<PAGE> 1
EXHIBIT 13
ANNUAL REPORT
Fiscal Year Ended March 31, 2000
[BREEZE-EASTERN LOGO] [ANDERTON LOGO]
[SEEGER LOGO] [BREEZE LOGO]
[PALNUT LOGO] [NORCO INC. LOGO]
[ELLISON LOGO] [TINNERMAN LOGO]
[AEROSPACE RIVET LOGO] [TRUARC LOGO]
[TCR CORPORATION LOGO] [INDUSTRIAL RETAINING RINGS LOGO]
[LOGO] TRANSTECHNOLOGY CORPORATION
engineered products for global partners(TM)
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NET SALES
($ in Millions)
1996 1997 1998 1999 2000
----- ----- ----- ----- -----
158.0 178.7 203.9 228.0 299.3
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
AFTER TAX INCOME
FROM CONTINUING
OPERATIONS
($ in Millions)
1996 1997 1998 1999* 2000**
---- ---- ---- ---- ----
8.5 9.7 12.0 12.3 10.6
</TABLE>
* Excluding net non-recurring gain of $2.3 million in 1999
** Excluding plant consolidation charge of $3.4 million in 2000
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
DILUTED INCOME
PER SHARE
FROM CONTINUING
OPERATIONS
(In Dollars)
1996 1997 1998 1999* 2000**
---- ---- ---- ---- ----
1.66 1.87 2.11 1.94 1.72
</TABLE>
* Excluding net non-recurring gain of $.36 per share in 1999
** Excluding plant consolidation charge of $.56 per share in 2000
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CAPITAL EXPENDITURES
($ in Millions)
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
6.5 5.5 8.7 14.8 10.0
</TABLE>
TABLE OF CONTENTS
1 SELECTED FINANCIAL DATA
2 LETTER TO SHAREHOLDERS
4 AEROSPACE PRODUCTS GROUP
6 INDUSTRIAL PRODUCTS GROUP
12 FINANCIAL INFORMATION
2000 NET SALES
ALLOCATION BY MARKET TYPE
[PIE CHART]
<TABLE>
<S> <C>
Distribution 26%
Automotive 29%
Aerospace 18%
Consumer/Durables 6%
Industrial Machinery 8%
Heavy Truck OEM 13%
</TABLE>
2000 NET SALES
DOMESTIC VS. INTERNATIONAL OPERATIONS
[PIE CHART]
<TABLE>
<S> <C>
International 22%
Domestic 78%
</TABLE>
2000 NET FASTENER SALES
ALLOCATION BY MARKET TYPE
[PIE CHART]
<TABLE>
<CAPTION>
<S> <C>
Distribution 32%
Automotive 37%
Aerospace 1%
Consumer/Durables 5%
Industrial Machinery 9%
Heavy Truck OEM 16%
</TABLE>
<PAGE> 3
SELECTED FINANCIAL DATA
The following table provides selected financial data with respect to the
consolidated statements of operations of the Company for the fiscal five years
ended March 31, 2000, and the consolidated balance sheets of the Company at the
end of each such year.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA YEARS ENDED MARCH 31,
(In thousands, except per share amounts) 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Net sales $ 299,252 $ 228,006 $ 203,928 $ 178,684 $ 158,024
--------- --------- --------- --------- ---------
Income from continuing operations
before income taxes 11,508 24,294 20,153 16,620 14,300
Provision for income taxes 4,373 9,704 8,162 6,898 5,792
--------- --------- --------- --------- ---------
Income from continuing operations 7,135 14,590 11,991 9,722 8,508
Loss from discontinued operations -- -- (924) (934) (1,134)
--------- --------- --------- --------- ---------
Income before extraordinary charge 7,135 14,590 11,067 8,788 7,374
Extraordinary charge for refinancing of debt (541) (781) -- -- --
--------- --------- --------- --------- ---------
Net income $ 6,594 $ 13,809 $ 11,067 $ 8,788 $ 7,374
--------- --------- --------- --------- ---------
Earnings (loss) per share:
Basic:
Income from continuing operations $ 1.16 $ 2.33 $ 2.17 $ 1.92 $ 1.67
Loss from discontinued operations -- -- (0.17) (0.18) (0.22)
Extraordinary charge for refinancing of debt (0.09) (0.12) -- -- --
--------- --------- --------- --------- ---------
Net income per share $ 1.07 $ 2.21 $ 2.00 $ 1.74 $ 1.45
--------- --------- --------- --------- ---------
Diluted:
Income from continuing operations $ 1.16 $ 2.30 $ 2.11 $ 1.87 $ 1.66
Loss from discontinued operations -- -- (0.16) (0.18) (0.22)
Extraordinary charge for refinancing of debt (0.09) (0.12) -- -- --
--------- --------- --------- --------- ---------
Net income per share $ 1.07 $ 2.18 $ 1.95 $ 1.69 $ 1.44
--------- --------- --------- --------- ---------
Dividends declared and paid per share $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26
--------- --------- --------- --------- ---------
Total assets $ 482,755 $ 279,720 $ 236,073 $ 199,136 $ 199,367
Long-term debt $ 194,759 $ 102,463 $ 51,350 $ 67,516 $ 72,565
Stockholders' equity $ 128,883 $ 123,710 $ 115,832 $ 77,444 $ 72,470
Book value per share $ 20.97 $ 20.25 $ 18.47 $ 15.40 $ 14.21
Shares outstanding at year-end 6,145 6,108 6,272 5,028 5,099
--------- --------- --------- --------- ---------
</TABLE>
MARKET AND DIVIDEND DATA
<TABLE>
<CAPTION>
MARKET PRICE
QUARTER ENDED HIGH LOW DIVIDENDS
--------------------------------------------------------------------------------
<S> <C> <C> <C>
June 28, 1998 $ 30-5/8 $ 25-9/16 $ .065
September 26, 1998 27-1/8 20-1/4 .065
December 27, 1998 23-11/16 18-9/16 .065
March 31, 1999 20-3/4 16-1/2 .065
--------------------------------------------------------------------------------
June 27, 1999 20-7/16 16-15/16 .065
September 26, 1999 19-3/4 11-5/8 .065
December 26, 1999 12-5/16 8-1/8 .065
March 31, 2000 15-3/16 10-1/2 .065
--------------------------------------------------------------------------------
</TABLE>
2000 ANNUAL REPORT 1
<PAGE> 4
[PICTURE]
During the fiscal year that ended March 31, 2000 our company made two strategic
acquisitions that have increased our focus on our niche businesses and laid the
foundation for stronger, more rapid growth in shareholder value. The Tinnerman
assembly fastener business and the Ellison retaining ring business will further
extend our global leadership position in each of those product lines as well as
provide us the opportunity to increase their growth and profitability. Primarily
as a result of these acquisitions, sales increased 31% in the fiscal year,
although after tax income from operations decreased 14% and net income, after
the recognition of special charges and an extraordinary item, decreased 52%.
Our results for fiscal 2000 were mixed, with both successes and disappointments.
Our internal operating results and share price were affected by external
conditions in the marketplace and the economy. The dramatic decline in the price
of shares in small cap industrial companies over the past two years has been a
tremendous financial blow not only to our shareholders, but also to those of our
entire peer group. Much has been written about the disconnect in valuations
between industrials and high-tech and Internet stocks, but knowing that it is a
systemic problem shared by many does not make the effects of that disconnect any
easier to live with. Fortunately, some of the excesses in the market seem to be
correcting themselves, and we hope to see a more rational investment outlook
return soon. Operationally, a surprisingly strong British Pound sterling against
the Euro and Deutsche mark reduced sales and profits in the European retaining
ring product lines that were already weakened by a slowdown in the distribution
and machinery markets. The 20% decline in the Euro over the past fifteen months
gave a second wallop as we translated our German results into dollars. Also
adding to our challenges were higher interest rates on our non-acquisition
related borrowings and the short-term amortization of bank loan fees related to
our fiscal 2000 acquisitions and refinancing.
The downturn of our aerospace fastener unit in fiscal 2000 was the single
largest factor contributing to missing our company-wide internal targets for the
first time in eight years. The unit's revenues were cut almost in half from 1999
levels and profits were eliminated completely because of several factors,
including the loss of its largest customer; a slowdown in the airframe build
rate; Boeing's "push-back" upon the fastener industry of over $400 million in
"excess" fastener inventories; work stoppages at Boeing; the consolidation of
several major distributors, and severe price cutting as manufacturers suddenly
found themselves with excess capacity.
Our domestic retaining ring business saw further erosion in its market share in
the first half of the year, although it began to recoup some of its lost ground
in the second half. The July 1999 acquisition of the Ellison business was
dilutive in fiscal 2000, in that no operating earnings were realized from the
combined Anderton/Ellison business as the consolidation began, yet interest
expense on the purchase price and plant consolidation charges were recognized
for eight months. The physical consolidation of the Anderton and Ellison
factories in the UK is now complete, with more than $4 million of annual
operating costs scheduled for elimination beginning in the first quarter of
fiscal 2001.
FELLOW SHAREHOLDERS
2 TRANSTECHNOLOGY CORPORATION
<PAGE> 5
Our other fastener businesses are also developing in an exciting fashion. German
and European distribution and industrial markets for retaining rings have
recently become very strong, and our domestic unit has begun to regain the
market share it lost over the past four years. Of equal importance, the
worldwide retaining ring business has now been consolidated under a single
management team, with a focused global marketing organization determined to
regain market share and enter new markets. Our assembly fastener business is
also poised for growth in both revenues and operating income as the combination
of Palnut with Tinnerman hits its stride, building on Tinnerman's contribution
of $.08 per share in just seven months of fiscal 2000. The highly skilled
engineering sales force of Tinnerman fills a long-missing link in our assembly
fastener business, and the broad Palnut product line provides Tinnerman's
customers a much wider offering of fastening solutions.
Our aerospace products group once again outperformed our expectations and posted
another record year of sales and profits. Our Norco, Inc. division, acquired in
July 1998, has more than doubled its operating profit since it became part of
our company, while Breeze-Eastern set a new record for sales and operating
profit. Both divisions have strong backlogs and solid prospects for further
growth in fiscal 2001 and beyond.
As we enter the new fiscal year, your management team is focused on four basic
initiatives. First, we want to maximize the value added of our products by
focusing on engineered solutions to solve our customers' problems. Second, we
want to produce our products to the highest quality standards at the lowest cost
by utilizing lean manufacturing techniques. Third, we want to develop a company
with an industry-wide, multi-disciplinary approach to e-commerce. And, fourth,
we want to concentrate our efforts to pay-down debt further by reducing working
capital, liquidating excess assets, and accelerating cash flows. We believe that
these four programs, each under the leadership of a senior manager, will provide
the impetus and framework for each of our business units and the company as a
whole to achieve their potential in fiscal 2001.
As I end this eighth year as your chairman and chief executive officer, I would
like to thank each of the more than 2,600 TransTechnology employees around the
world who work so hard to make this company the success that it is today. The
best part of my job is to meet these people in their offices and factories, and
to see the pride and excitement that they put into their work. It is their
spirit that drives our company forward.
I would also like to thank each of the members of our Board of Directors who
have provided our management team with advice, support and guidance as we have
seen the world change so rapidly around us. And, most importantly, I thank you,
the shareholders, who have placed your trust, confidence, and resources in our
hands. We appreciate your support, and look forward to continued growth in the
future.
