at March
31, 1997. Rescue hoist and cargo hook products new orders for the three months
ended June 29, 1997 increased $600,000, or 7.0%, to $9.3 million from $8.7
million for the three months ended June 30, 1996. The increase was primarily due
to the timing and delivery of products to
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<PAGE> 21
customers. Backlog of unfilled orders at June 29, 1997 was approximately $33.0
million compared to approximately $32.5 million at March 31, 1997.
FISCAL YEAR ENDED MARCH 31, 1997 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1996
Net Sales. Net sales for fiscal 1997 increased $20.7 million, or 13.1%, to
$178.7 million from $158.0 million for fiscal 1996. Specialty fastener products
net sales for fiscal 1997 increased $16.7 million, or 13.1%, to $144.2 million
from $127.5 million for fiscal 1996. The increase was primarily due to the
inclusion of twelve months of financial results of Seeger in fiscal 1997
compared to nine months in fiscal 1996, the inclusion of nine months of
financial results of Pebra in fiscal 1997 and an overall increase in volume of
U.S. gear-driven band fasteners. This increase was partially offset by a
weakened economy in Europe and a stronger U.S. dollar relative to the Deutsche
Mark. Rescue hoist and cargo hook products net sales for fiscal 1997 increased
$4.0 million, or 12.9%, to $34.5 million from $30.5 million for fiscal 1996.
This increase was attributable to both the rescue hoist systems and related
spare parts and tie-down product lines, and was partially offset by lower cargo
hook net sales. These increases and decreases in net sales were primarily due to
customer timing and placement of new orders.
Gross Profit. Gross profit for fiscal 1997 increased $5.6 million, or
11.1%, to $56.2 million from $50.6 million for fiscal 1996. The primary factor
contributing to the increased gross profit was the increase in net sales.
General, Administrative and Selling Expenses. General, administrative and
selling expenses for fiscal 1997 increased $3.5 million, or 11.0%, to $35.3
million from $31.8 million for fiscal 1996. This increase is primarily due to
the inclusion of the financial results of Pebra in fiscal 1997.
Operating Income. Operating income for fiscal 1997 increased $2.1 million,
or 11.2%, to $20.9 million from $18.8 million for fiscal 1996. Specialty
fastener products operating income for fiscal 1997 increased $338,000, or 1.4%,
to $24.0 million from $23.7 million for fiscal 1996. The primary factor
contributing to the increase in operating income was an increase in net sales.
This increase was partially offset by lower margins in Europe, excess capacity
which increased price competition, reduced net sales and decreased operating
efficiencies and a stronger U.S. dollar relative to the Deutsche Mark. Rescue
hoist and cargo hook products operating income for fiscal 1997 increased $2.6
million, or 51.9%, to $7.5 million from $4.9 million for fiscal 1996. The
increase was primarily due to plant operating efficiency improvements, higher
net sales volume and product mix and inventory utilization improvements. Other
corporate expenses for fiscal 1997 increased $784,000, or 8.0%, to $10.6 million
from $9.8 million for fiscal 1996.
Interest Expense. Interest expense for fiscal 1997 increased $481,000, or
7.6%, to $6.8 million from $6.3 million for fiscal 1996. The increase is
primarily attributable to increased bank borrowings incurred to finance the
acquisition of Seeger in June 1995.
Interest Income. Interest income for fiscal 1997 increased $192,000, or
19.0%, to $1.2 million from $1.0 million for fiscal 1996. Interest income is
derived from notes received from the sale of former operations and properties.
Royalty and Other Income. Royalty and other income for fiscal 1997
increased $500,000, or 61.0%, to $1.3 million from $820,000 for fiscal 1996.
This increase was primarily due to a one-time royalty payment received in fiscal
1997 related to the rescue hoist and cargo hook segment.
Income Taxes. Income taxes from continuing operations for fiscal 1997
increased $1.1 million, or 19.1%, to $6.9 million from $5.8 million for fiscal
1996. This increase is attributable to increased income before income taxes and
an increase in the effective income tax rate to 41.5% from 40.5%.
Net Income. Income from continuing operations for fiscal 1997 increased
$1.2 million, or 14.3%, to $9.7 million from $8.5 million for fiscal 1996. The
increase is primarily attributable to the same factors discussed in operating
income. Loss from discontinued operations for fiscal 1997 decreased $200,000, or
17.6%, to $934,000 from $1.1 million for fiscal 1996. Net income for fiscal 1997
increased $1.4 million, or 19.2%, to $8.8 million from $7.4 million for fiscal
1996.
Backlog. Specialty fastener products new orders for fiscal 1997 increased
$33.1 million, or 27.0%, to $156.0 million from $122.9 million for fiscal 1996.
The primary reasons for the increase were the inclusion of
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<PAGE> 22
twelve months of financial results of Seeger in fiscal 1997 compared to nine
months in fiscal 1996, the inclusion of nine months of financial results of
Pebra in fiscal 1997 and an overall increase in volume of U.S. gear-driven band
fasteners. Backlog of unfilled orders was approximately $36.1 million at March
31, 1997 compared to approximately $31.4 million at March 31, 1996. Rescue hoist
and cargo hook products new orders for fiscal 1997 decreased $3.6 million, or
9.0%, to $27.3 million from $30.9 million for fiscal 1996. The decrease was
primarily due to the timing of new orders and an unusually high level of orders
in fiscal 1996. At March 31, 1997, the backlog of unfilled orders was
approximately $32.5 million compared to approximately $30.9 million at March 31,
1996.
FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1995
Net Sales. Net sales for fiscal 1996 increased $56.9 million, or 56.3%, to
$158.0 million from $101.1 million for fiscal 1995. Specialty fastener products
net sales for fiscal 1996 increased $56.4 million, or 79.3%, to $127.5 million
from $71.1 million for fiscal 1995. The increase in net sales was primarily due
to the inclusion of the financial results of nine months of Seeger in fiscal
1996, and to a lesser extent, the inclusion of a full year of financial results
of IRR in fiscal 1996 compared to eight months of financial results in fiscal
1995. Additionally, the increase in net sales was attributable to increased
industrial and heavy truck OEM demand for gear-driven band fasteners in fiscal
1996 compared to fiscal 1995. Rescue hoist and cargo hook products net sales for
fiscal 1996 increased $518,000, or 1.7%, to $30.5 million from $30.0 million for
fiscal 1995.
Gross Profit. Gross profit for fiscal 1996 increased $21.4 million, or
73.6%, to $50.6 million from $29.2 million for fiscal 1995. The primary factor
contributing to the increased gross profit was the increase in net sales. Gross
profit expressed as a percentage of net sales increased to 32.0% in fiscal 1996
from 28.8% in fiscal 1995. This increase was primarily due to the inclusion of
an additional four months of financial results of IRR in fiscal 1996 and higher
plant operating efficiencies, price adjustments and better inventory utilization
at Breeze-Eastern in fiscal 1996.
General, Administrative and Selling Expenses. General, administrative and
selling expenses for fiscal 1996 increased $14.8 million, or 86.6%, to $31.8
million from $17.1 million for fiscal 1995. This increase is primarily due to
the inclusion of nine months of financial results of Seeger and an additional
four months of financial results of IRR in fiscal 1996.
Operating Income. Operating income for fiscal 1996 increased $6.7 million,
or 55.2%, to $18.8 million from $12.1 million for fiscal 1995. Specialty
fastener products operating income for fiscal 1996 increased $7.2 million, or
43.7%, to $23.7 million from $16.5 million for fiscal 1995. The primary factors
contributing to the increase are the inclusion of nine months of financial
results of Seeger in fiscal 1996, and to a lesser extent, the inclusion of a
full year of financial results of IRR in fiscal 1996 compared to eight months of
financial results in fiscal 1995. Additionally, the increase was attributable to
increased industrial and heavy truck OEM demand for gear-driven band fasteners
in fiscal 1996 compared to fiscal 1995. Rescue hoist and cargo hook products
operating income for fiscal 1996 increased $4.8 million, or 2,980.0%, to $4.9
million from $160,000 for fiscal 1995. This substantial increase was
accomplished primarily because of higher plant operating efficiencies, price
adjustments and better inventory utilization. Other corporate expenses for
fiscal 1996 increased $5.3 million, or 116.0%, to $9.8 million from $4.6 million
for fiscal 1995, primarily due to a write-down of marketable equity securities
received from the sale of a former operation.
Interest Expense. Interest expense for fiscal 1996 increased $3.5 million,
or 123.1%, to $6.3 million from $2.8 million for fiscal 1995. The increase is
primarily attributable to increased bank borrowings incurred to finance the
acquisition of Seeger in June 1995.
Interest Income. Interest income for fiscal 1996 increased $250,000, or
33.0%, to $1.0 million from $760,000 for fiscal 1995. Interest income is derived
from notes received from the sale of former operations and properties.
Royalty and Other Income. Royalty and other income for fiscal 1996
increased $10,000, or 1.2%, to $820,000 from $810,000 for fiscal 1995.
Income Taxes. Income taxes from continuing operations for fiscal 1996
increased $2.3 million, or 67.5%, to $5.8 million from $3.5 million for fiscal
1995. This increase is attributable to increased income before income taxes and
an increase in the effective income tax rate to 40.5% from 31.9%.
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Net Income. Net income from continuing operations for fiscal 1996
increased $1.1 million, or 15.2%, to $8.5 million from $7.4 million for fiscal
1995. The increase is primarily attributable to the same factors discussed in
operating income. Loss from discontinued operations for fiscal 1996 decreased
$3.7 million, or 76.6%, to $1.1 million from $4.9 million for fiscal 1995. Net
income for fiscal 1996 increased $4.8 million, or 191.1%, to $7.4 million from
$2.5 million for fiscal 1995.
Backlog. Specialty fastener products new orders for fiscal 1996 increased
$48.8 million, or 66.0%, to $122.9 million from $74.1 million for fiscal 1995.
The primary reasons for the increase were the inclusion of nine months of
financial results of Seeger in fiscal 1996, and to a lesser extent, the
inclusion of twelve months of financial results of IRR in fiscal 1996 compared
to eight months of financial results in fiscal 1995 and increased industrial and
heavy truck OEM demand for gear-driven band fasteners in fiscal 1996. Backlog of
unfilled orders was approximately $31.4 million at March 31, 1996 compared to
approximately $12.7 million at March 31, 1995. Rescue hoist and cargo and hook
products new orders for fiscal 1996 increased $9.3 million, or 31.0%, to $39.7
million from $30.4 million for fiscal 1995. The increase was primarily due to
increased marketing efforts and the timing of new orders. At March 31, 1996 the
backlog of unfilled orders was approximately $30.9 million compared to
approximately $21.8 million at March 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist primarily of general working
capital needs, capital expenditures, debt service, dividends and capital for
future acquisitions. Except with respect to the funding of any future
acquisitions, management believes that funds available under the Credit
Facility, together with cash generated from operations, will be sufficient to
support cash requirements in fiscal 1998. Management further believes that the
Company could obtain additional capital to make acquisitions primarily through
either issuances of common or preferred stock, or debt or lease financing,
although no assurance can be given with respect to whether such financing would
be available when required or whether such financing can be obtained on terms
acceptable to the Company.
For the three months ended June 29, 1997, net cash provided by operating
activities was $2.3 million compared to $3.3 million for the three months ended
June 30, 1996. The primary sources of cash from operations during the three
months ended June 29, 1997 included net income of $2.3 million, non-cash charges
for depreciation and amortization of $2.2 million, a decrease in inventory of
$1.5 million and an increase in other liabilities of $1.3 million, offset
primarily by decreases in accounts payable of $3.4 million, and accrued
compensation of $2.3 million (which was primarily attributable to the payment of
accrued fiscal 1997 Company-wide annual employee bonuses).
For fiscal 1997, net cash provided by operating activities was $14.3
million compared to $10.7 million and $7.5 million for fiscal 1996 and 1995,
respectively. The primary sources of cash from operations during fiscal 1997
included net income of $8.8 million, non-cash charges for depreciation and
amortization of $7.4 million, and increase in other liabilities of $1.4 million,
offset primarily by a decrease in accounts payable of $3.7 million. The primary
sources of cash from operations in fiscal 1996 included net income of $7.4
million, non-cash charges for depreciation, amortization and a loss on the
write-down of marketable securities of $6.0 million and $2.6 million,
respectively, a decrease in accounts receivable and other assets of $4.3 million
and $4.8 million, respectively, and an increase in accrued compensation of $2.2
million (which was primarily attributable to accrued fiscal 1996 Company-wide
annual bonuses), offset primarily by increases in inventory and assets held for
sale of $6.1 million and $1.9 million, respectively, and a decrease in other
liabilities of $8.6 million.
The Company's capital expenditures were $1.7 million, $5.5 million, $6.5
million and $5.0 million for the three months ended June 29, 1997 and fiscal
1997, 1996 and 1995, respectively. The Credit Facility is with a group of
commercial banks and is secured by all of the Company's assets. As of March 31,
1997, the Credit Facility was amended to increase the capital expenditures
limitation to $9.0 million per year. The Company believes that the combination
of internally generated cash flow and amounts available for borrowing under the
Credit Facility is sufficient to fund capital expenditure requirements
anticipated in fiscal 1998. The Company is subject to various contingencies
related to land and groundwater contamination at several facilities.
Expenditures made pursuant to the remediation and restoration of these sites
approximated $1.1 million and $1.3 million in fiscal 1997 and fiscal 1996,
respectively. These expenditures are primarily of a non-recurring
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nature and are not capitalized. The Company expects additional
environmental-related expenditures in fiscal 1998 to approximate prior years'
expenditures. Management believes that, after taking into consideration
information provided by counsel, the resolution of these matters will not have a
material adverse effect on the Company's liquidity.
On April 17, 1997, the Company acquired TCR for $32.6 million in cash, plus
other contingent consideration. The purchase price was financed entirely with
borrowings under the Credit Facility. In fiscal 1997, the Company completed the
sale of a facility formerly used by the chaff products operation for $2.1
million in cash. The proceeds from the sale were used to repay a portion of the
outstanding balance under the Revolver.
The Credit Facility is comprised of the Revolver, the International Lines
of Credit, Term Loan A and Term Loan B. As of October 26, 1997, the Revolver had
borrowings outstanding of $8.6 million from a total commitment of $30.0 million.
As of October 26, 1997, the International Lines of Credit had borrowings
outstanding of $9.7 million from a total commitment of $10.0 million. Interest
on amounts outstanding under the Revolver and the International Lines of Credit
is tied to the primary lending bank's prime rate, or at the Company's option,
the London Interbank Offered Rate ("LIBOR"), plus a margin that varies depending
upon the Company's achievement of certain operating and financial goals.
Term Loan A and Term Loan B are secured by the same collateral and are due
and payable on March 31, 2002 and June 30, 2002, respectively. Quarterly
principal payments on Term Loan A are $2.2 million, with increases to $3.0
million, $3.2 million and $4.0 million in June 1998, June 1999 and June 2000,
respectively. Interest on Term Loan A is tied to the primary lending bank's
prime rate, or LIBOR, plus a margin that varies depending upon the Company's
achievement of certain operating and financial goals. Annual principal payments
on Term Loan B of $500,000 are due through June 30, 2000, with balloon payments
of $7.5 million and $15.0 million due on June 30, 2001 and June 30, 2002,
respectively. Interest on Term Loan B accrues at the primary lending bank's
prime rate plus two percentage points. The Credit Facility also gives the
Company the option of using LIBOR plus three and one-quarter percentage points.
At June 29, 1997, $79.8 million of the Company's outstanding borrowings were
based on LIBOR. The Credit Facility contains other outstanding financial
covenants, including a limitation on the ability of the Company to pay quarterly
dividends in excess of 25% of the Company's cumulative net income and that at
least 50% of the net proceeds of a financing such as the Offering are required
to be used to prepay outstanding indebtedness.
In May 1994, the Company obtained authorization to repurchase up to 200,000
shares of Common Stock. Under this program, the Company repurchased 172,500 and
5,000 shares of Common Stock at a cost of $2.1 million and $65,000 in fiscal
1995 and 1996, respectively. In September 1996, the Company obtained special
authorization and purchased an additional 100,000 shares of Common Stock at a
cost of $1.6 million
The Company paid dividends to holders of Common Stock totaling $326,000,
$1.3 million, $1.3 million and $1.3 million for the three months ended June 29,
1997 and fiscal 1997, 1996 and 1995, respectively. The Company expects to
continue declaring and paying dividends on its Common Stock; however, no
assurance can be made that the Company will declare or pay any dividends in the
future.
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share." SFAS No. 128 establishes standards for computing and presenting earnings
per share and is effective for fiscal 1998. The Company believes that the effect
of implementing this standard will not effect results differently than currently
reported. In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which will be effective for
the Company beginning in the fiscal year ending March 31, 1999. SFAS No. 131
redefines how operating segments are determined and requires expanded
quantitative and qualitative disclosures relating to a company's operating
segments. The Company has not yet completed its analysis of which operating
segments, if any, it will disclose differently than previously reported.
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BUSINESS
GENERAL
The Company is a leading worldwide designer and manufacturer of engineered
specialty fastener products for niche applications serving a wide range of
industrial markets, including automotive and truck, off-highway heavy machinery,
machine tools and consumer durables. The Company targets fastener applications
that require substantial design and engineering resources. Specialty fastener
products include retaining rings, gear-driven band fasteners, assembly fasteners
and custom cold-formed parts. In addition, through Breeze-Eastern, the Company
operates the world's largest manufacturer of performance-critical rescue hoists
and cargo hooks used primarily for helicopter rescue and transport applications.
In fiscal 1997, the Company's specialty fastener segment accounted for
approximately 81% of net sales. Over five years ago, the Company's current
management identified the engineered specialty fastener market as a core
business and began repositioning the Company to achieve significant growth in
this sector. From fiscal 1993 through fiscal 1997, the Company committed its
management and financial resources to successfully acquire and integrate five
specialty fastener companies while it divested various unrelated businesses. As
a result of these acquisitions and internal growth, net sales and operating
income for the specialty fastener segment have grown at a compound annual growth
rate of 49% and 44%, respectively, from fiscal 1993 through fiscal 1997.
Significant investments in manufacturing efficiency, product development,
systems and management have better positioned the Company to take advantage of
future growth opportunities.
BUSINESS STRATEGY
The Company's objectives are to become a premier manufacturer of specialty
fastener products and other industrial components used by other manufacturers in
the production of their finished goods and to sustain long-term profitable
growth. In order to accomplish these objectives, the Company is implementing the
following strategies:
Focus on Niche Markets. The Company's products focus on niche market
applications which demand proprietary design and engineering to serve
non-standard requirements in markets with few direct competitors. The Company
believes its engineering capabilities provide a competitive advantage allowing
it to achieve a greater market share in many of its product lines.
Increase Market Share. The Company believes that constantly improving both
the quality of its products and its low-cost manufacturing base along with the
development of new products will permit it to increase market share in each of
the markets in which it competes. Trends by OEMs, including single sourcing,
that favor high quality and reliable suppliers who provide design and
engineering capabilities may present growth opportunities for the Company.
Develop New Proprietary Products. The Company also intends to expand its
existing array of products and applications by qualifying new fasteners,
fastening systems and other industrial components for integration into
customers' new product lines. New fastener products with proprietary design and
engineering are developed by combining skilled engineering and marketing teams
and allowing them to work alongside customers creating better design and
functionality. The Company also plans to expand its rescue hoist and cargo hook
business by developing motion control products for the helicopter, aerospace,
and weapons systems markets.
Integrate Marketing Capabilities. The Company is integrating its marketing
capabilities across its specialty fastener product lines and geographic areas to
capitalize on cross-marketing opportunities. The Company intends to leverage
existing customer relationships by marketing additional products which the
Company has traditionally neither provided to the customer nor marketed through
a separate sales channel. Furthermore, the Company anticipates marketing its
various specialty fastener product lines through a coordinated marketing program
designed to provide customers with a single supplier capable of fulfilling all
of a customer's requirements for items produced by any of the Company's
operations. The Company believes
24
<PAGE> 26
many cross-marketing opportunities exist between its European and U.S.
operations in several product markets in which it competes.
Improve Operating Efficiencies. The Company strives to constantly improve
the efficiency and productivity of its operations so as to achieve and maintain
low-cost producer status in each of its product lines. The Company has
implemented a series of programs designed to improve efficiency while at the
same time maintaining or improving quality control. The Company utilizes
statistical process control systems to record information at each stage of the
production process to ensure specifications are met and to identify areas which
may require further improvement.
Pursue Strategic Acquisitions. To enhance future growth, the Company
intends to continue to pursue strategic acquisitions. In considering candidates
for acquisition, after first considering the strategic fit of the target's
products or manufacturing processes with those of the Company's existing
operations, the Company expects such a target to add to earnings and cash flow,
possess a strong management team, present opportunities for profitability
improvement through productivity enhancements, expand channels of distribution
and offer cross-marketing opportunities.
ACQUISITION HISTORY
The Company believes it is the seventh largest specialty fastener company
in the highly fragmented U.S. fastener market and the leading worldwide
manufacturer of rescue hoists and cargo hooks. Since management identified the
specialty fastener market as a core business in 1992, the Company has divested
several unrelated businesses and completed five acquisitions of specialty
fastener companies. The following table sets forth certain information
concerning the businesses which have been acquired through September 28, 1997:
<TABLE>
<CAPTION>
NAME OF
ACQUIRED PRINCIPAL DATE TOTAL
COMPANY LOCATION ACQUIRED NET SALES(1) CONSIDERATION PRINCIPAL PRODUCTS
- -------- ----------- ------------ ------------ ------------- -------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Palnut New Jersey August 1993 $ 26.1 $20.5 Stamped fasteners
IRR New Jersey August 1994 8.3 15.3 Retaining rings
Seeger Germany June 1995 59.1 46.8 Retaining rings
Pebra Germany June 1996 6.9 3.0 Gear-driven band
fasteners
TCR Minnesota April 1997 23.3 32.6 Cold-formed fasteners
</TABLE>
- ---------------
(1) Represents the acquired companies' sales during their respective last
completed fiscal year immediately preceding the acquisition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Acquisitions."
PRODUCTS
The Company's specialty fastener products are typically integral components
of its customers' end products. The Company competes in niche markets by
offering engineered, customized and value-added products for specific
applications. The Company's rescue hoist and cargo hook products group is the
world's leading supplier of rescue hoists and cargo hook systems which are
primarily used in military and civilian helicopters worldwide. These products
are designed to be efficient and reliable in extreme operating conditions.
Specialty fastener products and rescue hoist and cargo hook products accounted
for approximately
25
<PAGE> 27
81% and 19% of the Company's fiscal 1997 net sales, respectively. See Note 13 to
the Consolidated Financial Statements. The following table sets forth certain
information with respect to the Company's products:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
PLANT
LOCATIONS
PRODUCTS TRADE NAMES (NUMBER) PRIMARY MARKETS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RETAINING RINGS
Retaining rings, C and E clips, Seeger, Anderton, Germany (2) Automotive and truck, industrial
snap rings, circlips Waldes Truarc, U.S. (2) distribution, industrial
Industrial U.K. (1) machinery
Retaining Ring Brazil (1)
- ---------------------------------------------------------------------------------------------------------
GEAR-DRIVEN BAND FASTENERS
Worm drive clamps, Breeze Industrial, U.S. (1) Automotive and truck, industrial
T-bolt clamps, V-band clamps Pebra Germany (1) distribution, hardware,
plumbing, aerospace
- ---------------------------------------------------------------------------------------------------------
ASSEMBLY FASTENERS
Single and multi-thread stamped Palnut U.S. (1) Automotive and truck, industrial
nuts, clips, push-nuts distribution, industrial
machinery, consumer products
- ---------------------------------------------------------------------------------------------------------
EXTERNALLY THREADED AND
SPECIALTY MACHINED COMPONENTS
Custom cold-formed components, TCR U.S. (1) Automotive and truck, commercial
friction welded parts, screw equipment, industrial machinery,
machined parts consumer products
- ---------------------------------------------------------------------------------------------------------
RESCUE HOISTS AND CARGO HOOKS
Rescue hoists, cargo winches, Breeze-Eastern U.S. (1) Transportation, aerospace,
cargo hooks, tie-downs defense
- ---------------------------------------------------------------------------------------------------------
</TABLE>
SPECIALTY FASTENER PRODUCTS
The Company derived approximately 81% of its fiscal 1997 net sales from the
manufacture and sale of engineered specialty fasteners, and believes it is the
seventh largest specialty fastener manufacturer in the highly fragmented U.S.
fastener market which is estimated to be $8 billion. Operating in small niches
within the U.S. and worldwide fastener markets, the Company competes under
established brand names and believes it is among the market leaders in most of
its product lines. The Company's specialty fastener products are used around the
world in a wide range of industries, such as automotive and heavy truck,
computer disk drives, toys, cameras and appliances. Through increased
engineering and marketing resources, the Company continues to search for new
applications for its products in current and new industries worldwide.
Retaining Rings. The Company believes it is the world's largest
manufacturer of retaining rings, with operations in the U.S., Germany, the U.K.
and Brazil. The Company manufactures and markets products for both the U.S. and
international transportation equipment and industrial markets under established
trade names such as Seeger(R) (distributed by Seeger-Orbis (Germany) and
Seeger-Reno (Brazil)), Anderton(TM) (U.K.), Waldes Truarc(R) (U.S.) and
Industrial Retaining Ring(TM) (U.S.). Retaining rings are typically engineered
to a customer's exacting specifications or industry-wide standards and are used
primarily in transmissions and drive train and braking systems on automobiles,
trucks and off-highway equipment. The Company's retaining rings are also used in
industrial equipment, computers, photographic equipment, marine equipment and
almost any situation where movement on a shaft must be restricted.
The North American retaining ring market, which the Company estimates to be
at least $45 million, is primarily served by the Company and one competitor. The
market has experienced limited growth as retaining rings are eliminated from
certain applications; however, new retaining ring applications are also being
developed. The Company's retaining rings are sold primarily to distributors who
sell these products to a broad
26
<PAGE> 28
range of end users. As with many industrial component markets, the retaining
ring market is also experiencing distributor consolidation, long-term contracts
at competitive pricing and just-in-time ordering. In response to these trends,
the Company has undertaken a comprehensive review of manufacturing processes,
floor layout, headcount and capacity to improve the profitability of the U.S.
retaining ring business. As a result of this study, consolidation of two U.S.
marketing and customer service functions has been completed in the first quarter
of fiscal 1998.
In addition, the Company continues to rationalize international
manufacturing capacity with the closing of Seeger's Eichen, Germany, facility
and the moving of production equipment into an existing and modified plant in
Bingley, U.K., which the Company expects to be completed by the end of the third
quarter of fiscal 1998. The Company anticipates its Seeger unit will realize
cost savings from lower U.K. wage rates, lower headcount and improved
manufacturing efficiencies. The Company expects these initiatives to allow it to
gain additional market share through lower selling prices while improving
margins. Each of the Company's retaining ring operations in the U.K., Germany
and Brazil have received an ISO-9000 series certification (meeting the
comprehensive quality standards promulgated by the major OEMs). The facilities
in the U.S. are in the process of completing the required audit and anticipate
achieving ISO-9000 certification by the end of fiscal 1998.
