-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TXg0Nmn++vXpYeHLT4LkqryuZ/N7io6iNEtk177yxESCoWB1YpD3LqH2uX3kczqO JKktJQwevCqAy14EPLJc9A== 0000950152-98-006697.txt : 19980814 0000950152-98-006697.hdr.sgml : 19980814 ACCESSION NUMBER: 0000950152-98-006697 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSMATION INC CENTRAL INDEX KEY: 0000099302 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 160874418 STATE OF INCORPORATION: OH FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-03905 FILM NUMBER: 98685251 BUSINESS ADDRESS: STREET 1: 10 VANTAGE PT CITY: ROCHESTER STATE: NY ZIP: 14624 BUSINESS PHONE: 7163527777 MAIL ADDRESS: STREET 1: 10 VANTAGE PT CITY: ROCHESTER STATE: NY ZIP: 14624 10-Q 1 TRANSMATION, INC. QUARTERLY REPORT/FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 ------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------------- ---------------------- Commission file number 0-3905 ----------------------- TRANSMATION, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) OHIO 16-0874418 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10 Vantage Point Drive, Rochester, NY 14624 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 716-352-7777 ------------------------ Former name, former address and former fiscal year, if changed since last report Indicate by check mark (X) whether the registrant, (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Number of Shares Outstanding Date - ----- ---------------------------- ---- Common 5,851,372 July 30, 1998 TOTAL PAGES - 14 2 Part I FINANCIAL INFORMATION Item 1. Financial Statements TRANSMATION, INC. CONSOLIDATED BALANCE SHEET Unaudited
June 30, March 31, ASSETS: 1998 1998 ------------ ------------ Current Assets: Cash $ 462,204 $ 652,664 Accounts Receivable, less allowance for doubtful accounts of $541,000 at 6/30/98 and $592,000 at 3/31/98 10,919,774 12,540,347 Inventories 10,960,769 10,675,829 Prepaid Expenses and Deferred Charges 1,360,893 1,344,799 Deferred Tax Assets 540,172 540,172 ----------- ----------- Current Assets 24,243,812 25,753,811 Properties, at cost, less accumulated Depreciation 6,310,649 6,405,053 Goodwill, less accum. Amortization of $1,596,735 at 6/30/98 and $1,320,500 at 3/31/98 18,923,711 19,199,947 Deferred Charges 206,753 204,308 Deferred Income Taxes 58,582 58,582 Other Assets 253,513 253,513 ----------- ----------- $49,997,020 $51,875,214 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities Notes Payable $ 2,500,000 Current Portion of Long Term Debt $ 2,856,000 2,856,000 Accounts Payable 6,603,049 7,861,779 Accrued Payrolls, Commissions & Other 1,798,816 2,174,389 Income Taxes Payable 160,742 234,984 ----------- ----------- Current Liabilities 11,418,607 15,627,152 Long-Term Debt 23,738,636 21,752,922 Deferred Compensation 492,257 509,981 ----------- ----------- 35,649,500 37,890,055 ----------- ----------- Commitments and Contingent Liabilities Stockholders' Equity: Common Stock, par value $.50 per share Authorized - 15,000,000 shares - issued and outstanding - 5,851,372 at 6/30/98, 5,830,942 at 3/31/98 (including 2,853,692 shares issued on 7/22/97) 2,925,686 2,915,471 Capital in Excess of Par Value 2,328,020 2,227,117 Accumulated Translation Adjustment (159,103) (120,788) Retained Earnings 9,252,917 8,963,359 ----------- ----------- 14,347,520 13,985,159 ----------- ----------- $49,997,020 $51,875,214 =========== ===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2 3 TRANSMATION, INC. CONSOLIDATED STATEMENT OF INCOME UNAUDITED
April 1, 1998 - April 1, 1997 - June 30, 1998 June 30, 1997 --------------- --------------- Net Sales $17,959,309 $19,113,082 Cost and Expenses: Cost of Product Sold 11,827,445 13,075,821 Selling & Administrative Expenses 4,629,075 4,665,734 Research & Development Costs 434,321 399,407 Interest Expense 590,410 588,298 ----------- ----------- 17,481,251 18,729,260 ----------- ----------- Income Before Taxes 478,058 383,822 Provision for Income Taxes State and Federal 188,500 142,000 ----------- ----------- Net Income 289,558 241,622 Retained Earnings at Beginning of Period 8,963,359 7,965,388 ----------- ----------- Retained Earnings at End of Period $ 9,252,917 $ 8,207,010 =========== =========== Earnings Per Share - Basic $.05 $.04 Earnings Per Share - Diluted $.05 $.04
See notes to consolidated financial statements 3 4 TRANSMATION, INC. CONSOLIDATED STATEMENT OF CASH FLOWS UNAUDITED