/s/ Michael J. Berthelot
Michael J. Berthelot
Chairman, President and Chief Executive Officer
2000 ANNUAL REPORT 3
<PAGE> 6
[GRAPHIC OF JETS]
4 TRANSTECHNOLOGY CORPORATION
<PAGE> 7
TransTechnology's BREEZE-EASTERN division is the world's leading designer and
manufacturer of sophisticated helicopter rescue hoists, cargo winches and cargo
hook systems. These complex, highly engineered systems add significantly to the
versatility of an aircraft for a relatively small cost. The equipment is used
the world over by military and civilian agencies to save lives, complete
missions, and transport cargo. Most helicopter manufacturers today, including
Agusta, Bell, Boeing, Eurocopter, MD Helicopters, Sikorsky and GKN-Westland
specify Breeze-Eastern's systems as standard equipment on their aircraft because
of Breeze-Eastern's record for performance, safety, reliability, durability, and
service. Innovation and new product development remain an important focus at
Breeze-Eastern, one reason why its products will be found on the new V-22 Osprey
tiltrotor vertical take-off and landing aircraft for the U.S. Marine Corps, the
Sikorsky UH-60Q Blackhawk MEDEVAC helicopter for the U.S. Army, the EHI
Cormorant Search and Rescue helicopter for the Canadian National Defense Forces
and the Agusta A-109 (Power) utility helicopter. Breeze-Eastern also designs and
manufactures handling systems for weapons' platforms and motion control
actuation systems for civilian and military aircraft.
NORCO, INC., acquired in 1998, is the global leader in the design and
manufacture of mechanical components and systems such as hold open rods, quick
connect/disconnect locking systems, helicopter blade restraint systems, latch
assemblies, safety locks, and application-specific mechanical systems. Its power
transmission line of products include rollnuts, rollnut longspan assemblies,
ball reversers, ball oscillators, FlenNut assemblies and other
application-specific linear motion assemblies.
During the company's successful history of servicing the commercial and defense
aviation industry, Norco has forged special relationships with several original
equipment manufacturers. These relationships enable Norco to work in
collaboration with its customers not only during the early design stage, but
also throughout the life-cycle of each manufacturing program.
The Company's aircraft building customers include Airbus, Boeing, Lockheed
Martin and Northrop Grumman. Norco also sells to aircraft system suppliers such
as BF Goodrich Aerospace Structures (cowlings), Short Brothers plc. (nacelles),
and GKN-Westland Aerospace Structures (composite doors on the Airbus A-340,
CRJ700 and C27J).
AEROSPACE PRODUCTS GROUP
2000 ANNUAL REPORT 5
<PAGE> 8
[GRAPHIC OF ENGINEERED RINGS]
<PAGE> 9
TransTechnology Engineered Rings
Under the newly created banner of 'TransTechnology Engineered Rings' ("TTER"),
TransTechnology Corporation has brought together the world's leading brand names
in rings - TRUARC(R), SEEGER(R), ANDERTON(R), ELLISON(R) and TINNERMAN(R). The
world leader in this product, TTER combines know-how and experience based on a
75-year heritage.
With five manufacturing sites on three continents, TransTechnology has the
enviable position of being the only global manufacturer of this highly
engineered product. TTER manufactures the total range of retaining and snap
rings conforming to all ANSI, military, and international standards, as well as
our customers' own exacting specifications, all of which are QS 9000 or ISO 9000
based.
Predominantly used in automotive and off-road applications such as vehicle
transmissions, drive trains, steering, brakes and turbochargers, the product is
also widely used in general industrial and marine applications, household goods,
computers and printers. In fact, TTER rings can be found in any application
where axial retention of mechanical parts on shafts or in bores is required.
Our ring products are marketed directly to OEM's or through a network of
distributors worldwide, as well as through TransTechnology sales offices in
Mexico, Paris, France and Barcelona, Spain. The newly created Automotive
Division based at the Southfield Sales and Advanced Engineering Office provides
full design and engineering support to the US automobile industry.
INDUSTRIAL PRODUCTS GROUP
2000 ANNUAL REPORT 7
<PAGE> 10
[GRAPHIC OF ENGINEERED PRODUCTS]
8 TRANSTECHNOLOGY CORPORATION
<PAGE> 11
TransTechnology Engineered Products
TransTechnology, through its BREEZE INDUSTRIAL PRODUCTS and PEBRA divisions,
manufactures the most comprehensive line of worm-drive and T-Bolt / V-Band
clamps in the world. BREEZE(R) and PEBRA stainless steel clamps are well known
for their quality and engineering and are both ISO 9000 certified. BREEZE(R)
T-Bolt and Constant-Torque(R) clamp products are used in diesel engine, heavy
truck, marine and off-road equipment applications throughout the world.
BREEZE(R) is a certified supplier to Caterpillar, Paccar, and many other heavy
equipment manufacturers. BREEZE(R) "Aero-Seal(R)", "Euro-Seal(R)" and
"Power-Seal(R)" clamps are supplied through major distributors to the
industrial, hardware, automotive, marine and retail markets for use in repair,
maintenance and overhaul applications, and are used by many manufacturers of
industrial and consumer products. PEBRA brand clamps are supplied to both the
European heavy truck and equipment markets and to industrial product
manufacturers. PEBRA also manufactures quality hose rings used in turbocharger
applications, a new product line introduced this year.
TCR CORPORATION ("TCR") designs and manufactures sophisticated specialty
industrial components. Combining its expertise in cold forging and machining
technologies with QS 9000 quality standards, TCR provides its broad customer
base with innovative products and takes pride in creating cost effective
solutions to complex manufacturing problems. TCR components are used by a wide
range of industries worldwide, with key market groups including the automotive,
small engine, hydraulic valve and other specialty manufacturers.
TransTechnology's AEROSPACE RIVET MANUFACTURERS CORPORATION ("ARM") produces
cold-headed premium solid and tubular rivets, spacers, threaded bolts and
screws, and specialty engineered fasteners for the aerospace industry. ARM is
licensed by Boeing to produce the patented Hi-Kote(TM) coated rivet, which
eliminates the need for wet sealant installation. ARM's modern facility includes
state-of-the-art manufacturing, heat treat, and chemical processing equipment.
All of ARM's products meet quality approvals for ISO-9002, Boeing D1-9000 or
MIL-I-45208 specifications.
INDUSTRIAL PRODUCTS GROUP
2000 ANNUAL REPORT 9
<PAGE> 12
[GRAPHIC OF ENGINEERED COMPONENTS]
<PAGE> 13
TransTechnology Engineered Components
TransTechnology Engineered Components ("TTEC") supplies metal and plastic
fastening components for automotive, commercial, industrial and distribution
markets under the trademarks TINNERMAN(R) and PALNUT(R). With four manufacturing
plants in the USA and Canada, our primary products include spring steel
fasteners, plastic fastening components, headlamp adjusting devices, and
customized metal stampings. TransTechnology has integrated the latest tooling
and metal forming technologies with state-of-the-art assembly equipment to
ensure the manufacture of superior fasteners. Our design knowledge, engineering
expertise, prototype development and QS-9000 capabilities assure that customers
consistently receive a well-crafted, well-tested component. In December 1999,
TTEC relocated its Detroit sales offices to new facilities in Southfield,
Michigan which will include on-premise design and prototype capability.
The combination of the TINNERMAN(R) and PALNUT(R) product lines brings our
customers 90 years of proven experience in fastener design, more than anyone
else in the business. With over 15,000 standard and special purpose fasteners,
TTEC can provide solutions to the most difficult manufacturing and assembly
problems. For unique applications, TTEC has custom design capabilities which
provide the added assurance that our customers receive the right part from the
start, saving valuable time and money. TTEC is committed to maintaining a
world-class, technology-driven operation to meet the needs of all its customers.
INDUSTRIAL PRODUCTS GROUP
2000 ANNUAL REPORT 11
<PAGE> 14
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, 2000 and 1999, and the related
statements of consolidated operations, stockholders' equity and cash flows for
each of the three years in the period ended March 31, 2000. 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 conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of TransTechnology Corporation and
subsidiaries at March 31, 2000 and 1999, and the results of their operations and
their cash flows for each of the three years in the period ended March 31, 2000
in conformity with accounting principles generally accepted in the United States
of America.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
May 18, 2000
12 TRANSTECHNOLOGY CORPORATION
<PAGE> 15
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31,
ASSETS 2000 1999
--------- ---------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 3,350 $ 2,255
Accounts receivable (net of allowance for doubtful accounts of
$1,129 and $240 in 2000 and 1999, respectively) 61,819 36,323
Inventories 65,744 58,668
Prepaid expenses and other current assets 1,942 2,360
Deferred income taxes 1,872 1,295
--------- ---------
Total current assets 134,727 100,901
--------- ---------
PROPERTY:
Land 14,320 12,564
Buildings 29,933 21,654
Machinery and equipment 93,725 67,381
Furniture and fixtures 11,587 9,075
Leasehold improvements 3,503 727
--------- ---------
Total 153,068 111,401
Less accumulated depreciation and amortization 47,048 35,017
--------- ---------
Property - net 106,020 76,384
--------- ---------
OTHER ASSETS:
Notes receivable 3,455 3,694
Costs in excess of net assets of acquired businesses (net of
accumulated amortization of $10,933 and $7,002 in 2000 and
1999, respectively) 192,115 76,731
Patents and trademarks (net of accumulated amortization of $1,334 and $756
in 2000 and 1999, respectively) 20,809 3,696
Deferred income taxes 9,987 6,757
Other 15,642 11,557
--------- ---------
Total other assets 242,008 102,435
--------- ---------
TOTAL $ 482,755 $ 279,720
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 82,585 $ 46
Accounts payable - trade 25,550 14,247
Accrued compensation 10,359 6,161
Accrued income taxes 5,799 765
Other current liabilities 8,672 8,588
--------- ---------
Total current liabilities 132,965 29,807
--------- ---------
LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS 194,759 102,463
--------- ---------
DEFERRED INCOME TAXES 11,873 11,949
--------- ---------
OTHER LONG-TERM LIABILITIES 14,275 11,791
--------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 11 and 12)
STOCKHOLDERS' EQUITY:
Preferred stock - authorized, 300,000 shares; none issued
Common stock - authorized, 14,700,000 shares of $.01 par value;
issued, 6,691,232 and 6,653,855 shares in 2000 and 1999, respectively 67 67
Additional paid-in capital 77,587 77,246
Retained earnings 63,722 58,721
Accumulated other comprehensive loss (3,157) (3,021)
Unearned compensation (267) (239)
--------- ---------
137,952 132,774
Less treasury stock, at cost - 546,394 and 546,213
shares in 2000 and 1999, respectively (9,069) (9,064)
--------- ---------
Total stockholders' equity 128,883 123,710
--------- ---------
TOTAL $ 482,755 $ 279,720
========= =========
</TABLE>
See notes to consolidated financial statements.
