<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 July 2, 2000
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)
<TABLE>
<S> <C>
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)
</TABLE>
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 August 8, 2000, the total number of outstanding
shares of registrant's one class of common stock was
6,150,884.
<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 Month Periods Ended July 2, 2000
and June 27, 1999....................................................... 3
Consolidated Balance Sheets--
July 2, 2000 and March 31, 2000......................................... 4
Statements of Consolidated Cash Flows--
Three Month Periods Ended July 2, 2000 and
June 27, 1999........................................................... 5
Notes to Consolidated Financial Statements............................. 6-12
Item 2. Management's Discussion and Analysis of Financial
------- Condition and Results of Operations.....................................13-14
Item 3. Quantitative and Qualitative Disclosures about Market Risk.............. 15
-------
PART II. Other Information
------------------
Item 1. Legal Proceedings....................................................... 16
-------
Item 6. Exhibits and Reports on Form 8-K........................................ 16
-------
SIGNATURES ............................................................................. 16
EXHIBIT 27.............................................................................. 17
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited Statements of Consolidated Operations, Consolidated
Balance Sheets, and Consolidated Cash Flows are of TransTechnology Corporation
and its consolidated subsidiaries (collectively, "the Company"). These reports
reflect all adjustments of a normal recurring nature, which are, in the opinion
of management, necessary for a fair presentation of the results of operations
for the interim periods reflected therein. The results reflected in the
unaudited Statement of Consolidated Operations for the period ended July 2,
2000, 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 Condition 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 Company's Annual Report on Form 10-K filed for
the fiscal year ended March 31, 2000.
[THIS PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE> 4
STATEMENTS OF CONSOLIDATED OPERATIONS
UNAUDITED
(In Thousands of Dollars, Except Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------
JULY 2, 2000 JUNE 27, 1999
------------- ---------------
<S> <C> <C>
Net sales $ 84,365 $ 55,368
Cost of sales 61,186 39,251
Plant consolidation charge 1,330 --
----------- -----------
Gross profit 21,849 16,117
----------- -----------
General, administrative
and selling expenses 14,709 11,185
Interest expense (a) 8,932 1,630
Interest income (53) (63)
Royalty and other income (526) (232)
----------- -----------
Income (loss) before income taxes (1,213) 3,597
Income taxes (benefit) (461) 1,439
----------- -----------
Net income (loss) $ (752) $ 2,158
=========== ===========
Basic earnings per share: (Note 1)
Net income (loss) $ (0.12) $ 0.35
=========== ===========
Diluted earnings per share:
Net income (loss) $ (0.12) $ 0.35
=========== ===========
Numbers of shares used in computation
of per share information:
Basic 6,147,000 6,124,000
Diluted 6,147,000 6,158,000
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
(a) The interest expense for the three month period ended July 2, 2000, includes
accelerated write-off of fees related to the bridge debt of $1.1 million.