Gear-Driven Band Fasteners. The Company believes Breeze Industrial has one
of the broadest lines of gear-driven band fasteners in the world. Breeze(R)
stainless steel band fasteners are well known for their quality and engineering;
Breeze(R) T-bolt and patented Constant-Torque(R) fastener products are used
primarily in diesel engine, heavy truck, marine and off-highway equipment
applications throughout the world. Breeze Industrial is a certified supplier to
Caterpillar Inc., Navistar International Corporation and other heavy equipment
manufacturers. Breeze Industrial's Aero-Seal(R), Euro-Seal(R) and Power-Seal(R)
gear-driven band fasteners are found in hardware, automotive and retail stores
for use in repair, maintenance and overhaul applications, and are used by many
manufacturers of industrial and consumer products. The Company is focusing its
marketing efforts on the heavy vehicle segment worldwide, where the Company
believes its superior products provide it with a competitive advantage. Breeze
Industrial has recently developed and introduced a new worm-driven V-band
fastener capable of greater tolerances for use in the heavy truck and plumbing
markets. The Company estimates that approximately 15% to 20% of current sales of
gear-driven band fasteners are attributable to proprietary products.
Breeze Industrial competes with several companies in a highly competitive
market on the basis of quality, performance, timely delivery and pricing. As end
users of the Company's products strive to reduce their costs through price
reduction of components and shortened lead times, pricing of the Company's
products is under pressure as independent distributors continue to consolidate
and increase their purchasing power.
Breeze Industrial is developing additional products for its major customers
to take advantage of the consolidation trend by offering the broadest product
line available. To better position the Company to meet the current and
anticipated demand and to alleviate current capacity limitations, the Company
expects to expand its North American gear-driven band fasteners facility in the
current fiscal year to house additional manufacturing capacity. The Company is
also currently considering a more substantial capacity increase. Breeze
Industrial was recently advised that it had passed its audit for ISO-9000, and
expects to receive its certification by the end of October 1997.
Assembly Fasteners. The Company believes Palnut is one of the leading U.S.
manufacturers of assembly fasteners. Palnut supplies engineered, custom
fastening devices, including lock nuts, push-nuts, u-nuts and a variety of
single and multi-threaded stainless and high-carbon steel fasteners, primarily
to the automotive industry. Palnut serves primarily OEMs and tier I and tier II
suppliers with applications for interior and exterior trim components,
instrument panels, grills and radiators. Assembly fasteners are also used in a
broad range of other applications such as in appliances, toys, electronics,
lighting, mining and construction equipment.
The North American assembly fastener market in which Palnut competes is
estimated by the Company to be $170 million. Market trends include the
expectation of continuous improvement of quality, cost reduction and delivery
performance, rapid response and supplier rationalization by the Company's
customers.
27
<PAGE> 29
Palnut's market segments are served through both direct sales and distribution.
Palnut is currently pursuing ISO-9000 certification.
Externally Threaded and Specialty Machined Components. TCR, which the
Company acquired on April 17, 1997, designs and manufactures sophisticated
externally threaded fastening devices and custom industrial components,
utilizing its expertise in cold forming, machining technologies and friction
welding in one integrated facility. Combined with TCR's in-house secondary
manufacturing operations, these processes offer customers the ability to replace
multi-part assemblies with single parts capable of higher tolerances, lower
weight and lower costs. TCR focuses on large volume manufacturing of components
and assemblies with high levels of production difficulty. TCR's products are
used by industrial customers worldwide, primarily in the automotive, hydraulic
and recreational products industries.
Each of the market segments in which TCR competes is highly competitive
with no single competitor having a dominant market share. The Company believes
that TCR's combined capabilities in cold forming, machining technologies and
friction welding provide it with marketplace differentiation and a competitive
advantage. TCR competes in various markets where it designs and manufactures
highly sophisticated fasteners and is typically the sole supplier. Market trends
that are placing additional emphasis on supplier design and sub-assembly
capabilities are expected to favorably position TCR for future growth
opportunities.
RESCUE HOIST AND CARGO HOOK PRODUCTS
Breeze-Eastern is the world's leading designer and manufacturer of
sophisticated helicopter rescue hoists, cargo winches and cargo hooks. These
complex engineered systems add significantly to the versatility of an aircraft
for a relatively small cost and are used worldwide by military and civilian
agencies to complete rescue operations and mission profiles as well as transport
cargo. Many of the leading aerospace and defense prime contractors, including
Agusta SpA, Bell Helicopter Textron, Boeing Co., Eurocopter (a joint venture
between Aerospatiale SA and Daimler-Benz AG), Lockheed Martin Corp., McDonnell
Douglas Corp., Raytheon Company and Sikorsky Aircraft Corporation, specify the
Company's systems as standard equipment on their platforms because of
Breeze-Eastern's record for safety, reliability, durability and service.
Innovation and new product development remain an important focus at
Breeze-Eastern, which is one reason why its products are included in the design
of the new V-22 Osprey vertical take-off and landing aircraft due to enter
production in 1999 for the U.S. Marine Corps. Breeze-Eastern also manufactures
fixed wing aircraft cargo winches, weapons handling systems for ground defense
platforms, tie-down equipment and tow hook assemblies utilized by helicopters
employed in U.S. Navy minesweeping operations.
On August 27, 1997, Breeze-Eastern was recognized by Lockheed Martin Vought
Systems ("LMVS") as a Certified Supplier of hoist equipment for the U.S. Army's
Multiple Launch Rocket System ("MLRS"). During the 18 years of production of the
MLRS weapons system, Breeze-Eastern has, on a sole-source basis, supplied LMVS
with more than 2,500 hoist systems.
Breeze-Eastern is the established leader in the estimated $50 million
worldwide rescue hoist and cargo hook market with an estimated market share of
more than 60%. Although the market leader, Breeze-Eastern competes against
divisions or subsidiaries of larger companies with significantly greater
financial resources. The Company believes that Breeze-Eastern's success can be
attributed to several competitive advantages, including product recognition, a
broad customer base, superior product design and engineering capabilities, a
fully integrated manufacturing facility and superior aftermarket product
support.
Additionally, Breeze-Eastern is expanding its existing array of products
into the highly fragmented aerospace and defense motion control systems market.
Motion control systems have similar technologies and customer bases to those of
Breeze-Eastern's rescue hoist, cargo winch and cargo hook products. This has
facilitated the award to Breeze-Eastern of several orders for motion control
products from major aerospace and defense prime contractors. Market trends, such
as customer demand for enhanced system capabilities and consolidation of
suppliers, are expected to create additional opportunities for Breeze-Eastern.
28
<PAGE> 30
CUSTOMERS
The Company's customers are comprised of a diverse group of manufacturers
and distributors, including automotive OEMs, automotive suppliers, heavy truck
OEMs, industrial components distributors, industrial machine manufacturers,
consumer products manufacturers, helicopter OEMs, aerospace and defense
contractors and commercial and military search and rescue agencies. The
Company's strategy is to avoid reliance on a single end-user market or customer.
During the three months ended June 29, 1997 and June 30, 1996, net sales to the
Company's top ten customers accounted for approximately 21% and 23% of total net
sales, respectively, and net sales to non-U.S. customers accounted for
approximately 40% and 44% of total net sales, respectively.
The following table shows the Company's fiscal 1997 specialty fastener
products segment net sales by market type:
FISCAL 1997 SPECIALTY FASTENER SEGMENT NET SALES BY MARKET TYPE
<TABLE>
<S> <C>
INDUSTRIAL MACHINERY 11
CONSUMER / DURABLES 3
DISTRIBUTION 44
HEAVY TRUCK OEM 21
AUTOMOTIVE 21
</TABLE>
SALES AND MARKETING
The Company markets its specialty fastener products through a combination
of a direct sales force, distributors and manufacturers' representatives. As of
September 1997, the sales force consisted of 56 salespeople located in 10
offices throughout the world, 727 distributors worldwide and 191 manufacturers'
representatives. The Company's sales offices are based at its manufacturing
facilities with additional offices in Detroit, Michigan and Paris, France. The
sales force sells products directly to automotive OEMs, heavy truck OEMs and
various industrial and consumer products manufacturers, and are generally
compensated on a salary and commission basis. The Company also sells its
fasteners to distributors and manufacturers' representatives who, in turn, sell
to OEMs, numerous manufacturers and other customers. Often the OEMs will
determine whether the Company sells a product directly to the OEM or through an
independent distributor.
Each of the Company's specialty fastener product lines maintain independent
sales and marketing efforts in order to address unique customer markets. The
Company plans to leverage its expanding distribution base for specialty fastener
products and capitalize on emerging cross-marketing opportunities by increasing
the coordination of sales activities among its divisions and subsidiaries. In
addition, management intends to aggressively pursue overseas sales expansion
through cross-marketing opportunities with respect to both its retaining ring
operations and gear-driven band fastener applications.
Breeze-Eastern maintains an internal sales force and several independent
manufacturers' representatives and distributors to market its rescue hoist and
cargo hook products. The internal sales force consists of four salaried
employees who sell directly to the major aircraft manufacturers from
Breeze-Eastern's office in Union, New Jersey.
The Company has taken certain actions to improve the efficiency of its
domestic retaining ring sales and marketing. Marketing, sales, credit and
customer service functions of the North American retaining ring
29
<PAGE> 31
business have been consolidated into a new location at Breeze-Eastern's
premises. This consolidation has facilitated the creation of a single sales
force, price book and discount policy and brand image.
MANUFACTURING AND PRODUCTION
The primary production processes in the Company's specialty fastener
segment include high-speed metal stamping, wire-forming, cold forming,
machining, heat treating and plating. The products consist primarily of small
carbon steel and stainless steel fasteners and assemblies that have low per-unit
prices and are generally sold in large quantities. These products require a high
level of engineering content and value can be added during the customer's design
phase. The quality, condition and technology of the tools used in the production
of such parts is the single most critical aspect of the manufacturing process.
The rescue hoist and cargo hook products are manufactured using primarily
purchased parts, such as motors and cables, which are produced to exacting
specifications, as well as "mission-critical" parts manufactured by
Breeze-Eastern. All of the finished products are engineered and require rigorous
testing procedures.
The following table sets forth certain information concerning the Company's
principal manufacturing facilities for its continuing operations:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
LOCATION FUNCTION OWNERSHIP FOOTAGE
- ------------------------------------ --------------------------------- ---------- -----------
<S> <C> <C> <C>
SPECIALTY FASTENER SEGMENT
Saltsburg, Pennsylvania Breeze Industrial offices and Owned 100,000
manufacturing plant
Mountainside, New Jersey Palnut offices and manufacturing Owned 142,000
plant
Irvington, New Jersey IRR manufacturing plant Owned 37,000
Somerset, New Jersey Seeger engineering and Leased 104,000
manufacturing plant
Konigstein, Germany Seeger Group offices and Owned 149,000
Seeger-Orbis manufacturing plant
Eichen, Germany Seeger-Orbis manufacturing plant Owned 51,000
Bingley, U.K. Anderton offices and Owned 124,000
manufacturing plant
Sao Paulo, Brazil Seeger-Reno offices and Owned 85,000
manufacturing plant
Frittlingen, Germany Pebra offices and manufacturing Owned 30,000
plant
Minneapolis, Minnesota TCR offices and manufacturing Leased 130,000
plant
RESCUE HOIST AND CARGO HOOK SEGMENT
Union, New Jersey Breeze-Eastern offices and Owned 188,000
manufacturing plant; U.S.
retaining ring marketing, sales,
credit and customer service
offices
</TABLE>
The Company believes that such facilities are suitable and adequate and
that additional space, if necessary, will be available. The Company continues to
own or lease properties that it no longer needs in its operations. These
properties are located in California, Pennsylvania, New York, New Jersey,
Illinois and North Carolina. In some instances, the properties are leased or
subleased and in nearly all instances these properties are for sale. The
properties in New York and New Jersey are the subject of active sales
negotiations and the property in North Carolina was recently sold.
30
<PAGE> 32
Currently, the Company is evaluating the consolidation of certain of its
operations. The Company has undertaken a comprehensive review of manufacturing
processes, floor layout, headcount and capacity to improve the profitability of
its businesses. The Company's Eichen, Germany retaining ring production facility
has ceased operations and is expected to be fully closed by the end of the third
quarter of fiscal 1998 with approximately two-thirds of the business to be
transferred to the Bingley, U.K. facility and the balance to the Konigstein,
Germany facility.
PATENTS
The Company currently holds a number of U.S. and international patents,
covering a variety of products and processes. Although the Company believes
patent protection to be valuable in certain circumstances, management does not
believe that the termination, expiration or infringement of one or more of the
Company's patents would have a material adverse effect on the business or
prospects of the Company.
The Company is not involved in any material patent infringement litigation
and believes that its processes and products do not infringe on the intellectual
property rights of others; however, there can be no assurance that a material
patent infringement claim will not be asserted against the Company in the
future. The Company has from time to time asserted infringement claims by notice
to third parties. Such claims, however, have been settled by the Company and
have not resulted in litigation.
EMPLOYEES
As of October 26, 1997, the Company employed 1,557 persons, including
approximately 327 unionized employees at three North American manufacturing
facilities who are subject to collective bargaining agreements and approximately
226 employees at five non-U.S. manufacturing facilities who are members of trade
unions or the local equivalents. The Company has not experienced any work
stoppages during the last five years. Management believes that its relations
with its employees are good. As of October 26, 1997, there were 1,367 employees
associated with the specialty fastener products segment, 170 employees with the
rescue hoist and cargo hook products segment and 20 employees with the corporate
office.
ENVIRONMENTAL MATTERS
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property and may be held liable to a governmental
entity or to third parties for property damage and for investigation and
clean-up costs incurred by such parties in connection with the contamination.
Such laws typically impose clean-up responsibilities and liability without
regard to whether the owner knew of or caused the presence of the contaminants,
and the liability under such laws has been interpreted to be joint and several
unless the harm is divisible and there is a reasonable basis for allocation of
responsibility. The costs of investigation, remediation or removal of such
substances, or the failure to properly remediate the contamination of such
property, may adversely affect the owner's ability to sell such property or to
borrow using such property as collateral. Persons who arrange for the disposal
or treatment of hazardous or toxic substances at a disposal or treatment
facility also may be liable for the costs of removal or remediation of a release
of hazardous or toxic substances at such disposal or treatment facility, whether
or not such facility is owned or operated by such person. In addition, some
environmental laws create a lien on the contaminated site in favor of the
government for damages and costs incurred in connection with the contamination.
Finally, the owner of the site may be subjected to common law claims by third
parties based on damages and costs resulting from environmental contamination
emanating from such site.
The Company has commenced environmental site assessments and clean-up
feasibility studies to determine the presence, extent and sources of any
environmental contamination at a site in Pennsylvania which continues to be
owned although the related business has been sold. Although no governmental
action requiring remediation has been taken at this time, the Company is working
in cooperation with the relevant state authority and any remedial work required
to be performed would be subject to the approval of such authority. A design
report for implementation of a portion of a remedy at the Pennsylvania site has
been
31
<PAGE> 33
prepared and submitted to the Commonwealth of Pennsylvania. At June 29, 1997,
the balance of the Company's clean-up reserve was $2.0 million, which amount is
payable over the next several years. In addition, the Company is pursuing
recovery of a portion of clean-up costs in litigation with several of its
insurance carriers. The Company expects that remediation work at the
Pennsylvania site will not be completed before fiscal 2000.
The Company also continues to participate in environmental assessments and
remediation work at 13 other locations, which include operating facilities,
facilities for sale and previously owned facilities. The Company estimates that
its potential cost for implementing corrective action at these sites will not
exceed $1.0 million, which amount is payable over the next several years, and
has provided for the estimated costs in its accrual for environmental
liabilities.
In addition, the Company has been named as a potentially responsible party
in six environmental proceedings pending in several other states in which it is
alleged that the Company was a generator of waste that was sent to landfills and
other treatment facilities and, as to several sites, it is alleged that the
Company was an owner or operator. Such properties generally relate to businesses
which have been sold or discontinued. It is not possible to reliably estimate
the costs associated with any remedial work to be performed until studies at
these sites have been completed, the scope of work defined and a method of
remediation selected and approved by the relevant state authorities, and the
costs allocated among the potentially responsible parties.
LEGAL PROCEEDINGS
During the ordinary course of business, the Company, from time to time, is
threatened with or becomes a party to legal actions and other proceedings in
addition to those referenced under the caption "-- Environmental Matters."
Management is of the opinion that, after taking into consideration information
furnished by its counsel, the outcome of currently known actions and proceedings
to which it is a party will not, singly or in the aggregate, have a material
adverse effect on the business, financial condition, results of operations and
cash flow of the Company.
32
<PAGE> 34
MANAGEMENT
The following table sets forth certain information with respect to the
executive officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ ---- --------------------------------------------------------
<S> <C> <C>
Michael J. Berthelot.......... 47 Chairman of the Board of Directors and Chief Executive
Officer
Patrick K. Bolger............. 62 President, Chief Operating Officer and Director
Chandler J. Moisen............ 63 Executive Vice President
Joseph F. Spanier............. 51 Vice President, Chief Financial Officer and Treasurer
Winston Lau................... 51 Vice President of Operations
Gerald C. Harvey.............. 47 Vice President, Secretary and General Counsel
Gideon Argov.................. 41 Director
Walter Belleville............. 70 Director
Thomas V. Chema............... 50 Director
Michel Glouchevitch........... 43 Director
James A. Lawrence............. 44 Director
William J. Recker............. 55 Director
</TABLE>
MR. BERTHELOT has served as the Chairman of the Board of Directors and
Chief Executive Officer of the Company since July 1995 and as a director since
January 1991. In September 1991, he became Vice Chairman of the Board of
Directors and, on January 1, 1992, he became acting President and Chief
Executive Officer of the Company. From July to September 1992, Mr. Berthelot was
removed from his Vice Chairman, acting President and Chief Executive Officer
positions. From October 1992 to July 1995, Mr. Berthelot served as the Company's
Chairman of the Board, President and Chief Executive Officer. Mr. Berthelot has
been Chief Executive Officer of Canterbury Holdings Corporation, a private
investment company, since September 1981. From 1989 to 1992, he was a partner in
the certified public accounting/management consulting firm of Barnes, Wendling,
Cook & O'Connor, Inc.
MR. BOLGER has served as President and Chief Operating Officer of the
Company since July 1995. He joined the Company as Group Vice
President -- Aerospace Products in January 1990 and became Executive Vice
President, Chief Operating Officer and a director in October 1992. From August
to October 1992, Mr. Bolger served as one of three executive officers in the
Company's Office of the President. Prior to joining the Company, he was Group
Vice President of the Hamilton Standard Division of United Technologies
Corporation, which manufactures control systems for the aerospace industry.
MR. MOISEN has served as Executive Vice President of the Company since
January 1997. He joined the Company in 1991 and served as Vice President,
Treasurer and Chief Financial Officer of the Company from August 1991 to
December 1996 and as Senior Vice President from October 1992 to December 1996.
From August to October 1992, Mr. Moisen served as one of three executive
officers in the Company's Office of the President. From 1989 to 1991, Mr. Moisen
served as Senior Vice President and Chief Financial Officer of G-Tech Corp., a
computer hardware and software manufacturer.
MR. SPANIER has served as Vice President, Chief Financial Officer and
Treasurer of the Company since January 1997. From November 1996 to January 1997,
he served as the Company's Vice President of Finance. From November 1994 to
November 1996, he served as Chief Financial Officer and Vice President of
Financial Administration of MG Industries, a manufacturer of industrial gases
and a subsidiary of Hoechst AG. From 1990 to November 1994, Mr. Spanier was Vice
President and Corporate Controller of Quaker Chemical Corporation ("Quaker"), a
manufacturer of chemical specialties. From May to November 1994, he also served
as Treasurer of Quaker.
MR. LAU has served as the Company's Vice President of Operations since
November 1995. In April 1996, he became President of the Company's Palnut, IRR
and Seeger business units. From June 1994 to November 1995, Mr. Lau was Vice
President, International of Crane Company. From November 1991 to
33
<PAGE> 35
May 1994, he was President and CEO of Crane Canada Inc., a manufacturer of
industrial and commercial valves and plumbing fixtures and a national
distributor of plumbing supplies. Mr. Lau previously held various executive
positions with the Ingersoll-Rand Company in MIS, operations, marketing,
distribution, finance and international operations.
MR. HARVEY has served as Vice President, Secretary and General Counsel of
the Company since February 1996. From 1994 to 1996, Mr. Harvey was a member of
the law firm of Pfaltz & Woller, P.A. and, from 1988 to 1994, he was a member of
the law firm of Hannoch Weisman, A Professional Corporation.
MR. ARGOV has been a director of the Company since March 1995. Since 1991,
he has been Chairman, President and Chief Executive Officer of Kollmorgen
Corporation, a $230 million diversified technology company that manufactures
high performance motion control and electro-optical instruments. From 1988 to
1991, Mr. Argov was President, Chief Executive Officer and a principal of High
Voltage Engineering Corporation, a $150 million diversified electrical producer
of industrial controls, instrumentation and industrial machinery.
MR. BELLEVILLE has been a director of the Company since June 1992. Since
1983, he has been Chief Executive Officer and Chairman of the Board of ATI
Machinery, Inc., the largest Caterpillar tractor rental and leasing company in
the western U.S. Since 1985, he has also served as Chairman of the Board of
Sav-Trac of Arizona, Inc., a heavy equipment repair facility. In addition, from
1985 to 1995, Mr. Belleville served as President and Chief Executive Officer of
Happy Horizons, Inc., an aircraft brokerage firm, and President of Pacific Plus,
Inc., a consulting firm that specializes in turnarounds of troubled companies.
MR. CHEMA has been a director of the Company since September 1992. Since
1989, he has been a partner in the Cleveland, Ohio law firm of Arter & Hadden,
specializing in energy and telecommunications consulting. From January 1990 to
February 1996, he served as Chairman of the Ohio Building Authority, an
independent state agency that annually issues approximately $650 million of
bonds and is responsible for financing and operating state office buildings and
other facilities for the State of Ohio. From May 1990 to July 1995, Mr. Chema
also served as Executive Director of the Gateway Economic Development
Corporation of Greater Cleveland, a not-for-profit corporation chartered to
build a baseball stadium and arena in downtown Cleveland. Mr. Chema is President
of Gateway Consultants, Inc., a firm he founded in 1995 to provide consulting
services relative to the financing and development of public assembly facilities
such as ballparks, stadiums and arenas.
MR. GLOUCHEVITCH has been a director of the Company since May 1996. Since
1992, he has been a Managing Director of Triumph Capital Group, Inc., a manager
of institutional funds making private equity investments in middle market
companies. From 1988 to 1991, he was a general partner in Riordan Venture
Management, where he managed the personal assets of Richard J. Riordan, now
mayor of Los Angeles.
MR. LAWRENCE has been a director of the Company since September 1992. Since
1996, he has been Executive Vice President and Chief Financial Officer of
Northwest Airlines, Inc. From 1993 to 1996, he served as President and Chief
Executive Officer, Asia/Middle East/Africa of Pepsi-Cola Company, the unit of
PepsiCo responsible for soft drink operations outside North America. From 1992
to 1993, he served as Executive Vice President of Pepsi-Cola International. From
1983 to 1992, Mr. Lawrence was a partner of LEK Partnership, a general
partnership organized in England to provide management consulting and merger and
acquisition advisory services. From 1986 to 1992, he also served as the Chairman
of LEK Consulting Inc., the U.S. operating subsidiary of LEK Partnership.
MR. RECKER has been director of the Company since October 1997. Since 1990,
he has been Managing Director, President and CEO of Gretag Imaging Group, Inc.,
an independent manufacturer of a broad line of photo finishing equipment. Mr.
Recker also serves on the Board of Directors of Gretag-Macbeth AG, a public
company, traded on the Swiss Stock Exchange.
34
<PAGE> 36
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of October 26, 1997, and as adjusted to reflect the
completion of the Offering with respect to (i) each person who is known by the
Company to be the beneficial owner of 5% or more of the then outstanding shares
of Common Stock, (ii) each director and executive officer, (iii) each of the
Selling Stockholders and (iv) all directors and executive officers as a group:
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES OF COMMON STOCK
BENEFICIALLY SHARES OF BENEFICIALLY
OWNED PRIOR TO THE COMMON OWNED AFTER THE
OFFERING (1) STOCK TO BE OFFERING
------------------------ SOLD IN ----------------------
NAME NUMBER PERCENTAGE THE OFFERING NUMBER PERCENTAGE
- ---------------------------------------- --------- ---------- --------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Arch C. Scurlock
c/o Research Industries, Incorporated
(2)
123 North Pitt Street
Alexandria, Virginia 22314.............. 1,146,740(3) 22.5 -0- 1,146,740 18.5
Kennedy Capital Management, Inc. (2)
10829 Olive Blvd.
St. Louis, Missouri 63141............... 403,425(4) 7.9 -0- 403,425 6.5
Michael J. Berthelot
c/o TransTechnology Corporation
150 Allen Road
Liberty Corner, New Jersey 07938........ 369,953(5) 7.1 40,000 329,953 5.3
Dimensional Fund Advisors, Inc. (2)
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401.......... 356,900(6) 7.0 -0- 356,900 5.8
FMR Corp. (2)
82 Devonshire Street
Boston, Massachusetts 02109............. 333,900(7) 6.5 -0- 333,900 5.4
Ryback Management Corporation (2)
7711 Carondelet Avenue Box 16900
St. Louis, Missouri 63105............... 319,500(8) 6.3 -0- 319,500 5.2
Patrick K. Bolger....................... 73,342(9) 1.4 40,000 33,342 *
Chandler J. Moisen...................... 38,664(10) * 20,000 18,664 *
Joseph F. Spanier....................... 6,172(11) * -0- 6,172 *
Winston Lau............................. 3,372(12) * -0- 3,372 *
Gerald C. Harvey........................ 3,359(13) * -0- 3,359 *
Gideon Argov............................ 4,337 * -0- 4,337 *
Walter Belleville....................... 8,960(14) * -0- 8,960 *
Thomas V. Chema......................... 1,899(15) * -0- 1,899 *
Michel Glouchevitch..................... 14,152(16) * -0- 14,152 *
James A. Lawrence....................... 60,339(17) 1.2 -0- 60,339 *
William J. Recker....................... -0- * -0- -0- *
All directors and executive officers
as a group (12 persons)................. 584,549(18) 11.0 100,000 484,549 7.6
</TABLE>
- ---------------
* Less than 1%.
35
<PAGE> 37
<TABLE>
<C> <S>
(1) Unless otherwise indicated in these footnotes, each stockholder had sole voting and
investment power with respect to the shares of Common Stock beneficially owned. All
share amounts reflect beneficial ownership determined pursuant to Rule 13d-3 under the
Securities and Exchange Act of 1934, as amended (the "Exchange Act").
(2) Based on the most recent Schedule 13D or 13G on file with the Commission.
(3) Includes 1,100,000 shares of Common Stock owned by Research Industries, Incorporated
("RII"); Dr. Scurlock owns 95% of the outstanding shares of capital stock of RII and
may be deemed to beneficially own the 1,100,000 shares of Common Stock owned by RII.
(4) Kennedy Capital Management, Inc., an investment adviser registered under the Investment
Advisers Act of 1940, as amended (the "IAA"), has sole voting power with respect to
379,400 shares and sole dispositive power with respect to 403,425 shares.
(5) Includes options exercisable within 60 days to purchase 129,000 shares of Common Stock.
(6) Dimensional Fund Advisors, Inc., ("Advisors"), an investment adviser registered under
the IAA, has sole voting power with respect to 215,800 shares and sole dispositive
power with respect to 356,900 shares. Persons who are officers of Advisors also serve
as officers of DFA Investment Dimensions Group Inc. (the "Fund") and The DFA Investment
Trust Company (the "Trust"), each an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "ICA"). In their capacities
as officers of the Fund and the Trust, such persons have sole voting power with respect
to 99,100 shares and 42,000 shares, respectively.