2000 ANNUAL REPORT 13
<PAGE> 16
STATEMENTS OF CONSOLIDATED OPERATIONS
(In thousands, except share data)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 299,252 $ 228,006 $ 203,928
Cost of sales 209,949 156,090 137,820
Plant consolidation charge 991 -- --
----------- ----------- -----------
Gross profit 88,312 71,916 66,108
General, administrative and selling expenses 53,447 46,552 40,187
Interest expense 19,945 6,938 7,228
Interest income (518) (412) (1,020)
Other income - net (624) (6,362) (440)
Allowance on notes receivable -- 906 --
Provision for plant consolidation 4,554 -- --
----------- ----------- -----------
Income from continuing operations before income taxes 11,508 24,294 20,153
Provision for income taxes 4,373 9,704 8,162
----------- ----------- -----------
Income from continuing operations 7,135 14,590 11,991
Loss from disposal of discontinued operations
(net of applicable tax benefit of $1,301) -- -- (924)
----------- ----------- -----------
Income before extraordinary charge 7,135 14,590 11,067
Extraordinary charge for refinancing of debt (net of applicable
tax benefits of $339 and $532 for 2000 and 1999, respectively) (541) (781) --
----------- ----------- -----------
Net income $ 6,594 $ 13,809 $ 11,067
----------- ----------- -----------
Earnings (loss) per share:
Basic:
Income from continuing operations $ 1.16 $ 2.33 $ 2.17
Loss from disposal of discontinued operations -- -- (0.17)
Extraordinary charge for refinancing of debt (0.09) (0.12) --
----------- ----------- -----------
Net income per share $ 1.07 $ 2.21 $ 2.00
----------- ----------- -----------
Diluted:
Income from continuing operations $ 1.16 $ 2.30 $ 2.11
Loss from disposal of discontinued operations -- -- (0.16)
Extraordinary charge for refinancing of debt (0.09) (0.12) --
----------- ----------- -----------
Net income per share $ 1.07 $ 2.18 $ 1.95
----------- ----------- -----------
Weighted - average basic shares outstanding 6,139,000 6,249,000 5,520,000
Weighted - average diluted shares outstanding 6,150,000 6,341,000 5,689,000
</TABLE>
See notes to consolidated financial statements.
14 TRANSTECHNOLOGY CORPORATION
<PAGE> 17
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
2000 1999 1998
--------- --------- ---------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 6,594 $ 13,809 $ 11,067
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary charge for refinancing of debt 541 781 --
Gain on sale of marketable securities -- (1,082) --
Depreciation and amortization 17,617 10,802 9,054
Write-down of assets - plant consolidation 1,762 -- --
Provision for losses on accounts and notes receivable 199 803 537
Loss (gain) on sale or disposal of fixed assets and
discontinued businesses 10 (28) 1,087
Changes in assets and liabilities - excluding the effects
of acquisitions:
(Increase) decrease in accounts receivable (9,923) 1,073 (2,732)
Decrease (increase) in inventories 4,089 2,266 (2,685)
(Increase) decrease in other assets (1,472) 1,888 (3,330)
Increase (decrease) in accounts payable 7,369 (2,604) 1,770
Increase (decrease) in accrued compensation 2,548 (3,603) 2,989
Increase (decrease) in income taxes payable 3,924 686 (1,300)
(Decrease) increase in other liabilities (6,550) (6,115) 2,751
========= ========= =========
Net cash provided by operating activities 26,708 18,676 19,208
========= ========= =========
Cash flows from investing activities:
Business acquisitions (187,086) (43,901) (34,774)
Capital expenditures (10,037) (14,759) (8,745)
Proceeds from sale of fixed assets and discontinued businesses 534 502 2,144
Proceeds from sale of marketable securities 3 2,024 --
Decrease in notes and other receivables 782 3,128 1,954
--------- --------- ---------
Net cash used in investing activities (195,804) (53,006) (39,421)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term borrowings 344,147 159,089 68,400
Payments on long-term debt (166,904) (119,942) (78,336)
Debt issue costs (5,679) -- --
Exercise of stock options and other 310 1,157 2,213
Stock offering proceeds -- -- 26,908
Proceeds from foreign exchange contracts -- -- 2,036
Treasury stock purchases -- (4,926) --
Dividends paid (1,593) (1,625) (1,467)
--------- --------- ---------
Net cash provided by financing activities 170,281 33,753 19,754
--------- --------- ---------
Effect of exchange rate changes on cash (90) (128) (121)
Increase (decrease) in cash and cash equivalents 1,095 (705) (580)
Cash and cash equivalents at beginning of year 2,255 2,960 3,540
--------- --------- ---------
Cash and cash equivalents at end of year $ 3,350 $ 2,255 $ 2,960
========= ========= =========
Supplemental information:
Interest payments $ 17,959 $ 7,130 $ 7,647
Income tax payments $ 2,218 $ 5,177 $ 5,988
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
2000 ANNUAL REPORT 15
<PAGE> 18
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
YEARS ENDED ADDITIONAL COMPRE- COMPRE-
MARCH 31, 2000, COMMON STOCK TREASURY STOCK PAID-IN RETAINED HENSIVE UNEARNED HENSIVE
1999 AND 1998 SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS LOSS COMPENSATION INCOME
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1997 5,316,971 $ 53 (289,237) $(3,939) $46,745 $ 36,937 $(2,118) $ (234)
Net income -- -- -- -- -- 11,067 -- $11,067
Other comprehensive income:
Currency translation
adjustment (net of taxes
of $331) -- -- -- -- -- -- (487) -- (487)
Unrealized investment
holding gains (net of taxes
of $75) -- -- -- -- -- -- 110 -- 110
Cash dividends ($.26 per share) -- -- -- -- -- (1,467) -- -- --
Public sale of common stock,
net of expenses 1,063,900 11 -- -- 26,897 -- -- -- --
Issuance of stock under
stock option plan 178,416 2 -- -- 2,211 -- -- -- --
Issuance of stock under
bonus plan 4,792 -- (2,817) (60) 106 -- -- (2) --
--------- ------- -------- ------- ------- -------- ------- -------- -------
BALANCE, MARCH 31, 1998 6,564,079 66 (292,054) (3,999) 75,959 46,537 (2,495) (236) $10,690
=======
Net income -- -- -- -- -- 13,809 -- -- $13,809
Other comprehensive income:
Currency translation
adjustment(net of taxes
of $467) -- -- -- -- -- -- (701) -- (701)
Unrealized investment
holding gains (net of taxes
of $117) -- -- -- -- -- -- 175 -- 175
Cash dividends ($.26 per
share) -- -- -- -- -- (1,625) -- -- --
Purchase of treasury stock (248,700) (4,926) -- -- -- -- --
Issuance of stock under
stock option plan 84,714 1 -- -- 1,156 -- -- -- --
Issuance of stock under
bonus plan 5,062 -- (5,459) (139) 131 -- -- (3) --
--------- ------- -------- ------- ------- -------- ------- -------- -------
BALANCE, MARCH 31, 1999 6,653,855 67 (546,213) (9,064) 77,246 58,721 (3,021) (239) $13,283
=======
Net income -- -- -- -- -- 6,594 -- -- $ 6,594
Other comprehensive income:
Currency translation
adjustment (net of taxes
of $80) -- -- -- -- -- -- (131) -- (131)
Unrealized investment
holding losses (net of
taxes of $3) -- -- -- -- -- -- (5) -- (5)
Cash dividends ($.26 per share) -- -- -- -- -- (1,593) -- -- --
Issuance of stock under
stock option plan 29,200 -- -- -- 189 -- -- -- --
Issuance of stock under
bonus plan 8,177 -- (181) (5) 152 -- -- (28) --
--------- ------- -------- ------- ------- -------- ------- -------- -------
BALANCE, MARCH 31, 2000 6,691,232 $ 67 (546,394) $(9,069) $77,587 $ 63,722 $(3,157) $ (267) $ 6,458
========= ======= ======== ======= ======= ======== ======= ======== =======
</TABLE>
See notes to consolidated financial statements.
16 TRANSTECHNOLOGY CORPORATION
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING PRINCIPLES
BUSINESS - The fiscal year for TransTechnology Corporation (the "Company") ends
on March 31. Accordingly, all references to years in the Notes to Consolidated
Financial Statements refer to the fiscal year ended March 31 of the indicated
year unless otherwise specified.
The Company develops, manufactures and sells a wide range of products in two
industry segments, Specialty Fastener Products and Aerospace Products. The
Company has manufacturing facilities located in the United States, Canada,
Germany, the United Kingdom and Brazil. The Specialty Fastener Products Segment
produces highly engineered precision metal retaining rings, gear driven band
fasteners, circlips, custom cold-formed parts, head light adjusters, rivets and
other threaded and non-threaded assembly fasteners primarily for the automotive,
heavy truck, industrial, aerospace and consumer/durables markets and accounted
for approximately 80% of the Company's consolidated 2000 net sales. Through its
Aerospace Products Segment, the Company develops, manufactures, sells and
services a complete line of sophisticated lifting and restraining products,
principally performance critical helicopter rescue hoist and cargo hook systems,
winches and hoists for aircraft and weapons systems and aircraft engine
compartment hold open rods, actuators and other motion control devices. This
segment accounted for approximately 20% of the Company's consolidated 2000 net
sales.
USE OF ESTIMATES - The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in its
consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include the accounts of the Company and its subsidiaries, all of which, except
one subsidiary in Spain, are wholly-owned. Intercompany balances and
transactions are eliminated in consolidation. Investments in less than 20% owned
companies are accounted for by the cost method.
REVENUE RECOGNITION - Sales and cost of sales are recorded when title passes to
customers which is generally at the time products are shipped. All of the
Company's contracts are firm fixed-price. Accounts receivable from the United
States Government represent billed receivables and substantially all amounts are
expected to be collected within one year. 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.
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 - Property is recorded at
cost. 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. The Company reviews property and equipment and assets held for sale
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. It has been determined that
no impairment loss needs to be recognized for such assets.
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. The Company has determined that there is
no impairment in value, since projected future cash flows on an undiscounted
basis, through the period such costs in excess of net assets of acquired
businesses are being amortized, are in excess of the recorded asset amount.
PATENTS AND TRADEMARKS - Patents are amortized on a straight-line basis over
their remaining lives not to exceed 20 years. Trademarks are amortized on a
straight-line basis over 40 years.
EARNINGS PER SHARE ("EPS") - The computation of basic earnings per share is
based on the weighted-average number of common shares outstanding. The
computation of diluted earnings per share assumes the foregoing and, in
addition, the exercise of all dilutive stock options using the treasury stock
method.
The components of the denominator for basic earnings per common share and
diluted earnings per common share are reconciled as follows:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Basic earnings per common share:
Weighted-average common
shares outstanding 6,139,000 6,249,000 5,520,000
--------- --------- ---------
Diluted earnings per common share:
Weighted-average common
shares outstanding 6,139,000 6,249,000 5,520,000
Stock options 11,000 92,000 169,000
--------- --------- ---------
Denominator for diluted
earnings per common share 6,150,000 6,341,000 5,689,000
--------- --------- ---------
</TABLE>
2000 ANNUAL REPORT 17
<PAGE> 20
Options to purchase 288,759 shares of common stock at prices between $15.13 and
$30.13 were outstanding during 2000 but were not included in the computation of
diluted EPS because the options' exercise prices were greater than the average
market price of the common shares. Similarly, during 1999 options to purchase
169,774 shares of common stock at prices between $22.94 and $27.88 were
outstanding but were not included in the computation of EPS. During 1998, all
options to purchase common stock were included in the computation of EPS.
RESEARCH, DEVELOPMENT AND ENGINEERING COSTS - Research and development costs and
engineering costs, which are charged to expense when incurred, amounted to $2.0
million, $2.4 million and $2.1 million in 2000, 1999 and 1998, respectively.
