-----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, VVObAmMHleucXGg0XA/Uv0ns+NMpBLHwcB5U9loBlCdcFnpq0tVlp4cOfZSozaUO 7ILxshAi4J2jTcz8fma/4Q== 0000950123-96-000611.txt : 19960216 0000950123-96-000611.hdr.sgml : 19960216 ACCESSION NUMBER: 0000950123-96-000611 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960214 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSTECHNOLOGY CORP CENTRAL INDEX KEY: 0000099359 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 954062211 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07872 FILM NUMBER: 96518399 BUSINESS ADDRESS: STREET 1: 700 LIBERTY AVENUE CITY: UNION STATE: NJ ZIP: 07083 BUSINESS PHONE: 908-964-56 MAIL ADDRESS: STREET 1: 700 LIBERTY AVENUE CITY: UNION STATE: NJ ZIP: 07083 FORMER COMPANY: FORMER CONFORMED NAME: SPACE ORDNANCE SYSTEMS INC DATE OF NAME CHANGE: 19740717 10-Q 1 FORM 10-Q 1 FORM 10-Q --------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (MARK ONE) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------------- ----------------- Commission file number 1-7872 --------------------- TRANSTECHNOLOGY CORPORATION (Exact name of registrant as specified in its charter) Delaware 95-4062211 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 700 Liberty Avenue 07083 Union, New Jersey (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (908) 964-5666 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ As of February 6, 1996, the total number of outstanding shares of registrant's one class of common stock was 5,103,218 2 TRANSTECHNOLOGY CORPORATION INDEX
PART I. Financial Information Page No. Item 1. Financial Statements...................................... 2 Statements of Consolidated Operations-- Three and Nine Month Periods Ended December 31, 1995 and December 25, 1994..................................... 3 Consolidated Balance Sheets-- December 31, 1995 and March 31, 1995...................... 4 Statements of Consolidated Cash Flow-- Nine Months Ended December 31, 1995 and December 25, 1994......................................... 5 Statements of Consolidated Stockholders' Equity-- Nine Months Ended December 31, 1995....................... 6 Notes to Consolidated Financial Statements................ 7 - 11 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition................... 12 - 18 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K.......................... 19 SIGNATURES...................................................................... 19 EXHIBIT 11...................................................................... 20 EXHIBIT 27...................................................................... 21
1 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The following unaudited Statements of Consolidated Operations, Consolidated Balance Sheets and Statements of Consolidated Cash Flow are of TransTechnology Corporation and its consolidated subsidiaries. These reports reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary to a fair presentation of the results of operations for the interim periods reflected therein. The results reflected in the unaudited Statements of Consolidated Operations for the period ended December 31, 1995 are not necessarily indicative of the results to be expected for the entire year. The December 31, 1995 unaudited Consolidated Financial Statements include the assets and liabilities of the Seeger Group of companies acquired by TransTechnology Corporation on June 30, 1995. See Note 5 of the Notes to Unaudited Consolidated Financial Statements for further discussion on this acquisition. The following unaudited Consolidated Financial Statements should be read in conjunction with the notes thereto, and Management's Discussion and Analysis set forth in Item 2 of Part I of this report, as well as the audited financial statements and related notes thereto contained in the Form 10-K filed for the fiscal year ended March 31, 1995. [THIS SPACE INTENTIONALLY LEFT BLANK] 2 4 STATEMENTS OF CONSOLIDATED OPERATIONS UNAUDITED (In Thousands of Dollars Except Share Data)