(7) As reported in Schedule 13G filed by FMR Corp. on February 14, 1997 (the "Schedule
13G"), Fidelity Management & Research Company ("Fidelity Research"), a wholly-owned
subsidiary of FMR Corp. and an investment adviser registered under the IAA,
beneficially owns 333,900 shares. Fidelity Low-Priced Stock Fund, an investment company
registered under the ICA, beneficially owns 333,900 shares. In addition, the Schedule
13G reports that each of Edward C. Johnson III, the Chairman of FMR Corp., and FMR
Corp., through its control of Fidelity Research, and certain related funds claim to
have sole dispositive power as to 333,900 shares owned by such funds. The sole voting
power of such shares resides in the respective Board of Trustees of each of the various
funds.
(8) As reported in Schedule 13G filed by Ryback Management Corporation on January 27, 1997,
Lindner Growth Fund, an investment company registered under the ICA is the beneficial
owner of 300,000 shares. Lindner Growth Fund is a separate series of the Lindner
Investment Series Trust, an investment company registered under the ICA. Ryback
Management Corporation, an investment adviser registered under the IAA, beneficially
owns 19,500 shares. Ryback has the sole power to vote all 319,500 shares held by both
Ryback and Lindner.
(9) Includes options exercisable within 60 days to purchase 59,000 shares of Common Stock.
(10) Includes 14,342 shares held jointly with Mr. Moisen's spouse and options exercisable
within 60 days to purchase 22,700 shares of Common Stock.
(11) Includes options exercisable within 60 days to purchase 5,000 shares of Common Stock.
(12) Includes options exercisable within 60 days to purchase 3,000 shares of Common Stock.
(13) Includes options exercisable within 60 days to purchase 3,083 shares of Common Stock.
(14) Includes 3,000 shares held jointly with Mr. Belleville's spouse and options exercisable
within 60 days to purchase 3,000 shares of Common Stock.
(15) Includes options exercisable within 60 days to purchase 714 shares of Common Stock.
(16) Includes options exercisable within 60 days to purchase 3,333 shares of Common Stock.
(17) Includes options exercisable within 60 days to purchase 25,000 shares of Common Stock.
(18) Includes options exercisable within 60 days to purchase 252,830 shares of Common Stock.
</TABLE>
36
<PAGE> 38
DESCRIPTION OF CAPITAL STOCK
The Company's Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), provides for authorized capital stock of 15,000,000 shares,
consisting of 14,700,000 shares of Common Stock, par value $.01 per share, and
300,000 shares of preferred stock, par value $1.00 per share ("Preferred
Stock"). As of October 26, 1997, 5,099,759 shares of Common Stock were issued
and outstanding and no shares of Preferred Stock were issued and outstanding.
The following summary of the material terms of the capital stock of the Company
does not purport to be complete and is subject to and qualified in its entirety
by reference to the Certificate of Incorporation and Bylaws.
COMMON STOCK
All shares of Common Stock offered hereby will be duly authorized, fully
paid and nonassessable. Subject to the preferential rights of any other class or
series of stock, holders of Common Stock are entitled to receive dividends on
such stock if, as and when authorized and declared by the Board of Directors out
of assets legally available therefor and to share ratably in the assets of the
Company legally available for distribution to its shareholders in the event of
the liquidation, dissolution or winding up after payment of or adequate
provision for all known debts and liabilities of the Company.
Each outstanding share of Common Stock entitles the holder to one vote on
all matters submitted to a vote of stockholders, including the election of
directors and, except as provided with respect to any other class or series of
stock, the holders of such shares will possess the exclusive voting power. There
is no cumulative voting in the election of directors, which means that the
holders of a majority of the outstanding shares of Common Stock can elect all of
the directors then standing for election and the holders of the remaining shares
will not be able to elect any directors. Holders of shares of Common Stock have
no preference, conversion, exchange, sinking fund, redemption or appraisal
rights and have no preemptive rights to subscribe for any securities of the
Company. Shares of Common Stock have equal dividend, liquidation and other
rights.
PREFERRED STOCK
The Board of Directors is authorized to issue Preferred Stock in series and
to fix designations, powers, preferences, rights, qualifications, limitations or
restrictions of any such series, including, without limitation, the rate and
nature of dividends, the price and terms and conditions on which shares may be
redeemed, the amount payable in the event of voluntary or involuntary
liquidation, the terms and conditions for conversion or exchange into any other
class or series of stock, voting rights, preemptive rights and other terms. To
date, the Board of Directors has not so fixed any such Preferred Stock. Although
no Preferred Stock is currently outstanding, because the Board of Directors has
the power to establish the preferences and rights of the shares of any series of
such Preferred Stock, it may afford holders of any such Preferred Stock
preferences, powers and rights (including voting rights), senior to the rights
of holders of Common Stock, which could adversely affect the holders of Common
Stock.
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain Effects of Authorized But Unissued Stock. Under the Certificate of
Incorporation, as of October 26, 1997, after giving effect to the Offering,
there were approximately 8,510,241 shares of Common Stock and 300,000 shares of
Preferred Stock available for future issuance. These additional shares may be
utilized for a variety of corporate purposes, including future public offerings
to raise additional capital or to facilitate corporate acquisitions.
One of the effects of the existence of unissued and unreserved Common Stock
and Preferred Stock may be to enable the Board of Directors to issue shares to
persons friendly to current management that could render more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise, and thereby protect the continuity of
the Company's management. Such additional shares also could be used to dilute
the stock ownership of persons seeking to obtain control of the Company.
37
<PAGE> 39
Delaware Business Combination Act. Section 203 (the "Delaware Business
Combination Act") of the Delaware General Corporation Law generally imposes a
three-year moratorium on business combinations between a Delaware corporation
and an "interested stockholder" (in general, a stockholder owning 15% or more of
a corporation's outstanding voting stock) or an affiliate or associate thereof
unless (i) prior to an interested stockholder becoming such, the board of
directors of the corporation approved either the business combination or the
transaction resulting in the interested stockholder becoming such; (ii) upon
consummation of the transaction resulting in an interested stockholder becoming
such, the interested stockholder owns at least 85% of the voting stock
outstanding at the time the transaction commenced (excluding, from the
calculation of outstanding shares, shares beneficially owned by directors who
are also officers and certain employee stock plans); or (iii) on or after an
interested stockholder becomes such, the business combination is approved by (a)
the board of directors and (b) holders of at least two-thirds of the outstanding
shares (other than those shares beneficially owned by the interested
stockholder) at a meeting of stockholders.
The Delaware Business Combination Act applies to certain public companies
incorporated in the State of Delaware unless the corporation expressly elects
not to be governed by such legislation and sets forth such election in (i) the
corporation's original certificate of incorporation; (ii) an amendment to the
corporation's bylaws as adopted by the corporation's board of directors within
90 days of the effective date of such legislation; or (iii) an amendment to the
corporation's certificate of incorporation or bylaws as approved by (in addition
to any other vote required by law) a majority of the shares entitled to vote
(however, such amendment would not be effective until twelve months after the
date of its adoption and would not apply to any business combination between the
corporation and any person who became an interested stockholder on or prior to
such adoption of such amendment). The Company has not made such an election and
is therefore subject to the Delaware Business Combination Act.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Wachovia Bank &
Trust Co. N.A.
38
<PAGE> 40
UNDERWRITING
The underwriters named below (the "Underwriters"), for whom ABN AMRO
Chicago Corporation and EVEREN Securities, Inc. are acting as representatives
(the "Representatives"), have severally agreed, subject to the terms and
conditions specified in the underwriting agreement among the Company, the
Representatives and the Selling Stockholders (the "Underwriting Agreement"), to
purchase from the Company and the Selling Stockholders the respective number of
shares of Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
UNDERWRITER OF COMMON STOCK
------------------------------------------------------------------- ---------------
<S> <C>
ABN AMRO Chicago Corporation.......................................
EVEREN Securities, Inc.............................................
---------
Total.................................................... 1,100,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions and that the Underwriters will be
obligated to purchase all of the shares of Common Stock offered hereby (other
than those shares covered by the over-allotment option described below) if any
are purchased. The Underwriting Agreement provides that, in the event of a
default by an Underwriter, in certain circumstances the purchase commitments of
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public initially at the
public offering price set forth on the cover page of this Prospectus and to
certain selected dealers at such public offering price less a concession not in
excess of $ per share, and that the Underwriters and such dealers may
allow to certain other dealers, including any Underwriters, a discount not in
excess of $ per share. After the initial offering to the public, the
public offering price and other selling terms may be changed by the
Representatives.
The Company has granted to the Underwriters an option, exercisable by ABN
AMRO Chicago Corporation, expiring at the close of business on the 30th day
after the date of this Prospectus, to purchase up to an aggregate of 165,000
additional shares of Common Stock at the public offering price less the
underwriting discount as set forth on the cover page of this Prospectus. Such
option may be exercised only to cover over-allotments in the sale of the shares
of Common Stock offered hereby. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of Common Stock as
it was obligated to purchase pursuant to the Underwriting Agreement.
Each of the Company's executive officers and directors and each Selling
Stockholder, who collectively will own 483,549 shares of Common Stock upon the
completion of the Offering, and the Company, have agreed for a period of 90 days
after the date of this Prospectus not to register for sale, sell, offer,
contract to sell, grant an option for sale or otherwise dispose of or transfer
any capital stock of the Company or any securities convertible into or
exchangeable or exercisable for capital stock of the Company, without the prior
written consent of ABN AMRO Chicago Corporation, except (i) in the case of the
Company, issuances pursuant to the exercise of employee stock options granted
under the Company's existing incentive plans and,
39
<PAGE> 41
(ii) in the case of the executive officers and directors and each Selling
Stockholder, permitted transfers, gifts and pledges of shares where the donees
or pledgees, as the case may be, agree in writing to be bound by the terms of
such agreement.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including civil liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
The Common Stock is traded on the New York Stock Exchange under the symbol
"TT."
The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act.
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Common Stock in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the
Representatives to reclaim a selling concession from a syndicate member when the
Common Stock originally sold by such syndicate member is purchased in a
syndicate covering transaction to cover syndicate short positions. Such
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the Common Stock to be higher than it would otherwise be in
the absence of such transactions. These transactions may be effected on the New
York Stock Exchange or otherwise and, if commenced, may be discontinued at any
time.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholders by Hahn Loeser & Parks LLP, Cleveland,
Ohio. Certain legal matters will be passed upon for the Underwriters by Jones,
Day, Reavis & Pogue, Chicago, Illinois. Jones, Day, Reavis & Pogue from time to
time acts as counsel in certain matters for the Company.
EXPERTS
The financial statements of the Company and its consolidated subsidiaries,
except The New Seeger Group (whose members are consolidated subsidiaries), as of
March 31, 1996 and 1997 and for each of the three years in the period ended
March 31, 1997 included in this Prospectus and the related financial statement
schedule incorporated by reference in this Prospectus, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are included and incorporated by reference herein. The financial statements of
The New Seeger Group as of March 31, 1996 and for the period then ended have
been audited by Arthur Andersen LLP as stated in their report included herein.
Such financial statements of the Company and its consolidated subsidiaries are
included herein in reliance upon the respective reports of such firms given upon
their authority as experts in accounting and auditing. The financial statements
of TCR as of December 31, 1996 and 1995 and for the years then ended
incorporated by reference in this Prospectus have been audited by Ocel, Heimer &
Associates, Ltd., independent auditors, as stated in their report incorporated
by reference herein. Such financial statements of TCR are incorporated by
reference herein in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing. Each of the foregoing firms are
independent auditors.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-2 (of which this Prospectus is a part) under the Securities Act, with respect
to the securities offered hereby. This Prospectus does not contain all
information set forth in the Registration Statement, certain portions of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information about the Company and the securities offered
hereby, reference is made to the Registration Statement, including the exhibits
filed as a part thereof and otherwise incorporated therein. Statements made in
this Prospectus as to
40
<PAGE> 42
the contents of any document referred to are not necessarily complete, and in
each instance reference is made to such exhibit for a more complete description
and each such statement is qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files periodic reports, proxy statements and
other information with the Commission. The Registration Statement, including
exhibits thereto, as well as such reports, proxy statements and other
information filed by the Company with the Commission can be inspected, without
charge, and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, 7 World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 at prescribed rates. The
Common Stock is listed on the New York Stock Exchange. Reports, proxy statements
and other information filed by the Company with the Commission may be inspected
and copied at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005. The Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants,
including the Company, that file electronically with the Commission and that is
located at http://www.sec.gov. The Registration Statement was filed
electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act are incorporated by reference in this Prospectus and made a part hereof: the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1997;
the Company's Current Reports on Form 8-K dated April 29, 1997 (as amended by
Form 8-K/A) and October 17, 1997; and the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 29, 1997. Any statement contained in any
document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein modifies, supersedes or replaces such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of any such person, a copy of any or all of the documents incorporated
herein by reference (other than exhibits to such documents, unless such exhibits
are specifically incorporated by reference in such documents). Requests for such
copies should be directed to TransTechnology Corporation, 150 Allen Road,
Liberty Corner, New Jersey 07938, telephone number (908) 903-1600, Attention:
Gerald C. Harvey, Vice President, Secretary and General Counsel.
41
<PAGE> 43
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
TransTechnology Corporation and Subsidiaries:
Audited Financial Statements
Independent Auditors' Reports....................................................... F-2
Consolidated Balance Sheets as of March 31, 1997 and 1996........................... F-4
Statements of Consolidated Operations for the Years Ended March 31, 1997, 1996 and
1995............................................................................. F-5
Statements of Consolidated Cash Flows for the Years Ended March 31, 1997, 1996 and
1995............................................................................. F-6
Statements of Consolidated Stockholders' Equity for the Years Ended March 31, 1997,
1996 and 1995.................................................................... F-7
Notes to Consolidated Financial Statements.......................................... F-8
Unaudited Financial Statements
Condensed Consolidated Balance Sheets as of June 29, 1997 and March 31, 1997........ F-23
Condensed Statements of Consolidated Operations for the Three Months Ended June 29,
1997 and June 30, 1996........................................................... F-24
Condensed Statements of Consolidated Cash Flows for the Three Months Ended June 29,
1997 and June 30, 1996........................................................... F-25
Condensed Statements of Consolidated Stockholders' Equity for the Three Months Ended
June 29, 1997.................................................................... F-26
Notes to Condensed Consolidated Financial Statements................................ F-27
</TABLE>
F-1
<PAGE> 44
INDEPENDENT AUDITORS' REPORT
To The Stockholders and the Board of Directors of TransTechnology Corporation:
We have audited the accompanying consolidated balance sheets of TransTechnology
Corporation and subsidiaries as of March 31, 1997 and 1996, and the related
statements of consolidated operations, stockholders' equity and cash flows for
each of the three years in the period ended March 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of The New Seeger Group
(whose members are consolidated subsidiaries) for the period ended March 31,
1996, which statements reflect total assets and total revenues constituting 32%
and 28%, respectively, of the related consolidated totals for the year. These
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to the amounts included for The New
Seeger Group for the period ended March 31, 1996, is based solely on the report
of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of TransTechnology Corporation and subsidiaries at March 31,
1997 and 1996, and the results of their operations and their cash flows for each
of the three years in the period ended March 31, 1997 in conformity with
generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
May 12, 1997
F-2
<PAGE> 45
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
The New Seeger Group:
We have audited the accompanying combined balance sheet in U.S. Dollars of The
New Seeger Group (as defined in notes 1 and 3) as of March 31, 1996, and the
related combined statements of income, shareholders' equity and cash flows for
the period July 1, 1995 though March 31, 1996 which, as described in Note 3,
have been prepared on the basis of accounting principles generally accepted in
the United States. These financial statements are the responsibility of The New
Seeger Group's management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements in U.S. Dollars referred to
above present fairly, in all material respects, the financial position of The
New Seeger Group as of March 31, 1996, and the results of their operations and
their cash flows for the period July 1, 1995 through March 31, 1996, in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN
Wirtschaftsprufungsgestllschaft
Steuerberatungsgesellschaft mbH
/s/ LAUPENMUHLEN
Laupenmuhlen
Wirtschaftsprufer
(certified auditor)
/s/ KUGLER
Kugler
Wirtschaftsprufer
(certified auditor)
Eschborn/Frankfurt/M.
May 28, 1996
F-3
<PAGE> 46
TRANSTECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents...................................................... $ 3,540 $ 2,362
Accounts receivable (net of allowance for doubtful accounts of $588 and $735 in
1997 and 1996, respectively)................................................. 28,392 28,368
Notes receivable............................................................... 1,838 1,258
Inventories.................................................................... 50,677 50,551
Prepaid expenses and other current assets...................................... 1,028 1,726
Deferred income taxes.......................................................... 4,293 1,037
Assets held for sale........................................................... 7,617 9,980
-------- --------
Total current assets.................................................... 97,385 95,282
-------- --------
Property:
Land........................................................................... 12,272 12,616
Buildings...................................................................... 20,636 20,523
Machinery and equipment........................................................ 42,760 39,600
Furniture and fixtures......................................................... 6,349 5,398
Leasehold improvements......................................................... 190 189
-------- --------
Total................................................................... 82,207 78,326
Less accumulated depreciation and amortization................................. 23,594 17,749
-------- --------
Property -- net......................................................... 58,613 60,577
-------- --------
Other Assets:
Notes receivable............................................................... 11,125 12,824
Costs in excess of net assets of acquired businesses (net of accumulated
amortization of $3,869 and $3,308 in 1997 and 1996, respectively)............ 18,878 16,411
Other.......................................................................... 13,135 14,273
-------- --------
Total other assets...................................................... 43,138 43,508
-------- --------
TOTAL............................................................................ $199,136 $199,367
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Current portion of long-term debt.............................................. $ 5,907 $ 6,026
Accounts payable -- trade...................................................... 11,050 14,719
Accrued compensation........................................................... 6,845 6,473
Accrued income taxes........................................................... 1,632 1,415
Other current liabilities...................................................... 12,844 9,301
-------- --------
Total current liabilities............................................... 38,278 37,934
-------- --------
Long-term Debt Payable to Banks and Others....................................... 67,516 72,565
-------- --------
Other Long-term Liabilities...................................................... 15,898 16,398
-------- --------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock -- authorized, 300,000 shares; none issued
Common stock -- authorized, 14,700,000 shares of $.01 par value; issued,
5,316,971 and 5,276,463 shares in 1997 and 1996, respectively................ 53 53
Additional paid-in capital..................................................... 46,745 46,188
Retained earnings.............................................................. 36,937 29,467
Other stockholders' equity..................................................... (2,352) (1,083)
-------- --------
81,383 74,625
Less treasury stock, at cost -- 289,237 and 177,500 shares in 1997 and 1996,
respectively................................................................. (3,939) (2,155)
-------- --------
Total stockholders' equity.............................................. 77,444 72,470
-------- --------
TOTAL............................................................................ $199,136 $199,367
======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 47
TRANSTECHNOLOGY CORPORATION
STATEMENTS OF CONSOLIDATED OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net sales................................................. $ 178,684 $ 158,024 $ 101,122
Cost of sales............................................. 122,480 107,426 71,968
--------- --------- ---------
Gross profit.................................... 56,204 50,598 29,154
General, administrative and selling expenses.............. 35,309 31,812 17,051
Interest expense.......................................... 6,797 6,316 2,831
Interest income........................................... (1,202) (1,010) (760)
Royalty and other income.................................. (1,320) (820) (810)
--------- --------- ---------
Income from continuing operations before income taxes..... 16,620 14,300 10,842
Income taxes.............................................. 6,898 5,792 3,457
--------- --------- ---------
Income from continuing operations......................... 9,722 8,508 7,385
Discontinued operations:
Loss from operations (net of applicable tax benefits of
$323 and $1,619 for 1996 and 1995, respectively)..... -- (517) (2,602)
Loss from disposal (net of applicable tax benefits of
$663, $1,077 and $1,400 for 1997, 1996 and 1995,
respectively)........................................ (934) (617) (2,250)
--------- --------- ---------
Net income.............................................. $ 8,788 $ 7,374 $ 2,533
========= ========= =========
Earnings per share:
Income from continuing operations....................... $ 1.92 $ 1.67 $ 1.45
Loss from discontinued operations....................... (0.18) (0.22) (0.95)
--------- --------- ---------
Net income.............................................. $ 1.74 $ 1.45 $ 0.50
========= ========= =========
Number of shares used in computation of per share
information............................................. 5,064,000 5,093,000 5,109,000
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 48
TRANSTECHNOLOGY CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 8,788 $ 7,374 $ 2,533
Adjustments to reconcile net income to net cash provided
by operating activities:
Loss recognized on write down of marketable
securities.......................................... -- 2,613 --
Depreciation and amortization......................... 7,406 6,027 5,349
Provision for losses on accounts receivable........... 139 468 65
Loss (gain) on sale or disposal of fixed assets and
discontinued businesses............................. 64 (307) 704
Change in assets and liabilities -- net of
acquisitions and dispositions:
(Increase) decrease in accounts receivable.......... (620) 4,290 (2,672)
Decrease (increase) in inventories.................. 191 (6,098) 5,595
Decrease (increase) in assets held for sale......... 262 (1,915) (3,672)
(Increase) decrease in other assets................. (453) 4,825 (2,521)
(Decrease) increase in accounts payable............. (3,650) 462 3,211
Increase in accrued compensation.................... 553 2,226 1,041
Increase (decrease) in income tax payable........... 242 (676) (121)
Increase (decrease) in other liabilities............ 1,385 (8,577) (2,043)
-------- -------- --------
Net cash provided by operating activities........... 14,307 10,712 7,469
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions.................................... (3,602) (45,594) (15,952)
Capital expenditures..................................... (5,477) (6,471) (5,033)
Proceeds from sale of fixed assets and discontinued
business.............................................. 2,705 8,111 6,977
Decrease in notes receivable............................. 1,119 1,055 2,515
-------- -------- --------
Net cash used in investing activities................. (5,255) (42,899) (11,493)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings....................... 40,105 107,363 42,019
Payments on long-term debt............................... (45,273) (73,156) (36,289)
Proceeds from issuance of stock under stock option
plan.................................................. 365 188 202
Treasury stock purchases................................. (1,625) (65) (2,090)
Dividends paid........................................... (1,318) (1,325) (1,301)
-------- -------- --------
Net cash (used in) provided by financing activities...... (7,746) 33,005 2,541
-------- -------- --------
Effect of exchange rate changes on cash.................. (128) -- --
Increase (decrease) in cash and cash equivalents......... 1,178 818 (1,483)
Cash and cash equivalents at beginning of year........... 2,362 1,544 3,027
-------- -------- --------
Cash and cash equivalents at end of year................. $ 3,540 $ 2,362 $ 1,544
======== ======== ========
Supplemental information:
Interest payments........................................ $ 6,606 $ 5,036 $ 3,054
Income tax payments...................................... $ 3,810 $ 1,989 $ 1,573
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 49
TRANSTECHNOLOGY CORPORATION
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED COMMON STOCK TREASURY STOCK ADDITIONAL OTHER
MARCH 31, 1997, ------------------- ------------------- PAID-IN RETAINED STOCKHOLDERS'
1996 AND 1995 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) $65,953
Net income.................. -- -- -- -- -- 2,533 -- 2,533
Cash dividends ($.255 per
share).................... -- -- -- -- -- (1,301) -- (1,301)
Purchase of treasury
stock..................... -- -- (172,500) (2,090) -- -- -- (2,090)
Issuance of stock under
stock option plan......... 24,789 -- -- -- 202 -- -- 202
Issuance of stock under
incentive bonus
plan -- net............... 28,423 -- -- -- 317 -- (122) 195
Foreign translation
adjustments............... -- -- -- -- -- -- 54 54
Unrealized investment
holding losses............ -- -- -- -- -- -- (1,044) (1,044)
--------- --- -------- ------- ------- ------- ------- --------
BALANCE, MARCH 31, 1995....... 5,242,316 52 (172,500) (2,090) 45,802 23,418 (2,680) 64,502
Net income.................. -- -- -- -- -- 7,374 -- 7,374
Cash dividends ($.26 per
share).................... -- -- -- -- -- (1,325) -- (1,325)
Purchase of treasury
stock..................... -- -- (5,000) (65) -- -- -- (65)
Issuance of stock under
stock option plan......... 20,308 1 -- -- 187 -- -- 188
Issuance of stock under
incentive bonus
plan -- net............... 13,839 -- -- -- 199 -- (122) 77
Foreign translation
adjustments............... -- -- -- -- -- -- (894) (894)
Realized investment holding
losses.................... -- -- -- -- -- -- 2,613 2,613
--------- --- -------- ------- ------- ------- ------- --------
BALANCE, MARCH 31, 1996....... 5,276,463 53 (177,500) (2,155) 46,188 29,467 (1,083) 72,470
Net income.................. -- -- -- -- -- 8,788 -- 8,788
Cash dividends ($.26 per
share).................... -- -- -- -- -- (1,318) -- (1,318)
Purchase of treasury
stock..................... -- -- (100,000) (1,625) -- -- -- (1,625)
Issuance of stock under
stock option plan......... 30,381 -- -- -- 365 -- -- 365
Issuance of stock under
incentive bonus
plan -- net............... 10,127 -- (11,737) (159) 192 -- 75 108
Foreign translation
adjustments............... -- -- -- -- -- -- (1,061) (1,061)
Unrealized investment
holding losses............ -- -- -- -- -- -- (283) (283)
--------- --- -------- ------- ------- ------- ------- --------
BALANCE, MARCH 31, 1997....... 5,316,971 $ 53 (289,237) $(3,939) $ 46,745 $ 36,937 $(2,352) $77,444
========= === ======== ======= ======= ======= ======= ========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 50
TRANSTECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING PRINCIPLES
TransTechnology Corporation (the "Company") develops, manufactures and
sells a wide range of products in two industry segments, Specialty Fastener
Products and Rescue Hoist and Cargo Hook Products. The Company has manufacturing
facilities located in the United States, Germany, the United Kingdom and Brazil.
The Specialty Fastener Products Segment produces highly engineered precision
metal retaining rings, clamps, circlips and other fasteners primarily for the
automotive, heavy truck, industrial and toy markets and accounted for
approximately 81% of the Company's consolidated 1997 net sales. Through its
Rescue Hoist and Cargo Hook Products Segment, the Company develops,
manufactures, sells and services a complete line of sophisticated lifting and
restraining products -- principally helicopter rescue hoist and cargo hook
systems, and winches and hoists for aircraft and weapons systems, and accounted
for approximately 19% of the Company's consolidated 1997 net sales.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Principles of Consolidation -- The accompanying consolidated financial
statements include the accounts of TransTechnology Corporation and its
subsidiaries, all of which are wholly-owned. Intercompany balances and
transactions are eliminated in consolidation.
Related Party -- Research Industries Incorporated owns approximately 22% of
the Company's outstanding common stock. Two former directors of the Company are
the only shareholders of Research Industries Incorporated and each of these
directors had a consulting contract with the Company that expired during fiscal
1995. During fiscal 1995, the Company expensed and paid $0.7 million for these
contracts.
Accounting for Contracts -- All of the Company's contracts are firm
fixed-price. Sales and cost of sales on such contracts are recorded as
deliveries are made. Losses on contracts are recorded as they are identified.
Cash and Cash Equivalents -- The Company considers all highly liquid
investments with a maturity at date of acquisition of three months or less to be
cash equivalents.
Accounts Receivable -- Accounts receivable from the United States
Government represent billed receivables and substantially all amounts are
expected to be collected within one year. The Company has no amounts billed
under retainage provisions of contracts.
Inventories -- Inventories are stated at the lower of cost or market. Cost
is determined using the first-in, first-out method. Cost includes material,
labor and manufacturing overhead costs.
Property and Related Depreciation and Amortization -- Provisions for
depreciation are made on a straight-line basis over the estimated useful lives
of depreciable assets ranging from three to thirty years. Amortization of
leasehold improvements is computed on a straight-line basis over the shorter of
the estimated useful lives of the improvements or the terms of the leases. In
March 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," was issued. SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used or disposed of by an entity
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. During 1997 the
Company adopted this statement and determined that no impairment loss need be
recognized for applicable assets.
