<PAGE> 1
FORM 10-Q
---------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-7872
---------------------
TRANSTECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-4062211
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
150 Allen Road 07938
Liberty Corner, New Jersey (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (908) 903-1600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
As of November 5, 1997, the total number of
outstanding shares of registrant's one class of
common stock was 5,099,759.
<PAGE> 2
TRANSTECHNOLOGY CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. Financial Information Page No.
--------------------- --------
<S> <C>
Item 1. Financial Statements........................................ 2
Statements of Consolidated Operations--
Three and Six Month Periods Ended September 28, 1997
and September 29, 1996...................................... 3
Consolidated Balance Sheets--
September 28, 1997 and March 31, 1997....................... 4
Statements of Consolidated Cash Flows--
Six Months Ended September 28, 1997 and
September 29, 1996.......................................... 5
Statements of Consolidated Stockholders' Equity--
Six Months Ended September 28, 1997......................... 6
Notes to Consolidated Financial Statements.................. 7-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................12-18
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders......... 19
Item 6. Exhibits and Reports on Form 8-K............................ 19
SIGNATURES................................................................. 20
EXHIBIT 11................................................................. 21
EXHIBIT 27................................................................. 22
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited Statements of Consolidated Operations, Consolidated
Balance Sheets and Statements of Consolidated Cash Flows are of TransTechnology
Corporation and its consolidated subsidiaries. These reports reflect all
adjustments of a normal recurring nature, which are, in the opinion of
management, necessary to a fair presentation of the results of operations for
the interim periods reflected therein. The results reflected in the unaudited
Statements of Consolidated Operations for the period ended September 28, 1997
are not necessarily indicative of the results to be expected for the entire
year. The following unaudited Consolidated Financial Statements should be read
in conjunction with the notes thereto, and Management's Discussion and Analysis
of Financial Conditions and Results of Operations set forth in Item 2 of Part I
of this report, as well as the audited financial statements and related notes
thereto contained in the Form 10-K filed for the fiscal year ended March 31,
1997.
[THIS SPACE INTENTIONALLY LEFT BLANK]
2
<PAGE> 4
STATEMENTS OF CONSOLIDATED OPERATIONS
UNAUDITED
(In Thousands of Dollars Except Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------------------- -----------------------------------------
SEPTEMBER 28, 1997 SEPTEMBER 29, 1996 SEPTEMBER 28, 1997 SEPTEMBER 29, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net sales $ 50,013 $ 43,580 $ 99,936 $ 88,220
Cost of sales 34,080 31,084 68,655 62,023
------------------ ------------------ ------------------ ------------------
Gross profit 15,933 12,496 31,281 26,197
------------------ ------------------ ------------------ ------------------
General, administrative
and selling expenses 10,278 8,106 19,849 16,667
Interest expense 2,184 1,814 4,160 3,624
Interest income (323) (283) (566) (552)
Other income (217) (204) (220) (221)
------------------ ------------------ ------------------ ------------------
Income from continuing operations
before income taxes 4,011 3,063 8,058 6,679
Income taxes 1,624 1,336 3,304 2,855
------------------ ------------------ ------------------ ------------------
Income from continuing operations 2,387 1,727 4,754 3,824
Discontinued operations:
Loss from disposal (net of applicable
tax benefits of $93 and $165 for the
three and six months ended 9/28/97,
respectively, and $157 and $344
for the three and six months ended
9/29/96, respectively) (125) (206) (227) (475)
------------------ ------------------ ------------------ ------------------
Net income $ 2,262 $ 1,521 $ 4,527 $ 3,349
================== ================== ================== ==================
Earnings per Share: (Note 1)
Income from continuing operations $ 0.45 $ 0.34 $ 0.91 $ 0.75
Loss from discontinued operations (0.02) (0.04) (0.04) (0.09)
------------------ ------------------ ------------------ ------------------
Net income $ 0.43 $ 0.30 $ 0.87 $ 0.66
================== ================== ================== ==================
Number of shares used in computation
of per share information 5,289,000 (a) 5,100,000 5,231,000 (a) 5,102,000
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
(a) The quarter and six month period ended September 28, 1997, weighted average
shares outstanding includes common stock equivalents of approximately
206,000 shares and 183,000 shares, respectively, related to stock options.