Included in these amounts were expenditures of $1.3 million, $1.2 million and
$1.1 million in 2000, 1999 and 1998, respectively, which represent costs related
to research and development activities.
FOREIGN CURRENCY TRANSLATION - The assets and liabilities of the Company's
international operations have been translated into U.S. dollars at year-end
exchange rates, with resulting translation gains and losses accumulated as a
separate component of Accumulated other comprehensive loss. Income and expense
items are converted into U.S. dollars at average rates of exchange prevailing
during the year. The Company treated its operation in Brazil as highly
inflationary until the end of the third quarter of fiscal 1999. Effective
December 28, 1998, the Brazilian operation ceased to be considered highly
inflationary by the Company and the functional currency was changed from the
U.S. dollar to the Brazilian real.
INCOME TAXES - Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of 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 March 1997, 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. During fiscal 1999, the
Company sold all of these shares for $2.0 million and realized a pretax gain of
$1.1 million.
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 certain intercompany financing
denominated in foreign currencies, accounts receivable denominated in foreign
currencies, a percentage of projected sales denominated in foreign currencies,
and projected foreign currency intercompany purchases. Gains and losses on the
financing transactions are included in other income - net. Gains and losses on
forward foreign exchange instruments that hedge specific third party
transactions are included in the cost or carrying value of the underlying
transaction. Gains and losses on instruments that are hedges of projected third
party transactions are included in current period income.
NEW ACCOUNTING STANDARDS - In June 1998, Statement of Financial Accounting
Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging
Activities was issued 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. The Company is currently evaluating the impact this pronouncement
will have on its consolidated financial statements.
RECLASSIFICATIONS - Certain reclassifications have been made to prior years'
financial statements to conform to the 2000 presentation.
2. DISCONTINUED OPERATIONS
During fiscal 1998 the Company recorded after tax costs of $0.9 million for the
disposal of previously discontinued and sold operations. These costs represent
adjustments to previous estimates related primarily to legal and environmental
matters.
Included in Other Assets at both March 31, 2000 and 1999 were assets held for
sale related to discontinued operations of $5.2 million.
18 TRANSTECHNOLOGY CORPORATION
<PAGE> 21
3. ACQUISITIONS
On August 31, 1999, the Company acquired all of the assets and assumed certain
liabilities, consisting primarily of trade debts and accrued expenses, of the
Engineered Fasteners Division of Eaton Corporation and its Tinnerman product
line (collectively referred to as "Tinnerman") for a total purchase price of
$173.3 million in cash. Tinnerman had 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, Roettges & 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 purchase price to the assets and liabilities of Ellison is
preliminary pending final purchase price adjustments, if any, between the
Company and the selling shareholders. As part of the acquisition plan, the
Company closed its existing facility in Bingley, UK 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. In the quarter
ended March 31, 2000, the Company recorded an additional $0.1 million related to
this plant consolidation. The total charge consists 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 $0.8 million for severance and related benefit payments to
approximately 100 Anderton employees. At March 31, 2000, the Company had $0.3
million remaining in current liabilities related to these costs.
In addition, in the quarter ended March 31, 2000, approximately $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.
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.
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 April 17, 1997, the Company acquired all of the outstanding stock of TCR
Corporation ("TCR") for $32.6 million in cash including direct acquisition
costs, and other contingent consideration. TCR, located in Minneapolis,
Minnesota, produces cold forged and other externally threaded fasteners and
related products for the automotive, heavy vehicle, marine and industrial
markets.
The following is a summary of the assets acquired and the liabilities assumed
(in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Current assets $ 29,232 $ 12,723 $ 5,862
Long-term assets 174,516 37,944 34,449
Liabilities assumed (16,662) (6,766) (5,537)
--------- -------- --------
Cash paid including
acquisition costs $ 187,086 $ 43,901 $ 34,774
========= ======== ========
</TABLE>
The following summarizes the Company's pro forma information as if the
acquisitions of Tinnerman, Ellison, ARM and NORCO had occurred at the beginning
of the periods presented. The pro forma results give effect to the amortization
of goodwill and additional depreciation and the effects on interest expense and
taxes (in thousands, except per share data):
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Net sales $338,747 $345,768
======== ========
Income from continuing operations $ 7,378 $ 13,064
======== ========
Net income $ 6,837 $ 12,283
======== ========
Basic earnings per share $ 1.11 $ 1.97
======== ========
Diluted earnings per share $ 1.11 $ 1.94
======== ========
</TABLE>
The above pro forma information does not purport to be indicative of the
financial results which actually would have occurred had the acquisitions been
made at the beginning of the period presented or subsequent to that date.
4. INVENTORIES
Inventories at March 31, consisted of the following (in thousands):
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Finished goods $24,012 $23,592
Work in process 18,367 11,403
Purchased and manufactured parts 23,365 23,673
------- -------
Total $65,744 $58,668
======= =======
</TABLE>
2000 ANNUAL REPORT 19
<PAGE> 22
5. INCOME TAXES
The components of total income (loss) from operations (including continuing and
discontinued operations and extraordinary items) before income taxes were (in
thousands):
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Domestic $ 16,008 $ 23,689 $17,068
Foreign (5,378) (708) 860
-------- -------- -------
Total $ 10,630 $ 22,981 $17,928
-------- -------- -------
</TABLE>
The provision for income taxes is summarized below (in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
Currently payable:
<S> <C> <C> <C>
Federal $ 3,285 $3,771 $4,325
Foreign 1,318 -- 77
State 419 587 808
------- ------ ------
5,022 4,358 5,210
Deferred (988) 4,814 1,651
------- ------ ------
Total $ 4,034 $9,172 $6,861
======= ====== ======
</TABLE>
The provision (benefit) for income taxes is allocated between continuing and
discontinued operations and extraordinary items as summarized below (in
thousands):
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Continuing $ 4,373 $ 9,704 $ 8,162
Discontinued -- -- (1,301)
Extraordinary (339) (532) --
------- ------- -------
Total $ 4,034 $ 9,172 $ 6,861
======= ======= =======
</TABLE>
The consolidated effective tax rates for continuing operations differ from the
federal statutory rates as follows (in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Statutory federal rate 35.0 % 35.0 % 35.0 %
State income taxes after
federal income tax 5.2 4.9 4.8
Earnings of the foreign
sales corporation (9.1) (3.4) (2.4)
Amortization of purchase
adjustments not deductible
for tax purposes 5.2 2.3 1.6
Foreign rate differential 3.2 1.0 --
Other (1.5) 0.2 1.5
------ ------ ------
Consolidated effective tax rate 38.0% 40.0% 40.5%
====== ====== ======
</TABLE>
The following is an analysis of accumulated deferred income taxes (in
thousands):
<TABLE>
<CAPTION>
2000 1999
Assets:
Current:
<S> <C> <C>
Employee benefit accruals $ 829 $ 544
Inventory 56 309
Net operating loss carry forward 796 328
Other 191 114
------- -------
Total current 1,872 1,295
======= =======
Noncurrent:
Employee benefit accruals 666 238
Environmental 583 602
Accrued liabilities 2,046 2,174
Investment -- 617
Net operating loss carryforwards 4,531 1,411
Other 2,161 1,715
------- -------
Total noncurrent 9,987 6,757
======= =======
Total assets $11,859 $ 8,052
======= =======
Liabilities:
Property $ 9,858 $11,217
Other 2,015 732
======= =======
Total liabilities $11,873 $11,949
======= =======
</TABLE>
6. LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS
Long-term debt payable to banks and others, including current maturities, at
March 31 consisted of the following (in thousands):
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Credit agreement - 6.12% $ -- $101,440
Credit agreement - 7.75% -- 400
Credit agreement - 8.67% 154,723 --
Term loan - 8.69% 46,250 --
Bridge loan - 15.44% 75,000 --
Other 1,371 669
-------- --------
277,344 102,509
Less current maturities 82,585 46
-------- --------
Total $194,759 $102,463
======== ========
</TABLE>
20 TRANSTECHNOLOGY CORPORATION
<PAGE> 23
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. 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 intends 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 which may be applied to certain refinancing fees.
An extraordinary charge for the refinancing of debt, net of tax, in the amount
of $0.5 million was incurred for the year ended March 31, 2000, to reflect the
write-off of the unamortized debt issue costs of the prior credit agreement.
The Company has unused borrowing capacity for both domestic and international
operations of $45.3 million as of March 31, 2000, and letters of credit of $4.9
million. The Revolver, Bridge Loan and Term Loan are secured by all of the
Company's assets. As of March 31, 2000, the Company had total borrowings of
$275.9 million under the amended agreements which have a weighted-average
interest rate of 10.48%. The Company had $1.4 million of other borrowings
consisting 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%.
Borrowings under the Revolver as of March 31, 2000, were $154.7 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 March 31, 2000, $152.5 million of the Company's outstanding
borrowings utilized LIBOR, of which $127.0 million were payable in U.S. Dollars
and $7.1 million and $18.4 million were payable in Deutsche marks and Pounds
sterling, respectively.
Borrowings under the Term Loan as of March 31, 2000, were $46.3 million of which
$7.5 million is due within one year, $8.8 million is due in year two, $10.0
million is due in year three, $12.5 million is due in year four, and $7.5
million is due upon maturity in year five.
Borrowings under the Bridge Loan as of March 31, 2000, were $75.0 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 9.5% and increases in quarterly
increments 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 a warrant
escrow agreement that stipulates that the Company shall issue stock warrants 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 debt for a class of debt securities which the Company would be required to
register for public distribution. The Company intends 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 after the Bridge Loan
maturity date on 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,
and contains 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%.
<TABLE>
Debt maturities (in thousands):
<S> <C>
2001 $ 82,585
2002 8,838
2003 10,090
2004 12,594
2005 162,303
Thereafter 934
--------
Total $277,344
========
</TABLE>
2000 ANNUAL REPORT 21
<PAGE> 24
7. STOCKHOLDERS' EQUITY AND EMPLOYEE/DIRECTOR STOCK OPTIONS
The Company maintains the amended and restated 1992 long-term incentive plan
(the "1992 Plan"), the 1998 non-employee directors stock option plan (the "1998
Plan") and the 1999 long-term incentive plan (the "1999 Plan").
Under the terms of the 1992 Plan, 800,000 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. Under the terms of
the 1999 plan, 300,000 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 July 2009. Under both plans, option exercise
prices equal the fair market value of the common shares at their grant dates.
For grants made prior to May 1999, options expire not later than five years
after the date of the grant. Options granted beginning in May 1999 expire not
later than 10 years after the date of the grant; options granted to officers and
employees, awarded as part of a three-year bonus plan, expire not later than 5
years after the date of the grant. Options granted to directors and to officers
and employees with the annual yearly cash bonus vest ratably over three years
beginning one year after the date of the grant; options granted to officers and
employees awarded as part of a three-year long term bonus plan vest at the end
of the three-year plan period. Restricted stock is payable in equivalent number
of common shares. The shares are distributable in a single installment and, with
respect to officers and employees, restrictions lapse ratably over a three year
period from the date of the award, and with respect to directors, the
restrictions lapse after one year.