Three Months Ending ---------------------------------- June 30, 1998 June 30, 1997 ------------- ------------- Cash Flows from Operating Activities Net Income $ 289,558 $ 241,622 Items Not Requiring (Providing) Cash Included in Income Depreciation and Amortization 733,833 675,805 Provision for Losses on Accounts Receivable (51,000) (66,900) Other Assets 298,944 Decrease(Increase) in Accounts Receivable 1,671,573 (339,556) (Increase) in Inventories (284,940) (1,002,535) (Increase) in Prepaid Expenses & Deferred Charges (18,539) (45,522) (Decrease) in Accounts Payable (1,258,730) (923,778) Increase(Decrease) in Accrued Payrolls, Commissions and Other Liabilities (375,573) 10,662 (Decrease) in Income Taxes Payable (74,242) (527,489) (Decrease) in Deferred Compensation (17,724) (19,143) ------------ ------------ Net Cash Provided(used) by Operating Activities 614,216 (1,697,890) ------------ ------------ Cash Flows from Investing Activities: Purchase of EIL Instruments, Inc. (22,000,000) Purchases of Properties (363,193) (1,203,387) ------------ ------------ Net Cash (used in) Investing Activities (363,193) (23,203,387) ------------ ------------ Cash Flows from Financing Activities: (Decrease)Increase in Notes Payable & Current Portion of LTD (2,500,000) 2,700,784 Exercise of Stock Options & Warrants 111,118 227,155 Increase in Long-Term Debt 1,985,714 21,487,493 ------------ ------------ Net Cash (used) Provided by Financing Activities (403,168) 24,415,432 ------------ ------------ Effect of Exchange Rate Changes on Cash (38,315) 3,295 ------------ ------------ Net (Decrease) in Cash (190,460) (482,550) Cash at Beginning of Period 652,664 758,215 ------------ ------------ Cash at End of Period $ 462,204 $ 275,665 ============ ============ Cash Paid for Interest and Income Taxes is as follows: Interest Paid $ 637,703 $ 143,979 Taxes Paid $ 190,297 $ 682,715
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 5 TRANSMATION, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY UNAUDITED
Number of Shares of $.50 Par Value Common Stock Capital Accumulated Common Stock Issued and in Excess of Retained Translation Outstanding Outstanding Par Value Earnings Adjustment -------------- ------------- ------------- --------- ----------- Balance, March 31, 1996 2,451,946 $1,225,973 $1,124,583 $5,905,652 ($93,819) Issuance of Stock 374,466 187,233 1,997,163 Currency Translation Activity (36,713) Net Income 2,059,736 --------- ---------- ---------- ---------- -------- Balance, March 31, 1997 2,826,412 1,413,206 3,121,746 7,965,388 (130,532) Two for One Stock Split On 7/22/97 2,853,692 1,426,846 (1,426,846) Issuance of Stock 150,838 75,419 532,217 Currency Translation Activity 9,744 Net Income 997,971 --------- ---------- ---------- ---------- -------- Balance, March 31,1998 5,830,942 2,915,471 2,227,117 8,963,359 (120,788) Issuance of Stock 20,430 10,215 100,903 Currency Translation Activity (38,315) Net Income 289,558 --------- ---------- ---------- ---------- -------- Balance, June 30, 1998 5,851,372 $2,925,686 $2,328,020 $9,252,917 ($159,103) ========= ========== ========== ========== =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5 6 Note 1 - Borrowings At June 30, 1998, the Company has a $30,572,000 Revolving Credit and Term Loan agreement with banks. At June 30, 1998, $13,572,000 is borrowed under the term loan. The term loan, dated April 4, 1997, extends through January 1, 2003, and requires 21 consecutive quarterly installment payments which commenced January 1, 1998. Interest is payable on a formula basis, at the Company's option, at rates above prime or above LIBOR determined on the basis of Company performance as determined by its leverage ratio. On June 30, 1998, interest to be paid under the Term Loan was at 2.75% above LIBOR or 1.25% above the bank's prime lending rate. At June 30, 1998, $10,166,636 was borrowed under the Revolving Credit portion of the Company's credit facility. The term of the Revolving Credit facility, dated April 4, 1997, extends through January 4, 2001. Interest is payable under the revolving credit facility on a formula basis, at the Company's option, at rates above prime or above LIBOR determined on the basis of Company performance as determined by its leverage ratio. On June 30, 1998, interest to be paid under the Revolving Credit Agreement was at 2.50% above LIBOR or 1.00% above the bank's prime lending rate. At June 30, 1998, interest was payable on the above loans