3
<PAGE> 5
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share Data)
<TABLE>
<CAPTION>
(UNAUDITED)
JULY 2, 2000 MARCH 31, 2000
------------ --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,392 $ 3,350
Accounts receivable (net of allowance for doubtful accounts
of $1,353 at July 2, 2000 and $1,129 at March 31, 2000) 58,124 61,819
Inventories 66,337 65,744
Prepaid expenses and other current assets 3,104 1,942
Deferred income taxes 1,915 1,872
--------- ---------
Total current assets 131,872 134,727
--------- ---------
Property, plant and equipment 151,330 153,068
Less accumulated depreciation and amortization 48,924 47,048
--------- ---------
Property, plant and equipment - net 102,406 106,020
--------- ---------
Other assets:
Notes receivable 3,361 3,455
Costs in excess of net assets of acquired businesses (net of accumulated amortization:
July 2, 2000, $12,211; March 31, 2000, $10,933) 190,837 192,115
Patents and trademarks (net of accumulated amortization: 20,374 20,809
July 2, 2000, $1,769; March 31, 2000, $1,334)
Deferred income taxes 10,091 9,987
Other 15,269 15,642
--------- ---------
Total other assets 239,932 242,008
--------- ---------
Total $ 474,210 $ 482,755
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 82,874 $ 82,585
Accounts payable-trade 22,368 25,550
Accrued compensation 7,850 10,359
Accrued income taxes 2,194 5,799
Other current liabilities 10,501 8,672
--------- ---------
Total current liabilities 125,787 132,965
--------- ---------
Long-term debt payable to banks and others 196,141 194,759
--------- ---------
Deferred income taxes 12,731 11,873
--------- ---------
Other long-term liabilities 12,610 14,275
--------- ---------
Stockholders' equity:
Preferred stock-authorized, 300,000 shares; none issued -- --
Common stock-authorized, 14,700,000 shares of $.01 par value;
issued 6,697,312 at July 2, 2000, and 6,691,232 at March 31, 2000 67 67
Additional paid-in capital 77,641 77,587
Retained earnings 62,571 63,722
Accumulated other comprehensive loss (3,980) (3,157)
Unearned compensation (288) (267)
--------- ---------
136,011 137,952
Less treasury stock, at cost - (546,428 shares at July 2, 2000 and
546,394 at March 31, 2000) (9,070) (9,069)
--------- ---------
Total stockholders' equity 126,941 128,883
--------- ---------
Total $ 474,210 $ 482,755
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
STATEMENTS OF CONSOLIDATED CASH FLOWS
UNAUDITED
(In Thousands of Dollars)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------
JULY 2, 2000 JUNE 27, 1999
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (752) $ 2,158
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization 5,566 3,055
Provision for losses on notes and accounts receivable 106 59
Loss on sale or disposal of fixed assets 133 37
Gain on sale of marketable securities (7) --
Change in assets and liabilities net of acquisitions:
Decrease (increase) in accounts receivable 3,318 (1,507)
(Increase) decrease in inventories (1,205) 2,201
Increase in other assets (741) (318)
Decrease in accounts payable (2,434) (2,931)
Decrease in accrued compensation (2,457) (1,061)
(Decrease) increase in income tax payable (3,605) 1,149
Increase (decrease) in other liabilities 886 (1,984)
--------- ---------
Net cash (used in) provided by operating activities (1,192) 858
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,768) (1,628)
Proceeds from sale of fixed assets 16 8
Decrease in notes receivable 97 168
Proceeds from sale of marketable securities 11 3
--------- ---------
Net cash used in investing activities (1,644) (1,449)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 25,371 11,200
Payments on long-term debt (23,076) (12,557)
Proceeds from issuance of stock under stock option plan -- 185
Dividends paid (399) (397)
--------- ---------
Net cash provided by (used in) financing activities 1,896 (1,569)
--------- ---------
Effect of exchange rate changes on cash (18) (26)
Decrease in cash and cash equivalents (958) (2,186)
Cash and cash equivalents at beginning of period 3,350 2,255
--------- ---------
Cash and cash equivalents at end of period $ 2,392 $ 69
========= =========
Supplemental Information:
Interest payments $ 7,566 $ 1,611
Income tax payments $ 1,703 $ 549
</TABLE>
--------------------------------
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE> 7
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars)
NOTE 1. Earnings Per Share
Basic earnings per share is computed by dividing net income by the
weighted-average number of shares outstanding. Diluted earnings per
share is computed by dividing net income by the sum of the
weighted-average number of shares outstanding plus the dilutive effect
of shares issuable through the exercise of stock options.
