-----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, HPdF1UJPdcg20FoVTt5awAtNoFIxqCHS7m7QRM84evId2cwTtONJtlhcBLVEYBcb naNXAh3AnBVYvPAs6jpXmg== 0000950152-99-006870.txt : 19990817 0000950152-99-006870.hdr.sgml : 19990817 ACCESSION NUMBER: 0000950152-99-006870 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 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: 99690106 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. 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, 1999 ------------------------------------ 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 5,957,392 July 30, 1999 TOTAL PAGES - 15 2 Part I ------ FINANCIAL INFORMATION --------------------- Item 1. Financial Statements - ---------------------------- TRANSMATION, INC. CONSOLIDATED BALANCE SHEET Unaudited
June 30, March 31, ASSETS: 1999 1999 ------------ ------------ Current Assets: Cash $ 532,211 $ 282,625 Accounts Receivable, less allowance for doubtful accounts of $475,000 at 6/30/99 and $549,000 at 3/31/99 13,550,368 13,301,156 Inventories 13,255,286 12,009,770 Income Taxes Receivable 246,555 371,673 Prepaid Expenses and Deferred Charges 1,668,571 1,905,008 Deferred Tax Assets 257,480 257,480 ------------ ------------ Current Assets 29,510,471 28,127,712 Properties, at cost, less accumulated Depreciation 7,484,823 6,886,231 Goodwill, less accum. Amortization of $2,777,753 at 6/30/99 and $2,473,621 at 3/31/99 21,623,218 21,738,856 Deferred Charges 187,699 214,295 Deferred Income Taxes 65,692 65,692 Other Assets 262,798 262,798 ------------ ------------ $ 59,134,701 $ 57,295,584 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities Current Portion of Long Term Debt $ 2,325,000 $ 2,200,000 Accounts Payable 9,023,150 11,423,358 Accrued Payrolls, Commissions & Other 2,253,693 2,167,714 ------------ ------------ Current Liabilities 13,601,843 15,791,072 Long-Term Debt 29,813,400 26,166,900 Deferred Compensation 414,759 431,609 ------------ ------------ 43,830,002 42,389,581 ------------ ------------ Stockholders' Equity: Common Stock, par value $.50 per share - Authorized - 15,000,000 shares 2,978,696 2,966,371 Capital in Excess of Par Value 2,640,181 2,581,055 Accumulated Translation Adjustment (163,507) (200,568) Retained Earnings 10,302,644 10,012,460 ------------ ------------ 15,758,014 15,359,318 Treasury stock, at cost, 119,358 shares at 6/30/99 (453,315) (453,315) ------------ ------------ 15,304,699 14,906,003 ------------ ------------ $ 59,134,701 $ 57,295,584 ============ ============
See Notes to Consolidated Financial Statements 2 3 TRANSMATION, INC. CONSOLIDATED STATEMENT OF INCOME UNAUDITED
April 1, 1999 - April 1, 1998 - June 30, 1999 June 30, 1998 --------------- --------------- Net Sales $20,034,814 $17,959,309 Costs and Expenses: Cost of Product Sold 13,623,575 11,827,445 Selling & Admin. Expenses 4,882,604 4,629,075 Research & Develop. Costs 383,360 434,321 Interest Expense 662,291 590,410 ----------- ----------- 19,551,830 17,481,251 ----------- ----------- Income Before Taxes 482,984 478,058 Provision for Income Taxes State and Federal 192,800 188,500 ----------- ----------- Net Income 290,184 289,558 Retained Earnings at Beginning of Period 10,012,460 8,963,359 ----------- ----------- Retained Earnings at End of Period $10,302,644 $ 9,252,917 =========== =========== Earnings Per Share - Basic $ .05 $ .05 Earnings Per Share - Diluted $ .05 $ .05
See Notes to Consolidated Financial Statements 3 4 TRANSMATION, INC. CONSOLIDATED STATEMENT OF CASH FLOWS UNAUDITED
Three Months Ended June 30, 1999 June 30, 1998 ------------- ------------- Cash Flows from Operating Activities Net Income $ 290,184 $ 289,558 Items Not Requiring (Providing) Cash Included in Income Depreciation and Amortization 822,539 733,833 Provision for Losses on Accounts Receivable (74,000) (51,000) Decrease (Increase) in Accounts Receivable (175,212) 1,671,573 (Increase) in Inventories (1,245,516) (284,940) Decrease (Increase) in Prepaid Expenses & Deferred Charges 263,033 (18,539) (Decrease) in Accounts Payable (2,400,208) (1,258,730) Increase (Decrease) in Accrued Payrolls, Commissions and Other Liabilities 85,979 (375,573) Increase(Decrease) in Income Taxes Payable 125,118 (74,242) (Decrease) in Deferred Compensation (16,850) (17,724) ----------- ----------- Net Cash Provided (used) by Operating Activities (2,324,933) 614,216 ----------- ----------- Cash Flows from Investing Activities: Purchase of Metermaster, Inc. (188,494) Purchases of Properties (1,116,999) (363,193) ----------- ----------- Net Cash (used in) Investing Activities (1,305,493) (363,193) ----------- ----------- Cash Flows from Financing Activities: (Decrease) Increase in Notes Payable & Current Portion of LTD 125,000 (2,500,000) Issuance of Stock 71,451 111,118 Increase in Long-Term Debt 3,646,500 1,985,714 ----------- ----------- Net Cash (used) Provided by Financing Activities 3,842,951 (403,168) ----------- ----------- Effect of Exchange Rate Changes on Cash 37,061 (38,315) ----------- ----------- Net Increase(Decrease) in Cash 249,586 (190,460) Cash at Beginning of Period 282,625 652,664 ----------- ----------- Cash at End of Period $ 532,211 $ 462,204 =========== =========== Cash Paid for Interest and Income Taxes is as follows: Interest Paid $ 613,849 $ 637,703 Taxes Paid $ 67,297 $ 190,297