3
<PAGE> 5
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars Except Share Data)
<TABLE>
<CAPTION>
UNAUDITED
SEPTEMBER 28, 1997 MARCH 31, 1997
------------------ --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,191 $ 3,540
Accounts receivable (net of allowance for doubtful accounts
of $725 at September 28, 1997 and $588 at March 31, 1997) 33,105 28,392
Notes receivable 3,631 1,838
Inventories 50,034 50,677
Prepaid expenses and other current assets 1,191 1,028
Deferred income taxes 4,189 4,293
Assets held for sale 7,052 7,617
------------------ --------------
Total current assets 101,393 97,385
------------------ --------------
Property, Plant and Equipment 90,695 82,207
Less accumulated depreciation and amortization 26,572 23,594
------------------ --------------
Property, Plant and Equipment - net 64,123 58,613
------------------ --------------
Other assets:
Notes receivable 8,504 11,125
Costs in excess of net assets of acquired businesses (net of
accumulated amortization:
September 28, 1997, $4,493; March 31, 1997, $3,869) 45,824 18,878
Other 11,119 13,135
------------------ --------------
Total other assets 65,447 43,138
------------------ --------------
Total $ 230,963 $ 199,136
================== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 10,671 $ 5,907
Accounts payable-trade 12,585 11,050
Accrued compensation 5,666 6,845
Accrued income taxes 1,407 1,632
Other current liabilities 15,571 12,844
------------------ --------------
Total current liabilities 45,900 38,278
------------------ --------------
Long-term debt payable to banks and others 86,242 67,516
------------------ --------------
Other long-term liabilities 17,056 15,898
------------------ --------------
Stockholders' equity:
Preferred stock-authorized, 300,000 shares; none issued -- --
Common stock-authorized, 14,700,000 shares of $.01 par value;
issued 5,391,478 at September 28, 1997, and 5,316,971 at
March 31, 1997 54 53
Additional paid-in capital 47,634 46,745
Retained earnings 40,806 36,937
Other stockholders' equity (2,741) (2,352)
------------------ --------------
85,753 81,383
Less treasury stock, at cost - (291,719 shares at
September 28, 1997 and 289,237
at March 31, 1997) (3,988) (3,939)
------------------ --------------
Total stockholders' equity 81,765 77,444
------------------ --------------
Total $ 230,963 $ 199,136
================== ==============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE> 6
STATEMENTS OF CONSOLIDATED CASH FLOWS
UNAUDITED
(In Thousands of Dollars)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------------------
SEPTEMBER 28, 1997 SEPTEMBER 29, 1996
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,527 $ 3,349
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 4,359 3,834
Provision for losses on notes and accounts receivable 317 53
Loss (gain) on sale or disposal of fixed assets and
discontinued businesses 77 (8)
Change in assets and liabilities net of acquisitions
and dispositions:
(Increase) decrease in accounts receivable (837) 2,412
Decrease in inventories 2,369 1,107
Decrease in assets held for sale 565 926
Decrease (increase) in other assets 86 (4,530)
Decrease in accounts payable (603) (4,005)
Decrease in accrued compensation (1,179) (1,293)
(Decrease) increase in income tax payable (225) 628
(Decrease) increase in other liabilities (434) 3,154
-------- --------
Net cash provided by operating activities 9,022 5,627
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions net of cash acquired (33,929) (3,219)
Capital expenditures (3,247) (2,545)
Proceeds from sale of fixed assets and discontinued business 283 2,118
Decrease in notes receivable 828 458
-------- --------
Net cash used in investing activities (36,065) (3,188)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 53,033 20,336
Payments on long-term debt (29,543) (20,414)
Proceeds from forward exchange rate contracts 2,036 --
Proceeds from issuance of stock under stock option plan 889 311
Stock repurchases -- (1,625)
Dividends paid (658) (665)
-------- --------