F-8
<PAGE> 51
TRANSTECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Costs in Excess of Net Assets of Acquired Businesses -- The difference
between the purchase price and the fair value of the net assets of acquired
businesses is included in the accompanying Consolidated Balance Sheets under the
caption "Costs in Excess of Net Assets of Acquired Businesses" and is being
amortized over 40 years, or shorter periods where deemed appropriate. The
Company has determined that there is no impairment in value since projected
future operating results on an undiscounted basis through the period such costs
in excess of net assets of acquired businesses are being amortized are expected
to be sufficient to absorb the amortization.
Earnings per Share -- Earnings per share are based on the weighted average
number of common shares and, if dilutive, common stock equivalents (stock
options) outstanding during each year.
Research and Development and Engineering Costs -- Research and development
and engineering costs in support of active products, which are charged to
expense when incurred, amounted to $2.0 million, $1.7 million and $1.4 million
in 1997, 1996 and 1995, respectively. Included in these amounts were
expenditures of $0.8 million, $0.9 million and $0.4 million in 1997, 1996 and
1995, respectively, which represent costs related to research and development
activities.
Foreign Currency Translation -- Pursuant to Statement of Financial
Accounting Standards No. 52, the assets and liabilities of the Company's
international operations, other than the operations located in a highly
inflationary country, have been translated into U.S. dollars at year-end
exchange rates, with resulting translation gains and losses accumulated as a
separate component of other stockholders' equity. Income and expense items are
converted into U.S. dollars at average rates of exchange prevailing during the
year. Translation adjustments of the operation located in a country with a
highly inflationary economy, are included as a component of operating income.
Income Taxes -- Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases.
Investments -- On March 1, 1994, the Company received 465,000 shares of
Mace Security International common stock, valued at $3.4 million, as partial
consideration for the sale of a division. In the fourth quarter of 1996, the
Company recorded a $2.6 million pretax charge to continuing operations to write
down the carrying value of these shares to their current market value as the
decline in value of these shares was determined to be other than temporary.
Gross unrealized holding losses of $0.3 million were reported as a reduction of
other stockholders' equity in the March 31, 1997 balance sheet.
Financial Instruments -- The Company does not hold or issue financial
instruments for trading purposes. Amounts to be paid or received under interest
rate swap agreements are recognized as increases or reductions in interest
expense in the periods in which they accrue. The Company enters into off-balance
sheet forward foreign exchange instruments in order to hedge purchase
commitments and certain foreign denominated long-term debt. Gains and losses on
these instruments are included in other income/expense.
New Accounting Standards -- In February 1997, the Financial Accounting
Standards Board adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share". SFAS No. 128 establishes standards for computing and
presenting earnings per share and is effective for the Company's fiscal year
ending March 31, 1998. The Company believes that the effect of implementing this
standard will not effect results differently than currently reported. In June
1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information", which will be
effective for the Company beginning in the fiscal year ending March 31, 1999.
SFAS No. 131 redefines how operating segments are determined and requires
expanded quantitative and qualitative disclosures relating to a
F-9
<PAGE> 52
TRANSTECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
company's operating segments. The Company has not yet completed its analysis of
which operating segments, if any, it will disclose differently than previously
reported.
Reclassifications -- Certain reclassifications have been made to prior
years to conform to the 1997 presentation.
2. DISCONTINUED OPERATIONS
In June 1995 and January 1996, the Company sold the domestic and European
portions of its computer graphics service operations, respectively, in two
separate transactions to two different buyers. These businesses operated under
the name TransTechnology Systems & Services and were classified as discontinued
operations in March 1995. The sale of the domestic portion for $0.7 million in
cash and $0.6 million in notes receivable was for book value, and the sale of
the European portion for $0.1 million in cash and $0.2 million in notes
receivable resulted in an after-tax gain on disposal of $0.1 million in 1996.
Additional after-tax disposal costs of $0.2 million were recorded in 1997 in
connection with these sales.
In August 1995, the Company sold its Electronics division for $4.4 million
in cash and $9.6 million in notes receivable. The sale of this operation
resulted in an after-tax gain on disposal of $0.2 million.
In March 1995, the Company sold substantially all of the assets and
business of its chaff products operation for $6.7 million in cash. The sale of
this operation resulted in an after-tax loss on disposal of $0.4 million.
Additional after-tax disposal costs of $0.2 million were recorded in 1996 in
connection with the sale. The Company retained the chaff avionics product line
and negotiated its sale separately in May 1995 for $0.3 million in cash and $0.7
million in notes receivable, resulting in an after-tax charge of $0.4 million.
In the fourth quarter of 1996, the Company recorded an after-tax charge of $0.4
million to record the anticipated loss on the sale of the facility that was
formerly used by this operation. Additional after-tax disposal costs of $0.1
million were recorded in 1997 related to the final sale of this facility.
Additional after-tax costs of $0.6 million, $0.7 million and $1.9 million
were recorded in 1997, 1996 and 1995, respectively, in connection with other
previously discontinued and sold operations. These additional costs represent
adjustments to previous estimates related primarily to legal and environmental
matters.
Operating results of the discontinued businesses were as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995
------ -------
<S> <C> <C>
Total sales................................................... $7,951 $35,515
====== =======
Loss before income taxes...................................... $ (840) $(4,221)
Income tax benefit............................................ 323 1,619
------ -------
Loss from operations.......................................... $ (517) $(2,602)
====== =======
</TABLE>
The loss from operations includes interest expense of $0.2 million and $0.5
million in 1996 and 1995, respectively.
Assets held for sale at March 31, 1997 and 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Inventory...................................................... $ 429 $ 529
Property....................................................... 6,577 8,039
Other assets................................................... 611 1,412
------ ------
Assets held for sale........................................... $7,617 $9,980
====== ======
</TABLE>
F-10
<PAGE> 53
TRANSTECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
3. ACQUISITIONS
On June 18, 1996, the Company acquired the Pebra hose clamp business from
Pebra GmbH Paul Braun i.K. for approximately $3.0 million in cash plus direct
acquisition costs. Pebra manufactures heavy duty hose clamps primarily for use
in the manufacture of heavy trucks in Europe.
On June 30, 1995, the Company acquired the Seeger Group of companies from a
unit of AB SKF of Goteborg, Sweden for approximately $43.0 million in cash plus
direct acquisition costs and the assumption of trade debts and accrued expenses.
The Seeger Group, headquartered in Konigstein, Germany, manufactures circlips,
snap rings and retaining rings.
Effective August 31, 1994, the Company acquired all of the outstanding
capital stock of Industrial Retaining Ring Company and its affiliated companies
for a total purchase price of $15.3 million in cash and the assumption of
liabilities. Industrial Retaining Ring Company manufactures retaining rings and
clips used primarily in the heavy equipment and industrial machinery industries.
4. INVENTORIES
Inventories at March 31 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Finished goods............................................... $21,897 $22,645
Work in process.............................................. 10,335 9,326
Purchased and manufactured parts............................. 18,445 18,580
------- -------
Total........................................................ $50,677 $50,551
======= =======
</TABLE>
5. INCOME TAXES
The components of total income (loss) from operations (including continuing
and discontinued operations) before income taxes were (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Domestic............................................ $12,167 $ 8,124 $3,694
Foreign............................................. 2,856 3,642 (723)
------- ------- ------
Total..................................... $15,023 $11,766 $2,971
======= ======= ======
</TABLE>
The provision for income taxes is summarized below (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ----
<S> <C> <C> <C>
Currently payable:
Domestic............................................. $3,549 $1,813 $140
Foreign.............................................. 42 656 --
State................................................ 975 517 208
------ ------ ----
4,566 2,986 348
Deferred............................................... 1,669 1,406 90
------ ------ ----
Total........................................ $6,235 $4,392 $438
====== ====== ====
</TABLE>
F-11
<PAGE> 54
TRANSTECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The provision (benefit) for income taxes is allocated between continuing
and discontinued operations as summarized below (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Continuing.......................................... $6,898 $ 5,792 $ 3,457
Discontinued........................................ (663) (1,400) (3,019)
------ ------- -------
Total..................................... $6,235 $ 4,392 $ 438
====== ======= =======
</TABLE>
The consolidated effective tax rates for continuing operations differ from
the federal statutory rates as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory federal rate...................................... 35.0% 34.0% 34.0%
State income taxes after federal income tax................. 4.5 3.6 4.6
Earnings of the foreign sales corporation................... (2.0) (2.6) (2.6)
Amortization of purchase adjustments not deductible for tax
purposes.................................................. -- 1.9 1.0
Revision of prior years' tax accruals....................... -- -- (5.1)
Foreign rate differential................................... 2.4 2.6 --
Other....................................................... 1.6 1.0 --
---- ---- ----
Consolidated effective tax rate............................. 41.5% 40.5% 31.9%
==== ==== ====
</TABLE>
The following is an analysis of accumulated deferred income taxes (in
thousands):
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Assets:
Current:
Inventory................................................ $ 2,025 $ 969
Net operating loss....................................... 650 --
Tax basis in excess of book basis on disposal of
subsidiary............................................. 640 --
Other.................................................... 978 68
------- ------
Total current....................................... 4,293 1,037
Noncurrent:
Environmental............................................ 917 1,067
Purchase accounting adjustments.......................... 2,068 3,820
Investment............................................... 1,128 1,049
Net operating loss....................................... 1,618 --
Other.................................................... -- 737
------- ------
Total noncurrent.................................... 5,731 6,673
------- ------
Total assets.................................................. $10,024 $7,710
======= ======
Liabilities:
Noncurrent:
Depreciation............................................. $ 3,765 $1,200
Purchase accounting adjustments.......................... 2,097 2,097
Other.................................................... 938 605
------- ------
Total liabilities............................................. $ 6,800 $3,902
======= ======
</TABLE>
F-12
<PAGE> 55
TRANSTECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Summary -- accumulated deferred income taxes (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Net current assets............................................ $ 4,293 $1,037
Net noncurrent (liabilities) assets........................... (1,069) 2,771
------- ------
Total............................................... $ 3,224 $3,808
======= ======
</TABLE>
6. LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS
Long-term debt payable, including current maturities, at March 31 consisted
of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Credit agreement -- 7.580%................................... $22,825 $ --
Credit agreement -- 7.965%................................... -- 21,420
Term loan -- 7.50%........................................... 25,289 --
Term loan -- 7.804%.......................................... -- 31,320
Term loan -- 9.79%........................................... 24,500 25,000
Other........................................................ 809 851
------- -------
73,423 78,591
Less current maturities...................................... 5,907 6,026
------- -------
Total.............................................. $67,516 $72,565
======= =======
</TABLE>
Credit Agreement -- At March 31, 1997, the Company's debt consisted of
$16.7 million of borrowings under a revolving credit line, $6.1 million of
borrowings under international lines of credit, a $25.3 million term loan, a
$24.5 million term loan and $0.8 million of other borrowings. The revolving bank
credit line commitment as amended on December 31, 1996 is $30.0 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, which are included in the borrowing base formula, are limited
to $5.0 million. Letters of credit under the line at March 31, 1997 were $0.1
million. The total commitment from the international lines of credit as amended
on December 31, 1996 is $10.0 million and has the same availability and
collateral as the revolving credit line, but is not subject to a borrowing base
formula. Interest on the revolver and international lines of credit are tied to
the primary bank's prime rate, or, at the Company's option, the London Interbank
Offered Rate (LIBOR) plus a margin that varies depending upon the Company's
achievement of certain operating and financial goals.
The $25.3 million (which includes $7.6 million and $6.3 million payable in
Deutsche Mark and pound sterling, respectively) and $24.5 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 March 31, and June
30, 2002, respectively. The $25.3 million term loan had an additional $15.0
million available through March 1997 for future acquisitions. Quarterly
principal payments on the $25.3 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 $25.3 million
term loan is tied to the lending bank's prime rate, or LIBOR, plus a margin that
varies, depending on the Company's achievement of certain operating and
financial goals. Principal payments on the $24.5 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 $15.0 million due and
payable on June 30, 2001 and June 30, 2002, respectively. Interest on the $24.5
million term loan accrues at the primary
F-13
<PAGE> 56
TRANSTECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
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 March 31, 1997, the Company had $49.9 million of borrowings utilizing
LIBOR. The agreement as amended March 31, 1997, provides for additional term
loans of $20.0 million.
The credit facility limits the Company's ability to pay dividends to 25% of
net income and restricts capital expenditures to $9.0 million annually, 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%.
<TABLE>
<CAPTION>
DEBT MATURITIES (IN THOUSANDS):
--------------------------------------------------------------------------
<S> <C>
1998 (current)............................................................ $ 5,907
1999...................................................................... 5,852
2000...................................................................... 7,180
2001...................................................................... 8,588
2002...................................................................... 30,373
Thereafter................................................................ 15,523
-------
Total................................................................... $73,423
=======
</TABLE>
7. STOCKHOLDERS' EQUITY AND EMPLOYEE/DIRECTOR STOCK OPTIONS
Under the terms of the Company's amended and restated 1992 long-term
incentive plan, 570 thousand of the Company's common shares may be granted as
stock options or awarded as restricted stock to officers, directors and certain
employees of the Company through September 2002. Option exercise prices equal
the market price of the common shares at their grant dates. Options expire not
later than five years after the date of the grant. Options granted vest ratably
over three years beginning one year after the date of grant. Restricted stock is
payable in equivalent number of common shares; the shares are distributable in a
single installment and vest ratably over a three year period from the date of
the award.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation,"
in October 1995. Under SFAS No. 123, companies can either continue to account
for stock compensation plans pursuant to existing accounting standards or elect
to expense the value derived from using an option pricing model such as
Black-Scholes. The Company will continue to apply existing accounting standards.
However, SFAS No. 123 requires disclosure of pro forma net income and earnings
per share as if the Company had adopted the expensing provisions of SFAS No.
123. Based on Black-Scholes values, pro forma net income for 1997 and 1996 would
be $8.7 million and $7.4 million, respectively; pro forma earnings per common
share for 1997 and 1996 would be $1.73 and $1.45, respectively.
F-14
<PAGE> 57
TRANSTECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following table summarizes stock option activity over the past two
years under the plan:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
--------- ----------------
<S> <C> <C>
Outstanding at April 1, 1995.............................. 375,015 $12.37
Granted................................................. 109,000 12.40
Exercised............................................... (20,308) 9.22
Canceled or expired..................................... (55,111) 13.12
-------
Outstanding at March 31, 1996............................. 408,596 12.62
Granted................................................. 97,000 16.85
Exercised............................................... (30,381) 12.04
Canceled or expired..................................... (11,001) 12.55
-------
Outstanding at March 31, 1997............................. 464,214 13.54
=======
Options exercisable at March 31, 1996..................... 177,253 11.97
Options exercisable at March 31, 1997..................... 264,211 12.26
</TABLE>
In 1997 and 1996, the Company awarded restricted stock totaling 6,435 and
18,267 shares, respectively. The weighted-average fair value of this restricted
stock was $17.25 and $13.33 in 1997 and 1996, respectively. The expense recorded
in 1997 and 1996 for restricted stock awards was $159 thousand and $122
thousand, respectively.
The weighted-average Black-Scholes value per option granted in 1997 and
1996 was $13.55 and $10.28, respectively. The following weighted-average
assumptions were used in the Black-Scholes option pricing model for options
granted in 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Dividend yield....................................................... 1.4% 2.0%
Volatility........................................................... 29.0% 25.0%
Risk-free interest rate.............................................. 6.2% 5.7%
Expected term of options (in years).................................. 4 4
</TABLE>
For options outstanding and exercisable at March 31, 1997, the exercise
price ranges and average remaining lives were:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------- -----------------------------------
RANGE OF NUMBER WEIGHTED- NUMBER WEIGHTED-AVERAGE
EXERCISE OUTSTANDING AT WEIGHTED-AVERAGE AVERAGE EXERCISABLE AT EXERCISE
PRICES MARCH 31, 1997 REMAINING LIFE EXERCISE PRICE MARCH 31, 1997 PRICE
- -------------- -------------- ---------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
$ 9 to $14 232,214 2 $ 11.24 174,213 $10.77
$15 to $19 232,000 3 15.85 89,998 15.13
------- -------
464,214 3 $ 13.54 264,211 $12.26
======= =======
</TABLE>
8. EMPLOYEE BENEFIT PLANS
The Company has an incentive bonus plan which provides for cash payments to
selected employees based upon formulas approved by the Board of Directors.
Provisions for awards under the plan approximated $1.6 million, $1.7 million and
$1.2 million in 1997, 1996 and 1995, respectively. The Company has two defined
contribution plans covering substantially all domestic employees. Contributions
are based on certain percentages of an employee's eligible compensation.
Expenses related to these plans were $2.5 million, $2.2 million and $1.6 million
in 1997, 1996 and 1995, respectively.
F-15
<PAGE> 58
TRANSTECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The Company provides postretirement benefits to union employees at one of
the Company's divisions. The Company continues to fund these benefits on a
pay-as-you-go basis.
The components of net postretirement benefit cost for the years ended March
31 were as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits earned during the year)................. $ 3 $ 88 $ 94
Interest cost on projected postretirement benefit obligation... 79 168 168
Amortization of transition obligation.......................... -- 101 101
Amortization of net gain -- (10) --
--- ---- ----
Total postretirement benefit cost.................... $82 $347 $363
=== ==== ====
</TABLE>
The accumulated postretirement benefit obligation and funded status at
March 31 were as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees...................................................... $ (920) $ (774)
Fully eligible plan participants.............................. (20) (365)
Other active plan participants................................ (70) (1,161)
------- -------
Accumulated postretirement benefit obligation in excess of plan
assets........................................................ (1,010) (2,300)
Unrecognized net gain........................................... (6) (217)
Unrecognized transition obligation -- 1,724
------- -------
Accrued postretirement benefit liability........................ $(1,016) $ (793)
======= =======
</TABLE>
As of March 31, 1997 the Plan was amended reducing the remaining service
lives of participants and limiting certain benefits provided by the Plan. The
curtailment resulted in an additional 1997 expense of approximately $530
thousand.
Accrued postretirement benefit cost is included in other liabilities on the
balance sheet.
The assumed health care cost trend rates used for measurement purposes was
12% for 1997 and 1996, trending down 1% each year to 10% in 1999 and then
decreasing .5% each year to 6% in 2007 and beyond, for substantially all
participants. The weighted-average discount rate used was 7.5% at March 31, 1997
and 1996.
A 1% increase in health care trend rate would increase the annual expense
by approximately 12.2% for the year ended March 31, 1997 and accumulated
postretirement benefit obligation by approximately 13.6% at March 31, 1997.
In addition, the Company maintains several defined benefit retirement plans
for certain non-U.S. employees. Funding policies are based on local statutes.
Net periodic pension cost for the plans for the years ended March 31 includes
the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Service cost......................................................... $ 49 $ 40
Interest cost........................................................ 436 343
Net deferral and amortization........................................ 43 34
---- ----
Net periodic pension cost............................................ $528 $417
==== ====
</TABLE>
F-16
<PAGE> 59
TRANSTECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following table sets forth the funded status of the plans at March 31
(in thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Total accumulated benefit obligation.............................. $5,408 $6,370
------ ------
Projected benefit obligation...................................... $5,489 $6,615
Unrecognized net gain (loss)...................................... 75 (245)
------ ------
Unfunded accrued pension cost (included in other long-term
liabilities).................................................... $5,564 $6,370
====== ======
</TABLE>
In determining the projected benefit obligation, the discount rates were
7.25% and 7.5% at March 31, 1997 and 1996, respectively, and the rates of salary
increases were 2.5% and 3% in 1997 and 1996, respectively.
9. FINANCIAL INSTRUMENTS
Interest Rate Swap Agreements -- The Company periodically enters into
interest rate swap agreements to effectively convert all or a portion of its
floating-rate debt to fixed-rate debt in order to reduce the Company's risk to
movements in interest rates. Such agreements involve the exchange of fixed and
floating interest rate payments over the life of the agreement without the
exchange of the underlying principal amounts. Accordingly, the impact of
fluctuations in interest rates on these interest rate swap agreements is fully
offset by the opposite impact on the related debt. Swap agreements are only
entered into with strong creditworthy counterparties. The swap agreements in
effect were as follows:
<TABLE>
<CAPTION>
RECEIVE
MATURITIES RATE(1) PAY RATE
NOTIONAL ---------- ------- --------
AMOUNT
--------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
March 31, 1997............................ $25,000 8/98 5.56% 6.54%
DM12,648 12/98 3.31% 4.57%
March 31, 1996............................ $25,000 8/98 5.88% 6.54%
DM15,313 12/98 3.36% 4.57%
</TABLE>
- ---------------
(1) Based on three-month LIBOR
Foreign Currency Exchange Agreements -- The Company enters into forward
foreign currency agreements to hedge foreign currency denominated debt
instruments. Realized and unrealized gains and losses arising from forward
currency contracts are recognized as adjustments to the gains and losses
resulting from the underlying hedged transactions.
In addition, the Company enters into forward currency contracts to hedge
certain foreign currency purchase commitments. Gains and losses from these
transactions are included in the cost of the underlying purchases.
The table below summarizes by currency the contractual amounts of the
Company's foreign exchange contracts at March 31, 1997. The "Buy" amounts
represent the U.S. dollar equivalent of commitments to purchase foreign
currencies, and the "Sell" amounts represent the U.S. dollar equivalent to sell
foreign currencies (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
CURRENCY BUY SELL BUY SELL
------------------------------------------------ --- ------- ------ ----
<S> <C> <C> <C> <C>
Deutsche Mark................................... $96 $11,992 $1,015 $--
Pound Sterling.................................. -- 1,459 -- --
--
--- ------- ------
$96 $13,451 $1,015 $--
=== ======= ====== ==
</TABLE>
F-17
<PAGE> 60
TRANSTECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Fair Value of Financial Instruments -- The fair values of cash and cash
equivalents, receivables and notes receivable approximate their carrying values
due to the short-term nature of the instruments.
The fair value of the Company's long-term notes receivable and debt
approximates their carrying values due to the variable interest-rate feature of
the instruments. The fair values of the Company's interest rate swaps and
forward foreign exchange agreements are the estimated amounts the Company would
have to (pay) or receive to terminate the agreements at March 31, 1997 based
upon quoted market prices as provided by financial institutions which are
counterparties to the agreements and were as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
------------ ------------
(PAY)RECEIVE (PAY)RECEIVE
<S> <C> <C>
Interest rate swap agreements.............................. $ (240) $ (1,397)
Forward foreign exchange agreements........................ 1,329 30
</TABLE>
10. COMMITMENTS
Rent expense under operating leases, net of subleases, for the years ended
March 31, 1997, 1996, and 1995 was $2.3 million, $2.0 million and $1.8 million,
respectively. The Company has no material capital leases.
The Company and its subsidiaries have minimum rental commitments under
noncancellable operating leases (relating primarily to leased buildings) which
are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
- ------------------------------------------------------
<S> <C>
1998........................................... $2,669
1999........................................... 2,117
2000........................................... 1,032
2001........................................... 604
2002........................................... 489
Thereafter..................................... 132
------
Total.................................. $7,043
======
</TABLE>
Included in the above amounts is the aggregate lease commitment associated
with the Company's former corporate office which has been subleased. Future
sublease rentals receivable at March 31, 1997 totalled $0.6 million. Other
long-term liabilities at March 31, 1997 include a $0.1 million obligation
associated with the lease which expires in July 1998.
11. CONTINGENCIES
Environmental Matters. The Company has commenced environmental site
assessments and cleanup feasibility studies to determine the presence, extent
and sources of any environmental contamination at a site in Pennsylvania which
continues to be owned although the related business has been sold. Although no
governmental action requiring remediation has been taken at this time, the
Company is working in cooperation with the relevant state authority and any
remedial work required to be performed would be subject to its approval. A
design report for implementation of a portion of a remedy at the Pennsylvania
site has been prepared and submitted to the state. At March 31, 1997, the
balance of the Company's cleanup reserve was $2.1 million payable over the next
several years. In addition, the Company is pursuing recovery of a portion of
cleanup costs in litigation with several of its insurance carriers. The Company
expects that remediation work at the Pennsylvania site will not be completed
until fiscal 2000.
The Company also continues to participate in environmental assessments and
remediation work at twelve other locations, which include operating facilities,
facilities for sale, and previously owned facilities. The
F-18
<PAGE> 61
TRANSTECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Company estimates that its potential cost for implementing corrective action at
these sites will not exceed $1.0 million payable over the next several years,
and has provided for the estimated costs in its accrual for environmental
liabilities.
In addition, the Company has been named as a potentially responsible party
in five environmental proceedings pending in several other states in which it is
alleged that the Company was a generator of waste that was sent to landfills and
other treatment facilities and, as to several sites, it is alleged that the
Company was an owner or operator. Such properties generally relate to businesses
which have been sold or discontinued. It is not possible to reliably estimate
the costs associated with any remedial work to be performed until studies at
these sites have been completed, the scope of work defined and a method of
remediation selected and approved by the relevant state authorities, and the
costs allocated among the potentially responsible parties.
Litigation. The Company is also engaged in various other legal proceedings
incidental to its business.
It is the opinion of management that, after taking into consideration
information furnished by its counsel, the above matters will have no material
effect on the Company's consolidated financial position or the results of the
Company's operations in future periods.
12. SUBSEQUENT EVENTS
On April 17, 1997, the Company acquired all of the outstanding stock of TCR
Corporation for $32.6 million cash plus other contingent consideration. TCR,
located in Minneapolis, produces externally threaded fasteners and related
products for the automotive, heavy vehicle, marine and industrial markets. TCR
sales were approximately $23.0 million for calendar year 1996.
The acquisition was financed by a term loan under the Company's credit
agreement resulting in increased annual principal payments of approximately $3.4
million beginning June 1997.
13. SEGMENT AND GEOGRAPHIC INFORMATION
The Company develops, manufactures and sells, primarily, specialty fastener
products and rescue hoist and cargo hook products. Specialty Fastener Products
include gear-driven band fasteners, threaded fasteners and retaining rings for
the marine, auto, toy, aircraft, heavy equipment and industrial machinery
industries. Rescue Hoist and Cargo Hook Products include lifting, control, and
restraint devices -- principally helicopter rescue hoists and external hook
systems, winches and hoists for aircraft and weapon-handling systems, and
aircraft and cargo tie-downs.
Operating profit is net sales less operating expenses. General corporate
expenses, interest and income taxes have not been deducted in determining
operating profit. Assets, depreciation and amortization, and capital
expenditures are those identifiable to a particular segment by their use.
Approximately 9%, 8% and 18% of sales from continuing operations in 1997, 1996
and 1995, respectively, were derived from sales to the United States Government
and its prime contractors which are attributable primarily to the Rescue Hoist
and Cargo Hook Products Segment.
F-19
<PAGE> 62
TRANSTECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
DEPRECIATION/
FISCAL OPERATING CAPITAL AMORTIZATION IDENTIFIABLE
(IN THOUSANDS) YEAR SALES PROFIT(1) EXPENDITURES(2) EXPENSE(2) ASSETS
- --------------------------------- ------ -------- --------- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Specialty fastener products...... 1997 $144,197 $ 24,040 $ 4,715 $ 5,881 $140,960
1996 127,487 23,702 5,171 4,710 138,001
1995 71,103 16,500 3,193 1,906 60,986
--------
Rescue hoist and cargo hook
products....................... 1997 34,487 7,483 618 645 26,146
1996 30,537 4,928 901 756 26,334
1995 30,019 160 469 605 24,493
--------
Total segments................... 1997 178,684 31,523 5,333 6,526 167,106
1996 158,024 28,630 6,072 5,466 164,335
1995 101,122 16,660 3,662 2,511 85,479
--------
Corporate........................ 1997 -- (9,253) 144 825 32,030
1996 -- (8,987) 399 438 35,032
1995 -- (3,882) 64 260 43,917
--------
Corporate interest and other
income......................... 1997 -- 1,147 -- --
1996 -- 973 -- -- --
1995 -- 895 -- -- --
--------
Interest expense................. 1997 -- (6,797) -- -- --
1996 -- (6,316) -- -- --
1995 -- (2,831) -- -- --
--------
Consolidated..................... 1997 $178,684 $ 16,620 $ 5,477 $ 7,351 $199,136
1996 158,024 14,300 6,471 5,904 199,367
1995 101,122 10,842 3,726 2,771 129,396
--------
</TABLE>
- ---------------
(1) Operating profit represents net sales less operating expenses which include
all costs and expenses related to the Company's operations in each segment.