at rates ranging from 8.16% to 9.50%. Required payments under the term loan are as follows: July 1, 1998 - June 30, 1999 $2,856,000 July 1, 1999 - June 30, 2000 $2,857,000 July 1, 2000 - June 30, 2001 $2,857,000 July 1, 2001 - June 30, 2002 $2,858,000 July 1, 2002 - March 31, 2003 $2,144,000 The revolving credit and term loan agreement contains, among other provisions, restrictions on the annual amount of capital expenditures, payment of dividends, the annual amount of expenditures made for the purpose of printing and distributing catalogs. Additionally, the Company has pledged its personal property and fixtures, including inventory and equipment, and its accounts receivable as collateral security for the loan. Further, the Company has agreed to pay to the lender an amount equal to 1/4% of the unused portion of the total credit available. The fee is payable quarterly and total commitment fees paid on any unused lines of credit under revolving credit agreements were immaterial in years 1997-1998. The Company also agreed to pay a closing fee in the amount of $80,000 and an agency fee in the amount of $45,000 in conjunction with the Revolving Credit and Term Loan facility; both fees are being amortized over the term of the loans. 6 7 The Company is in compliance with or had received waivers for all provisions of its loan agreement as of June 30, 1998. Note 2 - Inventories The major classifications of inventory are as follows:
June 30, March 31, 1998 1998 ---- ---- Raw Materials and Purchased Parts $ 4,379,588 $ 4,221,730 Work in Process 653,085 629,545 Finished Products 6,773,715 6,529,564 ----------- ----------- 11,806,388 11,380,839 Less Inventory Reserves (845,619) (705,010) ----------- ----------- $10,960,769 $10,675,829 =========== ===========
Note 3 - Net Income Per Share In 1997, the Company adopted SFAS No. 128, "Earnings Per Share," which requires disclosure of basic and diluted earnings per share. Basic earnings per share is computed based on the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the assumed conversion of dilutive stock options and warrants. In computing the per share effect of assumed conversion, funds which would have been received from the exercise of options and warrants are considered to have been used to purchase common shares at average market prices for the period, and the resulting net additional common shares are included in the calculation of average common shares outstanding. All previously reported earnings per share amounts were restated upon adoption of SFAS No. 128. 7 8 The table below summarizes the amounts used to calculate basic and diluted earnings per share:
THREE MONTHS ENDED JUNE 30, 1998 THREE MONTHS ENDED JUNE 30, 1997 -------------------------------- -------------------------------- AVERAGE AVERAGE NET OUTSTANDING PER NET OUTSTANDING PER EARNINGS SHARES SHARE EARNINGS SHARES SHARE -------- ----------- ----- -------- ----------- ----- Basic Earnings Per Share $289,558 5,770,913 $0.05 $241,622 2,803,376 $0.09 Stock Split 7/22/97 2,803,376 ($0.05) Basic Earnings After Stock Split $289,558 5,770,913 $0.05 $241,622 5,606,752 $0.04 Effect of Dilutive Options & Warrants 584,998 354,434 -------- --------- ----- -------- --------- ------ Diluted Earnings Per Share $289,558 6,355,911 $0.05 $241,622 5,961,186 $0.04 ======== ========= ===== ======== ========= ======
Certain anti-dilutive outstanding stock options and warrants were excluded from the calculation of average shares outstanding since their exercise prices exceeded the average market price of common shares during the period. The anti-dilutive stock options and warrants so excluded at the end of each of the last two interim periods and their associated exercise prices are summarized below. The options expire at various times between 1999 and 2002. Number of Exercise Options and Warrants Price -------------------- -------- 1998 539,320 $6.875 - $9.25 1997 None None Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition The Company's primary sources of liquidity and capital are funds provided through its borrowing agreement with banks, its profitability and management of its Balance Sheet. 