Under the terms of the 1998 Plan, non-employee directors are entitled to receive
matching options for each share of the Company's common stock which they hold at
the end of a 60-day period following initial election as a director, but not to
exceed 25,000 shares with the strike price of the option being the fair market
value of the shares at their grant dates, and thereafter, for each share of the
Company's common stock that they purchase on the open market, with the strike
price of the option being the purchase price of the share, up to a maximum of
5,000 options in any twelve month period or 15,000 options over a three year
period. Options granted under the 1998 Plan vest on the first anniversary of the
grant, provided that, exclusive of the options granted to match shares held at
the end of the 60-day period, the optionee may not acquire by exercise of the
options more than 5,000 shares in any one year. Options expire not later than
five years after the date of the grant.
The Company continues to apply the accounting standards set forth in APB No. 25.
However, disclosures are required of pro forma net income and earnings per share
as if the Company had adopted the accounting provisions of SFAS No. 123. Based
on Black-Scholes values, pro forma net income for 2000, 1999 and 1998 would be
$6.1 million, $14.0 million and $11.0 million, respectively; pro forma earnings
per common share for 2000, 1999 and 1998 would be $1.00, $2.24 and $1.93,
respectively.
The following table summarizes stock option activity over the past three years
under the plan:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
<S> <C> <C>
Outstanding at March 31, 1997 464,214 $ 13.54
Granted 96,000 21.07
Exercised (178,416) 12.41
Canceled or expired (8,000) 15.00
--------
Outstanding at March 31, 1998 373,798 15.63
Granted 181,156 26.92
Exercised (84,714) 13.03
Canceled or expired (32,194) 23.81
--------
Outstanding at March 31, 1999 438,046 17.66
Granted 155,715 18.90
Exercised (29,200) 14.53
Canceled or expired (75,521) 15.47
--------
Outstanding at March 31, 2000 489,040 19.56
========
Options exercisable at March 31, 1998 201,130 13.87
Options exercisable at March 31, 1999 197,417 14.74
Options exercisable at March 31, 2000 183,829 19.13
</TABLE>
In 2000, 1999 and 1998 the Company awarded restricted stock totaling 8,177
shares, 5,062 shares and 4,792 shares, respectively. The weighted-average fair
value of this restricted stock was $18.60, $25.33 and $22.14 in 2000, 1999 and
1998, respectively. The expense recorded in 2000, 1999 and 1998 for restricted
stock was $124,000, $107,000 and $60,000, respectively.
The weighted-average Black-Scholes value per option granted in 2000, 1999 and
1998 was $14.40, $21.59 and $19.75, respectively. The following weighted-average
assumptions were used in the Black-Scholes option pricing model for options
granted in 2000, 1999 and 1998:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Dividend yield 1.3% 1.4% 1.0%
Volatility 25.0% 24.0% 25.0%
Risk-free interest rate 5.5% 5.5% 6.0%
Expected term of options
(in years) 4.0 4.0 4.0
</TABLE>
For options outstanding and exercisable at March 31, 2000, the exercise price
ranges and average remaining lives were:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------- --------------------------------------
RANGE OF NUMBER OUTSTANDING WEIGHTED-AVERAGE WEIGHTED-AVERAGE NUMBER EXERCISABLE WEIGHTED-AVERAGE
EXERCISE PRICES AT MARCH 31, 2000 REMAINING LIFE EXERCISE PRICE AT MARCH 31, 2000 EXERCISE PRICE
<S> <C> <C> <C> <C> <C>
$ 11-15 39,989 1 $12.83 38,084 $12.76
16-21 283,123 3 18.85 102,667 18.46
22-28 165,928 3 27.01 43,078 26.77
------- ------ ------- ------
489,040 2 $19.56 183,829 $19.13
======= ====== ======= ======
</TABLE>
22 TRANSTECHNOLOGY CORPORATION
<PAGE> 25
8. EMPLOYEE BENEFIT PLANS
The Company has three 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 $3.0
million, $2.5 million and $2.8 million in 2000, 1999 and 1998, respectively.
The Company provides postretirement benefits to union employees at two of the
Company's divisions. The Company funds these benefits on a pay-as-you-go basis.
In addition, the Company maintains several defined benefit retirement plans for
certain employees. Funding policies are based upon local statutes.
(In thousands)
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
-------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
-------------------------------------------------------------------------------------
2000 1999 1998 2000 1999 1998
COMPONENTS OF NET
PERIODIC BENEFIT COST:
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 444 $ 402 $ 409 $ 15 $ 2 $ 2
Interest cost 1,211 835 841 119 69 72
Expected return on
plan assets (1,611) (573) (439) -- -- --
Amortization of
net gain 505 43 43 28 -- --
------- ------- ------- ------- ------- -------
Net periodic
benefit cost $ 549 $ 707 $ 854 $ 162 $ 71 $ 74
======= ======= ======= ======= ======= =======
WEIGHTED-AVERAGE
ASSUMPTIONS AS OF
MARCH 31:
Discount rate 6.67% 6.00% 6.88% 7.88% 7.00% 7.00%
Expected return on
plan assets 7.59% 7.00% 8.00% -- -- --
Rate of compensation
increase 3.13% 3.25% 3.50% -- -- --
</TABLE>
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
---------------------------------------------------------
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
---------------------------------------------------------
2000 1999 2000 1999
CHANGE IN BENEFIT
OBLIGATION:
<S> <C> <C> <C> <C>
Benefit obligation at
beginning of year $ 13,702 $ 12,191 $ 1,024 $ 1,054
Service cost 444 402 15 2
Interest cost 1,211 835 119 69
Plan participants'
contributions 131 136 -- --
Effect of acquisitions 9,108 -- 1,122 --
Amendments -- -- -- --
Actuarial gain (341) 1,169 223 2
Benefits paid (1,402) (792) (138) (103)
Effect of foreign
exchange (755) (239) -- --
-------- -------- -------- --------
Benefit obligation at
end of year $ 22,098 $ 13,702 $ 2,365 $ 1,024
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
---------------------------------------------------------
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
---------------------------------------------------------
2000 1999 2000 1999
CHANGE IN PLAN ASSETS:
<S> <C> <C> <C> <C>
Fair value of plan assets
at beginning of year $ 7,565 $ 7,116 $ -- $ --
Effect of aquisitions 11,725 -- -- --
Actual return
on plan assets 1,069 591 -- --
Employer contribution 352 313 138 103
Plan participants'
contributions 131 136 -- --
Benefits paid (978) (318) (138) (103)
Effect of foreign
exchange (112) (273) -- --
-------- -------- -------- --------
Fair value of plan assets
at end of year $ 19,752 $ 7,565 $ -- $ --
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
------------------------------------------------------
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
------------------------------------------------------
2000 1999 2000 1999
RECONCILIATION OF
FUNDED STATUS:
<S> <C> <C> <C> <C>
Funded status $(2,349) $(6,137) $(2,365) $(1,024)
Unrecognized actuarial
(gain) loss (2,440) 502 258 63
Unrecognized prior
service cost 516 564 -- --
------- ------- ------- -------
Accrued liability $(4,273) $(5,071) $(2,107) $ (961)
======= ======= ======= =======
</TABLE>
The assumed health care cost trend rates used for measurement purposes were
5.63% and 10.0% for 2000 and 1999, respectively. Under the Plan the actuarially
determined effect of a one-percentage point change in the assumed health care
cost trend would have the following effects:
<TABLE>
<CAPTION>
ONE ONE
PERCENTAGE PERCENTAGE
POINT POINT
INCREASE DECREASE
<S> <C> <C>
Effect on total of service
and interest cost components $34 $(27)
Effect on accumulated
postretirement benefit obligation 289 (226)
</TABLE>
2000 ANNUAL REPORT 23
<PAGE> 26
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>
NOTIONAL
AMOUNT RECEIVE PAY
(IN THOUSANDS) MATURITIES RATE(1) RATE
<S> <C> <C> <C> <C>
March 31, 2000 $25,000 5/02 6.13 % 5.48 %
25,000 5/02 6.13 5.48
37,500 3/03 6.13 6.58
37,500 3/03 6.13 6.58
</TABLE>
(1) Based on three-month LIBOR
FOREIGN CURRENCY EXCHANGE AGREEMENTS - The Company enters into forward foreign
currency agreements to hedge foreign currency financing transactions. 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.
The Company enters into off-balance-sheet forward foreign exchange instruments
in order to hedge certain intercompany financing denominated in foreign
currencies, accounts receivable denominated in foreign currencies, a percentage
of projected sales denominated in foreign currencies, and projected foreign
currency intercompany purchases. Gains and losses on forward foreign exchange
instruments that hedge specific third party transactions are included in the
cost of carrying value of the underlying transaction. Gains and losses on
instruments that are hedges of projected third party transactions are included
in current period income. The Company recognized $0.5 million of unrealized
gains on forward exchange contracts in 2000.
The table below summarizes, by currency, the contractual amounts of the
Company's foreign exchange contracts at March 31, 2000 and 1999. 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>
2000 1999
-------------------------------------------------
BUY SELL BUY SELL
<S> <C> <C> <C> <C>
Currency
Deutsche mark $ -- $10,589 $ 546 $12,439
Pound sterling 17,501 1,667 -- 2,556
------- ------- ------- -------
$17,501 $12,256 $ 546 $14,995
======= ======= ======= =======
</TABLE>
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 receive
to terminate the agreements at March 31, 2000 based upon quoted market prices as
provided by financial institutions which are counterparties to the agreements
and were as follows (in thousands):
<TABLE>
<CAPTION>
2000 1999
RECEIVE RECEIVE
<S> <C> <C>
Interest rate swap agreements $2,405 $ --
Forward foreign exchange
agreements 1,537 626
</TABLE>
10. EXTRAORDINARY ITEM
In fiscal 2000, the Company refinanced its credit facilities. Due to the
termination of the prior credit agreement, the Company recognized an
extraordinary charge of $0.5 million, net of tax, to write-off the unamortized
portion of the loan origination costs associated with the prior agreement. (See
Note 6).
In fiscal 1999, the Company recognized an extraordinary charge of $0.8 million,
net of tax, to write-off the remaining deferred loan fees associated with the
early extinguishment of the Company's indebtedness pursuant to its revised and
amended revolving credit facility.
11. COMMITMENTS
Rent expense under operating leases for the years ended March 31, 2000, 1999,
and 1998 was $2.7 million, $3.2 million and $2.3 million, respectively.
The Company and its subsidiaries have minimum rental commitments under
noncancelable operating leases, primarily leased buildings, as follows (in
thousands):
<TABLE>
<S> <C>
2001 $ 2,462
2002 2,035
2003 1,374
2004 743
2005 329
Beyond 2005 1,862
-------
Total $ 8,805
=======
</TABLE>
24 TRANSTECHNOLOGY CORPORATION
<PAGE> 27
12. CONTINGENCIES
ENVIRONMENTAL MATTERS -During the fourth quarter of fiscal 2000, the Company
presented an environmental cleanup plan for a portion of a site in Pennsylvania
which continues to be owned although the related business has been sold. This
plan was submitted pursuant to the Consent Order with the Pennsylvania
Department of Environmental Protection ("PaDEP") concluded in the fourth quarter
of fiscal 1999. Pursuant to the Consent Order, the Company has paid $0.2 million
for past costs, future oversight expenses and in full settlement of claims made
by PaDEP related to the environmental remediation of the site with an additional
$0.2 million to be paid in fiscal 2001, which amount has been provided for by
the Company in its accrual for environmental liabilities. A second Consent Order
is contemplated by December 1, 2000 for another portion of the site, and a third
Consent Order for the remainder of the site is contemplated by October 1, 2002.