General corporate expenses and interest and other income earned at the
corporate level are included in the corporate section. Interest expense is
also separately reported. The amount of the "Consolidated" line represents
"Income from Continuing Operations Before Income Taxes." Loss from
discontinued operations is not included.
(2) The capital expenditures and depreciation/amortization expense from
discontinued operations are excluded from the above schedule.
F-20
<PAGE> 63
TRANSTECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
In 1997, 1996 and 1995, the Company had revenues from export sales as follows
(in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Western Europe..................................... $ 8,349 $ 7,230 $ 6,641
Canada............................................. 6,316 6,323 5,896
Pacific and Far East............................... 3,027 2,312 1,638
Mexico, Central and South America.................. 1,751 851 1,015
Middle East........................................ 194 167 114
Other.............................................. 156 22 136
------- ------- -------
Total.................................... $19,793 $16,905 $15,440
======= ======= =======
</TABLE>
Results set forth below for international operations represent sales and
operating income of foreign-based Company operations (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net sales:
Domestic operations...................................... $120,655 $112,860
International operations (1)............................. 58,029 45,164
-------- --------
Net sales.................................................. $178,684 $158,024
======== ========
Operating income:
Domestic operations...................................... $ 24,991 $ 22,454
International operations (1)............................. 6,532 6,176
-------- --------
Operating income...................................... 31,523 28,630
Interest expense........................................... (6,797) (6,316)
Corporate expense and other................................ (8,106) (8,014)
-------- --------
Income from continuing operations before tax............... $ 16,620 $ 14,300
======== ========
Identifiable assets:
Domestic operations...................................... $ 94,794 $ 96,944
International operations (1)............................. 72,312 67,391
Corporate................................................ 32,030 35,032
-------- --------
Total assets............................................... $199,136 $199,367
======== ========
</TABLE>
- ---------------
(1) International operations are primarily located in Europe. Prior to 1996 the
Company had no significant international operations.
F-21
<PAGE> 64
TRANSTECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
14. UNAUDITED QUARTERLY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1997
Net sales.................................. $44,640 $43,580 $42,851 $47,613 $178,684
Gross profit............................... 13,701 12,496 13,990 16,017 56,204
Income from continuing operations.......... 2,097 1,727 3,020 2,878 9,722
Loss from discontinued operations.......... (269) (206) (199) (260) (934)
------- ------- ------- ------- --------
Net income....................... $ 1,828 $ 1,521 $ 2,821 $ 2,618 $ 8,788
======= ======= ======= ======= ========
Earnings (loss) per share (a):
Income from continuing operations.......... $ 0.41 $ 0.34 $ 0.60 $ 0.55 $ 1.92
Loss from discontinued operations.......... (0.05) (0.04) (0.04) (0.05) (0.18)
------- ------- ------- ------- --------
Net income................................. $ 0.36 $ 0.30 $ 0.56 $ 0.50 $ 1.74
======= ======= ======= ======= ========
1996
Net sales.................................. $26,207 $43,861 $41,087 $46,869 $158,024
Gross profit............................... 8,268 11,889 13,818 16,623 50,598
Income from continuing operations.......... 1,733 1,343 2,793 2,639 8,508
Loss from discontinued operations.......... (172) (149) (447) (366) (1,134)
------- ------- ------- ------- --------
Net income....................... $ 1,561 $ 1,194 $ 2,346 $ 2,273 $ 7,374
======= ======= ======= ======= ========
Earnings (loss) per share:
Income from continuing operations.......... $ 0.34 $ 0.26 $ 0.55 $ 0.52 $ 1.67
Loss from discontinued operations.......... (0.03) (0.03) (0.09) (0.07) (0.22)
------- ------- ------- ------- --------
Net income................................. $ 0.31 $ 0.23 $ 0.46 $ 0.45 $ 1.45
======= ======= ======= ======= ========
</TABLE>
- ---------------
(a) Calculation of earnings per share for the quarter ended March 31, 1997
includes common stock equivalents of approximately 170,000 shares relating
to stock options.
F-22
<PAGE> 65
TRANSTECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
UNAUDITED
JUNE 29, MARCH 31,
1997 1997
--------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................................... $ 2,298 $ 3,540
Accounts receivable (net of allowance for doubtful accounts of $548
at June 29, 1997 and $588 at March 31, 1997).................... 32,372 28,392
Notes receivable................................................... 3,749 1,838
Inventories........................................................ 50,928 50,677
Prepaid expenses and other current assets.......................... 1,703 1,028
Deferred income taxes.............................................. 4,212 4,293
Assets held for sale............................................... 7,205 7,617
-------- --------
Total current assets....................................... 102,467 97,385
-------- --------
Property, Plant and Equipment........................................ 89,658 82,207
Less accumulated depreciation and amortization..................... 25,145 23,594
-------- --------
Property, Plant and Equipment -- net............................ 64,513 58,613
-------- --------
Other Assets:
Notes receivable................................................... 8,988 11,125
Costs in excess of net assets of acquired businesses (net of
accumulated amortization: June 29, 1997, $4,153; March 31, 1997,
$3,869)......................................................... 46,194 18,878
Other.............................................................. 12,515 13,135
-------- --------
Total other assets......................................... 67,697 43,138
-------- --------
TOTAL................................................................ $ 234,677 $ 199,136
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt.................................. $ 10,004 $ 5,907
Accounts payable -- trade.......................................... 9,832 11,050
Accrued compensation............................................... 4,525 6,845
Accrued income taxes............................................... 2,333 1,632
Other current liabilities.......................................... 16,309 12,844
-------- --------
Total current liabilities.................................. 43,003 38,278
-------- --------
Long-term debt payable to banks and others........................... 95,378 67,516
-------- --------
Other long-term liabilities.......................................... 17,156 15,898
-------- --------
Stockholders' equity:
Preferred stock-authorized, 300,000 shares; none issued
Common stock-authorized, 14,700,000 shares of $.01 par value;
issued 5,319,759 at June 29, 1997, and 5,316,971 at March 31,
1997............................................................ 54 53
Additional paid-in capital......................................... 46,800 46,745
Retained earnings.................................................. 38,876 36,937
Other stockholders' equity......................................... (2,602) (2,352)
-------- --------
83,128 81,383
Less treasury stock, at cost -- (291,719 shares at June 29, 1997
and 289,237 shares at March 31, 1997)........................... (3,988) (3,939)
-------- --------
Total stockholders' equity................................. 79,140 77,444
-------- --------
TOTAL................................................................ $ 234,677 $ 199,136
======== ========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-23
<PAGE> 66
TRANSTECHNOLOGY CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
UNAUDITED
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------
JUNE 29, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Net sales........................................................ $ 49,923 $ 44,640
Cost of sales.................................................... 34,575 30,939
----------- -----------
Gross profit........................................... 15,348 13,701
----------- -----------
General, administrative and selling expenses..................... 9,571 8,561
Interest expense................................................. 1,976 1,810
Interest income.................................................. (243) (269)
Other income..................................................... (3) (17)
----------- -----------
Income from continuing operations before income taxes............ 4,047 3,616
Income taxes..................................................... 1,680 1,519
----------- -----------
Income from continuing operations................................ 2,367 2,097
Discontinued operations:
Loss from disposal (net of applicable tax benefit of $72 and
$189 for the three months ended June 29, 1997 and June 30,
1996, respectively)......................................... (102) (269)
----------- -----------
Net income..................................................... $ 2,265 $ 1,828
=========== ===========
Earnings per share:
Income from continuing operations.............................. $ 0.46 $ 0.41
Loss from discontinued operations.............................. (0.02) (0.05)
----------- -----------
Net income..................................................... $ 0.44 $ 0.36
=========== ===========
Number of shares used in computation of per share information.... 5,186,000 5,104,000
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-24
<PAGE> 67
TRANSTECHNOLOGY CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------
JUNE 29, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 2,265 $ 1,828
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................. 2,152 1,920
Provision for losses on accounts receivable.................... 23 52
Loss on sale or disposal of fixed assets and discontinued
businesses.................................................. 5 38
Change in assets and liabilities net of acquisitions and
dispositions:
(Increase) decrease in accounts receivable.................. (60) 2,146
Decrease in inventories..................................... 1,475 988
Decrease in assets held for sale............................ 412 865
Increase in other assets.................................... (325) (3,909)
Decrease in accounts payable................................ (3,356) (2,361)
Decrease in accrued compensation............................ (2,320) (1,663)
Increase in income tax payable.............................. 701 770
Increase in other liabilities............................... 1,324 2,645
-------- --------
Net cash provided by operating activities................... 2,296 3,319
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions net of cash acquired....................... (33,929) (3,344)
Capital expenditures............................................. (1,748) (1,307)
Proceeds from sale of fixed assets and discontinued business..... 261 1,987
Decrease in notes receivable..................................... 226 235
-------- --------
Net cash used in investing activities....................... (35,190) (2,429)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings............................... 45,500 8,431
Payments on long-term debt....................................... (13,541) (10,200)
Proceeds from issuance of stock under stock option plan.......... 56 179
Dividends paid................................................... (326) (332)
-------- --------
Net cash provided by (used in) financing activities......... 31,689 (1,922)
-------- --------
Effect of exchange rate changes on cash.......................... (37) --
Decrease in cash and cash equivalents............................ (1,242) (1,032)
Cash and cash equivalents at beginning of period................. 3,540 2,362
-------- --------
Cash and cash equivalents at end of period....................... $ 2,298 $ 1,330
======== ========
Supplemental information:
Interest payments................................................ $ 1,145 $ 1,342
Income tax payments.............................................. $ 115 $ 337
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-25
<PAGE> 68
TRANSTECHNOLOGY CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
UNAUDITED
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK ADDITIONAL OTHER
FOR THE QUARTER ------------------ ------------------ PAID-IN RETAINED STOCKHOLDERS'
ENDED JUNE 29, 1997 SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY TOTAL
- ------------------- --------- ------ -------- ------- ---------- -------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31,
1997............. 5,316,971 $ 53 (289,237) $(3,939) $ 46,745 $ 36,937 $ (2,352) $77,444
Net income......... -- -- -- -- -- 2,265 -- 2,265
Cash dividends
($.065 per
share)........... -- -- -- -- -- (326) -- (326)
Unrealized
investment
holding losses... -- -- -- -- -- -- (40) (40)
Effects of stock
under incentive
bonus
plan -- net...... 2,788 1 (2,482) (49) 55 -- (17) (10)
Foreign translation
adjustments...... -- -- -- -- -- -- (193) (193)
====
--------- ------- ------- ------- ------- -------
Balance, June 29,
1997............. 5,319,759 $ 54 (291,719) $(3,988) $ 46,800 $ 38,876 $ (2,602) $79,140
========= ======== ======= ======= ======= ======= =======
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-26
<PAGE> 69
TRANSTECHNOLOGY CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
1. FINANCIAL STATEMENTS
The unaudited Statements of Consolidated Operations, Consolidated Balance
Sheets and Statements of Consolidated Cash Flows are of TransTechnology
Corporation and its consolidated subsidiaries. These financial statements
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 June 29, 1997 are not
necessarily indicative of the results to be expected for the entire year. The
unaudited Consolidated Financial Statements should be read in conjunction with
the notes thereto, and Management's Discussion and Analysis of Financial
Condition and Results of Operations, as well as the audited financial statements
and related notes thereto contained elsewhere in this Prospectus.
2. 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.
Calculation of earnings per share for the period ended June 29, 1997
includes common stock equivalents of approximately 159,000 shares relating to
stock options.
3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JUNE 29, 1997 MARCH 31, 1997
------------- --------------
<S> <C> <C>
Finished goods........................................ $22,003 $ 21,897
Work in process....................................... 10,131 10,335
Purchased and manufactured parts...................... 18,794 18,445
------- -------
Total inventories........................... $50,928 $ 50,677
======= =======
</TABLE>
4. LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS
Long-term debt payable, including current maturities, at June 29, 1997 and
March 31, 1997 consisted of the following:
<TABLE>
<CAPTION>
INTEREST RATE JUNE 29, 1997 MARCH 31, 1997
------------- ------------- --------------
<S> <C> <C> <C>
Credit agreement........................... 5.15% $ 2,441 --
Credit agreement........................... 7.58% -- $ 22,825
Credit agreement........................... 7.81% 10,000 --
Credit agreement........................... 8.72% 5,320 --
Credit agreement........................... 9.00% 2,200 --
Term loan.................................. 6.57% 7,451 --
Term loan.................................. 7.5% -- 25,289
Term loan.................................. 7.69% 600 --
Term loan.................................. 7.81% 45,800 --
Term loan.................................. 8.72% 6,325 --
Term loan.................................. 9.06% 24,000 --
Term loan.................................. 9.79% 500 24,500
Other...................................... 745 809
------- --------
105,382 73,423
Less current maturities.................... 10,004 5,907
------- --------
Total............................ $95,378 $ 67,516
======= ========
</TABLE>
F-27
<PAGE> 70
TRANSTECHNOLOGY CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- CONTINUED
CREDIT AGREEMENT
On June 29, 1997 the Company's debt consisted of $12.2 million of
borrowings under a revolving credit line ("the Revolver"), $7.8 million of
borrowings under international lines of credit ("the International Lines of
Credit"), a $60.2 million term loan ("Term Loan A"), a $24.5 million term loan
("Term Loan B") and $0.7 million of other borrowings. The Revolver commitment of
$30.0 million will be available to the Company through December 31, 2000 and is
subject to a borrowing base formula. The Company's credit agreement with a group
of commercial banks 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, which are included in the borrowing base formula are limited
to $5.0 million. Letters of credit under the line at June 29, 1997 were $0.1
million. The total commitment under the International Lines of Credit is $10.0
million and is subject to the same availability and collateral as the revolver,
but is not subject to a borrowing base formula. Interest on the Revolver and the
International Lines of Credit is tied to the primary lending bank's prime rate,
or at the Company's option, the London Interbank Offered Rate ("LIBOR"), plus a
margin that varies depending upon the Company's achievement of certain operating
and financial goals.
On March 31,1997, the Company amended its Term Loan A bank debt to increase
the availability by $20.0 million, giving the Company a total of $35.0 million
available for acquisitions. On April 17, 1997, $32.6 million of this amount was
used by the Company to acquire TCR Corporation.
The $60.2 million and $24.5 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 March 31, and June 30, 2002,
respectively. Quarterly principal payments on Term Loan A are $2.2 million, with
escalations to $3.0 million, $3.2 million and $4.0 million in June, 1998, 1999
and 2000, respectively. Interest on Term Loan A is tied to the primary lending
banks prime rate, or LIBOR, plus a margin that varies depending upon the
Company's achievement of certain operating and financial goals. Annual principal
payments on Term Loan B of $0.5 million are due through June 30, 2000, with
final balloon payments of $7.5 million and $15.0 million due on June 30, 2001
and June 30, 2002, respectively. Interest on Term Loan B 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 June 29, 1997, $79.8 million of the Company's outstanding borrowings
utilized LIBOR.
Additionally, the credit facility limits capital expenditures to $9.0
million annually and contains other customary financial covenants including a
limit on the Company's ability to pay dividends to 25% of net income.
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%.
F-28
<PAGE> 71
TRANSTECHNOLOGY CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- CONTINUED
DEBT MATURITIES
<TABLE>
<CAPTION>
JUNE 30,
-------------------------------------------------
<S> <C>
1998 (current)................................... $ 10,004
1999............................................. 12,524
2000............................................. 13,980
2001............................................. 43,859
2002............................................. 25,015
--------
Total.................................. $105,382
========
</TABLE>
5. DISCONTINUED OPERATIONS
After-tax costs of $0.1 million were recorded in the first quarter of 1998,
in connection with previously discontinued and sold businesses. These costs
represent adjustments to previous estimates related primarily to environmental
and legal matters.
Assets held for sale at June 29, 1997 and March 31, 1997 were as follows:
<TABLE>
<CAPTION>
JUNE 29, 1997 MARCH 31, 1997
------------- --------------
<S> <C> <C>
Inventory............................................. $ 427 $ 429
Property.............................................. 6,611 6,577
Other assets.......................................... 167 611
------ ------
Assets held for sale.................................. $ 7,205 $7,617
====== ======
</TABLE>
6. ACQUISITIONS
On June 18, 1996 the Company acquired the Pebra hose clamp business from
Pebra GmbH Paul Braun i.K. for approximately $3.0 million in cash plus direct
acquisition costs. Pebra is located in Frittlingen, Germany, and manufactures
heavy duty hose clamps primarily for use in the manufacture of heavy trucks in
Europe.
On April 17, 1997 the Company acquired all of the outstanding stock of TCR
Corporation ("TCR") for $32.6 million in cash plus direct acquisition costs and
other contingent consideration. TCR, located in Minneapolis, Minnesota, produces
externally threaded fasteners and related products for the automotive, heavy
vehicle, marine and industrial markets. The results of TCR have been included
from the date of acquisition. The results for the period from April 1, 1997 to
the date of acquisition were not deemed material and, therefore, APB No. 16 pro
forma information has not been presented for the quarter ended June 29, 1997.
7. NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board("FASB") adopted
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share," which establishes standards for computing and presenting earnings per
share and is effective for the Company's financial year ending March 31, 1998.
The Company believes that the effect of implementing this standard will not
effect results differently than as currently reported. In June 1997, the FASB
issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", which will be effective for the Company's fiscal year ending March
31, 1999. SFAS No. 131 redefines how operating segments are determined and
requires expanded quantitative and qualitative disclosures relating to a
company's operating segments. The Company has not yet completed its analysis of
which operating segments, if any, it will disclose differently than previously
reported.
8. RECLASSIFICATIONS
Certain reclassifications have been made to the prior year to conform to
the 1998 presentation.
F-29
<PAGE> 72
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL. UNDER NO CIRCUMSTANCES SHALL THE DELIVERY OF THIS
PROSPECTUS OR ANY SALE MADE PURSUANT TO THIS PROSPECTUS CREATE ANY IMPLICATION
THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary................... 3
Cautionary Statement Regarding
Forward-Looking Information........ 6
Risk Factors......................... 6
Use of Proceeds...................... 10
Price Range of Common Stock and
Dividend Policy.................... 11
Capitalization....................... 12
Selected Consolidated Financial
Data............................... 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 15
Business............................. 24
Management........................... 33
Principal and Selling Stockholders... 35
Description of Capital Stock......... 37
Underwriting......................... 39
Legal Matters........................ 40
Experts.............................. 40
Available Information................ 40
Incorporation of Certain Documents by
Reference.......................... 41
Index to Consolidated Financial
Statements......................... F-1
</TABLE>
======================================================
======================================================
1,100,000 SHARES
TRANSTECHNOLOGY CORPORATION LOGO
COMMON STOCK
PROSPECTUS
ABN AMRO CHICAGO CORPORATION
EVEREN SECURITIES, INC.
November , 1997
======================================================
<PAGE> 73
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered.
<TABLE>
<CAPTION>
APPROXIMATE
AMOUNT
-------------
<S> <C>
Securities and Exchange Commission Registration Fee................. $ 10,278.13
NYSE Listing Fee.................................................... 14,750.00
NASD Filing Fee..................................................... 3,892.00
Printing Expenses................................................... 200,000.00
Accounting Fees and Expenses........................................ 75,000.00
Legal Fees and Expenses............................................. 150,000.00
Transfer Agent Fees................................................. 10,000.00
Miscellaneous Fees and Expenses..................................... 36,079.87
----------
Total..................................................... $ 500,000.00
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a corporation organized under the laws of the State of
Delaware. The Company's Certificate of Incorporation provides that the Company
may indemnify its officers and directors to the full extent permitted by law.
Section 145 of the General Corporation Law of the State of Delaware ("DGCL")
provides that a Delaware corporation has the power to indemnify its officers and
directors in certain circumstances.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation),
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such action,
suit or proceeding provided that such director or officer acted in good faith in
a manner reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding,
provided that such director or officer had no reasonable cause to believe his
conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
director or officer, or former director or officer, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person acted in any of the capacities set forth
above, against expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit
provided that such director or officer acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which such director or officer shall have been adjudged to
be liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
that, despite the adjudication of liability, but in view of all the
circumstances of the case, such director or officer is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of such
other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to in subsections (a) and (b) or in the defense of any
II-1
<PAGE> 74
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification provided for by Section 145 shall not
be deemed exclusive of any other rights to which the indemnified party may be
entitled; and that the corporation shall have the power to purchase and maintain
insurance on behalf of a director or officer of the corporation against any
liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation would have the
power to indemnify him against such liabilities under Section 145. Any
indemnification under subsections (a) and (b) (unless ordered by a court) shall
be made only as authorized in the specific case upon a determination by a
majority vote of the directors who are not parties to such action, suit or
proceeding (or, if there are no such directors, by an independent counsel or by
the stockholders) that indemnification is proper in the circumstances because he
has met the standard of conduct set forth in subsections (a) and (b).
The Company's Certificate of Incorporation also provides that, to the
fullest extent permitted by the DGCL, a director shall not be liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director. Section 102 of the DGCL authorizes such a provision, and states that
such a provision shall not eliminate or limit the liability of a director (a)
for any breach of the director's duty of loyalty to the corporation or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) for unlawful payments
of dividends or unlawful stock purchases or redemptions by the corporation, or
(d) for any transaction from which the director derived an improper benefit.
The Company's Bylaws provide that the Company shall indemnify, to the
fullest extent permitted by law, any person who was or is made or is threatened
to be made a party to (or is otherwise involved in) any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was a director or officer of the Company or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture or other business or
nonprofit entity. The Bylaws provide that the Company shall be required to
indemnify a person in connection with a proceeding initiated by such person only
if the proceeding was authorized by the Board of Directors of the Company. The
Bylaws provide that the Company shall pay the expenses (including attorneys'
fees) incurred in defending any proceeding in advance of its final disposition,
provided that any such advance payments shall be made only upon receipt of an
undertaking by the director or officer to repay all amounts advanced if it
should ultimately be determined that the director or officer is not entitled to
be indemnified under the Bylaws or otherwise.
The Company has entered into an indemnification agreement with each of its
directors and executive officers pursuant to which the Company has agreed to
indemnify such persons against liability to the fullest extent permitted by law.
The Company may from time to time enter into similar agreements with additional
individuals who become officers and/or directors of the Company.
ITEM 16. EXHIBITS.
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement
4.1 Form of Common Stock Certificate (1)
5.1 Opinion of Hahn Loeser & Parks LLP regarding the legality of the securities being
offered
10.1 1996-1998 Incentive Compensation Plan of the Company (10)
**10.2 Amended and Restated 1992 Long Term Incentive Plan of the Company
10.3 Form of Incentive Stock Option Agreement (2)
10.4 Form of Director Stock Option Agreement (3)
10.5 Form of Restricted Stock Award Agreement used under the Company's Amended and
Restated 1992 Long Term Incentive Plan (4)
</TABLE>
II-2
<PAGE> 75
<TABLE>
<S> <C>
10.6 Indemnification Agreement dated February 11, 1987 between the Company and each of
its officers and directors (5)
10.7 Executive Life Insurance Plan (6)
10.8 Revolving Credit and Loan Agreement dated as of June 30, 1995 between the Company
and The First National Bank of Boston (7)
10.9 First Amendment to the Revolving Credit and Loan Agreement dated as of August 29,
1995 between the Company and the First National Bank of Boston (8)
10.10 Second Amendment to the Revolving Credit and Loan Agreement dated as of October 27,
1995 between the Company and the First National Bank of Boston (8)
10.11 Third Amendment to the Revolving Credit and Loan Agreement dated as of March 29,
1996 between the Company and the First National Bank of Boston (8)
10.12 Fourth Amendment to the Revolving Credit and Loan Agreement dated as of December
31, 1996 between the Company and the First National Bank of Boston (10)
10.13 Fifth Amendment to the Revolving Credit and Loan Agreement dated as of March 31,
1997 between the Company and the First National Bank of Boston (9)
10.14 Form of Executive Severance Agreement with Officers of the Company (10)
10.15 Form of Executive Severance Agreement with Subsidiary Presidents (10)
10.16 Form of Executive Severance Agreement with Division Presidents (10)
10.17 Form of Executive Severance Agreement with Overseas Subsidiary Managing Directors
(10)
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Ocel, Heimer & Associates, Ltd.
23.4 Consent of Hahn Loeser & Parks LLP (contained in Exhibit 5.1)
**24.1 Power of Attorney (set forth on the signature page hereof)
</TABLE>
- ---------------
** Previously filed.
(1) Incorporated by reference from the Company's Registration Statement on Form
8-A filed on December 22, 1987 (File No. 1-7872).
(2) Incorporated by reference from the Company's Registration Statement on Form
S-8 No. 33-87800 dated December 22, 1994.
(3) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1995 (File No. 1-7872).
(4) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1994 (File No. 1-7872).
(5) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1987 (File No. 1-7872).
(6) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1989 (File No. 1-7872).
(7) Incorporated by reference from the Company's Report on Form 8-K filed on
July 14, 1995 (File No. 1-7872).
(8) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996 (File No. 1-7872).
(9) Incorporated by reference from the Company's Report on Form 8-K filed on
April 29, 1997 (File No. 1-7872).
(10) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1997 (File No. 1-7872).
II-3
<PAGE> 76
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-4
<PAGE> 77
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Liberty Corner, New Jersey, on this 4th day of November, 1997.