8 9 During the quarter ended June 30, 1998, Accounts Receivable balances owing to the Company were reduced by $1,671,573 as the result of continued efforts to better manage this asset. Although inventories increased by $284,,940 in the June 1998 quarter, this increase resulted from the acquisition of inventory to support new product releases later in the fiscal year. The Company does anticipate that present inventory levels will be reduced by year-end. Trade Payables and various accrued liabilities were reduced by a total of $1,634,303 compared to March 31. This reduction resulted from payment of amounts due others in accordance with our normal payment terms. During the quarter, the Company repaid the final installment of $2,500,000 due under its April 1996 purchase of Altek. The primary source of funds for this transaction was an increase in bank debt. Results of Operations Comparison of April 1, 1998 - June 30, 1998 to April 1, 1997 - June 30, 1997 Sales totaled $17,959,309 in the quarter ended June 30, 1998 compared to $19,113,082 in the same quarter last year. This reduction resulted from lower sales to customers in the Far East compared to last year as the result of that region's continuing economic problems and also from lower sales to certain other foreign markets and from lower sales of the Company's Cal-Lab services which resulted from the Company's desire to perform higher margin services work than in the past and which, therefore, resulted in the Company foregoing opportunities to perform certain lower margin service work during the 1998 quarter. Cost of Products Sold totaled 65.9% of sales in 1998 compared to 68.4% of sales in 1997. This improvement is attributable to improved margins in the Company's Cal-Lab operation in 1998 compared to 1997. All other expenses were comparable in 1998 vs 1997. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a. See Index to Exhibits. b. Reports on Form 8-K. No reports on Form 8-K have been filed during the quarter for which this report is filed. 9 10 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRANSMATION, INC. Date August 12, 1998 /s/ Eric W. McInroy ----------------------- ---------------------------- Eric W. McInroy President and CEO Date August 12,1998 /s/ John A. Misiaszek ----------------------- ---------------------------- John A. Misiaszek Vice President, Finance 10 11 INDEX TO EXHIBITS (2) Plan of acquisition, reorganization, arrangement, liquidation or succession Not applicable. (3) Articles of Incorporation and By Laws (i) The Articles of Incorporation, as amended, are incorporated herein by reference to Exhibit 4(a) to the Registrant's Registration Statement on Form S-8 (Registration No. 33-61665) filed on August 8, 1995. Certificate of Amendment thereto is incorporated herein by reference to Exhibit I to the Registrant's Form 10-Q for the quarter ended September 30, 1996. (ii) By-laws, as amended through August 18, 1987, are incorporated herein by reference to Exhibit (3) to the Registrant's Form 10-K for the year ended March 31, 1988. (4) Instruments defining the rights of security holders, including indentures (a) Revolving Credit and Term Loan Agreement dated April 4, 1997 among Transmation, Inc. and Manufacturer's and Traders Trust Company and State Street Bank and Trust Company is incorporated herein by reference to Exhibit 4(c) to the Registrant's Form 8-K dated April 18, 1997. (b) Amendment No. 1 thereto is incorporated by reference to Exhibit 4(a) to the Registrant's Form 10-K for the year ended March 31, 1998. (10) Material Contracts The documents listed under (4) are incorporated herein by reference. (11) Statement re Computation of Per Share Earnings Computation can be clearly determined from Note 3 to the Financial Statements included herein at Item 1. (15) Letter re unaudited interim financial information Not applicable. (18) Letter re change in Accounting Principles Not applicable. (19) Report furnished to security holders Not applicable. (22) Published report regarding matters submitted to vote of security holders Not applicable. 11 12 (23) Consents of Experts and Counsel Not applicable. (24) Power of attorney Not applicable. *(27) Financial Data Schedule The Financial Data Schedule is included herein as Exhibit 27. (99) Additional Exhibits Not applicable. - ----------- * Exhibit filed with this Report 12 EX-27 2 EXHIBIT 27
5 3-MOS MAR-31-1999 JUN-30-1998 462,204 0 11,460,774 541,000 10,960,769 24,243,812 12,396,213 6,085,564 49,997,020 11,418,607 26,594,636 0 0 2,925,686 11,421,834 49,997,020 13,607,082 17,959,309 8,900,006 11,827,445 5,114,396 (51,000) 590,410 478,058 188,500 289,558 0 0 0 289,558 .05 .05
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