THREE MONTHS ENDED NINE MONTHS ENDED -------------------------- -------------------------- 12/31/95 12/25/94 12/31/95 12/25/94 ----------- ----------- ----------- ----------- Total revenue $ 41,601 $ 26,328 $ 112,445 $ 71,176 Cost of sales 27,269 17,759 77,180 49,518 ----------- ----------- ----------- ----------- Gross profit 14,332 8,569 35,265 21,658 ----------- ----------- ----------- ----------- General, administrative and selling expenses 7,644 4,080 20,850 11,871 Interest expense 1,787 857 4,552 1,863 ----------- ----------- ----------- ----------- Total general, administrative, selling and interest expenses 9,431 4,937 25,402 13,734 ----------- ----------- ----------- ----------- Income from continuing operations before income taxes 4,901 3,632 9,863 7,924 Income taxes 2,108 1,198 3,994 2,724 ----------- ----------- ----------- ----------- Income from continuing operations 2,793 2,434 5,869 5,200 Discontinued operations: Loss from operations (net of applicable tax benefits of $74,000 and $368,000 for the quarter and nine months ended 12/31/95, respectively, and $393,000 and $1,332,000 for the quarter and nine months ended 12/25/94, respectively) (121) (785) (601) (2,174) Loss from disposal (net of applicable tax benefits of $200,000 and $102,000 for the quarter and nine months ended 12/31/95, respectively, and $181,000 and $247,000 for the quarter and nine months ended 12/25/94, respectively) (326) (295) (167) (403) ----------- ----------- ----------- ----------- Net income $ 2,346 $ 1,354 $ 5,101 $ 2,623 =========== =========== =========== =========== Earnings per Share: (Note 1) Income from continuing operations $ 0.55 $ 0.48 $ 1.15 $ 1.01 Loss from discontinued operations (0.09) (0.21) (0.15) (0.50) ----------- ----------- ----------- ----------- Net income $ 0.46 $ 0.27 $ 1.00 $ 0.51 =========== =========== =========== =========== Number of shares used in computation of per share information 5,099,000 5,082,000 5,092,000 5,124,000
See accompanying notes to unaudited consolidated financial statements. 3 5 CONSOLIDATED BALANCE SHEETS (In Thousands of Dollars Except Share Data)
UNAUDITED 12/31/95 3/31/95 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 2,867 $ 1,544 Accounts receivable: United States Government 931 1,204 Commercial (net of allowance for doubtful accounts of $607,000 at 12/31/95 and $103,000 at 3/31/95) 22,331 18,280 Notes receivable 1,167 836 Inventories 47,492 25,239 Prepaid expenses and other current assets 792 2,706 Deferred income taxes 2,582 2,592 Net assets of discontinued businesses 10,386 24,269 --------- --------- Total current assets 88,548 76,670 Property, Plant & Equipment 76,530 42,574 Less accumulated depreciation and amortization 16,480 13,040 --------- --------- Property, Plant & Equipment - net 60,050 29,534 --------- --------- Other assets: Notes receivable 13,183 3,274 Costs in excess of net assets of acquired businesses (net of accumulated amortization: 12/31/95, $3,254,000; 3/31/95, $2,793,000) 16,956 12,813 Other 14,748 7,105 --------- --------- Total other assets 44,887 23,192 --------- --------- Total $ 193,485 $ 129,396 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 6,141 $ 3,356 Accounts payable-trade 8,434 9,147 Accrued compensation 4,032 4,247 Accrued income taxes 2,568 591 Other current liabilities 9,719 6,267 --------- --------- Total current liabilities 30,894 23,608 --------- --------- Long-term debt payable to banks and others 74,845 37,021 --------- --------- Other long-term liabilities 19,294 4,265 --------- --------- Stockholders' equity: Preferred stock-authorized, 300,000 shares; none issued -- -- Common stock-authorized, 14,700,000 shares of $.01 par value; issued 5,277,644 at 12/31/95, and 5,242,316 at 3/31/95 53 52 Additional paid-in capital 46,202 45,802 Retained earnings 27,526 23,418 Other stockholders' equity (3,174) (2,680) --------- --------- 70,607 66,592 Less treasury stock, at cost - (177,500 shares at 12/31/95 and 172,500 shares at 3/31/95) (2,155) (2,090) --------- --------- Total stockholders' equity 68,452 64,502 --------- --------- Total $ 193,485 $ 129,396 ========= =========
- -------------------------------------- See accompanying notes to unaudited consolidated financial statements. 4 6 STATEMENTS OF CONSOLIDATED CASH FLOW UNAUDITED (In Thousands of Dollars)