TransTechnology Corporation
By: /s/ JOSEPH F. SPANIER
------------------------------------
Joseph F. Spanier, Vice President,
Chief Financial Officer and
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ----------------------------------- ------------------
<S> <C> <C>
* /s/ MICHAEL J. BERTHELOT Chairman of the Board and Chief November 4, 1997
- ------------------------------------- Executive Officer (Principal
Michael J. Berthelot Executive Officer)
* /s/ PATRICK K. BOLGER President, Chief Operating Officer November 4, 1997
- ------------------------------------- and Director
Patrick K. Bolger
/s/ JOSEPH F. SPANIER Vice President, Chief Financial November 4, 1997
- ------------------------------------- Officer (Principal Financial and
Joseph F. Spanier Accounting Officer) and Treasurer
* /s/ GIDEON ARGOV Director November 4, 1997
- -------------------------------------
Gideon Argov
* /s/ WALTER BELLEVILLE Director November 4, 1997
- -------------------------------------
Walter Belleville
* /s/ THOMAS V. CHEMA Director November 4, 1997
- -------------------------------------
Thomas V. Chema
* /s/ MICHEL GLOUCHEVITCH Director November 4, 1997
- -------------------------------------
Michel Glouchevitch
* /s/ JAMES A. LAWRENCE Director November 4, 1997
- -------------------------------------
James A. Lawrence
*By: /s/ JOSEPH F. SPANIER
- -------------------------------------
Joseph F. Spanier, Attorney-in-fact
</TABLE>
II-5
<PAGE> 78
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- -------- ------------------------------------------------------------------------
<S> <C> <C>
1.1 Form of Underwriting Agreement
4.1 Form of Common Stock Certificate (1)
5.1 Opinion of Hahn Loeser & Parks LLP regarding legality of the securities
being offered
10.1 1996 -- 1998 Incentive Compensation Plan of the Company (10)
**10.2 Amended and Restated 1992 Long Term Incentive Plan of the Company
10.3 Form of Incentive Stock Option Agreement (2)
10.4 Form of Director Stock Option Agreement (3)
10.5 Form of Restricted Stock Award Agreement used under the Company's
Amended and Restated 1992 Long Term Incentive Plan (4)
10.6 Indemnification Agreement dated February 11, 1987 between the Company
and each of its officers and directors (5)
10.7 Executive Life Insurance Plan (6)
10.8 Revolving Credit and Loan Agreement dated as of June 30, 1995 between
the Company and the First National Bank of Boston (7)
10.9 First Amendment to the Revolving Credit and Loan Agreement dated as of
August 29, 1995 between the Company and the First National Bank of
Boston (8)
10.1 Second Amendment to the Revolving Credit and Loan Agreement dated as of
October 27, 1995 between the Company and the First National Bank of
Boston (8)
10.11 Third Amendment to the Revolving Credit and Loan Agreement dated as of
March 29, 1996 between the Company and the First National Bank of Boston
(8)
10.12 Fourth Amendment to the Revolving Credit and Loan Agreement dated as of
December 31, 1996 between the Company and the First National Bank of
Boston (10)
10.13 Fifth Amendment to the Revolving Credit and Loan Agreement dated as of
March 31, 1997 between the Company and the First National Bank of Boston
(9)
10.14 Form of Executive Severance Agreement with Officers of the Company (10)
10.15 Form of Executive Severance Agreement with Subsidiary Presidents (10)
10.16 Form of Executive Severance Agreement with Division Presidents (10)
10.17 Form of Executive Severance Agreement with Overseas Subsidiary Managing
Directors (10)
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Ocel, Heimer & Associates, Ltd.
23.4 Consent of Hahn Loeser & Parks LLP (contained in Exhibit 5.1)
**24.1 Power of Attorney (set forth in the signature page hereof)
</TABLE>
- ---------------
** Previously filed.
(1) Incorporated by reference from the Company's Registration Statement on Form
8-A filed on December 22, 1987 (File No. 1-7872).
(2) Incorporated by reference from the Company's Registration Statement on Form
S-8 No. 33-87800 dated December 22, 1994.
II-6
<PAGE> 79
(3) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1995 (File No. 1-7872).
(4) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1994 (File No. 1-7872).
(5) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1987 (File No. 1-7872).
(6) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1989 (File No. 1-7872).
(7) Incorporated by reference from the Company's Report on Form 8-K filed on
July 14, 1995 (File No. 1-7872).
(8) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996 (File No. 1-7872).
(9) Incorporated by reference from the Company's Report on Form 8-K filed on
April 29, 1997 (File No. 1-7872).
(10) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1997 (File No. 1-7872).
II-7
<PAGE> 1
EXHIBIT 1.1
1,100,000 SHARES*
TRANSTECHNOLOGY CORPORATION
Common Stock
UNDERWRITING AGREEMENT
______________ ___, 1997
ABN AMRO CHICAGO CORPORATION
EVEREN SECURITIES, INC.
As Representatives of the
several Underwriters named
in Schedule I hereto
c/o ABN AMRO Chicago Corporation
208 South LaSalle Street
Chicago, Illinois 60604
Ladies and Gentlemen:
Pursuant to the terms of this Underwriting Agreement (this
"Agreement"), TransTechnology Corporation, a Delaware corporation (the
"Company"), proposes, upon the terms and subject to the conditions set forth
herein, to issue and sell an aggregate of 1,000,000 shares of Common Stock, par
value $0.01 per share (the "Common Stock"), of the Company to the several
underwriters named in Schedule I hereto (collectively, the "Underwriters") and
the stockholders of the Company named in Schedule II hereto (the "Selling
Stockholders") propose, upon the terms and subject to the conditions set forth
herein, to sell to the Underwriters an aggregate of 100,000 shares of Common
Stock. The Company has agreed to issue and sell to the several Underwriters,
upon the terms and subject to the conditions set forth in Section 2 hereof, up
to an additional 165,000 shares of
- --------
* Plus an option to purchase up to 165,000 Additional Shares to cover
over-allotments.
<PAGE> 2
Common Stock. The aggregate of 1,100,000 shares to be sold by the Company and
the Selling Stockholders are herein called the "Firm Shares" and the aggregate
of 165,000 additional shares to be sold by the Company and the Selling
Stockholders are herein called the "Additional Shares." The Firm Shares and the
Additional Shares are hereinafter collectively referred to as the "Shares." ABN
AMRO Chicago Corporation and EVEREN Securities, Inc. are acting individually and
as representatives of the several Underwriters and in such capacity are
hereinafter referred to as the "Representatives."
Prior to the purchase and public offering of the Shares by the
several Underwriters, the Company and the Representatives shall enter into an
agreement substantially in the form of EXHIBIT A hereto (the "Pricing
Agreement"). The Pricing Agreement may take the form of an exchange of any
standard form of written telecommunication between the Company and the
Representatives and shall specify such applicable information as is indicated in
EXHIBIT A hereto. The offering of the Shares will be governed by this Agreement,
as supplemented by the Pricing Agreement. From and after the date of the
execution and delivery of the Pricing Agreement, this Agreement shall be deemed
to incorporate the Pricing Agreement.
The Company and the Selling Stockholders are advised by the
Representatives that the Underwriters have agreed to make a public offering of
their respective portions of the Shares as soon after the Registration Statement
(as defined below) has become effective and the Pricing Agreement has been
executed as in the judgment of the Representatives is advisable and to first
offer the Shares upon the terms set forth in the Prospectus (as defined below).
The Company, the Representatives and the other Underwriters hereby
agree to the following matters with respect to the purchase and sale of the
Shares:
SECTION 1. (a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:
(i) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Act"), a registration statement on
Form S-2 (File No. 333-37395), including a preliminary prospectus, relating to
the Shares and certain amendments thereto. The Company will next file with the
Commission one of the following: (A) prior to effectiveness of such registration
statement, a further amendment thereto, including the form of final prospectus,
(B) a final prospectus in accordance with Rules 430A and 424(b) under the Act or
(C) a term sheet (the "Term Sheet") as described in and in accordance with Rules
434 and 424(b) under the Act. As filed, the final prospectus, if one is used, or
the Term Sheet and the latest Preliminary Prospectus,
-2-
<PAGE> 3
if a final prospectus is not used, shall include all Rule 430A Information
(as defined below). There have been or will promptly be delivered to the
Representatives three signed copies of such registration statement and
amendments, together with three copies of all documents incorporated by
reference therein, three copies of each exhibit filed therewith, and conformed
copies of such registration statement and amendments (but without exhibits) and
of the related preliminary prospectus or prospectuses and final forms of
prospectus or Term Sheet, if a Term Sheet is used, for each of the Underwriters.
The term "Registration Statement" as used in this Agreement shall mean such
registration statement at the time such registration statement becomes effective
and, in the event any amendment thereto becomes effective prior to the Closing
Date (as hereinafter defined), shall also mean such registration statement as so
amended; provided, however, that such term shall also include all Rule 430A
Information deemed to be included in such registration statement at the time
such registration statement becomes effective as provided by Rule 430A and, if a
Term Sheet is used, shall also include all information deemed to be included in
such registration statement at the time such registration statement becomes
effective as provided by Rule 434; provided, further, that if the Company files
a registration statement under the Act to register a portion of the Shares and
relies on Rule 462(b) for such registration statement to become effective upon
filing with the Commission (the "Rule 462 Registration Statement"), then any
reference to "Registration Statement" herein shall be deemed to be to both the
registration statement referred to above (No. 333-37395) and the Rule 462
Registration Statement, as each such registration statement may be amended
pursuant to the Act. The term "Preliminary Prospectus" as used in this Agreement
shall mean any preliminary prospectus relating to the Shares filed with the
Commission under the Act and the rules and regulations thereunder, including any
preliminary prospectus included in the Registration Statement at the time it
becomes effective that omits Rule 430A Information. The term "Prospectus" as
used in this Agreement shall mean: (X) the prospectus relating to the Shares in
the form in which it is first filed with the Commission pursuant to Rule 424(b)
under the Act; (Y) if a Term Sheet is not used and no filing pursuant to Rule
424(b) under the Act is required, the form of final prospectus included in the
Registration Statement at the time the Registration Statement becomes effective;
or (Z) if a Term Sheet is used in lieu of a prospectus, the Term Sheet in the
form in which it is first filed with the Commission pursuant to Rule 424(b)
under the Act, together with the latest Preliminary Prospectus included in the
Registration Statement at the time it becomes effective (such Term Sheet and
Preliminary Prospectus are sometimes collectively referred to herein as the
"Rule 434 Prospectus"). The term "Rule 430A Information" as used in this
Agreement shall mean information with respect to the Shares and the offering
thereof permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A under the Act. The Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder are
hereinafter collectively referred to as the "Exchange Act." Any reference herein
to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to Form S-2
under the Act ("Incorporated Documents"), as of the date of such
-3-
<PAGE> 4
Preliminary Prospectus or Prospectus, as the case may be. The Incorporated
Documents, when they were filed with the Commission, conformed in all material
respects to the requirements of the Exchange Act and none of such documents
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
(ii) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, and each Preliminary Prospectus complied
in all material respects when so filed with the requirements of the Act (except
to the extent that, in conformity with the Act, such Preliminary Prospectus is
subject to completion).
(iii) The Registration Statement in the form in which it becomes
effective and also in such form as it may be when the Pricing Agreement is
executed or any post-effective amendment to the Registration Statement shall
become effective, and the Prospectus when and in the form last filed with the
Commission as part of the Registration Statement prior to effectiveness or, if
applicable, first filed pursuant to Rule 424(b) under the Act, and when any
supplement or amendment thereto is filed with the Commission, each will comply
in all material respects with the requirements of the Act, will not at any such
time contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. This
representation and warranty does not apply to statements in or omissions from
the Registration Statement or the Prospectus (or any supplement or amendment
thereto) made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by or on behalf of such
Underwriter through the Representatives specifically for use in the Registration
Statement.
(iv) There is no contract or other document of a character required
to be described in the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required.
(v) The accountants who have expressed their opinions with respect to
certain of the financial statements of the Company included or incorporated by
reference in the Registration Statement and the Prospectus, are independent
public accountants as required by the Act.
-4-
<PAGE> 5
(vi) The consolidated financial statements, together with the notes
thereto, of the Company included or incorporated by reference in the
Registration Statement and the Prospectus comply in all material respects with
the Act and present fairly the consolidated financial position of the Company as
of the dates indicated, and the consolidated results of operations, cash flows
and changes in financial position of the Company for the periods specified. Such
financial statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the entire period
involved except to the extent disclosed therein.
The pro forma financial statements and other pro forma information
included in the Prospectus present fairly the information shown therein, have
been prepared in accordance with generally accepted accounting principles and
the Commission's rules and guidelines with respect to pro forma financial
statements and other pro forma information, have been properly compiled on the
pro forma basis described therein, and, in the opinion of the Company, the
assumptions used in the preparation thereof are reasonable and the adjustments
used therein are appropriate under the circumstances.
(vii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware, with
full corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Registration Statement and Prospectus.
The Company is duly qualified to do business as a foreign corporation and in
good standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except in
any such case in which the failure to so qualify or be in good standing would
not have a material adverse effect upon the business of the Company and its
subsidiaries, taken as a whole; and no proceeding of which the Company has
knowledge has been instituted in any such jurisdiction, revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
qualification.
(viii) Each of the Company's subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to own,
lease and operate its properties and conduct its business as described in the
Registration Statement and Prospectus. Each of the Company's subsidiaries is
duly qualified to do business as a foreign corporation in good standing in each
jurisdiction in which the ownership or leasing of its properties or the conduct
of its business requires such qualification, except in any such case in which
the failure to so qualify or be in good standing would not have a material
adverse effect on the business of the Company and its subsidiaries, taken as a
whole. Each of the Company's subsidiaries has all authorizations, approvals,
orders, certificates and permits of and from all state, federal and other
regulatory officials and bodies necessary to own its properties and to conduct
its business as described in the Registration Statement and Prospectus, except
where the failure to have any such authorization, approval, order, certificate
-5-
<PAGE> 6
or permit would not have a material adverse effect on the business affairs,
business prospects, properties, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole. Except for the capital stock
of the subsidiaries and except as otherwise described in the Prospectus or as
disclosed to the Representatives in writing, the Company does not own any
capital stock of, or other securities evidencing an equity interest in, any
corporation, partnership or other entity. All of the issued and outstanding
shares of capital stock of the Company's subsidiaries have been duly authorized
and validly issued, are fully paid and non-assessable, and except as described
in the Prospectus, are owned by the Company, free and clear of any security
interest, claim, lien, encumbrance or adverse interest of any nature. Except as
described in the Prospectus, there are no outstanding subscriptions, rights,
warrants or options to acquire, or instruments convertible into or exchangeable
for, any shares of capital stock of any of the Company's subsidiaries.
(ix) The Company has an authorized and outstanding capitalization as
set forth in the Prospectus and the Shares conform to the description thereof
contained in the Prospectus. All of the issued and outstanding shares of Common
Stock (including the Shares to be sold by the Selling Stockholders to the
Underwriters) have been duly authorized, validly issued and are fully paid and
non-assessable and free of preemptive or other similar rights and there are no
options, agreements, contracts or other rights in existence to acquire from the
Company any shares of Common Stock, except as set forth in the Prospectus.
(x) The Shares to be sold by the Company pursuant to this Agreement
and the Pricing Agreement have been duly authorized and, when issued and paid
for in accordance with this Agreement and the Pricing Agreement, will be validly
issued, fully paid and non-assessable; the holders of the Shares will not be
subject to personal liability by reason of being such holders; there are no
holders of securities of the Company having rights, contractual or otherwise, to
registration thereof or preemptive rights to purchase Common Stock; all
corporate actions required to be taken for the authorization, issue and sale of
the Shares have been validly and sufficiently taken; and upon delivery of and
payment for such Shares hereunder, the Underwriters will acquire valid and
marketable title thereto, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature.
(xi) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated or
contemplated therein, there has not been (A) any material adverse change in the
condition (financial or otherwise), earnings, affairs, business or prospects of
the Company and its subsidiaries, taken as a whole, whether or not arising in
the ordinary course of business, (B) any material transaction entered into, or
any material liability or obligation incurred, by the Company or its
subsidiaries other than in the ordinary course of business, (C) any change in
the capital stock, or material increase in the short-term debt or long-term debt
of the Company or its subsidiaries, or (D) any
-6-
<PAGE> 7
dividend or distribution of any kind declared, paid or made by the Company or
its subsidiaries on its capital stock.
(xii) The Company and each of its subsidiaries have good and
marketable title to all properties and assets reflected as owned in the
financial statements hereinabove described or described in the Prospectus as
owned by them, free and clear of all liens, charges, encumbrances or
restrictions of any kind, except such as are referred to in such financial
statements or the Prospectus or which are not material to the business of the
Company and its subsidiaries, taken as a whole; all of the leases and subleases
material to the business of the Company and its subsidiaries, taken as a whole
or under which the Company or its subsidiaries holds properties are in full
force and effect; and neither the Company nor any of its subsidiaries has
received any notice of any material claim of any sort which has been asserted by
anyone adverse to the rights of the Company or any subsidiary as owner or as
lessee or sublessee under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such subsidiary to the
continued possession of the leased or subleased premises under any such lease or
sublease.
(xiii) Neither the Company nor any of its subsidiaries is in default
in the observance of any provision of its Certificate of Incorporation or
by-laws, or in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party or by which it
or any of its properties may be bound, the effect of which could be materially
adverse to the condition (financial or otherwise), earnings, affairs, business
or prospects of the Company and its subsidiaries, taken as a whole.
(xiv) The execution and delivery of this Agreement and the Pricing
Agreement, the issuance and delivery of the Shares, the consummation of the
transactions contemplated herein and in the Registration Statement and
compliance with the terms of this Agreement and the Pricing Agreement have been
duly authorized by all necessary corporate action and will not result in any
violation of the Certificate of Incorporation or by-laws of the Company or any
of its subsidiaries, and will not conflict with or result in a breach of any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge, encumbrance or restriction of any
kind upon any property or assets of the Company or any of its subsidiaries under
any contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries, or any of their
respective properties, is bound, or any existing applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or any of their respective properties. No
approval, authorization or consent of any court, regulatory body, administrative
agency or other governmental body having jurisdiction over the Company or any of
its subsidiaries is required in connection with the sale of
-7-
<PAGE> 8
the Shares to the Underwriters, except such as may be required under the Act,
state securities or Blue Sky laws or from the clearance of the offering with the
National Association of Securities Dealers, Inc. (the "NASD").
(xv) Except as disclosed in the Registration Statement or the
Prospectus, there is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, or any arbitrator or
arbitration panel, now pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries which could result
in any material adverse change to the condition (financial or otherwise),
earnings, affairs, business or prospects of the Company and its subsidiaries,
taken as whole; and there is no decree, judgment or order of any kind in
existence against or restraining the Company or any of its subsidiaries, or any
of their respective officers, employees or directors, from taking any actions of
any kind in connection with the business of the Company or any such subsidiary.
(xvi) The Company and each of its subsidiaries own or possess or have
obtained all material governmental licenses, permits, consents, orders,
approvals and other authorizations necessary to lease or own, as the case may
be, and to operate their properties and to carry on their businesses as
presently conducted, and neither the Company nor any such subsidiary has
received any notice of proceedings related to revocation or modification of any
such licenses, permits, consents, orders, approvals or authorizations which
singly or in the aggregate, if the subject of an unfavorable ruling or finding,
would be materially adverse to the condition (financial or otherwise), earnings,
affairs, business or prospects of the Company and its subsidiaries, taken as a
whole.
(xvii) The conduct of the business of the Company and each of its
subsidiaries is in compliance with all applicable federal, state and local laws
and regulations that regulate or are concerned in any way with the business of
the Company or such subsidiaries, where the effect of the failure to comply
would be materially adverse to the condition (financial or otherwise), earnings,
affairs, business or prospects of the Company and its subsidiaries, taken as a
whole.
-8-
<PAGE> 9
(xviii) The Company together with its subsidiaries owns or possesses,
or can acquire on reasonable terms, all right, title and interest in or to, or
has duly licensed from third parties, all patents, trademarks, service marks,
copyrights, trade names, trade secrets and other proprietary rights ("Trade
Rights") necessary to conduct the business now or proposed to be conducted by
it, and neither the Company nor any of its subsidiaries has received any notice
of, and has no knowledge of, infringement of or conflict with asserted rights of
others with respect to any such Trade Rights which, singly or in the aggregate,
if the subject of any unfavorable decision, ruling or finding, would be
materially adverse to the condition (financial or otherwise), earnings, affairs,
business or prospects of the Company and its subsidiaries, taken as a whole.
(xix) The Company has filed all tax returns required to be filed and
has paid all taxes which were payable pursuant to said returns or any
assessments with respect thereto, other than any tax returns which the Company
is contesting in good faith or which are not material to the Company and there
is no tax deficiency that has been, or to the knowledge of the Company might be,
asserted against the Company or any of its properties or assets that would or
could be expected to have a material adverse affect upon the condition
(financial or otherwise) or results of operations of the Company and its
subsidiaries, taken as a whole.
(xx) This Agreement has been duly executed and delivered by the
Company.
(xxi) A registration statement relating to the Common Stock has been
declared effective by the Commission pursuant to the Exchange Act and the Common
Stock is duly registered thereunder. The Shares have been authorized for trading
on the New York Stock Exchange, subject to notice of issuance or sale, as the
case may be.
(xxii) The Company is not, and does not intend to conduct its
business in a manner in which it would become, an "investment company" as
defined in Section 3(a) of the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(xxiii) All offers and sales of the Company's capital stock prior to
the date hereof were at all relevant times (A) registered under the Act or
exempt from the registration requirements thereof and (B) duly registered with,
or the subject of an available exemption from, the registration requirements of
the applicable state securities or Blue Sky laws.
(xxiv) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or manipulation
of the price of any security of the Company.
(xxv) Except as disclosed in the Registration Statement and the
Prospectus, no transaction has occurred between or among the Company, on the one
hand, and any of its officers or directors or any affiliate or affiliates of any
such officer or director, on the other hand, that is required to be so
disclosed, including, but not limited to, any outstanding loans, advances or
guaranties of indebtedness by the Company to or for the benefit of any
affiliates of the Company, or any of the officers or directors of the Company,
or any family member of any of them.
(xxvi) The Company has not, directly or indirectly, at any time (A)
made any contributions to any candidate for foreign political office, or if
made, failed to disclose fully any such contribution made in violation of law,
or (B) made any payment to any state, federal or foreign governmental officer or
official, or other person charged with
-9-
<PAGE> 10
similar public or quasi-public duties, other than payments or contributions
required or allowed by applicable law. The Company's internal accounting
controls and procedures are sufficient to enable the Company to comply in all
material respects with the Foreign Corrupt Practices Act of 1977, as amended.
(xxvii) Except as disclosed in the Registration Statement or the
Prospectus, the Company and each of its subsidiaries (a) are in compliance with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (b) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (c) are in compliance with all terms and conditions of
any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(xxviii) In the ordinary course of its business, the Company conducts
a periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the course of
which it identifies and evaluates associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws of any permit,
license or approval, any related constraints on operating activities and any
potential liabilities to third parties). Except as disclosed in the Registration
Statement and Prospectus, on the basis of such review, the Company has
reasonably concluded that such associated costs and liabilities would not,
singly or in the aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(xxix) The Company and each of its subsidiaries are in compliance
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company or any of its subsidiaries would have any liability; neither
the Company nor any of its subsidiaries has incurred or expects to incur
liability (i) under Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) for violation of section 412 or for
any tax under 4971 of the Internal Revenue Code of 1986, as amended, including
the regulations and published interpretations thereunder (the "Code"); and each
"pension plan" for which either the Company or any of its subsidiaries would
have any liability that is intended to be qualified under section 401(a) of the
Code is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which would cause the loss of such
qualification.
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<PAGE> 11
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLING
STOCKHOLDERS. Each Selling Stockholder severally but not jointly represents and
warrants and agrees with the Company and the Underwriters that:
(i) Such Selling Stockholder has good and marketable title to the
Shares proposed to be sold by such Selling Stockholder hereunder and full right,
power and authority to enter into this Agreement and the Pricing Agreement and
to sell, assign, transfer and deliver such Shares hereunder, free and clear of
all voting trust arrangements, security interests, claims, liens, encumbrances,
community property rights or adverse interests of any nature; and upon delivery
of and payment for such Shares hereunder, the Underwriters will acquire valid
and marketable title thereto, free and clear of all voting trust arrangements,
security interests, claims, liens, encumbrances, property rights or adverse
interests of any nature.
(ii) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or which might be reasonably
expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
(iii) Such Selling Stockholder has executed and delivered a Power of
Attorney ("Power of Attorney") among the Selling Stockholder, Joseph F. Spanier,
and Gerald C. Harvey (the "Agents"), naming the Agents as such Selling
Stockholder's attorneys-in-fact (and, by the execution by any Agent of this
Agreement, such agent hereby represents and warrants that he has been duly
appointed an attorney-in-fact by the Selling Stockholders pursuant to the Power
of Attorney) for the purpose of entering into and carrying out this Agreement
and the Pricing Agreement, and the Power of Attorney has been duly executed by
such Selling Stockholder and a copy thereof has been delivered to the
Representatives.
(iv) Such Selling Stockholder further represents and warrants and
agrees that such Selling Stockholder has deposited in custody, under a Custody
Agreement ("Custody Agreement") with Wachovia Bank N.A., as custodian
("Custodian"), certificates in negotiable form for the Shares to be sold
hereunder by such Selling Stockholder, for the purpose of further delivery
pursuant to this Agreement. Such Selling Stockholder agrees that the Shares to
be sold by such Selling Stockholder on deposit with the Custodian are subject to
the interests of the Company, the Underwriters and the other Selling
Stockholders, that the arrangements made for such custody, and the appointment
of the Agents pursuant to the Power of Attorney, are to that extent irrevocable,
and that the obligations of such Selling Stockholder hereunder and under the
Power of Attorney and the Custody Agreement shall not be terminated except as
provided in this Agreement, the Power of Attorney or the Custody Agreement by
any act of such Selling Stockholder, by operation of law, whether, in the case
of an individual Selling Stockholder, by the death or incapacity of such Selling
Stockholder or, in the case of a trust or estate, by
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<PAGE> 12
the death of the trustee or trustees or the executor or executors or the
termination of such trust or estate, or, in the case of a partnership or
corporation, by the dissolution, winding-up or other event affecting the legal
life of such entity, or by the occurrence of any other event. If any individual
Selling Stockholder, trustee or executor should die or become incapacitated, or
any such trust, estate, partnership or corporation should be terminated, or if
any other event should occur before the delivery of the Shares hereunder, the
documents evidencing Shares then on deposit with the Custodian shall be
delivered by the Custodian in accordance with the terms and conditions of this
Agreement as if such death, incapacity, termination or other event had not
occurred, regardless of whether or not the Custodian shall have received notice
thereof. Each Agent has been authorized by such Selling Stockholder to execute
and deliver this Agreement and the Pricing Agreement and the Custodian has been
authorized to receive and acknowledge receipt of the proceeds of sale of the
Shares to be sold by such Selling Stockholder against delivery thereof and to
otherwise act on behalf of such Selling Stockholder. The Custody Agreement has
been duly executed by such Selling Stockholder and a copy thereof has been
delivered to the Representatives.
(v) Each Preliminary Prospectus, insofar as it has related to such
Selling Stockholder and, to the knowledge of such Selling Stockholder in all
other respects, as of its date, has conformed in all material respects with the
requirements of the Act and, as of its date, has not included any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein not misleading; and the Registration Statement at
the time of effectiveness, and at all times subsequent thereto, (A) such parts
of the Registration Statement and the Prospectus and any amendments or
supplements thereto as relate to such Selling Stockholder, and the Registration
Statement and the Prospectus and any amendments or supplements thereto, to the
knowledge of such Selling Stockholder in all other respects, contained or will
contain all statements that are required to be stated therein in accordance with
the Act and in all material respects conformed or will in all material respects
conform to the requirements of the Act, and (B) neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, as it
relates to such Selling Stockholder, and, to the knowledge of such Selling
Stockholder in all other respects, included or will include any untrue statement
of a material fact or omitted or will omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided that neither clause (A) nor (B) shall have any affect if information
has been given by such Selling Stockholder to the Company and the
Representatives in writing which would eliminate or remedy any such untrue
statement or omission.
(vi) Except as set forth in the letters of even date herewith, each
among a Selling Stockholder, the Company and the Underwriters (collectively, the
"Lockup Agreements"), except as set forth in the letters of even date herewith,
each among a Selling Stockholder, the Company and the Underwriters
(collectively, the "Lockup Agreements"), such Selling Stockholder agrees with
the Company and the Underwriters not to sell, contract to sell or otherwise
dispose of any Common Stock or rights to purchase Common Stock for a period of
90 days after the date of the Pricing Agreement without the prior written
consent from ABN AMRO Chicago Corporation.
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<PAGE> 13
SECTION 2. AGREEMENT TO SELL AND PURCHASE.