Net cash provided by (used in) financing activities 25,757 (2,057)
-------- --------
Effect of exchange rate changes on cash (63) (49)
(Decrease) increase in cash and cash equivalents (1,349) 333
Cash and cash equivalents at beginning of period 3,540 2,362
-------- --------
Cash and cash equivalents at end of period $ 2,191 $ 2,695
======== ========
Supplemental Information:
Interest payments $ 3,060 $ 2,498
Income tax payments $ 2,227 $ 1,682
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE> 7
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
UNAUDITED
(In Thousands of Dollars Except Share Data)
<TABLE>
<CAPTION>
ADDITIONAL OTHER
FOR THE SIX MONTHS COMMON STOCK TREASURY STOCK PAID-IN RETAINED STOCKHOLDERS'
ENDED SEPTEMBER 28, 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 -- -- -- -- -- 4,527 -- 4,527
Cash dividends
($.13 per share) -- -- -- -- -- (658) -- (658)
Unrealized investment
holding gains -- -- -- -- -- -- 50 50
Effects of stock under
incentive bonus plan - net 74,507 1 (2,482) (49) 889 -- (73) 768
Foreign translation
adjustments -- -- -- -- -- -- (366) (366)
--------- --- -------- ------- ------- -------- ------- --------
Balance, September 28, 1997 5,391,478 $54 (291,719) $(3,988) $47,634 $ 40,806 $(2,741) $ 81,765
========= === ======== ======= ======= ======== ======= ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE> 8
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars)
NOTE 1. Earnings Per Share:
Earnings per share are based on the weighted average number of common
stock and common stock equivalents (stock options) outstanding during each
period. Calculation of earnings per share for the quarter and six month
periods ended September 28, 1997 includes common stock equivalents of
approximately 206,000 shares and 183,000 shares, respectively, relating to
stock options. In computing earnings per share for the quarter and six
month periods ended September 29, 1996 common stock equivalents were
either anti-dilutive because of the market value of the stock or not
material, and, therefore, have been excluded from the calculation.
NOTE 2. Inventories:
Inventories are summarized as follows:
<TABLE>
<CAPTION>
September 28,1997 March 31, 1997
------------------- -------------
<S> <C> <C>
Finished goods $ 21,366 $ 21,897
Work-in-process 11,241 10,335
Purchased and
manufactured parts 17,427 18,445
---------------- -------------
Total inventories $ 50,034 $ 50,677
================ =============
</TABLE>
7
<PAGE> 9
NOTE 3. Long-Term Debt Payable to Banks and Others
Long-term debt payable, including current maturities, consisted of the
following:
<TABLE>
<CAPTION>
September 28, 1997 March 31, 1997
------------------ --------------
<S> <C> <C> <C> <C>
Credit agreement -- 5.2% $ 1,990 --
Credit agreement -- 7.58% -- $22,825
Credit agreement -- 7.6875% 6,000 --
Credit agreement -- 8.97% 6,068 --
Credit agreement -- 9% 800 --
Term loan -- 6.57% 6,814 --
Term loan -- 7.5% -- 25,289
Term loan -- 7.75% 34,750 --
Term loan -- 7.6875% 9,375 --
Term loan -- 8.97% 5,561 --
Term loan -- 9% 825 --
Term loan -- 9.79% 24,000 24,500
Other 730 809
------- -------
96,913 73,423
Less current maturities 10,671 5,907
------- -------
Total $86,242 $67,516
======= =======
</TABLE>
Credit Agreement
On September 28, 1997 the Company's debt consisted of $8.3 million of borrowings
under a revolving credit line ("the Revolver"), $8.1 million of borrowings under
international lines of credit ("the International Lines of Credit"), a $55.8
million term loan ("Term Loan A"), a $24 million term loan ("Term Loan B") and
$0.7 million of other borrowings. The Revolver commitment of $30 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 million.
Letters of credit under the line at September 28, 1997 were $0.1 million. The
total commitment under the International Lines of Credit is $10 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 million, giving the company a total of $35 million available
for acquisitions. On April 17, 1997, $32.6 million of this amount was used by
the Company to acquire TCR Corporation.