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 5 TRANSMATION, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY UNAUDITED
Number of Shares of $.50 Par Value Common Accumulated Common Stock Capital in Other Stock Issued and Excess of Retained Comprehensive Treasury Outstanding Outstanding Par Value Earnings (Loss) Income Stock Total ----------- ----------- --------- -------- ------------- -------- ----- Balance, March 31, 1996 2,451,946 $1,225,973 $1,124,583 $5,905,652 ($93,819) $ 8,162,389 Components of Comprehensive Income: Net Income 2,059,736 2,059,736 Currency Translation Adjustment (36,713) (36,713) ------------ Total Comprehensive Income 2,023,023 Issuance of Stock 374,466 187,233 1,997,163 2,184,396 --------- ---------- ---------- ----------- --------- ----------- Balance, March 31, 1997 2,826,412 1,413,206 3,121,746 7,965,388 (130,532) 12,369,808 Components of Comprehensive Income Net Income 997,971 997,971 Currency Translation Adjustment 9,744 9,744 ----------- Total Comprehensive Income 1,007,715 Issuance of Stock 150,838 75,419 532,217 607,636 Two for One Stock Split on July 22, 1997 2,853,692 1,426,846 (1,426,846) --------- ---------- ---------- ----------- --------- ----------- Balance, March 31, 1998 5,830,942 2,915,471 2,227,117 8,963,359 (120,788) 13,985,159 Components of Comprehensive Income: Net Income 1,049,101 1,049,101 Currency Translation Adjustment (79,780) (79,780) ----------- Total Comprehensive Income 969,321 Issuance of Stock 101,800 50,900 353,938 404,838 Share Repurchase ($453,315) (453,315) --------- ---------- ---------- ----------- --------- --------- ----------- Balance, March 31, 1999 5,932,742 2,966,371 2,581,055 10,012,460 (200,568) (453,315) 14,906,003 Components of Comprehensive Income: Net Income 290,184 290,184 Currency Translation Adjustment 37,061 37,061 ----------- Total Comprehensive Income 327,245 Issuance of Stock 24,650 12,325 59,126 71,451 --------- ---------- ---------- ----------- --------- --------- ----------- Balance, June 30, 1999 5,957,392 $2,978,696 $2,640,181 $10,302,644 ($163,507) ($453,315) $15,304,699 ========= ========== ========== =========== ========= ========= ===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5 6 Note 1 - Borrowings - ------------------- At June 30, 1999, the Company has a $34,900,000 Revolving Credit and Loan Agreement with banks dated August 8, 1998 and amended February 8, 1999, and extending through June 1, 2007. At June 30, 1999, $19,900,000 is borrowed under term loans. The term loans require annual repayments of amounts outstanding, paid on a quarterly basis, as follows: July 1, 1999 - June 30, 2000 $2,325,000 July 1, 2000 - June 30, 2001 $3,020,000 July 1, 2001 - June 30, 2002 $3,980,000 July 1, 2002 - June 30, 2003 $3,980,000 July 1, 2003 - June 30, 2004 $2,755,000 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, 1999, interest to be paid under Term Loans was 2.40% to 3.00% above LIBOR or .50% to above the bank's prime lending rate. At June 30, 1999, $12,238,400 was borrowed under the Revolving Credit portion of the Company's credit facility. The term of the Revolving Credit Facility dated August 8, 1998, matures on July 1, 2001. Interest is payable under the Revolving Credit Facility on a formula basis, at the Company" option, at rates above prime or above LIBOR determined on the basis of the Company" performance as determined by its leverage ratio. On June 30, 1999, interest to be paid under the Revolving Credit Agreement was 2.40% above LIBOR or .50% above the bank's prime lending rate. At June 30, 1999, interest was payable on the above loans at rates ranging from 7.34% to 8.25%. The Company has entered into interest rate swaps resulting in a substantial portion of floating interest rate debt being swapped into fixed interest rate debt. The revolving credit and term loan agreement contains, among other provisions, requirements to maintain minimum levels of net worth, to meet minimum fixed charge coverage ratios and leverage ratios throughout the term of the loans. 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 its lenders an annual commitment fee from .125% to .25%, depending on performance of the Company, of the unused portion of the Lenders' Revolving Credit Committed Amount. The fee is payable quarterly and total commitment fees paid under any unused lines of credit under Revolving Credit Agreements were immaterial in all years 1997-1999. The Company agreed to pay a closing fee 6 7 in the amount of $130,000 in conjunction with the Revolving Credit and Term Loan Facility and the amendment thereto; fees are being amortized over the term of the loans. The Company is in compliance with provisions of its loan agreement or has received waivers as of June 30, 1999. 