The components of the denominator for basic earnings per share and
diluted earnings per share are reconciled as follows: (in thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
July 2, 2000 June 27, 1999
-------------- ---------------
<S> <C> <C>
Basic Earnings per Share:
Weighted average common
shares outstanding 6,147 6,124
======= =======
Diluted Earnings per Share:
Weighted average common
shares outstanding 6,147 6,124
Stock Options (dilutive*) -- 34
------- -------
Denominator for Diluted
Earnings per Share 6,147 6,158
======= =======
</TABLE>
* Not including anti-dilutive stock options totaling 395 for the three month
period ended July 2, 2000 and 79 for the three month period ended June 27,
1999.
6
<PAGE> 8
NOTE 2. Comprehensive Income
For the three month periods ended July 2, 2000 and June 27, 1999, other
comprehensive income is comprised of foreign currency translation
adjustments and unrealized holding gains and losses on marketable
securities. Comprehensive income is summarized below.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
July 2, 2000 June 27, 1999
-------------- ---------------
<S> <C> <C>
Net (loss) income $ (752) $ 2,158
Other comprehensive income
(loss), net of tax:
Foreign currency translation
adjustment (818) (258)
Unrealized investment
holding gain (5) 2
------- -------
Total comprehensive (loss)
income $(1,575) $ 1,902
======= =======
</TABLE>
NOTE 3. Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
July 2, 2000 March 31, 2000
-------------- ----------------
<S> <C> <C>
Finished goods $23,894 $24,012
Work in process 18,558 18,367
Purchased and
manufactured parts 23,885 23,365
-------- --------
Total inventories $66,337 $65,744
======== ========
</TABLE>
7
<PAGE> 9
NOTE 4. Long-term Debt Payable to Banks and Others
Long-term debt payable, including current maturities, consisted of the
following:
<TABLE>
<CAPTION>
July 2, 2000 March 31, 2000
---------------- ------------------
<S> <C> <C> <C> <C>
Revolver - 8.67% - $ 154,723
Revolver - 8.83% $ 148,079 -
Revolver - 10.75% 10,000 -
Term loan - 8.69% - 46,250
Term loan - 9.44% 44,375 -
Bridge loan - 15.44% - 75,000
Bridge loan - 16.69% 75,211 -
Other 1,350 1,371
----------- -----------
279,015 277,344
Less current maturities 82,874 82,585
----------- -----------
Total $ 196,141 $ 194,759
=========== ===========
</TABLE>
Credit Agreement
Effective August 31, 1999, the Company's revolving credit facility (the
"Revolver") was amended and increased from $145.0 million to $200.0
million, and additional term debt (the "Term Loan") of $50.0 million and
senior subordinated debt (the "Bridge Loan") of $75.0 million were
obtained in order to provide the necessary funds for the Tinnerman
acquisition (as defined in Note 4 below). Credit was provided by the
same group of lending banks plus several new lending banks. The Revolver
and Term Loan have a maturity of five years. The Bridge Loan has an
initial maturity of one year, after which time the Bridge Loan
automatically converts to a term loan subject to, among other things, an
early payment premium and the issuance of stock warrants (as more fully
described below). The stock warrants would provide for the lenders to
obtain up to ten percent of the shares of the Company's stock (on a
fully diluted basis) after August 31, 2000. The Company is currently
making arrangements to replace the Bridge Loan before August 31, 2000
with alternative long term subordinated debt under terms more favorable
to the Company. The Bridge Loan contains a provision for exit fees of
approximately $2.1 million. The Company has included $1.1 million of
costs related to the Bridge Loan replacement in interest expense during
the three month period ended July 2, 2000. The balance of the Bridge
Loan replacement costs will be expensed through the time of its
replacement, which is expected to be on or about August 31, 2000.
The Company has unused borrowing capacity for both domestic and
international operations of $36.9 million as of July 2, 2000 and letters
of credit of $4.9 million. The Revolver and Term Loan are secured by all
of the Company's assets. As of July 2, 2000, the Company had total
borrowings of $277.7 million under the amended agreements which have a
weighted-average interest rate of 11.18%. The Company had $1.4 million
of other borrowings consisting of collateralized borrowing arrangements
8
<PAGE> 10
with fixed interest rates of 3% and 3.75%, and loans on life insurance
policies owned by the Company with a fixed interest rate of 5%.