(a) Subject to such adjustments to eliminate any fractional share
sales or purchases as the Representatives in their discretion may make, (i) the
Company hereby agrees to issue and sell to the Underwriters an aggregate of
1,000,000 Firm Shares, (ii) the Selling Stockholders hereby agree, severally and
not jointly, to sell to the Underwriters in the respective amounts set forth in
Schedule II hereto, an aggregate of 100,000 Firm Shares, and (iii) on the basis
of the representations, warranties and agreements of the Company and the Selling
Stockholders herein contained and subject to the terms and conditions set forth
herein, each Underwriter agrees, severally and not jointly, to purchase from (A)
the Company and the Selling Stockholders, at the purchase price per Share set
forth in the Pricing Agreement (the "Purchase Price per Share"), the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto
(or such number of Firm Shares as such Underwriter shall be obligated to
purchase pursuant to the provisions of Section 9 hereof) and (B) the Selling
Stockholders the number of Firm Shares set further opposite the name of such
Selling Stockholder in Schedule II hereto.
(b) The Company and the Selling Stockholders agree to sell to the
Underwriters and, on the basis of the representations, warranties and agreements
of the Company and the Selling Stockholders set forth herein and subject to the
terms and conditions set forth herein, the Underwriters shall have the right to
purchase, from the Company up to 165,000 Additional Shares at the Purchase
Price per Share upon delivery to the Company and the Agents of the notice
hereinafter referred to. Such Additional Shares may be purchased solely for the
purpose of covering over-allotments made in connection with the offering of the
Firm Shares. If any Additional Shares are to be purchased, each Underwriter,
severally and not jointly, agrees to purchase from the Company the number
of Additional Shares (subject to such adjustments to eliminate fractional
Shares as the Representatives may determine) which bears the same proportion to
the total number of Additional Shares to be purchased from the Company as the
number of Firm Shares set forth opposite such Underwriter's name in Schedule I
(or such number of Firm Shares increased pursuant to the terms set forth in
Section 9 hereof) bears to the total number of Firm Shares.
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<PAGE> 14
SECTION 3. DELIVERY OF THE SHARES AND PAYMENT THEREFOR.
(a) Delivery to the Underwriters of the Firm Shares shall be made
against payment therefor at 9:00 a.m., Chicago, Illinois time, on the third full
business day following the date of the Pricing Agreement (the "Closing Date") at
the offices of Jones, Day, Reavis & Pogue, 77 West Wacker, Chicago, Illinois
60601-1692. The place of the closing and the Closing Date may be varied by
agreement among the Representatives and the Company.
(b) Delivery to the Underwriters of any Additional Shares to be
purchased by the several Underwriters shall be made in Chicago, Illinois against
payment therefor at the offices of Jones, Day, Reavis & Pogue, 77 West Wacker,
Chicago, Illinois 60601-1692 at such time on such date (the "Option Closing
Date"), which may be the same as the Closing Date, but shall in no event be
earlier than the Closing Date nor earlier than three nor later than ten business
days after the giving of the notice hereinafter referred to, as shall be
specified in written notice from the Representatives to the Company and the
Agents of the determination to purchase a number, specified in said notice, of
Additional Shares. Said notice may be given at any time within 30 days after the
date of the execution of the Pricing Agreement. The place of the closing and the
Option Closing Date may be varied by agreement among the Representatives and the
Company.
(c) If the Representatives, the Company and the Selling Stockholders
have elected to enter into the Pricing Agreement after the Registration
Statement is effective, the Purchase Price per Share to be paid by the several
Underwriters for the Shares shall be an amount equal to the public offering
price, less an amount to be determined by agreement among the Representatives,
the Company and the Selling Stockholders. The public offering price per Share of
the Shares shall be a fixed price to be determined by agreement between the
Representatives and the Company. The public offering price and the Purchase
Price per Share, when so determined, shall be set forth in the Pricing
Agreement. If such prices have not been agreed upon and the Pricing Agreement
has not been executed and delivered by all parties thereto by the close of
business on the fourth business day following the date of this Agreement, this
Agreement shall terminate forthwith, without liability of any party to any other
party, unless otherwise agreed to by the Company, the Selling Stockholders and
the
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<PAGE> 15
Representatives and except as otherwise provided in Section 5 hereof. If the
Representatives, the Company and the Selling Stockholders have elected to enter
into the Pricing Agreement prior to the Registration Statement becoming
effective, the public offering price and the Purchase Price per Share to be paid
by the several Underwriters for the Shares having each been determined and set
forth in the Pricing Agreement, the Company agrees to file an amendment to the
Registration Statement and the Prospectus before the Registration Statement
becomes effective.
(d) Certificates for the Firm Shares and for the Additional Shares
shall be registered in such names and in such denominations as the
Representatives shall request upon at least 48 hours prior notice to the Company
and the Custodian preceding the Closing Date or the Option Closing Date, as the
case may be. Such certificates shall be made available to the Representatives at
the office of The Depository Trust Company, New York, New York, for inspection
and packaging not later than at least 24 hours prior to the Closing Date or the
Option Closing Date, as the case may be. The certificates evidencing the Firm
Shares and the Additional Shares shall be delivered to the Representatives on
the Closing Date or the Option Closing Date, as the case may be, with any
transfer taxes thereon duly paid by the Company or the Selling Stockholders, as
the case may be, for the respective accounts of the several Underwriters,
against payment of the purchase price therefor by wire or other immediately
available funds. It is understood by the Company and the Selling Stockholders
that each of the Underwriters has authorized the Representatives, for its
account, to accept delivery of, receipt for and make payment of the purchase
price for, the Shares it has agreed to purchase.
SECTION 4. AGREEMENTS OF THE COMPANY. The Company covenants and agrees with
the several Underwriters that:
(a) The Company will endeavor to cause the Registration Statement to
become effective and will advise the Representatives promptly and, if requested
by the Representatives, will confirm such advice in writing, (i) when the
Registration Statement has become effective and when any post-effective
amendment to it becomes effective, and of the filing of any final prospectus or
supplement or amendment to the Prospectus, (ii) of any request by the Commission
for amendments or supplements to the Registration Statement or Prospectus or any
Preliminary Prospectus or for additional information, (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction, or the initiation or contemplation of any
proceeding for such purposes, and (iv) within the period of time referred to in
paragraph (f) below, of the happening of any event which makes any statement
made in the Registration Statement or Prospectus (as then amended or
supplemented) untrue in any material respect or which requires the making of any
additions to or changes in the Registration Statement or Prospectus (as then
amended or supplemented) in order to make the statements therein not misleading
or the necessity to amend or supplement the Prospectus to comply with
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<PAGE> 16
the Act or any other law. If at any time the Commission shall issue
any stop order suspending the effectiveness of the Registration Statement, the
Company will make every reasonable effort to obtain the withdrawal of such order
at the earliest possible moment. If the Company elects to rely on Rule 434 of
the Act, the Company will prepare a Term Sheet that complies with the
requirements of Rule 434 of the Act and will provide the Representatives with
copies of the form of Rule 434 Prospectus in such numbers as the Representatives
may reasonably request and file or transmit for filing with the Commission the
form of Prospectus complying with Rule 434(c)(2) of the Act in accordance with
Rule 424(b) of the Act by the close of business in Chicago on the business day
immediately succeeding the date hereof. If the Company elects not to rely on
Rule 434, the Company will provide the Representatives with copies of the form
of Prospectus in such numbers as the Representatives may reasonably request and
file or transmit for filing with the Commission such Prospectus in accordance
with Rule 424(b) of the Act, by the close of business in Chicago on the business
day immediately succeeding the date hereof.
(b) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance upon
Rule 430A under the Act, then promptly following the execution of the Pricing
Agreement, the Company will prepare and file with the Commission, in accordance
with Rule 430A and Rule 424(b) under the Act, copies of an amended Prospectus,
or, if required by Rule 430A, a post-effective amendment to the Registration
Statement (including an amended Prospectus) containing all information so
omitted.
(c) Neither the Company nor any of its subsidiaries will, prior to
the earlier of the Option Closing Date or termination or expiration of the
related option, incur any liability or obligation, direct or contingent, or
enter into any material transaction, other than in the ordinary course of
business, except as contemplated in the Prospectus.
(d) The Company will not file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus of which the
Representatives shall not previously have been advised or to which the
Representatives shall promptly after being so advised reasonably object in
writing.
(e) Prior to the effective date of the Registration Statement, the
Company has delivered or will deliver to each of the Underwriters, without
charge, copies of each form of Preliminary Prospectus in such quantities as they
have reasonably requested or may hereafter reasonably request. The Company
consents to the use, in accordance with the provisions of the Act and with the
securities or Blue Sky laws of the jurisdictions in which the Shares are offered
by the several Underwriters and by dealers, prior to the effective date of the
Registration Statement, of each Preliminary Prospectus so furnished by the
Company.
(f) On the effective date of the Registration Statement and
thereafter from time to time during such period as in the opinion of counsel for
the Underwriters a prospectus relating to the Shares is required by law to be
delivered in connection with
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<PAGE> 17
offers or sales of the Shares by an Underwriter or a dealer, the Company will
deliver to each Underwriter and dealer, without charge, as many copies of the
Registration Statement, the Prospectus and each Preliminary Prospectus and the
Incorporated Documents (and of any amendment or supplement to such documents) as
they may reasonably request. During such period, if any event occurs which in
the judgment of the Company, or in the opinion of counsel for the Underwriters,
should be set forth in the Prospectus in order to ensure that no part of the
Prospectus includes an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances at the time the Prospectus is delivered to a purchaser, not
misleading, the Company will forthwith prepare, submit to the Representatives,
file with the Commission and deliver, without charge to the several Underwriters
and dealers (whose names and addresses will be furnished by the Representatives
to the Company) to whom shares have been sold by the Underwriters or to other
dealers any amendments or supplements to the Prospectus so that the statements
in the Prospectus, as so amended or supplemented, will comply with the standards
set forth in this sentence. The Company consents to the use of such Prospectus
(and of any amendments or supplements thereto) in accordance with the provisions
of the Act and with the securities or Blue Sky laws of the jurisdictions
described in the preliminary Blue Sky memorandum in which the Shares are
lawfully offered by the several Underwriters and by all dealers to whom Shares
may be sold, both in connection with the offering or sale of the Shares and for
such period of time thereafter as the Prospectus is required by law to be
delivered in connection therewith. In case any Underwriter is required to
deliver a Prospectus (and any amendment or supplement thereto) more than nine
months after the first date upon which the Shares are offered to the public, the
Company will, upon request, but at the expense of such Underwriter, promptly
prepare and furnish such Underwriter with reasonable quantities of a Prospectus
complying with Section 10(a)(3) of the Act.
(g) The Company will cooperate with the Representatives and counsel
for the Underwriters in connection with the registration or qualification of the
Shares for offer and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions as the Representatives may
designate, will continue such registrations or qualifications in effect so long
as reasonably required for the distribution of the Shares and will file such
consents to service of process or other documents as may be necessary in order
to effect such registration or qualification; provided that in no event shall
the Company be obligated (i) to qualify to do business in any jurisdiction where
it is not now so qualified, (ii) to file any general consent to service of
process, or (iii) take any action that would subject it to income taxation in
any jurisdiction where it is not so qualified.
(h) For a period of five years after the date of the Pricing
Agreement:
(i) the Company will furnish to the Representatives (A) as soon as
available, a copy of each report of the Company of general interest mailed
to any class of its security holders (B) copies of all annual reports and
current
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<PAGE> 18
reports filed with the Commission on Forms 10-K, 10-Q and 8-K and any
amendment thereto or such other similar forms as may be designated by the
Commission and (C) from time to time, such other information concerning the
Company as the Representatives may reasonably request;
(ii) if at any time during such five year period, the Company shall
cease filing with the Commission the annual reports and current reports on
Forms 10-K, 10-Q and 8-K or other similar forms referred to in clause (i)
above, the Company will forward to its stockholders generally and the
Representatives and upon request to each of the other Underwriters (A) as
soon as practicable after the end of each fiscal year, copies of a balance
sheet and statements of income and retained earnings of the Company as of
the end of and for such fiscal year, certified by independent public
accountants, and (B) as soon as practicable after the end of each quarterly
fiscal period, except for the last quarterly fiscal period in each fiscal
year, a summary statement (which need not be certified) of income and
retained earnings of the Company for such period, which shall also be made
publicly available; and
(iii) the Company will furnish to the Representatives and to the
NASD, and by issuance of a press release, on the date of declaration,
notice of all dividends, including the amount and medium of payment, the
record date (which shall be not less than ten days subsequent to the
declaration date) and the payment date (which shall be not less than ten
days subsequent to the record date).
(i) The Company will make generally available to its security holders
an earnings statement of the Company, which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement and ending not later than 15 months thereafter, as soon as practicable
after the end of such period, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act and the rules and regulations of the
Commission thereunder (including Rule 158).
(j) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to Section 9 hereof or by notice
given by the Representatives of termination of this Agreement pursuant to
Section 10 hereof), or if this Agreement shall be terminated by the several
Underwriters because of any failure or refusal on the part of the Company to
comply with the terms or fulfill any of the conditions of this Agreement, the
Company agrees to reimburse the several Underwriters for all out-of-pocket
expenses (including reasonable fees and expenses of counsel for the
Underwriters) reasonably incurred by them in connection herewith but without any
further obligation of the Company for lost profits or otherwise. If this
Agreement is terminated pursuant to Section 9 or Section 10 hereof, the several
Underwriters shall themselves bear any such out-of-pocket expenses incurred by
them.
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<PAGE> 19
(k) Except as set forth in the Lockup Agreements, the Company will
not sell, contract to sell or otherwise dispose of any Common Stock or rights to
purchase Common Stock for a period of 90 days after the date of the Pricing
Agreement without the prior written consent of the Representatives. The Company
will also obtain similar agreements from each of its executive officers and
directors.
(l) The Company will apply the net proceeds from the sale of the
shares to be sold by it under this Agreement and the Pricing Agreement for the
purposes set forth in the Prospectus under the caption "Use of Proceeds."
(m) The Company will use its best efforts, subject to notice of
issuance, to list the Shares on the New York Stock Exchange.
SECTION 5. PAYMENT OF EXPENSES. The Company will pay, or reimburse if paid
by the Representatives, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, all costs and expenses incident to
the performance by it of its obligations under this Agreement and the Pricing
Agreement, including, without limiting the generality of the foregoing, (a)
preparation, printing, filing and distribution (including postage, air freight
charges and charges for counting and packaging) of the original registration
statement, the Registration Statement, each Preliminary Prospectus, the
Prospectus (including all Incorporated Documents, any exhibits and financial
statements and any Term Sheet delivered by the Company pursuant to Rule 434 of
the Act), each amendment and/or supplement to any of the foregoing, and this
Agreement, the Pricing Agreement, the Agreement Among Underwriters, Selected
Dealers Agreement, Powers of Attorney and Underwriters' Powers of Attorney and
Questionnaires, (b) furnishing to the several Underwriters and dealers copies of
the foregoing materials (provided, however, that any such copies furnished by
the Company more than nine months after the first date upon which the Shares are
offered to the public shall be at the expense of the several Underwriters or
dealers so requesting as provided in Section 4(f) above), (c) the registrations
or qualifications referred to in Section 4(g) above (including filing fees and
fees and disbursements of counsel in connection therewith) and expenses of
printing and delivering to the several Underwriters copies of the preliminary
and final Blue Sky memoranda, (d) the review of the terms of the public offering
of the Shares by the NASD (including the filing fees paid to the NASD in
connection therewith) and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith, (e) the performance by the Company and
each of the Selling Stockholders of its other obligations under this Agreement,
including the fees of the Company's and each Selling Stockholder's counsel and
accountants, (f) the issuance of the Shares and the preparation and printing of
the stock certificates representing the Shares, including any stamp taxes
payable in connection with the original issuance of the Shares, (g) furnishing
to the several Underwriters copies of all reports and information required by
Section 4(h) above, including reasonable costs of shipping and mailing, and (h)
the listing of the Common Stock on the New York Stock Exchange.
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SECTION 6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase the Firm Shares hereunder are
subject to the following conditions:
(a) That the Registration Statement shall have become effective not
later than 1:00 p.m., Chicago time, on the first full business day after the
date of this Agreement, or at such later date and time as shall be consented to
in writing by the Representatives, and, if the Representatives and the Company
have elected to rely upon Rule 430A, the price of the Shares and any
price-related or other information previously omitted from the effective
Registration Statement pursuant to such Rule 430A shall have been transmitted to
the Commission for filing pursuant to Rule 424(b) within the prescribed time
period, and, if the Representatives and the Company have elected to rely upon a
Term Sheet, such Term Sheet shall have been transmitted to the Commission for
filing pursuant to Rule 434 and Rule 424(b) within the prescribed time period,
and on or prior to the Closing Date, the Company shall have provided evidence
satisfactory to the Representatives of such timely filing, or a post-effective
amendment providing such information shall have been promptly filed and declared
effective in accordance with the requirements of Rule 430A. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for the purpose shall have been instituted or shall be
pending or, to the knowledge of the Company or the Selling Stockholders, shall
be contemplated by the Commission and there shall not have come to the attention
of the Representatives any facts that would cause them to believe that the
Prospectus, at the time it was required to be delivered to purchasers of the
Shares, contained any untrue statement of material fact or omitted to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) That subsequent to the effective date of the Registration
Statement, (i) there shall not have occurred any change, or any development
involving a prospective change, in or affecting particularly the business or
properties of the Company or its subsidiaries not contemplated by the
Prospectus, which, in the Representatives' opinion, as Representatives of the
several Underwriters, would materially adversely affect the market for the
Shares or make it impracticable or inadvisable to proceed with the offering or
the delivery of the Shares, as contemplated herein and in the Prospectus, or to
attempt to enforce contracts for the purchase of Shares, and (ii) the business
and operations of the Company shall not have been adversely affected by strike,
fire, flood, accident or other calamity (whether or not insured).
(c) The Representatives shall have received from Gerald C. Harvey,
Vice President, Secretary and General Counsel of the Company, a favorable
opinion dated the Closing Date and satisfactory to the Representatives and the
Underwriters' counsel to the effect that:
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(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with full corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Registration
Statement. The Company is duly qualified to do business as a foreign
corporation and in good standing in each jurisdiction where the ownership
or leasing of its properties or the conduct of its business requires such
qualification, except in any such case where the failure to so qualify or
be in good standing would not have a material adverse effect on the
condition (financial or otherwise) or results of operations of the Company
and its subsidiaries, taken as a whole.
(ii) An opinion to the same general effect as clause (i) of this
subparagraph (c) in respect of each direct and indirect subsidiary of the
Company.
(iii) All of the issued and outstanding capital stock of the
subsidiaries of the Company has been duly authorized and validly issued and
is fully paid and non-assessable, and except as disclosed in the
Registration Statement, the Company owns directly or indirectly 100 percent
of the outstanding capital stock of each subsidiary and, to the best
knowledge of such counsel, such stock is owned free and clear of any
security interests, claims, liens, encumbrances or adverse interests of any
nature.
(iv) The issued and outstanding capital stock of the Company has been
duly authorized and validly issued and is fully paid and non-assessable and
free of preemptive rights.
(v) The authorized capitalization of the Company consists entirely of
14,700,000 shares of Common Stock, of which __________ were issued and
outstanding on the date of the Prospectus and 300,000 shares of Preferred
Stock, of which no shares were issued and outstanding on the date of the
Prospectus and all of which conforms to the description thereof in the
Registration Statement and the Prospectus.
(vi) The certificates for the Shares to be delivered by the Company
hereunder are in due and proper form, and when duly countersigned by the
Company's transfer agent and delivered to the Representatives against
payment of the agreed consideration therefor in accordance with the
provisions of this Agreement and the Pricing Agreement, the Shares
represented thereby will be duly authorized and validly issued, fully paid
and nonassessable and free of preemptive rights and, to the knowledge of
such counsel, will be free of any security interest, claim, lien,
encumbrance or adverse interest of any nature, or rights of first refusal
in favor of, stockholders with respect to any of the Shares or the issuance
or sale thereof, pursuant to the Certificate of Incorporation or by-laws of
the Company and, to such counsel's knowledge, there are no contractual
preemptive rights, rights of first refusal, rights of co-
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sale or other similar rights which exist with respect to any of the Shares
or the issuance and sale thereof; and the Shares to be sold by the Company
hereunder have been duly and validly authorized and qualified for listing
on the New York Stock Exchange, subject to notice of issuance.
(vii) This Agreement and the Pricing Agreement have been duly and
validly authorized, executed and delivered by the Company and are legal,
valid and binding obligations of the Company, enforceable in accordance
with their terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity, and except
that such counsel need express no opinion as to those provisions relating
to indemnities for liabilities under the Act.
(viii) No authorization, approval, order or consent of any
governmental authority or agency is required for the valid issuance and
sale of the Shares, except such as may be required under the Act or state
securities laws as to which such counsel need express no opinion.
(ix) The execution, delivery and performance of this Agreement and
the Pricing Agreement by the Company, the issue and sale of the Shares, and
the consummation of the transactions contemplated hereby and thereby will
not conflict with or result in a breach of any of the provisions of, or
constitute a default under (A) the Company's Certificate of Incorporation
or by-laws or any agreement, franchise, license, indenture, mortgage, deed
of trust or other instrument or agreement known to such counsel to which
the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of their respective
properties is subject or (B) so far as known to such counsel, any statute,
order, rule or regulation applicable to the Company or any of its
subsidiaries of any court or other governmental authority or body having
jurisdiction over the Company or any of its subsidiaries or any of its
properties.
(x) To such counsel's knowledge, except as disclosed in the
Prospectus, no person has the right, contractual or otherwise, to cause the
Company to register pursuant to the Act any shares of capital stock of the
Company, upon the issuance and sale of the Shares to be sold by the Company
to the Underwriters pursuant to this Agreement.
(xi) To such counsel's knowledge, all offers and sales of the
Company's capital stock prior to the date hereof were at all relevant times
(A) registered under the Act or exempt from the registration requirements
of the Act or (B)duly registered or the subject of an available exemption
from the registration requirements of the applicable state securities or
blue sky laws.
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In rendering such opinion, such counsel may state that he is relying
upon the certificate of the transfer agent for the Common Stock, as to the
number of shares of Common Stock at any time or times outstanding. Such counsel
may also rely upon the opinions of other competent counsel and, as to factual
matters, on certificates of state officials, in which case such counsel's
opinion is to state that they are so doing and copies of such opinions or
certificates are to be attached to the opinion unless such opinions or
certificates (or, in the case of certificates, the information therein) have
been furnished to the Representatives otherwise.
(d) The Representatives shall have received from Hahn Loeser & Parks LLP,
counsel for the Company and the Selling Stockholders, a favorable opinion dated
the Closing Date and satisfactory to the Representatives and the Underwriters'
counsel to the effect that:
(i) All documents incorporated by reference in the Prospectus, when
they were filed with the Commission, complied as to form in all material
respects with the requirements of the Exchange Act; and such counsel have
no reason to believe that any of such documents, when they were so filed,
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such documents
were so filed, not misleading; such counsel need express no opinion as to
the financial statements or other financial or statistical data contained
in any such document.
(ii) The Registration Statement has become effective under the Act,
and, to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Act.
(iii) The Registration Statement (including the information deemed to
be part of the Registration Statement at the time of effectiveness pursuant
to Rule 430A(b), if applicable) as amended or supplemented (except for the
financial statements and notes thereto, the financial statement schedules
and other financial data included therein as to which such counsel need
express no opinion) and the Prospectus and any supplements or amendments
thereto (except for the financial statements and notes thereto, the
financial statement schedules and other financial data included therein, as
to which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the rules of the
Commission thereunder and nothing has come to the attention of such counsel
that would cause such counsel to believe that the Registration Statement
(including the information deemed to be part of the Registration Statement
at the time of effectiveness pursuant to Rule 430A(b), if applicable) as
amended or supplemented (except
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for the financial statements and notes thereto, the financial statement
schedules and other statistical or financial data included therein as to
which such counsel need express no opinion) at the time it became
effective, at the time the Pricing Agreement was executed and at the
Closing Date, contained any untrue statement of a material fact or omitted
or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or that, as of its
date, the Prospectus or any amendment or supplement thereto (except for the
financial statements and notes thereto, the financial statement schedules
and other statistical or financial data included therein as to which such
counsel need express no opinion) included or includes any untrue statement
of a material fact or omitted or omits to state any material fact necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Rule 434 Prospectus conforms to the
requirements of Rule 434 of the Act.
(iv) The statements in the Prospectus in the sections captioned
"Management" and "Description of Capital Stock," in each case insofar as
such statements reflect a summary of the material legal matters or the
documents referred to therein, fairly and accurately present the
information called for by the Act and the applicable rules and regulations
promulgated thereunder.
(v) To the knowledge of such counsel, there are no statutes or
regulations, provisions of the Delaware General Corporation Law or any
pending or threatened litigation or governmental proceedings against the
Company required to be described in the Prospectus which are not so
described, nor any contracts or documents of a character required to be
described in or filed as a part of the Registration Statement which are not
described or filed as required.
(vi) Neither the Company nor any of its subsidiaries is an
"investment company" or, to the knowledge of such counsel, a person
"controlled by" an "investment company" within the meaning of the
Investment Company Act.
(vii) The certificates for the Shares to be delivered by the Selling
Stockholders hereunder are in due and proper form, and when duly
countersigned by the Company's transfer agent and delivered to the
Representatives against payment of the agreed consideration therefor in
accordance with the provisions of this Agreement and the Pricing Agreement,
the Shares represented thereby will be duly authorized and validly issued,
fully paid and nonassessable and free of preemptive rights and, to the
knowledge of such counsel, will be free of any security interest, claim,
lien, encumbrance or adverse interest of any nature, or rights of first
refusal in favor of,
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<PAGE> 25
stockholders with respect to any of the Shares or the issuance or sale
thereof, pursuant to the Certificate of Incorporation or by-laws of the
Company and, to such counsel's knowledge, there are no contractual
preemptive rights, rights of first refusal, rights of co-sale or other
similar rights which exist with respect to any of the Shares or the
issuance and sale thereof; and the Shares to be sold by the Selling
Stockholders hereunder have been duly and validly authorized and qualified
for listing on the New York Stock Exchange, subject to notice of issuance.
(viii) With respect to each Selling Stockholder, this Agreement and
the Pricing Agreement have been duly authorized, executed and delivered by
or on behalf of each such Selling Stockholder; the Agents and the Custodian
for each such Selling Stockholder have been duly and validly authorized to
carry out all transactions contemplated herein on behalf of each such
Selling Stockholder; and the execution and performance of this Agreement
and the Pricing Agreement, the sale and transfer of the Shares by such
Selling Stockholder and the consummation of the transactions contemplated
herein by such Selling Stockholder will not contravene, conflict with any
of the provisions of, or result in a breach or default under, any
agreement, franchise, license, indenture, mortgage, deed of trust or other
agreement or instrument known to such counsel to which any of such Selling
Stockholders is a party or by which any are bound or to which any of the
property of such Selling Stockholders is subject, nor will such actions
violate any order, rule or regulation known to such counsel of any court or
regulatory or governmental body having jurisdiction over any of such
Selling Stockholders or any of their properties; and no consent, approval,
authorization or order of any court or governmental agency or body is
required for the consummation of the transactions contemplated by this
Agreement and the Pricing Agreement involving the sale and transfer of
Shares by the Selling Stockholders, except such as may be required under
the Act or state securities laws as to which counsel need express no
opinion.
(ix) Each Selling Stockholder has full right, power and authority to
enter into this Agreement and the Pricing Agreement and to sell, transfer
and deliver the Shares to be sold on the Closing Date or the Option Closing
Date, as the case may be, by such Selling Stockholder hereunder; upon
registration in the name of the Underwriters of such Shares to be sold by
such Selling Stockholder hereunder, the Underwriters (who counsel may
assume to be bona fide purchasers) will acquire valid title to such Shares
so sold, free and clear of all voting trust arrangements, security
interests, claims, liens, encumbrances, community property rights or any
adverse interests of any nature imposed on such Shares by such Selling
Stockholder or the Company.