The Company is also administering an agreed settlement with the Federal
government under which the government pays 50% of the environmental response
costs associated with a portion of the site. The Company is also in the process
of finalizing the documentation of an agreed settlement under which the Federal
government will pay 45% of the environmental response costs associated with
another portion of the site. At March 31, 2000, the Company's cleanup reserve
was $1.6 million based on the net present value of future expected cleanup
costs. In fiscal 1999, the Company settled for a recovery of a portion of
cleanup costs with its insurance carriers for approximately $5.1 million (net)
which is included in Other income-net. The Company expects that remediation at
the Pennsylvania site will not be completed for several years.
The Company also continues to participate in environmental assessments and
remediation work at ten 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 $0.2 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
seven 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, 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.
13. SEGMENT AND GEOGRAPHIC INFORMATION
The Company has two business segments. Each segment has separate management
teams that report operating results regularly which are reviewed by the chief
operating decision makers of the Company. Certain businesses have been
aggregated into the same reportable segment because they have similar products
and services, production processes, types of customers and distribution methods
and their long-term financial performance is affected by similar economic
conditions.
The Company develops, manufactures and sells a wide range of products in two
industry segments, Specialty Fastener Products and Aerospace Products. The
Company has manufacturing facilities located in the United States, Canada,
Germany, the United Kingdom and Brazil. The Specialty Fastener Products Segment
produces highly engineered precision metal retaining rings, gear driven band
fasteners, circlips, custom cold-formed parts, head light adjusters, rivets and
other threaded and non-threaded assembly fasteners primarily for the automotive,
heavy truck, industrial, aerospace and consumer/durables markets and accounted
for approximately 80% of the Company's consolidated 2000 net sales. Through its
Aerospace Products Segment, the Company develops, manufactures, sells and
services a complete line of sophisticated lifting and restraining products,
principally performance critical helicopter rescue hoist and cargo hook systems,
winches and hoists for aircraft and weapons systems and aircraft engine
compartment hold open rods, actuators and other motion control devices. This
segment accounted for approximately 20% of the Company's consolidated 2000 net
sales.
2000 ANNUAL REPORT 25
<PAGE> 28
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance
based on operating profit of the respective segments. 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 8%, 10% and 11% of sales from
continuing operations in 2000, 1999 and 1998, respectively, were derived from
sales to the United States Government and its prime contractors which are
attributable primarily to Aerospace Products.
<TABLE>
<CAPTION>
OPERATING DEPRECIATION/
FISCAL NET PROFIT CAPITAL AMORTIZATION IDENTIFIABLE
(IN THOUSANDS) YEAR SALES (LOSS)(1) EXPENDITURES EXPENSE(2) ASSETS
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Specialty Fastener 2000 $238,416 $ 24,615(3) $ 9,589 $ 14,310 $406,476
Products 1999 177,837 26,284 13,652 8,812 205,206
1998 168,469 26,177 7,935 7,801 178,331
Aerospace Products 2000 60,836 15,377 435 1,062 49,163
1999 50,169 12,080 728 991 51,883
1998 35,459 9,285 469 544 25,540
Total segments 2000 299,252 39,992 10,024 15,372 455,639
1999 228,006 38,364 14,380 9,803 257,089
1998 203,928 35,462 8,404 8,345 203,871
Corporate 2000 -- (9,131) 13 2,245 27,116
1999 -- (13,243)(4) 379 999 22,631
1998 -- (9,119) 341 709 32,202
Corporate interest 2000 -- 592 -- -- --
and other income-net 1999 -- 6,111(5) -- -- --
1998 -- 1,038 -- -- --
Interest expense 2000 -- (19,945) -- -- --
1999 -- (6,938) -- -- --
1998 -- (7,228) -- -- --
Consolidated 2000 299,252 11,508 10,037 17,617 482,755
1999 228,006 24,294 14,759 10,802 279,720
1998 203,928 20,153 8,745 9,054 236,073
</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 investments 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 depreciation/amortization expense from discontinued operations is
excluded from the above schedule.
(3) Specialty fastener operating income for 2000 includes charges of $5.5
million relating to the consolidation of two manufacturing facilities in
England.
(4) Corporate expense for 1999 includes a $0.9 million pretax charge to the
allowance for notes receivable, and a $1.5 million pretax incentive
compensation award.
(5) Corporate interest and other income for 1999 includes a pretax net gain of
$5.1 million for settlement of litigation claims against its insurance
carriers for environmental matters and a $1.1 million gain on sale of
marketable securities
Export sales are defined as sales to customers in foreign countries by the
Company's U.S. based operations.
Export sales amounted to the following (in thousands):
<TABLE>
<CAPTION>
LOCATION 2000 1999 1998
<S> <C> <C> <C>
Western Europe $18,144 $15,680 $ 7,980
Canada 10,788 9,170 7,095
Pacific and Far East 7,083 3,344 2,296
Mexico, Central and South America 4,348 2,267 2,556
Middle East 1,336 415 194
Other 1,627 275 158
------- ------- -------
Total $43,326 $31,151 $20,279
======= ======= =======
</TABLE>
26 TRANSTECHNOLOGY CORPORATION
<PAGE> 29
Results set forth below for international operations represents sales and
operating income of domestic and foreign based subsidiaries based on the
location the product was shipped from (in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Net sales:
Domestic operations $ 233,038 $ 171,302 $ 146,682
International operations(1) 66,214 56,704 57,246
--------- --------- ---------
Net sales $ 299,252 $ 228,006 $ 203,928
========= ========= =========
Operating income:
Domestic operations $ 42,711 $ 34,621 $ 30,808
International operations(1) (2,719) 3,743 4,654
--------- --------- ---------
Operating income 39,992 38,364 35,462
Interest expense (19,945) (6,938) (7,228)
Corporate expense and other (8,539) (7,132) (8,081)
--------- --------- ---------
Income from continuing operations before taxes $ 11,508 $ 24,294 $ 20,153
--------- --------- ---------
Identifiable assets:
Domestic operations $ 358,218 $ 193,690 $ 136,347
International operations(1) 97,421 63,399 67,524
Corporate 27,116 22,631 32,202
--------- --------- ---------
Total assets $ 482,755 $ 279,720 $ 236,073
========= ========= =========
</TABLE>
(1) International operations are primarily located in Europe, Canada and Brazil.
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>
2000
Net sales $55,368 $62,903 $85,872 $95,109 $299,252
Gross profit 16,117 18,863 25,626 27,706 88,312
Income (loss) before extraordinary charge 2,158 (330)(1) 2,865 2,442(1) 7,135
Extraordinary charge for refinancing of debt -- (541) -- -- (541)
------- ------- ------- ------- --------
Net income (loss) $ 2,158 $ (871) $ 2,865 $ 2,442 $ 6,594
======= ======= ======= ======= ========
Basic earnings (loss) per share:
Income (loss) before extraordinary charge $ 0.35 $ (0.05) $ 0.47 $ 0.40 $ 1.16
Extraordinary charge for refinancing of debt -- (0.09) -- -- (0.09)
------- ------- ------- ------- --------
Net income (loss) $ 0.35 $ (0.14) $ 0.47 $ 0.40 $ 1.07
======= ======= ======= ======= ========
Diluted earnings (loss) per share:
Income (loss) before extraordinary charge $ 0.35 $ (0.05) $ 0.47 $ 0.40 $ 1.16
Extraordinary charge for refinancing of debt -- (0.09) -- -- (0.09)
------- ------- ------- ------- --------
Net income (loss) $ 0.35 $ (0.14) $ 0.47 $ 0.40 $ 1.07
======= ======= ======= ======= ========
1999
Net sales $51,483 $56,368 $57,863 $62,292 $228,006
Gross profit 16,900 17,949 18,078 18,989 71,916
Income before extraordinary charge 3,202 2,208 3,643 5,537(2) 14,590
Extraordinary charge for refinancing of debt -- (781) -- -- (781)
------- ------- ------- ------- --------
Net income $ 3,202 $ 1,427 $ 3,643 $ 5,537 $ 13,809
======= ======= ======= ======= ========
Basic earnings (loss) per share:
Income before extraordinary charge $ 0.51 $ 0.35 $ 0.58 $ 0.90 $ 2.33
Extraordinary charge for refinancing of debt -- (0.12) -- -- (0.12)
------- ------- ------- ------- --------
Net income $ 0.51 $ 0.23 $ 0.58 $ 0.90 $ 2.21
======= ======= ======= ======= ========
Diluted earnings (loss) per share:
Income before extraordinary charge $ 0.50 $ 0.34 $ 0.58 $ 0.89 $ 2.30
Extraordinary charge for refinancing of debt -- (0.12) -- -- (0.12)
------- ------- ------- ------- --------
Net income $ 0.50 $ 0.22 $ 0.58 $ 0.89 $ 2.18
======= ======= ======= ======= ========
</TABLE>
(1) The second and fourth quarters of 2000 include charges of $4.5 million and
$1.1 million, respectively, relating to the consolidation of two
manufacturing facilities in England.
(2) Income before extraordinary charge for the quarter ended March 31, 1999
includes a pretax net gain of $5.1 million for an insurance settlement and a
$1.1 million pretax gain on sale of marketable securities.
2000 ANNUAL REPORT 27
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's fiscal year ends on March 31. Accordingly, all references to years
in this Management's Discussion and Analysis refer to the fiscal year ended
March 31 of the indicated year. Also, when referred to herein, operating profit
means net sales less operating expenses, without deduction for general corporate
expenses, interest and income taxes.
Sales in 2000 were $299.3 million, an increase of $71.2 million, or 31% from
1999, compared with a $24.1 million, or a 12% increase, from 1998 to 1999. Gross
profit in 2000 increased $16.4 million, or 23%, from 1999, compared with an
increase of $5.8 million, or 9%, from 1998 to 1999. Operating profit for 2000
was $40.0 million, an increase of $1.6 million or 4%, from 1999, compared with
an increase of $2.9 million or 8%, from 1998 to 1999. Operating profit in 2000
was adversely affected by plant consolidation expenses of $5.5 million as
described below in the discussion of acquisitions. In 1999, income before income
taxes and extraordinary charge was favorably affected by a $5.1 million gain
from the settlement of litigation relative to claims against its insurance
carriers for environmental matters and a $1.1 million gain from the sale of
marketable securities. Changes in sales, operating profit and new orders are
discussed below by segment, and additional information regarding industry
segments is contained in Note 13 of the Notes to Consolidated Financial
Statements.
Net income, including an extraordinary charge in 2000, was $6.6 million, or
$1.07 per diluted share, compared to $13.8, million or $2.18 per diluted share,
in 1999. Changes in net income were affected both by operating profit, as
discussed in the Business Segment sections below, interest expense, plant
consolidation expense and an extraordinary charge as discussed in the sections
below.
During the first half of 2000 the Company completed two acquisitions. On August
31, 1999, the Company acquired all of the assets and assumed certain liabilities
of the Engineered Fasteners Division of Eaton Corporation and its Tinnerman
product line (collectively referred to as "Tinnerman") for a total purchase
price of $173.3 million in cash. 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, Roettges & Co. GmbH (collectively referred to as
"Ellison") for $13.8 million in cash, a $0.4 million note payable, and other
contingent consideration.