Borrowings under the Revolver as of July 2, 2000, were $158.1 million.
Interest on the Revolver is 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 results. As of July 2, 2000, $148.1 million of the Company's
outstanding borrowings utilized LIBOR, of which $123.0 million were
payable in U.S. Dollars and $5.4 million and $19.6 million were payable
in Deutsche marks and Pounds sterling, respectively.
Borrowings under the Term Loan as of July 2, 2000, were $44.4 million of
which $7.5 million is due within one year, $9.4 million is due in year
two, $10.0 million is due in year three, $13.7 million is due in year
four, and $3.8 million is due upon maturity in year five.
Borrowings under the Bridge Loan as of July 2, 2000, were $75.2 million,
all of which is considered to be short term. Interest on the Bridge Loan
is based on LIBOR plus a margin (which is currently 10%) subject to an
overall maximum interest rate of 18%. The Bridge Loan matures on August
31, 2000, after which time, unless replaced, it converts automatically
to senior subordinated term debt with additional provisions. The major
additional provisions of the resulting term debt provide for the Company
to issue stock warrants from an escrow agreement entered into on August
31, 1999 to the debt holders for 731,197 shares of the Company's stock
exercisable at par value (or $.01) per share, representing ten percent
of the common equity of the Company on a fully diluted basis after
giving effect to the warrants. Other provisions of the resulting term
debt include various repayment premiums during the first seven years of
the term, an overall maximum interest rate of 18% and the right of the
holders of the Bridge Loan to require the Company to exchange this term
debt for a class of debt securities which the Company would be required
to register for public distribution. The Company is currently making
arrangements to replace the Bridge Loan prior to its maturity and,
therefore, does not expect to be subject to the provisions of the term
debt which would become effective on the Bridge Loan maturity date which
is August 31, 2000.
The credit agreements require the Company to maintain interest rate
protection on a minimum of $125.0 million of its variable rate debt. The
Company has, accordingly, provided for this protection by means of
interest rate swap agreements which have fixed the rate of interest on
$50.0 million of debt at a base rate of 5.48% through May 4, 2002, and
$75.0 million of debt at a base rate of 6.58% through March 3, 2003.
Under the agreement, the base interest rate is added to the applicable
interest rate margin to determine the total interest rate in effect. The
credit agreement also limits the Company's ability to pay dividends to
25% of net income and restricts annual capital expenditures to $12.0
million through 2001, $13.0 million in 2002, and $15.0 million
thereafter, as well as other customary financial covenants.
OTHER
Other long-term debt is comprised principally of collateralized
borrowing arrangements with fixed interest rates of 3% and 3.75% and
loans on life insurance policies owned by the Company with a fixed
interest rate of 5%.
9
<PAGE> 11
NOTE 5. Acquisitions
On August 31, 1999, the Company acquired substantially all of the assets
and assumed certain liabilities, consisting primarily of trade debts and
accrued expenses of the Engineered Fasteners Division and its Tinnerman
product line (collectively referred to as "Tinnerman") of Eaton
Corporation for a total purchase price of $173.3 million in cash.
Tinnerman has 650 employees and manufactures a wide variety of fastening
devices for the automotive, business equipment, consumer electronics and
home appliance markets. Tinnerman has manufacturing facilities in
Brunswick and Massillon, Ohio and Hamilton, Ontario, Canada.
On July 19, 1999, the Company acquired all the outstanding capital stock
of Ellison Holdings PLC, a privately held company, and its German
affiliate Ellison, Rotettges & Co. GmbH (collectively referred to as
"Ellison") for $13.8 million in cash, a $0.4 million note payable 24
months from the date of acquisition and other contingent consideration.