(x) This Agreement and the Pricing Agreement are legal, valid and
binding agreements of each Selling Stockholder except as enforceability of
the same may be limited by bankruptcy, insolvency, reorganization,
moratorium or
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<PAGE> 26
other similar laws affecting creditors' rights generally and by
general principles of equity, and except that such counsel need express no
opinion to those provisions relating to indemnities for liabilities arising
under the Act.
(xi) The Power of Attorney and Custody Agreement have been duly
executed and delivered by each Selling Stockholder and constitute valid and
binding agreements of each such Selling Stockholder in accordance with
their terms, except as enforceability of the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of equity,
and except that such counsel need express no opinion to those provisions
relating to indemnities for liabilities arising under the Act.
In rendering such opinion, such counsel may state that they are
relying upon the certificate of the Selling Stockholders and of officers of the
Company and the transfer agent for the Common Stock, as to the number of shares
of Common Stock at any time or times outstanding, and that insofar as their
opinion under clause (iii) above relates to the accuracy and completeness of the
Prospectus and Registration Statement, it is based upon a general review with
the Company's representatives and independent accountants of the information
contained therein, without independent verification by such counsel of the
accuracy or completeness of such information. Such counsel may also rely, as to
factual matters, on certificates of officers of the Company and of the Selling
Stockholders, in which case their opinion is to state that they are so doing and
copies of such certificates are to be attached to the opinion unless such
certificates (or the information therein) have been furnished to the
Representatives otherwise.
(e) That the Representatives shall have received on the Closing Date
a favorable opinion dated the Closing Date from Jones, Day, Reavis & Pogue,
counsel for the Underwriters, as to such matters as the Representatives may
reasonably require.
(f) That the Representatives shall have received letters addressed to
the Representatives and dated the date hereof and the Closing Date from Deloitte
& Touche LLP, independent public accountants for the Company, to the effect set
forth in Schedule III. There shall not have been any change or decrease
specified in the letters referred to in this subparagraph which makes it
impractical or inadvisable in the judgment of the Representatives to proceed
with the public offering or purchase of the Shares as contemplated hereby.
(g) That (i) no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date; (ii) there shall
not have been any change in the capital stock of the Company nor any material
increase in the short or long-term debt of the Company from that set forth or
contemplated in the Registration Statement; (iii) there shall not have been,
since the respective dates as to which information is given in the Registration
Statement and the Prospectus, except as may otherwise be set forth or
contemplated in the Registration Statement and the Prospectus, any material
adverse
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<PAGE> 27
change in the financial condition or results of operations of the Company; (iv)
the Company shall not have incurred any material liabilities or obligations,
direct or contingent (whether or not in the ordinary course of business), other
than those reflected in the Registration Statement, and (v) all of the
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the date hereof and the Closing Date as if made
on and as of each such date, and the Representatives shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the principal financial officer (or such other officers as are acceptable to
the Representatives) to the effect set forth in this Section 6(g) and in Section
6(h) hereof.
(h) That the Company shall not have failed at or prior to the Closing
Date to have performed or complied in all material respects with any of the
agreements herein contained and required to be performed or complied with by it
at or prior to the Closing Date.
(i) Within 24 hours after the Registration Statement becomes
effective, or within such longer period as to which the Representatives shall
have consented, the Shares shall have been qualified for sale or exempted from
such qualification under the securities laws of such jurisdictions as the
Representatives shall have designated prior to the time of execution of the
Pricing Agreement and such qualification or exemption shall continue in effect
to and including the Closing Date.
(j) That the representations and warranties of each Selling
Stockholder contained in this Agreement shall be true and correct on and as of
the date hereof and the Closing Date as if made on and as of each such date, and
the Representatives shall have received a certificate, dated the Closing Date,
to the effect set forth in this Section 6(j).
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of the Option Closing
Date of the conditions set forth in paragraphs (a) through (j); except that the
opinions called for in paragraphs (c), (d) and (e) shall be revised to reflect
the sale of Additional Shares and shall be dated the Option Closing Date, if
different from the Closing Date.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act or the Exchange Act from and against any and all losses,
claims, damages or liabilities, joint or several, whatsoever (including any
investigation, legal or other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claim
asserted) to which such Underwriter, or such controlling person may become
subject, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus or
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<PAGE> 28
the Registration Statement or the Prospectus or in any amendment or supplement
thereto or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred, except insofar as such losses, claims, damages or
liabilities arise out of or are based upon any such untrue statement or omission
or allegation thereof that has been made therein or omitted therefrom in
reliance upon and in conformity with information relating to such Underwriter
furnished in writing to the Company by or on behalf of any Underwriter through
the Representatives expressly for use therein; provided, however, that the
indemnification contained in this paragraph with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter (or of any person
controlling such Underwriter) with respect to any action or claim arising from
the sale of the Shares by such Underwriter brought by any person who purchased
Shares from such Underwriter if (i) a copy of the Prospectus (as amended or
supplemented if any amendments or supplements thereto shall have been furnished
to the Underwriter prior to the written confirmation of the sale involved) shall
not have been given or sent to such person by or on behalf of the Underwriter
with or prior to the written confirmation of the sale involved and (ii) the
untrue statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (as amended or supplemented if
amended or supplemented as aforesaid).
(b) The Selling Stockholders, severally in proportion to the number
of Shares to be sold by each of them hereunder, agree to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Act or the Exchange Act from and against any and all
losses, claims, damages or liabilities, joint or several, whatsoever (including
any investigation, legal or other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claim
asserted) to which such Underwriter, or such controlling person may become
subject, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus or the
Registration Statement or the Prospectus or in any amendment or supplement
thereto or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company by or on behalf of the Selling Stockholder specifically for
inclusion therein, and will reimburse each Underwriter for any legal or other
expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred, except insofar as such losses, claims, damages or liabilities arise
out of or are based upon any such untrue statement or omission or allegation
thereof that has been made therein or omitted therefrom in reliance upon and in
conformity with information
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<PAGE> 29
relating to such Underwriter furnished in writing to the Company by or on behalf
of any Underwriter through the Representatives expressly for use therein;
provided, however, that the indemnification contained in this paragraph with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter (or of any person controlling such Underwriter) with respect to any
action or claim arising from the sale of the Shares by such Underwriter brought
by any person who purchased Shares from such Underwriter if (i) a copy of the
Prospectus (as amended or supplemented if any amendments or supplements thereto
shall have been furnished to the Underwriter prior to the written confirmation
of the sale involved) shall not have been given or sent to such person by or on
behalf of the Underwriter with or prior to the written confirmation of the sale
involved and (ii) the untrue statement or omission of a material fact contained
in such Preliminary Prospectus was corrected in the Prospectus (as amended or
supplemented if amended or supplemented as aforesaid). In no event, however,
shall the liability of any Selling Stockholder for indemnification under this
Section 7(b) exceed the proceeds received by such Selling Stockholder from the
sale of Shares under this Agreement.
(c) If any action or claim shall be brought against any Underwriter
or any person controlling such Underwriter, in respect of which indemnity may be
sought against the Company, such Underwriter shall promptly notify the Company
in writing, and the Company shall assume the defense thereof, including the
employment of counsel and payment of all fees and expenses. Any Underwriter or
any such person controlling such Underwriter shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Underwriter or such controlling person and shall be reimbursed as they are
incurred unless (i) the Company has agreed in writing to pay such fees and
expenses, (ii) the Company has failed to assume the defense and employ counsel
or (iii) the named parties to any such action (including any impleaded party)
included such Underwriter or controlling person and the Company and such
Underwriter or controlling person shall have been advised by such counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the Company and that may also result in a
conflict of interest (in which case if such Underwriter or controlling person
notifies the Company, the Company shall not have the right to assume the defense
of such action on behalf of such Underwriter or controlling person, it being
understood, however, that the Company shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all such Underwriters and controlling persons, which firm shall
be designated in writing by the Representatives). The Company shall not be
liable for any settlement or any such action effected without the written
consent of the Company, but if settled with the written consent of the Company,
or if there shall be a final judgment for the plaintiff in any such action and
the time for filing all appeals has expired, the Company agrees to indemnify
and hold
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<PAGE> 30
harmless any Underwriter and any such controlling person from and against any
loss or liability by reason of such settlement or judgment.
(d) Each Underwriter will severally indemnify and hold harmless the
Company, its directors, its officers who sign the Registration Statement and
each Selling Stockholder, and any person controlling the Company within the
meaning of the Act or the Exchange Act to the same extent as the foregoing
indemnity from the Company to each Underwriter, but only with respect to
information relating to such Underwriter furnished in writing to the Company by
or on behalf of such Underwriter through the Representatives expressly for use
in the Registration Statement, the Prospectus or any Preliminary Prospectus. If
any action or claim shall be brought or asserted against the Company, any of its
directors, any such officer, any such Selling Stockholder, or any such
controlling person based on the Registration Statement, the Prospectus or any
Preliminary Prospectus and in respect of which indemnity may be sought against
any Underwriter, such Underwriter shall have the rights and duties given to the
Company pursuant to Section 7(c) hereof (except that if the Company shall have
assumed the defense thereof, such Underwriter shall not be required to do so,
but may employ separate counsel therein and participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of such
Underwriter), and the Company, its directors, any such officer, any such Selling
Stockholder and any such controlling person shall have the rights and duties
given to the Underwriters by Section 7(c) hereof.
(e) (i) If the indemnification provided for in this Section 7 is
unavailable as a matter of law to any indemnified party under this Section 7 in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable by damages,
liabilities or expenses (A) in such proportion as is appropriate to reflect the
relative benefits received by the Company, the Selling Stockholders and the
Underwriters from the offering of the Shares or (B) if the allocation provided
by clause (A) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (A)
above but also the relative fault of the Company, the Selling Stockholders and
the Underwriters in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The respective relative benefits received by
the Company, the Selling Stockholders and the Underwriters shall be deemed to be
in the same proportion in the case of the Company and the Selling Stockholders,
as the total price paid to the Company and the Selling Stockholders for the
Shares by the Underwriters (net of underwriting discount but before deducting
expenses), and in the case of the Underwriters as the underwriting discount
received by them bears to the total of such amounts paid to the Company and the
Selling Stockholders and received by the Underwriters as underwriting discount,
in each case as contemplated by the Prospectus. The relative fault of the
Company, the Selling Stockholders and the Underwriters shall be determined by
reference to, among other things, whether the
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<PAGE> 31
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Selling Stockholders or by the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, liabilities and expenses referred to
in this Section shall be deemed to include, subject to the limitations set forth
in this Section, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.
(ii) The Company, the Selling Stockholders and the Underwriters
agree that the determination of contribution pursuant to this Section based on
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph would not be just and equitable (even if the several Underwriters were
treated as one entity for such purpose). Notwithstanding the provisions of this
Section, no Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Shares underwritten by it and
distributed to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section are several in proportion to their respective
underwriting commitments and not joint. In no event, however, shall the
liability of any Selling Stockholder for contribution under this Section
7(e)(ii) exceed the proceeds received by such Selling Stockholder from the sale
of Shares under this Agreement.
(f) The indemnity and contribution agreements contained in this
Section and the representations and warranties of the Company and the Selling
Stockholders set forth in this Agreement shall remain operative and in full
force and effect, regardless of (i) any investigation made by or on behalf of
any Underwriter or any person controlling any Underwriter, the Company or its
directors or officers or any Selling Stockholder, (or any person controlling the
Company or any Selling Stockholder), (ii) acceptance of any Shares and payment
therefor hereunder and (iii) any termination of this Agreement. A successor or
assign of an Underwriter, the Company or its directors or officers, and their
legal and personal representatives (or of any person controlling an Underwriter,
or the Company or any Selling Stockholder) shall be entitled to the benefits of
the indemnity, contribution and reimbursement agreements contained in this
Section.
(g) The Underwriters severally confirm, and the Company and each
Selling Stockholder acknowledge, that the statements with respect to the public
offering of the Shares set forth on the cover page of, the legend concerning
stabilization on the inside front cover page of, the names of the Underwriters
and the number of Shares that they are purchasing, the concession and
reallowance figures and the information contained in the eighth paragraph, in
each case appearing under
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the caption "Underwriting" in, the Prospectus are correct and constitute the
only information furnished in writing by or on behalf of the Underwriters
expressly for use in the Registration Statement, the Prospectus or any
Preliminary Prospectus.
SECTION 8. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective immediately as to Sections 5, 7, 10 and 11 and as to all other
provisions at 10:00 A.M., Chicago Time, on the day following the date upon which
the Pricing Agreement is executed and delivered, unless such a day is a
Saturday, Sunday or holiday (and in that event this Agreement shall become
effective at such hour on the business day next succeeding such Saturday, Sunday
or holiday); but this Agreement shall nevertheless become effective at such
earlier time after the Pricing Agreement is executed and delivered as the
Representatives may determine on and by notice to the Company and the Selling
Stockholders or by release of any Shares for sale to the public. For the
purposes of this Section, the Shares shall be deemed to have been so released
upon the release for publication of any newspaper advertisement relating to the
Shares or upon the release by the Representatives of telecommunications (i)
advising Underwriters that the Shares are released for public offering, or (ii)
offering the Shares for sale to securities dealers, whichever may occur first.
SECTION 9. DEFAULT OF UNDERWRITERS. If any one or more of the Underwriters
shall fail or refuse to purchase Firm Shares which it or they have agreed to
purchase under this Agreement and the Pricing Agreement and the aggregate number
of Firm Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of Firm Shares, each non-defaulting Underwriter shall be obligated, severally,
in the proportion which the number of Firm Shares set forth opposite its name in
Schedule I bears to the aggregate number of Firm Shares set forth opposite the
names of all non-defaulting Underwriters or in such other proportion as the
Representatives may specify in accordance with the Agreement Among Underwriters
to purchase the Firm Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase. If any Underwriter or Underwriters
shall fail or refuse to purchase Firm Shares and the aggregate number of Firm
Shares with respect to which such default occurs is more than one-tenth of the
aggregate number of Firm Shares and arrangements satisfactory to the
Representatives and the Company for the purchase of such Firm Shares are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company. In any
such case which does not result in termination of this Agreement, either the
Representatives or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and the Prospectus or any other
documents or arrangements may be effected. Any action taken under this paragraph
shall not relieve any defaulting Underwriter from liability in respect of any
such default of any such Underwriter under this Agreement.
-32-
<PAGE> 33
(b) Any notice under this Section 9 may be made by telecopy or
telephone but shall be subsequently confirmed by letter.
SECTION 10. TERMINATION OF AGREEMENT. This Agreement and the Pricing
Agreement shall be subject to termination by notice given by the Representatives
to the Company, if (a) after the execution and delivery of this Agreement and
the Pricing Agreement and prior to the Closing Date (and with respect to the
Additional Shares, the Option Closing Date) (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York or in Chicago shall have been declared by either Federal,
New York or Illinois State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in the judgment of the Representatives, is material and
adverse and (b) in the case of any of the events specified in clauses (a)(i)
through (iv), such event, singly or together with any other such event, makes
it, in the judgment of the Representatives, impracticable to market the Shares
on the terms and in the manner contemplated in the Prospectus. Notice of such
cancellation shall be given to the Company by telecopy or telephone but shall be
subsequently confirmed by letter.
SECTION 11. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale to the
Underwriters of the Shares on the Closing Date is not consummated because any
condition to the Underwriters' obligations hereunder is not satisfied or because
of any refusal, inability or failure on the part of the Company or the Selling
Stockholders to perform any agreement herein or to comply with any provision
hereof, unless such failure to satisfy such condition or to comply with any
provision hereof is due to the default or omission of any Underwriter, the
Company and the Selling Stockholders agree to reimburse you and the other
Underwriters upon demand for all out-of-pocket expenses (including reasonable
fees and disbursements of counsel), but without any further obligation of the
Company for lost profits or otherwise, that shall have been reasonably incurred
by you and them in connection with the proposed purchase and the sale of the
Shares. Any such termination shall be without liability of any party to any
other party except that the provisions of this Section, Section 5 and Section 7
shall at all times be effective and shall apply.
SECTION 12. NOTICES. Except as otherwise provided in Sections 9 and 10
hereof, notice given pursuant to any of the provisions of this Agreement shall
be in writing and shall be delivered (a) if to the Company, at the office of the
Company at TransTechnology Corporation, 150 Allen Road, Liberty Corner, New
Jersey 07938, Attention: Gerald C. Harvey, with a copy to Hahn Loeser & Parks
LLP, 3300 BP America Building, 200 Public Square, Cleveland, Ohio 44114,
Attention: F. Ronald O'Keefe or (b) if to the Representatives, at the offices of
ABN AMRO Chicago
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<PAGE> 34
Corporation, 208 South LaSalle Street, 4th Floor, Chicago, Illinois 60604,
Attention: Corporate Finance Department, with a copy to Jones, Day, Reavis &
Pogue, 77 West Wacker, Chicago, Illinois 60601, Attention: Gary T. Johnson or
(c) if to the Selling Stockholders, to the Agents and the Custodian at such
address as they have previously furnished to the Company and the
Representatives, with a copy to Hahn Loeser & Parks LLP, 3300 BP America
Building, 200 Public Square, Cleveland, Ohio 44114, Attention: F. Ronald
O'Keefe, or in any case to such other address as the person to be notified may
have requested in writing.
SECTION 13. SUCCESSORS. The Agreement and the Pricing Agreement are made
solely for the benefit of the several Underwriters, the Company, their directors
and officers and other controlling persons referred to in Section 7 hereof, and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement or the Pricing Agreement.
The term "successors and assigns" as used in this Agreement shall not include a
purchaser from any of the several Underwriters of any of the Shares in his
status as such purchaser.
SECTION 14. REPRESENTATION OF UNDERWRITERS. The Representatives will act
for the several Underwriters in connection with the purchase, offering and sale
of the Shares, and any action taken by the Representatives will be binding upon
all the Underwriters.
SECTION 15. PARTIAL UNENFORCEABILITY. If any section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.
SECTION 16. APPLICABLE LAW. This Agreement and the Pricing Agreement shall
be governed by and construed in accordance with the laws of the State of
Illinois.
SECTION 17. COUNTERPARTS. This Agreement may be signed in various
counterparts which together shall constitute one and the same instrument.
-34-
<PAGE> 35
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.
Very truly yours,
TRANSTECHNOLOGY CORPORATION
BY:_______________________
NAME:
TITLE:
The Selling Stockholders
named in Schedule II
hereto, acting severally
BY:
------------------------------
Attorney-in-Fact
ACCEPTED AND DELIVERED AS OF
THE DATE FIRST WRITTEN ABOVE.
ABN AMRO CHICAGO CORPORATION
EVEREN SECURITIES, INC.
ACTING AS REPRESENTATIVES OF
THE SEVERAL UNDERWRITERS NAMED
IN SCHEDULE I HERETO.
BY: ABN AMRO CHICAGO CORPORATION
BY: _____________________________
-35-
<PAGE> 36
TRANSTECHNOLOGY CORPORATION
SCHEDULE I
UNDERWRITERS
NUMBER OF
NAME FIRM SHARES
- -------------------------------------------------------------------------------
ABN AMRO Chicago Corporation.................................
EVEREN SECURITIES, INC....................................... ________
TOTAL......................................... ========
<PAGE> 37
TRANSTECHNOLOGY CORPORATION
SCHEDULE II
SELLING STOCKHOLDERS
NUMBER OF
FIRM SHARES
NAME TO BE SOLD
Michael J. Berthelot............................................
Patrick K. Bolger...............................................
Chandler J. Moisen.............................................. ________
TOTAL............................................ ========
<PAGE> 38
TRANSTECHNOLOGY CORPORATION
SCHEDULE III
Comfort Letter of Deloitte & Touche LLP
(1) They are independent public accountants with respect to the Company
and its subsidiaries within the meaning of the Act.
(2) In their opinion the consolidated financial statements of the
Company and its subsidiaries included or incorporated by reference in the
Registration Statement and the consolidated financial statements of the Company
from which the information presented under the caption "Selected Consolidated
Financial Data" has been derived which are stated therein to have been examined
by them comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act.
(3) On the basis of specified procedures (but not an examination in
accordance with generally accepted auditing standards), including inquiries of
certain officers of the Company and its subsidiaries responsible for financial
and accounting matters as to transactions and events subsequent to ______, 1997,
a reading of minutes of meetings of the stockholders and directors of the
Company and its subsidiaries since ___________, 1997, a reading of the latest
available interim unaudited consolidated financial statements of the Company and
its subsidiaries (with an indication of the date thereof) and other procedures
as specified in such letter, nothing came to their attention which caused them
to believe that (i) the unaudited consolidated financial statements of the
Company and its subsidiaries included or incorporated by reference in the
Registration Statement do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the Exchange Act or that
such unaudited financial statements are not fairly presented in accordance with
generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in the
Registration Statement, [cover pro forma financial statements] and (ii) at a
specified date not more than five days prior to the date thereof in the case of
the first letter and not more than two business days prior to the date thereof
in the case of the second and third letters, there was any change in the capital
stock or long-term debt or short-term debt (other than normal payments) of the
Company and its subsidiaries on a consolidated basis or any decrease in
consolidated net current assets or consolidated] stockholders' equity as
compared with amounts shown on the latest unaudited balance sheet of the Company
included in the Registration Statement or for the period from the date of such
balance sheet to a date not more than five days prior to the day thereof in the
case of the first letter and not more than two business days prior to the date
thereof in the case of the second and third letters, there were any decreases,
as compared with the
<PAGE> 39
corresponding period of the prior year, in consolidated net sales, consolidated
income before income taxes or in the total or per share amounts of consolidated
net income except, in all instances, for changes or decreases which the
Prospectus discloses have occurred or may occur or which are set forth in such
letter.
(4) They have carried out specified procedures, which have been agreed
to by the Representatives, with respect to certain information in the Prospectus
specified by the Representatives, and on the basis of such procedures, they have
found such information to be in agreement with the general accounting records of
the Company and its subsidiaries.
-3-
<PAGE> 40
Exhibit A
1,100,000 SHARES*
TRANSTECHNOLOGY CORPORATION
COMMON STOCK
PRICING AGREEMENT
__________, 1997
ABN AMRO CHICAGO CORPORATION
EVEREN SECURITIES, INC.
Individually and as Representatives of the
Several Underwriters Named in Schedule I
to the Underwriting Agreement
c/o ABN AMRO Chicago Corporation
208 South LaSalle Street
4th Floor
Chicago, Illinois 60604
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement, dated _______ __,
1997 (the "Underwriting Agreement"), relating to the purchase by the several
Underwriters named in Schedule I thereto (collectively, the "Underwriters"), for
whom you are acting individually and as representatives (the "Representatives"),
of the above referenced Common Stock (the "Shares") of TransTechnology
Corporation (the "Company").
Pursuant to Section 3 of the Underwriting Agreement, the Company
agrees with each of the Underwriters as follows:
1. The public offering price per share of the Shares determined as
provided in said Section 3 shall be $_______.
2. The purchase price per share of the Shares to be paid by the
several Underwriters shall be $________, being an amount equal to the public
offering price set forth above, less $_______ per Share.
- --------
* Plus an option to purchase up to 165,000 Additional Shares to cover
over-allotments.
<PAGE> 41
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the Underwriters and the Company in accordance with its terms.
Very truly yours,
TRANSTECHNOLOGY CORPORATION
BY:______________________________
NAME:
TITLE:
Confirmed and Accepted, as of the date
first above written for themselves and as
Representatives of the other Underwriters
named in the Underwriting Agreement:
ABN AMRO CHICAGO CORPORATION
EVEREN SECURITIES, INC.
Acting as Representatives of the Several
Underwriters named in Schedule I to
the Underwriting Agreement
BY: ABN AMRO CHICAGO CORPORATION
BY: _____________________________
-2-
<PAGE> 1
EXHIBIT 5.1
[HAHN LOESER PARKS LETTERHEAD]
November 4, 1997
TransTechnology Corporation
150 Allen Road
Liberty Corner, New Jersey 07938
Gentlemen:
As counsel for TransTechnology Corporation, a Delaware corporation (the
"Company"), we are familiar with the Company's Registration Statement on Form
S-2, as amended (the "Registration Statement"), first filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, on October
8, 1997, with respect to 1,265,000 shares of the Company's Common Stock, $0.01
par value per share, of which 1,000,000 shares are offered for the account of
the Company ("Company Shares"), 100,000 shares are offered for the accounts of
certain selling stockholders (the "Selling Stockholders") named in the
Registration Statement (the "Selling Stockholder Shares") and 165,000 shares are
subject to an over-allotment option granted to the underwriters by the Company
(the "Over-Allotment Shares").
In connection with the foregoing, we have examined (a) the Amended and
Restated Certificate of Incorporation and the Amended Bylaws of the Company; (b)
the proposed form of Underwriting Agreement filed as an exhibit to the
Registration Statement (the "Underwriting Agreement") with respect to the
Company Shares, the Selling Stockholder Shares and the Over-Allotment Shares,
and (c) such records of the corporate proceedings of the Company and such other
documents as we deemed necessary to render this opinion.
Based upon such examination, we are of the opinion that:
1. The Company is a corporation organized and validly existing
under the laws of the State of Delaware.
2. The Company Shares and the Over-Allotment Shares to be sold by
the Company have been duly authorized and, when issued and
sold pursuant to the duly executed Underwriting Agreement (in
substantially the form filed as an exhibit to the Registration
Statement) and in the manner contemplated by the Registration
Statement, will be validly issued, fully paid and
nonassessable.
<PAGE> 2
TransTechnology Corporation
November 4, 1997
Page 2
3. The Selling Stockholder Shares to be sold by the Selling
Stockholders when sold pursuant to the duly executed
Underwriting Agreement (in substantially the form filed as an
exhibit to the Registration Statement) and in the manner
contemplated by the Registration Statement will be duly
authorized, validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and the reference to us under the caption "Legal Matters"
in the Prospectus that is a part of the Registration Statement.
Very truly yours,
/s/ HAHN LOESER & PARKS LLP
-----------------------------------
HAHN LOESER & PARKS LLP
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to Registration Statement No.
333-37395 of TransTechnology Corporation on Form S-2 of our reports dated May
12, 1997, included and incorporated by reference in the Annual Report on Form
10-K of TransTechnology Corporation for the year ended March 31, 1997 and to the
use of our report dated May 12, 1997, appearing in the Prospectus, which is part
of such Registration Statement. We also consent to the reference to us under the
headings "Summary Consolidated Financial Data" and "Experts" in such Prospectus.
Deloitte & Touche LLP
Parsippany, New Jersey
November 4, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The New Seeger Group:
As independent public accountants, we hereby consent to use of our report
included in this registration statement and to the incorporation by reference
of our report dated May 28, 1996 included in the Annual Report on Form 10-K of
TransTechnology Corporation for the year ended March 31, 1997 and to all
references to our Firm included in this registration statement.
ARTHUR ANDERSEN
Wirtschaftsprufungsgellschaft
Steuerberatungsgesellschaft mbH
Laupenmuhlen
Wirtschaftsprufer
(certified auditor)
Eschborn/Frankfurt/M.
November 4, 1997
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 2 to
Registration Statement No. 333-37395 of TransTechnology Corporation on Form S-2
of our report dated February 6, 1997 on our audit of the financial statements of
TCR Corporation as of December 31, 1996 and 1995 and for the years ended,
appearing in the Current Report on Form 8K/A of TransTechnology Corporation
dated April 17, 1997, which is also incorporated by reference in this
Registration Statement, and to the reference to us under the heading "Experts"
in such Prospectus.
Ocel, Heimer & Associates, Ltd.
Minneapolis, MN
November 4, 1997