8
<PAGE> 10
The $55.8 million and $24 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 million, $3.2 million and $4 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 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
September 28, 1997, $73.5 million of the Company's outstanding borrowings
utilized LIBOR.
Additionally, the credit facility limits capital expenditures to $9
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%.
Debt Maturities
<TABLE>
<CAPTION>
September 28,
-------------
<S> <C>
1998 (current) $ 10,671
1999 12,844
2000 14,818
2001 36,716
2002 21,864
--------
Total $ 96,913
========
</TABLE>
NOTE 4. Discontinued Operations
Through September 1997, the Company recorded an additional $0.2 million
after-tax disposal loss related to previously discontinued businesses.
This loss consisted primarily of disposal costs different from previous
estimates associated primarily with environmental and legal matters.
9
<PAGE> 11
Assets held for sale consisted of the following:
<TABLE>
<CAPTION>
September 28, 1997 March 31, 1997
------------------- --------------
<S> <C> <C>
Inventory $ 305 $ 429
Property 6,611 6,577
Other assets 136 611
------------- --------------
Assets held for sale $ 7,052 $ 7,617
============= ==============
</TABLE>
NOTE 5. Acquisitions
On June 18, 1996 the Company acquired the Pebra hose clamp business from
Pebra GmbH Paul Braun i.K. for approximately $3 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 for $32.6 million in cash plus direct acquisition costs and
other contingent consideration. TCR Corporation, located in Minneapolis,
Minnesota, produces externally threaded fasteners and related products for
the automotive, heavy vehicle, marine and industrial markets.
The following summarizes TransTechnology Corporation's combined Proforma
Revenue, Net Income and Earnings per Share information as if the
acquisition of TCR Corporation had occurred at the beginning of the period
presented. The Proforma results give effect to the amortization of
goodwill and the effects on interest expense and taxes.
<TABLE>
<CAPTION>
Six Months Ended
September 29, 1996
------------------
<S> <C>
Net Sales $ 99.9
======
Income from Continuing Operations $ 4.1
======
Net Income $ 3.7
======
Earnings per share $ 0.72
======
</TABLE>
The above Proforma information does not purport to be indicative of the
financial results which actually would have occurred had the acquisition
been made at the beginning of the period presented or subsequent to that
date.
10
<PAGE> 12
NOTE 6. 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
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.
NOTE 7. Reclassifications
Certain reclassifications have been made to the prior year to conform to
the 1998 presentation.
NOTE 8. Subsequent Event
On October 8, 1997, the Company filed a Registration Statement with
respect to an underwritten public offering of 1.0 million new shares of
its Common Stock, with an option granted to the underwriters to purchase
an additional 165,000 shares. On November 6, 1997, the Company announced
that the Registration Statement had been declared effective and that the
offering was priced at $27.625 per share. The net proceeds to the Company
from the offering will be used to repay indebtedness under the Company's
credit facility.
11
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
All references to three and six month periods in this Management's Discussion
refer to the three and six month periods ended September 28, 1997 for fiscal
year 1998 and the three and six month periods ended September 29, 1996 for
fiscal year 1997. Also when referred to herein, operating profit means net sales
less operating expenses, without deduction for general corporate expenses,
interest and income taxes.
Sales from continuing operations for the six month period in 1998 were $99.9
million, an increase of $11.7 million or 13% from the comparable period in 1997.
For the three month period in 1998 sales were $50 million, a $6.4 million or 15%
increase from the comparable period in 1997. As further discussed below, the
increased sales performance for the six and three month periods in 1998 resulted
primarily from the acquisition of TCR Corporation on April 17, 1997.
Gross profit for the six month period in 1998 increased $5.1 million or 19% from
the comparable period in 1997. For the three month period in 1998, gross profit
increased $3.4 million or 28%. Operating profit from continuing operations for
the six month period in 1998 was $16.2 million, an increase of $2.1 million or
15% from the comparable period in 1997. For the three month period in 1998
operating profit from continuing operations was $8.1 million, an increase of
$1.6 million or 26% from the comparable period in 1997. Changes in sales,
operating profit and new orders from continuing operations are discussed below
by segment.