Ellison, headquartered in Glusburn, West Yorkshire, England,
manufactures retaining and snap rings as well as lockwashers for the
automotive, heavy vehicle and industrial markets. The allocation of the
purchase price to the assets and liabilities of Ellison is preliminary
pending final purchase price adjustments, if any. As part of the
acquisition plan, the Company closed its existing Anderton facility in
Bingley, U.K. and consolidated that operation with the Ellison facility.
In the quarter ended September 26, 1999, the Company recorded a $4.5
million charge for the consolidation. The charge consisted of $3.8
million, principally related to the write-down of Anderton's assets no
longer being used to estimated realizable values and other costs
directly related to the exit of the facility, and approximately $0.7
million for severance and related benefit payments to approximately 100
Anderton employees. In the quarter ended March 31, 2000, $1.0 million
was charged to cost of sales primarily due to excess overtime incurred
to produce parts pending customer approval on first part production
lots.
In addition, in the quarter ended July 2, 2000, the Company recorded a
$1.3 million charge to cost of sales primarily related to excess
overtime to produce parts.
On July 28, 1998, the Company acquired all of the outstanding stock of
NORCO, Inc. ("NORCO") for $17.7 million in cash, including direct
acquisition costs, and other contingent consideration. NORCO, located in
Ridgefield, Connecticut, produces aircraft engine compartment hold open
rods, actuators and other motion control devices for the aerospace
industry.
On June 29, 1998, the Company acquired all of the outstanding stock of
Aerospace Rivet Manufacturers Corporation ("ARM") for $26.2 million in
cash, including direct acquisition costs, and other contingent
consideration. ARM, located in City of Industry, California, produces
rivets and externally threaded fasteners for the aerospace industry.
The Company has accounted for the above-mentioned acquisitions under the
purchase method of accounting and each acquisition has been consolidated
with the Company, beginning on the effective date of each acquisition.
The excess of the purchase price over the fair value of the net assets
acquired 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.
10
<PAGE> 12
The following summarizes the Company's unaudited pro forma information
as if the Ellison and Tinnerman acquisitions had occurred on April 1,
1999. The pro forma information is based on historical results of
operations, adjusted for acquisition costs, additional interest expense,
amortization of goodwill, additional depreciation and income taxes. It
is not necessarily indicative of what the results would have been had
the Company operated the acquired entities since April 1, 1999.
<TABLE>
<CAPTION>
Three Months Ended
June 27, 1999
-----------------
<S> <C>
Net sales $ 81,024
-----------------
Net income $ 966
-----------------
Basic earnings per share $ 0.16
-----------------
Diluted earnings per share $ 0.16
-----------------
Basic shares 6,124,000
Diluted shares 6,158,000
</TABLE>
NOTE 6. New Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," was
issued in June 1998 and, as amended by SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of SFAS Statement No. 133" in June 1999, is effective for
the Company for its fiscal year ending March 31, 2002. SFAS No. 133
requires that all derivative instruments be measured at fair value and
recognized in the balance sheet as either assets or liabilities.
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in
Financial Statements" was issued in December 1999 and, as amended by SAB
101b, "Second Amendment: Revenue Recognition in Financial Statements",
defers implementation of SAB 101 until no later than the fourth quarter
of fiscal 2001.
The Company is currently evaluating the impact that the foregoing two
pronouncements will have on its consolidated financial statements.
11
<PAGE> 13
NOTE 7. Disclosures about Segments and Related Information
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------
July 2, 2000 June 27, 1999
-------------- ---------------
<S> <C> <C>
Sales:
Specialty fastener products (a) $ 68,938 $ 41,184
Aerospace products 15,427 14,184
--------- ---------
Total $ 84,365 $ 55,368
========= =========
Operating profit
Specialty fastener products $ 7,180 $ 4,227
Aerospace products 3,553 3,223
--------- ---------
Total $ 10,733 $ 7,450
Corporate expense (3,130) (2,394)
Corporate interest and
other income 116 171
Interest expense (b) (8,932) (1,630)
--------- ---------
Income before income taxes $ (1,213) $ 3,597
========= =========
</TABLE>
(a) The results of operations of the Specialty Fasteners Products segment
for the three month period ended July 2, 2000 includes a charge of $1.3
million related to the consolidation of its two U.K. plants.