7 8 Note 2 - Inventories - -------------------- The major classifications of inventory are as follows: June 30, 1999 March 31, 1999 ------------- -------------- Raw Materials and Purchased Parts $ 5,685,597 $ 5,195,188 Work in Process 672,853 614,816 Finished Products 7,904,171 7,222,400 ------------ ------------ 14,262,621 13,032,404 Less Inventory Reserves (1,007,335) (1,022,634) ------------ ------------ $ 13,255,286 $ 12,009,770 ============ ============ 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. 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, 1999 -------------------------------- -------------------------------- 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 $ 290,184 5,844,549 $ 0.05 Effect of Dilutive Options & Warrants 584,998 170,539 --------- --------- ------ --------- --------- ------ Diluted Earnings Per Share $ 289,558 6,355,911 $ 0.05 $ 290,184 6,015,088 $ 0.05 ========= ========= ===== ========= ========= ======
8 9 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 1999 1,211,091 $3.75 - $9.25 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. During the quarter ended June 30, 1999, Accounts Receivable balances owing to the Company increased by $175,212 compared to balances which existed at March 31, 1999. This increase is the result of the higher level of sales achieved in the quarter ended June 30, 1999 compared to results in the quarter ended March 31, 1999. Inventories increased by $1,245,516 during the quarter ended June 30, 1999. The Company has determined that it is possible and preferable to operate at lower levels of inventory than existed at June 30, 1999 and throughout the balance of the current fiscal year, it is the Company's intention to reduce inventory levels from that level which existed at June 30, 1999 to a level below that which existed at March 31, 1999. Trade payables decreased by more than $2,400,000 in the quarter ended June 30, 1999. This reduction resulted from the liquidation of most payables acquired in the February, 1999 Metermaster acquisition. Bank debt increased by $3,771,500 during the quarter as the result of the foregoing actions. It is the Company's intention to reduce Trade Receivables and inventories during the remainder of the current fiscal year and to use proceeds which will result to reduce bank debt. 9 10 Results of Operations - --------------------- Comparison of April 1, 1999 - June 30, 1999 - ------------------------------------------- to April 1, 1998 - June 30, 1998 ----------------------------- Sales totaled $20,034,814 in the quarter ended June 30, 1999, an increase of 11.6% compared to sales of $17,959,309 recorded in the same quarter one year ago. This increase in 1999 is primarily the result of the Company's acquisition of Metermaster in February, 1999. Cost of products sold totaled 68% of sales in 1999 compared to 65.9% of sales in 1998. Certain service locations and other operations acquired in our February, 1999 Metermaster acquisition sustained operating cost levels greater than cost levels which have existed historically within the Company. The Company has taken action and will continue to take required actions to reduce operating costs at all locations to appropriate levels. Interest expense increased by 12% compared to that which resulted one year ago. This increase is the result of additional borrowings during 1999 which were required as the result of the Metermaster acquisition. 10 11 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. 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 8/10/99 /s/ Eric W. McInroy --------------------- --------------------------- Eric W. McInroy President and CEO Date 8/10/99 /s/ John A. Misiaszek --------------------- --------------------------- John A. Misiaszek Vice President, Finance 11 12 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 Credit and Loan Agreement dated August 7, 1998 between Transmation, Inc. and KeyBank National Association is incorporated herein by reference to Exhibit 4(a) to the Registrant's Form 10-Q for the quarter ended September 30, 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. (23) Consents of Experts and Counsel Not applicable. (24) Power of attorney Not applicable. 12 13 *(27) Financial Data Schedule The Financial Data Schedule is included herein as Exhibit 27. (99) Additional Exhibits Not applicable. - ----------------- * Exhibit filed with this Report 13 EX-27 2 EXHIBIT 27
5 This schedule contains summary financial information extracted from the Company's December 31, 1998 Form 10-Q and is qualified in its entirety by reference to such financial statements. 3-MOS MAR-31-2000 JUN-30-1999 532,211 0 14,025,368 475,000 13,550,368 29,510,471 14,831,200 7,346,377 59,134,701 13,601,843 29,813,400 0 0 2,978,696 12,326,003 59,134,701 15,697,602 20,034,814 10,497,363 13,623,575 5,340,034 (74,000) 662,221 482,984 192,800 290,184 0 0 0 290,184 .05 .05
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