As part of the Ellison acquisition plan, the Company recorded a plant
consolidation provision of $4.5 million to cover the estimated plant closure of
the Company's existing facility and consolidation costs. The initial estimate of
$4.5 million was recorded during the first half of 2000. During the fourth
quarter of 2000 additional expenses of $0.1 million were added to the provision.
In addition, approximately $1.0 million of additional costs relating to the
plant consolidation was charged to cost of sales in the fourth quarter.
During the first quarter of 2000 the Company recorded an extraordinary charge
for the early extinguishment of debt in the amount of $0.5 million after tax.
The early extinguishment of existing debt was necessary in order to obtain new
credit facilities which provided funding for the Tinnerman and Ellison
acquisitions.
Interest expense increased by $13.0 million in 2000 from 1999 due to the
additional bank borrowings required for the Tinnerman and Ellison acquisitions
as well as higher interest rates. Interest expense decreased by $0.3 million in
1999 from 1998 primarily due to lower borrowing rates.
New orders received during 2000 totaled $305.2 million, an increase of $84.3
million, or 38%, from 1999. This increase was due mainly to the acquisitions of
Tinnerman and Ellison during 2000. New orders received during 1999 totaled
$220.9 million, an increase of $14.0 million, or 7%, from 1998. At March 31,
2000, total backlog of unfilled orders was $109.6 million, compared to $89.7
million and $75.9 million at March 3l, 1999 and 1998, respectively. New orders
and backlog by industry segment are discussed below.
SPECIALTY FASTENER PRODUCTS SEGMENT
2000 COMPARED WITH 1999
Sales for the Specialty Fastener Products segment were $238.4 million in 2000,
an increase of $60.6 million, or 34%, from 1999. The increase in sales was
primarily
28 TransTechnology Corporation
<PAGE> 31
due to the acquisition of Ellison on July 19, 1999 and Tinnerman on August 31,
1999. Increases in domestic hose clamps and assembly fasteners and cold-headed
parts sales were offset by decreases in European hose clamps and both domestic
and international retaining rings. Sales of the rivet division continued to
decline due to loss of business from its largest customer and the down cycle of
the airframe industry. The Company has filed an arbitration demand against this
customer and the former owner seeking damages for fraud and breach of contract,
punitive damages and rescission.
Operating profit for the Specialty Fastener Products segment was $24.6 million
in 2000, a decrease of $1.7 million, or 6%, compared to 1999. Excluding $5.5
million of expenses relating to the consolidation of two retaining ring
factories in England as part of the Ellison acquisition program, operating
profit increased 15%. This increase was primarily driven by the Tinnerman
acquisition. Operating profits at the European operation were lower due to
reduced market and economic factors, as well as currency factors, especially the
exchange rates between the Pound sterling and the Euro. Domestic retaining ring
operating profit was lower due to lower sales volume. Operating profit in
assembly fasteners increased in 2000 mainly due to increased sales volume,
primarily in the U.S. automotive market.
New orders during 2000 for the Specialty Fastener Products segment were $243.4
million, an increase of $71.9 million, or 42%, mainly due to the Tinnerman and
Ellison acquisitions. Backlog of unfilled orders as of March 31, 2000 increased
to $65.4 million, compared to $45.9 million at March 31, 1999, mainly due to
acquisitions.
SPECIALTY FASTENER PRODUCTS SEGMENT
1999 COMPARED WITH 1998
Sales for the Specialty Fastener Products segment were $177.8 million in 1999,
an increase of $9.4 million, or 6%, from 1998. The increase in sales was
primarily due to the acquisition of ARM on June 29, 1998. Domestic Fastener
sales were otherwise lower or flat as compared to 1998 sales. Sales of the
European hose clamp division were lower reflecting mainly the loss of one major
customer, which had been anticipated. Sales from the Brazilian retaining ring
operation were also reduced compared to 1998 due to the currency devaluation as
well as economic difficulties experienced in Brazil during 1999. Domestic
retaining ring sales were also lower compared to 1998 due to a loss in market
share suffered during the consolidation of two plants in New Jersey.
Operating profit for the Specialty Fastener Products segment was $26.3 million
in 1999, an increase of $0.1 million compared to 1998. Increased operating
profit generated by the ARM acquisition was essentially offset by the lower
sales and resulting lower operating profit as discussed above from the domestic
and Brazilian retaining ring divisions as well as the European hose clamp
division. Lower operating profit also was experienced at the domestic hose clamp
division due to increased price competition and a change in product mix
resulting in lower absorption of overhead.
In 1999, new orders in the Specialty Fastener Products segment were $171.5
million, virtually the same as 1998. Increased orders stemming from the ARM
acquisition were offset as were sales for the period due to the reasons
discussed above. Backlog of unfilled orders was $45.9 million at March 31, 1999,
compared to $43.5 million at March 31, 1998.
AEROSPACE PRODUCTS SEGMENT
2000 COMPARED WITH 1999
Sales for the Aerospace Products segment were $60.8 million in 2000, an increase
of $10.7 million, or 21%, from 1999. Approximately 9% of the increase came from
increased rescue hoist and engineering development programs and 12% due to the
inclusion of twelve months of sales from NORCO this year compared to eight
months in 1999.
Operating profit for the Aerospace Products segment was $15.4 million, an
increase of $3.3 million, or 27%. This increase was due to the inclusion of
NORCO for the full year, as well as increased sales of rescue hoists.
New orders during 2000 for the Aerospace Products segment were $61.8 million, an
increase of $12.4 million, or 25%, mainly due to NORCO. Increased orders also
included increased engineering program orders and increased orders for spare
parts. Backlog of unfilled orders as of March 31, 2000 was $44.2 million,
compared to $43.8 million at March 31, 1999.
AEROSPACE PRODUCTS SEGMENT
1999 COMPARED WITH 1998
Sales for the Aerospace Products segment were $50.2 million in 1999, an increase
of $14.7 million or 41%
2000 ANNUAL REPORT 29
<PAGE> 32
from 1998. The increase was primarily due to the acquisition of NORCO on July
28, 1998. Sales of rescue hoist and cargo hook products were also higher for
1999 due mainly to the timing of program sales such as the Boeing V-22 program,
which were developed in prior years from continuing research and development
efforts.
The Aerospace Products segment reported an operating profit of $12.1 million in
1999, an increase of $2.8 million, or 30%, from 1998. The increase was primarily
due to the increased sales and operating profit generated by the NORCO
acquisition.
In 1999 new orders in the Aerospace Products segment increased by $14.0 million,
or 40%, from 1998. This increase was primarily due to the NORCO acquisition. New
orders for rescue hoists and cargo hooks also increased slightly. At March 31,
1999, the backlog of unfilled orders was $43.8 million, compared to $32.4
million at March 31, 1998.
YEAR 2000 READINESS
The Company undertook Year 2000 readiness programs at all of its facilities so
that the date change from the calendar year 1999 to 2000 did not cause
disruptions to the Company's operations or date sensitive systems. The Company
had been addressing this concern for several years and did not anticipate any
problems at any of its business units and did not expect any significant vendor
or customer related problems based on survey information gathered. Total costs
for Year 2000 programs were approximately $0.5 million of which $0.1 million was
capitalized. No further costs for Year 2000 programs are expected.
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.
NEW ACCOUNTING STANDARDS
In June 1998, Statement of Financial Accounting Standards ("SFAS") No. 133,
Accounting for Derivative Instruments and Hedging Activities, was issued 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. The Company
is currently evaluating the impact this pronouncement will have on its
consolidated financial statements.
ACQUISITIONS
On August 31, 1999, the Company acquired all of the assets and assumed certain
liabilities, consisting primarily of trade debts and accrued expenses, of the
Engineered Fasteners Division of Eaton Corporation and its Tinnerman product
line (collectively referred to as "Tinnerman") for a total purchase price of
$173.3 million in cash. Tinnerman had 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, Roettges & 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 purchase price to the assets and liabilities of Ellison is
preliminary pending final purchase price adjustments, if any, between the
Company and the selling shareholders. As part of the acquisition plan, the
Company closed its existing facility in Bingley, UK 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. In the quarter
ended March 31, 2000, the Company recorded an additional $0.1 million related to
this plant consol-
30 TRANSTECHNOLOGY CORPORATION
<PAGE> 33
idation. The total charge consists of $3.8 million principally related to the
write-down of Anderton's assets to estimated realizable values and other costs
directly related to the exit of the facility, and approximately $0.8 million for
severance and related benefit payments to approximately 100 Anderton employees.
At March 31, 2000, the Company had $0.3 million remaining in current liabilities
related to these costs.
In addition, 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.
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.
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 April 17, 1997, the Company acquired all of the outstanding stock of TCR
Corporation ("TCR") for $32.6 million in cash including direct acquisition
costs, and other contingent consideration. TCR, located in Minneapolis,
Minnesota, produces cold forged and other externally threaded fasteners and
related products for the automotive, heavy vehicle, marine and industrial
markets.
DISCONTINUED OPERATIONS
During fiscal 1998 the Company recorded after tax costs of $0.9 million for the
disposal of previously discontinued and sold operations. These costs represent
adjustments to previous estimates related primarily to legal and environmental
matters.
Included in Other Assets at March 31, 2000 and 1999, were assets held for sale
related to discontinued operations of $5.2 million in both years.
LIQUIDITY AND CAPITAL RESOURCES
The Company's debt-to-capitalization ratio was 68%, 45%, and 35% as of March 31,
2000, 1999 and 1998, respectively. The higher debt ratios for 2000 and 1999
reflect the additional bank borrowings necessary for the Tinnerman and Ellison
acquisitions in 2000, and the ARM and NORCO acquisitions in 1999. The current
ratio at March 31, 2000, was 1.01, compared to 3.39, and 2.06 at March 31, 1999
and 1998, respectively. Working capital was $1.8 million at March 31, 2000, down
$69.3 million from 1999 and down $49.2 million from 1998. The reduction in
working capital in 2000 was caused primarily by the Bridge Loan payable of $75.0
million, all of which is classified as a current liability, reflecting its
initial maturity date of August 31, 2000.
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. 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. The stock warrants would provide for the lenders to obtain up to
ten percent of the shares of the Company's stock after August 31, 2000. The
Company intends 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 which may be applied to certain refinancing fees.
An extraordinary charge for the refinancing of debt, net of tax, in the amount
of $0.5 million was incurred for the year ended March 31, 2000, to reflect the
write-off of the unamortized debt issue costs of the prior credit agreement.
The Company's credit agreements provide it with unused borrowing capacity for
both domestic and international operations of $45.3 million as of March 31,
2000, and letters of credit of up to $4.9 million. The
2000 ANNUAL REPORT 31
<PAGE> 34
Revolver, Bridge Loan and Term Loan are secured by all of the Company's assets.
As of March 31, 2000, the Company had total borrowings of $275.9 million under
the amended agreements which have a weighted average interest rate of 10.4%. The
Company had $1.4 million of other borrowings consisting 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%.
Borrowings under the Revolver as of March 31, 2000, were $154.7 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 March 31, 2000, $152.5 million of the Company's outstanding
borrowings utilized LIBOR, of which $127.0 million were payable in U.S. Dollars
and $7.1 million and $18.4 million were payable in Deutsche marks and Pounds
sterling, respectively.