(b) Interest expense for the three month period ended July 2, 2000 includes
an accelerated write-off of fees related to bridge debt of $1.1 million.
12
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
All references to three month periods in this Management's Discussion refer to
the three month period ended July 2, 2000 for fiscal year 2001 and the three
month period ended June 27, 1999 for fiscal year 2000. Also, when referred to
herein, operating profit means net sales less operating expenses, without
deduction for general corporate expenses, interest and income taxes. Unless
otherwise indicated, amounts per share refer to diluted amounts per share.
Sales for the three month period in 2001 were $84.4 million, a $29.0 million, or
52%, increase from the comparable period in 2000. Gross profit was $21.8 million
for the three month period in 2001, up $5.7 million, or 35%, from the comparable
period in 2000. Operating profit for the three month period in 2001 was $10.7
million, an increase of $3.3 million, or 44%, from the comparable period in
2000. Operating profit for the period ended July 2, 2000, includes a $0.5
million charge from unrealized mark-to-market valuation on outstanding forward
currency hedges of forecasted future currency exposures at its European
retaining rings businesses. Changes in sales, operating profit and new orders
from continuing operations are discussed below by segment.
Net loss for the three month period in 2001 was ($0.8) million, or ($0.12) per
share, compared to net income of $2.2 million, or $0.35 per share, for the
comparable period in 2000. As further discussed below, the decreased earnings
performance in 2001 resulted primarily from the additional expenses associated
with the consolidation of the Company's U.K. operations. Interest expense
increased $7.3 million for the three month period in 2001, primarily as a result
of additional borrowings to fund the Ellison and Tinnerman acquisitions. In
addition, interest expense in the three month period in 2001 included a charge
of $1.1 million related to the Bridge Loan. New orders received during the three
month period in 2001 totaled $84.3 million, an increase of $27.6 million, or
47%, from the comparable period in 2000. At July 2, 2000, total backlog of
unfilled orders was $109.5 million, compared to $89.0 million at June 27, 1999.
SPECIALTY FASTENER PRODUCTS SEGMENT
Sales for the Specialty Fastener Products segment were $68.9 million for the
three month period in 2001, an increase of $27.8 million, or 67%, from the
comparable period in 2000. The increase was primarily due to the acquisitions of
Ellison and Tinnerman.
Operating profit for the three month period in 2001 was $7.2 million, an
increase of $3.0 million, or 70%, from the comparable period in 2000. The
increase was primarily due to the acquisitions of Ellison and Tinnerman, offset
by decreased operating profit at ARM and additional U.K. plant consolidation
costs of $1.3 million. During the period ended July 2, 2000, the Company
received $0.9 million from an insurance company relating to lost sales and
inventory damaged in a flood of which the estimated gross profit of $0.4 million
was recognized as other income at the operating unit. Reduced demand in the
13
<PAGE> 15
domestic airframe construction industry and competitive price pressures in
general have continued to adversely affect operating profit for ARM.
New orders for the three month period in 2001 were $70.8 million, an increase of
$30.7 million, or 74%, from the comparable period in 2000, reflecting primarily
the Ellison and Tinnerman acquisitions. Backlog of unfilled orders at July 2,
2000 was $67.2 million, compared to $42.8 million at June 27, 1999.
AEROSPACE PRODUCTS SEGMENT
Sales for the Aerospace products segment were $15.4 million for the three month
period in 2001, an increase of $1.2 million, or 9%, from the comparable period
in 2000.
Operating profit for the three month period in 2001 was $3.6 million, an
increase of $0.3 million, or 10%, from the comparable period in 2000.