Net income, including discontinued operations, for the six month period in 1998
was $4.5 million or $0.87 per share, compared to $3.3 million or $0.66 per
share, for the comparable period of 1997. The three month period in 1998
experienced net income of $2.3 million or $0.43 per share compared to $1.5
million or $0.30 per share for the year earlier period. As further discussed
below, the increased earnings performance in 1998 resulted primarily from the
inclusion of TCR Corporation operations in the six and three month periods,
increased domestic fastener volume, and to a lesser extent, the Pebra
acquisition in the six month period.
Interest expense increased $0.5 million and $0.4 million for the six month and
three month periods in 1998, respectively. The increases were primarily the
result of increased bank borrowings used for the acquisition of TCR Corporation.
New orders received during the six month period in 1998 totaled $101.2 million,
an increase of $7.9 million or 8% from 1997's comparable period. For the three
month period, new orders totaled $49.4 million, an increase of $0.9 million or
2% from last year's comparable period. At September 28, 1997, total backlog of
unfilled orders was $73.2 million compared to $65.9 million at September 29,
1996.
12
<PAGE> 14
DISCONTINUED OPERATIONS
Through September, 1997, the Company recorded an additional $0.2 million
after-tax disposal loss related to other previously discontinued businesses.
This loss consisted primarily of disposal costs different from previous
estimates associated primarily with environmental and legal matters.
ACQUISITIONS
On April 17, 1997 the Company acquired all of the outstanding stock of TCR
Corporation for $32.6 million in cash plus other contingent consideration. TCR
Corporation, located in Minneapolis, Minnesota, produces externally threaded
fasteners and related products for the automotive, heavy vehicle, marine and
industrial markets.
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 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.
13
<PAGE> 15
FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
<TABLE>
<CAPTION>
SIX MONTHS ENDED NET CHANGE
--------------------------------------- ----------------------------
SEPTEMBER 28, 1997 SEPTEMBER 29, 1996 $ %
------------------ ------------------ ---------- ----------
<S> <C> <C> <C> <C>
Sales:
Specialty fastener products $ 82,698 $ 71,106 $ 11,592 16
Rescue hoist and cargo hook products 17,238 17,114 124 1
-------- -------- --------
Total $ 99,936 $ 88,220 $ 11,716 13
======== ======== ========
Operating profit:
Specialty fastener products $ 12,425 $ 10,772 $ 1,653 15
Rescue hoist and cargo hook products 3,745 3,305 440 13
-------- -------- --------
Total $ 16,170 $ 14,077 $ 2,093 15
Corporate expense (4,596) (4,263) (333) (8)
Corporate interest and other income 644 489 155 32
Interest expense (4,160) (3,624) (536) (15)
-------- -------- --------
Income from continuing
operations before
income taxes $ 8,058 $ 6,679 $ 1,379 21
======== ======== ========
</TABLE>
14
<PAGE> 16
FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NET CHANGE
--------------------------------------- -------------------------
SEPTEMBER 28, 1997 SEPTEMBER 29, 1996 $ %
------------------ ------------------ ---------- ----------
<S> <C> <C> <C> <C>
Sales:
Specialty fastener products $ 41,543 $ 35,607 $ 5,936 17
Rescue hoist and cargo hook products 8,470 7,973 497 6
-------- -------- --------
Total $ 50,013 $ 43,580 $ 6,433 15
======== ======== ========
Operating profit:
Specialty fastener products $ 6,333 $ 5,070 $ 1,263 25
Rescue hoist and cargo hook products 1,766 1,382 384 28
-------- -------- --------
Total $ 8,099 $ 6,452 $ 1,647 26
Corporate expense (2,341) (1,824) (517) (28)
Corporate interest and other income 437 249 188 76
Interest expense (2,184) (1,814) (370) (20)
-------- -------- --------
Income from continuing
operations before
income taxes $ 4,011 $ 3,063 $ 948 31
======== ======== ========
</TABLE>
15
<PAGE> 17
SPECIALTY FASTENER PRODUCTS SEGMENT
Sales for the specialty fastener products segment were $82.7 million for the six
month period in 1998, an increase of $11.6 million or 16% from the comparable
period in 1997. Sales for the three month period in 1998 were up $5.9 million or
17% from the same period in 1997. The six and three month increases were
primarily due to the inclusion of TCR Corporation operations in the current year
periods. Additionally, the net increase in specialty fastener sales were
impacted to a lesser extent by increased gear-driven fastener demand to the
heavy-duty truck market and the inclusion of Pebra operations (in the six month
period only), offset by lower domestic and European retaining ring sales in the
current year periods. Domestic retaining ring sales were lower primarily due to
customer service disruptions to the production work flow and slow production mix
rationalization as consolidation of the Company's two domestic manufacturing
facilities continues. European retaining ring sales were down primarily because
of the stronger dollar versus Deutsche Mark as compared to last years comparable
periods. Fiscal 1998 European retaining ring sales (as reported in local
currencies) posted increases versus the prior year comparable periods.