Borrowings under the Term Loan as of March 31, 2000, were $46.3 million of which
$7.5 million is due within one year, $8.8 million is due in year two, $10.0
million is due in year three, $12.5 million is due in year four, and $7.5
million is due upon maturity in year five.
Borrowings under the Bridge Loan as of March 31, 2000, were $75.0 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 9.5% and increases in quarterly
increments 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 a warrant
escrow agreement that stipulates that the Company shall issue stock warrants 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 debt for a class of debt securities which the Company would be required to
register for public distribution. The Company intends 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 after the Bridge Loan
maturity date on 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,
and contains other customary financial covenants.
The Company did not purchase any treasury stock in 2000 in contrast to 1999
during which the Company purchased 249,000 shares for $4.9 million. Treasury
stock purchases are made in the open market or in negotiated transactions when
opportunities are deemed to arise. Purchases of treasury stock are limited by
the terms of the Company's credit agreement.
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 in 2000 were $10.0
million compared with $14.8 million in 1999 and $8.7 million in 1998, with
capital expenditures for the Fastener Segment being much larger than those
required by the Aerospace Products Segment. The Company expects capital
expenditures in 2001 to be below the 2000 level.
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 rates and interest rates. The Company enters into
off-balance-sheet forward foreign exchange instruments in order to hedge certain
intercompany financing denominated in foreign currencies, accounts receivable
denominated in foreign currencies, a percentage of projected sales denominated
32 TRANSTECHNOLOGY CORPORATION
<PAGE> 35
in foreign currencies, and projected foreign currency intercompany purchases.
Gains and losses on forward foreign exchange instruments that hedge specific
third party transactions are included in the cost of carrying value of the
underlying transaction. Gains and losses on instruments that are hedges of
projected third party transactions are included in current period income.
The Company recognized $0.5 million of unrealized gains on forward exchange
contracts in 2000.
At March 31, 2000, the Company had outstanding forward foreign exchange
contracts to purchase and sell $29.8 million of various currencies (principally
Deutsche marks and Pounds sterling). At March 31, 2000, if all forward contracts
were closed out, the Company would receive approximately $1.5 million (the fair
value of all outstanding contracts). A 10% fluctuation in the exchange rates for
the currencies hedged would have an immaterial effect on fair values of these
instruments.
The Company enters into interest rate swap agreements to manage a portion of 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 March 31, 2000 the Company had outstanding interest rate
swap agreements to convert $125 million of floating rate debt to fixed rate
debt. The fair value of these swaps was approximately $2.4 million at March 31,
2000.
CONTINGENCIES
ENVIRONMENTAL MATTERS - During the fourth quarter of fiscal 2000 the Company
presented an environmental cleanup plan for a portion of a site in Pennsylvania
which continues to be owned although the related business has been sold. This
plan was submitted pursuant to the Consent Order and Agreement with the
Pennsylvania Department of Environmental Protection ("PaDEP") concluded in the
fourth quarter of fiscal 1999. Pursuant to the Consent Order, the Company has
paid $0.2 million for past costs, future oversight expenses and in full
settlement of claims made by PaDEP related to the environmental remediation of
the site with an additional $0.2 million to be paid in fiscal 2001, which amount
has been provided for by the Company in its accrual for environmental
liabilities. A second Consent Order is contemplated by December 1, 2000 for
another portion of the site, and a third Consent Order for the remainder of the
site is contemplated by October 1, 2002. The Company is also administering an
agreed settlement with the Federal government under which the government pays
50% of the environmental response costs associated with a portion of the site.
The Company is also in the process of finalizing the documentation of an agreed
settlement under which the Federal government will pay 45% of the environmental
response costs associated with another portion of the site. At March 31, 2000,
the Company's cleanup reserve was $1.6 million based on the net present value of
future expected cleanup costs. In 1999, the Company settled for a recovery of a
portion of cleanup costs with its insurance carriers for approximately $5.1
million (net) which is included in Other income-net. The Company expects that
remediation at the Pennsylvania site will not be completed for several years.
The Company also continues to participate in environmental assessments and
remediation work at ten 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 $0.2 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
seven 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 estimate reliably
the costs associated with any remedial work to be performed until studies at
these sites have been completed, the scope of work defined, 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.
2000 ANNUAL REPORT 33
<PAGE> 36
DIRECTORS
* GIDEON ARGOV
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
KOLLMORGEN CORPORATION
*+ WALTER BELLEVILLE
CHAIRMAN OF THE BOARD
ATI MACHINERY, INC.
- MICHAEL J. BERTHELOT
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
TRANSTECHNOLOGY CORPORATION
-+ THOMAS V. CHEMA
PARTNER, ARTER & HADDEN, LLP
PRESIDENT, GATEWAY CONSULTANTS GROUP, INC.
- JOHN H. DALTON
FORMER SECRETARY OF THE NAVY
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
EPCAD SYSTEMS, LLC
- MICHEL GLOUCHEVITCH
PRIVATE EQUITY INVESTOR
*+ JAMES A. LAWRENCE
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
GENERAL MILLS, INC.
WILLIAM J. RECKER
CHAIRMAN OF THE BOARD
GRETAG IMAGING HOLDING AG
----------
* AUDIT COMMITTEE
- NOMINATING COMMITTEE
+ INCENTIVES & COMPENSATION COMMITTEE
CORPORATE OFFICERS
MICHAEL J. BERTHELOT
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
JOSEPH F. SPANIER
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND TREASURER
GERALD C. HARVEY
VICE PRESIDENT, SECRETARY
AND GENERAL COUNSEL
ROBERT L. G. WHITE
PRESIDENT AEROSPACE PRODUCTS GROUP
ROBERT TUNNO
PRESIDENT INDUSTRIAL PRODUCTS GROUP
MONICA AGUIRRE
ASSISTANT TO THE CHAIRMAN
AND ASSISTANT SECRETARY
COUNSEL
HAHN LOESER & PARKS LLP
CLEVELAND, OHIO
AUDITORS
DELOITTE & TOUCHE LLP
PARSIPPANY, NEW JERSEY
TRANSFER AGENT
AND REGISTRAR
EQUISERVE
BOSTON EQUISERVE DIVISION
CANTON, MASSACHUSETTS
INVESTOR RELATIONS CONTACT
Michael J. Berthelot
Chairman of the Board, President
and Chief Executive Officer
TransTechnology Corporation
150 Allen Road
Liberty Corner, New Jersey 07938
908/903-1600
908/903-1616 Fax
www.transtechnology.com
ANNUAL MEETING
The annual shareholders' meeting will be held on Thursday, July 13, 2000 at the
Somerset Hills Hotel, 200 Liberty Corner Road, Warren, New Jersey 07059
FORM 10-K AND ADDITIONAL INFORMATION
The Company, upon request to the Investor Relations department, will provide to
any shareholder a copy of the Form 10-K required to be filed with the Securities
and Exchange Commission and any other available information.
34 TRANSTECHNOLOGY CORPORATION Design: Simon Design
<PAGE> 37
AEROSPACE PRODUCTS GROUP
ROBERT L. G. WHITE - PRESIDENT
BREEZE-EASTERN
Lifting and restraint products
700 Liberty Avenue
Union, NJ 07083-8198
908/686-4000
908/686-9292 Fax
Robert L.G. White - President
NORCO, INC.
Hold open rods and mechanical systems
139 Ethan Allen Highway
Ridgefield, CT 06877-6294
203/544-8301
203/544-7121 Fax
Surin M. Malhotra - President
INDUSTRIAL PRODUCTS GROUP
ROBERT TUNNO - PRESIDENT
TRANSTECHNOLOGY ENGINEERED RINGS
Retaining and snap rings, circlips, washers and shims
Ulf Jemsby - President
SEEGER-ORBIS GmbH
Wiesbadener Strasse 243
D-61462 Konigstein/Taunus
Germany
49/6174 2050
49/6174 205 100 Fax
Sven-Uwe Wolber - Vice President of Operations
TRANSTECHNOLOGY (GB) LTD.
'Hayfield', Colne Road
Glusburn, Keighley
West Yorkshire BD16 2PL
England
44/1535 633 333
44/1535 630 918 Fax
Ulf Jemsby - Acting Vice President of Operations
SALES OFFICES
TRANSTECHNOLOGY ESPANA S. A.
Barcelona, Spain
34/934 743 020
34/934 745 675 Fax
TRANSTECHNOLOGY FRANCE
Paris, France
33/130 132 069
33/130 131 710 Fax
INDUSTRIAL RETAINING RING COMPANY (IRR)
70 East Willow Street
Millburn, NJ 07041-9998
800/526-7055
973/926-4699 Fax
Peter Lowe - Vice President of Operations
Irvington Plant, New Jersey
973/926-5000
973/926-4292 Fax
TRANSTECHNOLOGY BRASIL LTDA.
Av. Prestes Maia, 230
Diadema, Sao Paulo
Brasil 09930-270
55/11 713 3133
55/11 713 4412 Fax
Edson Pardini - Vice President of Operations
TRANSTECHNOLOGY ENGINEERED PRODUCTS
Hose clamps, aerospace fasteners and cold headed parts
Robert Tunno - Acting President
BREEZE INDUSTRIAL PRODUCTS
100 Aero-Seal Drive
Saltsburg, PA 15681-9594
724/639-3571
724/639-3020 Fax
Thomas G. Watson - General Manager
SEEGER-ORBIS GmbH & CO. OHG.
PEBRA PRODUCTS DIVISION
Werk 4, Hauptstrasse 2/1
78665 Frittlingen, Germany
49/7426 949 15
49/7426 949 224 Fax
Bernd Hohn - Operations Manager
AEROSPACE RIVET MANUFACTURERS CORPORATION
17425 Railroad Street
City of Industry, CA 91748-1026
626/646-2150
626/646-2166 Fax
Michael Rott - General Manager
TCR CORPORATION
1600 67th Avenue North
Minneapolis, MN 55430-1755
612/560-2200
612/561-0949 Fax
John Funk - General Manager
TRANSTECHNOLOGY ENGINEERED COMPONENTS
Single and multi-thread assembly fasteners including push-nuts and u-nuts
Stanley E. Erman - President
1060 West 130th Street
Brunswick, Ohio 44212-2316
330/220-5361
330/220-5785 Fax
TRANSTECHNOLOGY ENGINEERED COMPONENTS LLC
Mountainside Plant, New Jersey
908/233-3300
908/233-3310 Fax
Dennis Mulrane -Vice President of Operations
Brunswick Plant, Ohio
330/220-5361
330/220-5797 Fax
Anderson L. Dobbins -Vice President of Operations
Massillon Plant, Ohio
330/832-1511
330/830-7571 Fax
Eric Claggett -Vice President of Operations
TransTechnology Canada Corporation, Hamilton, Canada
905/549-4661
905/549-9960 Fax
Michael Sheehy - Vice President of Operations
SALES OFFICES
SOUTHFIELD, MICHIGAN
248/226-6900
248/226-5950 Fax
SURREY, ENGLAND
44/134 484 6704
44/134 484 6709 Fax
OPERATIONAL GROUPS
2000 ANNUAL REPORT 35
<PAGE> 38
150 Allen Road
Liberty Corner, New Jersey 07938
Phone 908.903.1600
Fax 908.903.1616
www.transtechnology.com
[TRANSTECHNOLOGY CORPORATION LOGO]
engineered products for global partners(TM)