New orders for the three month period in 2001 were $13.6 million, versus $16.6
million in 2000, a $3.1 million, or 19%, reduction for the comparable period in
2000. Bookings for the quarter ended July 2, 2000 at the Company's
Breeze-Eastern division were below the comparable period ended June 27, 1999,
which reflected abnormally high bookings levels. Backlog of unfilled orders at
July 2, 2000, was $42.3 million, compared to $46.2 million at June 27, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's debt-to-capitalization ratio was 69% as of July 2, 2000, compared
to 68% as of March 31, 2000. The current ratio at July 2, 2000 was 1.05,
compared to 1.01 at March 31, 2000. Working capital was $6.1 million as of July
2, 2000, up $4.3 million from March 31, 2000. Management believes that the
Company's anticipated cash flow from operations, combined with the bank credit
agreement described above, will be sufficient to support working capital
requirements, capital expenditures and dividend payments at their current or
expected levels. Capital expenditures and dividend payments for the three month
period ended July 2, 2000 were $1.8 million and $0.4 million respectively.
In August 2000, the Company received $1.0 million for the sale of the Anderton,
Bingley, England facility.
EURO CURRENCY
Effective January 1, 1999, eleven countries comprising the European Union
established fixed foreign currency exchange rates and adopted a common currency
unit designated as the "Euro." The Euro has since become publicly traded and is
currently used in commerce during the present transition period which is
scheduled to end January 1, 2002, at which time a Euro denominated currency is
scheduled to be issued and is intended to replace those currencies of the eleven
member countries. The transition to the Euro has not resulted in problems for
the Company to date, and is not expected to have any material adverse impact on
the Company's future operations.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. Market risk is the potential loss
arising from adverse changes in market rates and prices, such as foreign
currency exchange and interest rates. The Company does not enter into
derivatives or other financial instruments for trading or speculative purposes.
The Company enters into financial instruments to manage and reduce the impact of
changes in foreign currency exchange rates and interest rates. The counter
parties are major financial institutions.
The Company uses forward exchange contracts principally to hedge the currency
fluctuations in transactions denominated in foreign currencies, thereby limiting
the Company's risk that would otherwise result from changes in exchange rates.
The principal transactions hedged are intercompany loans, intercompany purchases
and trade flows. Gains and losses on forward foreign exchange contracts and the
offsetting gains and losses on hedged transactions are reflected in the
Statement of Consolidated Operations.
At July 2, 2000, the Company had outstanding forward exchange contracts to
purchase and sell $24.3 million of various currencies (Deutsche marks, Pounds
sterling and the Euro). At July 2, 2000, if all forward contracts were closed
out, the Company would receive approximately $0.8 million (the difference
between the fair value of all outstanding contacts and the contract amounts). A
10% fluctuation in exchange rates for these currencies against the U.S. dollar
would change the fair value of the outstanding exchange contracts by $1.0
million. However, since these contracts hedge foreign currency denominated
transactions, any change in the fair value of the contracts would be offset by
changes in the underlying value of the transaction being hedged.
The Company enters into interest rate swap agreements to manage its exposure to
interest rate changes. The swaps involve the exchange of fixed and variable
interest rate payments without exchanging the notional principal amount.
Payments or receipts on the swap agreements are recorded as adjustments to
interest expense. At July 2, 2000, the Company had entered into interest rate
swap agreements to convert $125.0 million of floating interest rate debt to
fixed rate. At July 2, 2000, the fair value of these swap agreements was
approximately $2.1 million.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is engaged in various legal proceedings incidental to its
business. It is the opinion of management that, after taking into
consideration information furnished by its counsel, these matters will
not have a material effect on the Company's consolidated financial
position or the results of the Company's operations in future periods.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended July 2, 2000.
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: August 14, 2000 By: /s/Joseph F. Spanier
---------------------------------------------
JOSEPH F. SPANIER, Vice President
Treasurer and Chief Financial Officer*
*On behalf of the Registrant and as Principal Financial and Accounting
Officer.
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