Operating profit for the segment was $12.4 million for the six month period in
1998, an increase of $1.7 million or 15% from the comparable period in 1997. The
three month period in 1998 showed an operating profit of $6.3 million, an
increase of $1.3 million or 25% from the comparable period in 1997. The primary
reason for these increases were the same as those noted in the paragraph above
relative to the net increase in sales.
New orders increased by $10.3 million or 14% for the six month period in 1998.
New orders for the three month period in 1998 increased $3.9 million or 10% from
the comparable period in 1997. The primary reason for these increases were the
same as those noted in the paragraph above relative to the net increase in
sales. Backlog of unfilled orders at September 28, 1997 was $41.5 million
compared to $33.3 million at September 29, 1996.
RESCUE HOIST AND CARGO HOOK PRODUCTS SEGMENT
Sales for the rescue hoist and cargo hook products segment were $17.2 million
for the six month period in 1998, an increase of $0.1 million or 1% from the
comparable period in 1997. Sales for the three month period in 1998 were $8.5
million, up $0.5 million or 6% from the comparable period in 1997. The slight
increases were primarily due to the timing of customers placing new orders.
Operating profit for the six month period in 1998 was $3.7 million, an increase
of $0.4 million or 13% from the comparable period in 1997. The three month
period had an operating profit of $1.8 million, an increase of $0.4 million or
28% from the comparable period in 1997. The primary factors contributing to
these increases were the same as those noted in the paragraph above relative to
the increase in sales, the product sales mix and a slight decrease in
engineering expense during the current year.
16
<PAGE> 18
New orders for the six month period in 1998 decreased $2.4 million or 13% from
the comparable period in 1997. New orders for the three month period in 1997
decreased $3 million or 29% from the comparable period in 1997. The decreases in
both 1998 periods were primarily due to customer timing and placement of new
orders. Backlog of unfilled orders at September 28, 1997 was $31.8 million
compared to $32.7 million at September 29, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's debt-to-capitalization ratio was 54% as of September 28, 1997,
compared to 49% as of March 31, 1997. The current ratio at September 28, 1997,
stood at 2.21 compared to 2.54 at March 31, 1997. Working Capital was $55.5
million at September 28, 1997, down $3.6 million from March 31, 1997.
On September 28, 1997 the Company's debt consisted of $8.3 million of borrowings
under a revolving credit line ("the Revolver"), $8.1 million of borrowings under
international lines of credit ("the International Lines of Credit"), a $55.8
million term loan ("Term Loan A"), a $24 million term loan ("Term Loan B") and
$0.7 million of other borrowings. The Revolver commitment of $30 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 million.
Letters of credit under the line at September 28, 1997 were $0.1 million. The
total commitment under the International Lines of Credit is $10 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 million, giving the company a total of $35 million available
for acquisitions. On April 17, 1997, $32.6 million of this amount was used by
the Company to acquire TCR Corporation.
The $55.8 million and $24 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
million, $3.2 million and $4 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 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 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
17
<PAGE> 19
LIBOR plus three and one-quarter percentage points. At September 28, 1997, $73.5
million of the Company's outstanding borrowings utilized LIBOR.
Additionally, the credit facility limits capital expenditures to $9 million
annually and contains other customary financial covenants including a limit on
the Company's ability to pay dividends to 25% of net income.
Management believes that the Company's anticipated cash flow from operations,
combined with the bank credit described above, will be sufficient to support
working capital requirements, capital expenditures and dividend payments at
their current or expected levels. Capital expenditures in the six month period
in 1998 were $3.2 million as compared with $2.5 million in the comparable period
in 1997.
On October 8, 1997, the Company filed a Registration Statement with respect to
an underwritten public offering of 1.0 million new shares of its Common Stock,
with an option granted to the underwriters to purchase an additional 165,000
shares. On November 6, 1997, the Company announced that the Registration
Statement had been declared effective and that the offering was priced at
$27.625 per share. The net proceeds to the Company from the offering will be
used to repay indebtedness under the Company's credit facility.
18
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of the Registrant, held on July 24, 1997, all of the
directors of the Company were re-elected for a term of one year, and
shareholders ratified and approved an amendment to the Amended and Restated 1992
Long Term Incentive Plan. The results of the voting on the election of directors
were as follows:
<TABLE>
<CAPTION>
VOTES VOTES
FOR WITHHELD
--- --------
<S> <C> <C>
Gideon Argov 3,148,198 1,547,691
Walter Belleville 3,145,411 1,550,478
Michael J. Berthelot 3,146,091 1,549,798
Patrick K. Bolger 3,144,414 1,551,475
Thomas V. Chema 3,145,389 1,550,500
Michael Glouchevitch 3,145,917 1,549,972
James A. Lawrence 3,145,726 1,550,163
</TABLE>
The results of the voting on the proposal to amend the Amended and Restated 1992
Long Term Incentive Plan were as follows:
FOR - 2,729,456; AGAINST - 1,938,269; ABSTAIN - 28,164
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended September 28,
1997.
19
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSTECHNOLOGY CORPORATION
(Registrant)
Dated: November 10, 1997 By: /s/ Joseph F. Spanier
----------------------------------------
JOSEPH F. SPANIER, Vice President
and Chief Financial Officer*
* On behalf of the Registrant and as Principal Financial Officer.
20
<PAGE> 22
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11
STATEMENT OF THE COMPUTATION OF PER SHARE EARNINGS
IN ACCORDANCE WITH INSTRUCTION 4(g)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------------------- ----------------------------------------
SEPTEMBER 28, 1997 SEPTEMBER 29, 1996 SEPTEMBER 28, 1997 SEPTEMBER 29, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Primary earnings per share:
Weighted average number
of common shares outstanding 5,082,807 5,099,618 5,048,208 5,101,626
Dilutive effect of stock
option plan 206,000 - (a) 183,000 - (a)
----------- ---------- --------- ---------
5,288,807 5,099,618 5,231,208 5,101,626
=========== ========== ========= =========
Net income $ 2,262,000 1,521,000 4,527,000 3,349,000
=========== ========== ========= =========
Primary earnings per share $ 0.43 0.30 0.87 0.66
=========== ========== ========= =========
</TABLE>
(a) The inclusion of stock options in the calculation of primary earnings per
share was either anti-dilutive or not material as per APB 15.
21
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-28-1997
<CASH> 2,191
<SECURITIES> 0
<RECEIVABLES> 33,105
<ALLOWANCES> 725
<INVENTORY> 50,034
<CURRENT-ASSETS> 101,393
<PP&E> 90,695
<DEPRECIATION> 26,572
<TOTAL-ASSETS> 230,963
<CURRENT-LIABILITIES> 45,900
<BONDS> 96,913
0
0
<COMMON> 54
<OTHER-SE> (6,729)
<TOTAL-LIABILITY-AND-EQUITY> 230,963
<SALES> 99,936
<TOTAL-REVENUES> 100,722
<CGS> 68,655
<TOTAL-COSTS> 24,009
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 317
<INTEREST-EXPENSE> 4,160
<INCOME-PRETAX> 8,058
<INCOME-TAX> 3,304
<INCOME-CONTINUING> 4,754
<DISCONTINUED> (227)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,527
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.87
</TABLE>