NINE MONTHS ENDED ---------------------- 12/31/95 12/25/94 --------- --------- Cash Flows From Operating Activities: Net income $ 5,101 $ 2,623 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,620 3,429 Provision for losses on accounts receivable 182 121 (Gain) on sale or disposal of fixed assets and discontinued businesses (70) -- Change in assets and liabilities net of acquisitions and dispositions: Decrease in accounts receivable 9,663 1,969 Increase in income tax receivable -- (872) Increase in inventories (900) (221) Increase in net assets of discontinued businesses (277) (961) Decrease (increase) in other assets 298 (929) Decrease in accounts payable (5,815) (78) Decrease in accrued compensation (215) (1,249) Decrease in other liabilities (9,563) (636) Increase (decrease) in accrued income taxes 1,977 (494) --------- --------- Net cash provided by operating activities 4,001 2,702 --------- --------- Cash Flows from Investing Activities: Business acquisitions (42,094) (15,320) Capital expenditures (4,106) (2,990) Proceeds from sale of fixed assets and discontinued business 14,273 44 (Increase) decrease in notes receivable (10,241) 604 --------- --------- Net cash used in investing activities (42,168) (17,662) --------- --------- Cash Flows from Financing Activities: Proceeds from long-term borrowings 100,820 30,069 Payments on long-term debt (60,178) (15,272) Proceeds from issuance of stock under stock plans 400 327 Stock repurchases and other (559) (2,036) Dividends paid (993) (976) --------- --------- Net cash provided by financing activities 39,490 12,112 --------- --------- Net increase (decrease) in cash and cash equivalents 1,323 (2,848) Cash and cash equivalents at beginning of year 1,544 3,027 --------- --------- Cash and cash equivalents at end of year $ 2,867 $ 179 ========= ========= Supplemental Information: Interest payments $ 3,722 $ 2,281 Income tax payments $ 1,751 $ 1,246
- ------------------------------- See accompanying notes to unaudited consolidated financial statements. 5 7 STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY UNAUDITED
ADDITIONAL OTHER FOR THE NINE MONTHS COMMON STOCK TREASURY STOCK PAID-IN RETAINED STOCKHOLDERS' --------------------- --------------------- ENDED DECEMBER 31, 1995 SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY TOTAL - ---------------------------- ----------- --------- ---------- --------- ----------- ----------- -------------- ---------- Balance, March 31, 1995 5,242,316 $ 52 (172,500) $ (2,090) $ 45,802 $ 23,418 $ (2,680) $ 64,502 Net Income -- -- -- -- -- 5,101 -- 5,101 Cash dividends ($.195 per share) -- -- -- -- -- (993) -- (993) Unrealized investment holding losses -- -- -- -- -- -- (300) (300) Purchase of treasury stock -- -- (5,000) (65) -- -- -- (65) Issuance of stock under stock option plan 20,308 1 -- -- 187 -- -- 188 Issuance of stock under incentive bonus plan 15,020 -- -- -- 213 -- (104) 109 Foreign translation adjustments -- -- -- -- -- -- (90) (90) ----------- --------- ---------- --------- ----------- ----------- -------------- ---------- Balance, December 31, 1995 5,277,644 $ 53 (177,500) $ (2,155) $ 46,202 $ 27,526 $ (3,174) $ 68,452 =========== ========= ========== ========= =========== =========== ============== ==========
See accompanying notes to unaudited consolidated financial statements. 6 8 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands of Dollars) NOTE 1. Earnings Per Share: Earnings per share are based on the weighted average number of common stock and common stock equivalents (stock options) outstanding during each period. In computing earnings per share, common stock equivalents were either anti-dilutive because of the market value of the stock or not material, and, therefore, have been excluded from the calculation. NOTE 2. Inventories: Inventories are summarized as follows:
12/31/95 3/31/95 ----------- -------- Finished goods $ 25,972 $ 6,152 Work-in-process 6,934 3,867 Purchased and manufactured parts 14,586 15,220 ----------- -------- Total inventories $ 47,492 $ 25,239 =========== ========
NOTE 3. Long-term Debt Payable to Banks and Others Long term debt payable, including current maturities, at December 31, 1995 and March 31, 1995 consisted of the following:
12/31/95 3/31/95 -------- ----------- Credit Agreement - 8.3% $ 21,420 -- Credit Agreement - 8.3125% -- $ 16,300 Term Loans - 8.41% 58,600 -- Term Loans - 9.0% -- 23,080 Other 966 997 -------- ----------- 80,986 40,377 Less current maturities 6,141 3,356 -------- ----------- Total $ 74,845 $ 37,021 ======== ===========
7 9 Credit Agreement Related to the Company's acquisition of the Seeger Group, on June 30, 1995 the Company refinanced all of its bank debt, so that on December 31, 1995 it consisted of $17.3 million of borrowings under a revolving credit line, $4.1 million of borrowings under international lines of credit, a $33.6 million term loan and a $25 million term loan. The revolving bank credit line commitment is $34 million, which includes $5 million available for letters of credit. This commitment will be available to the Company through December 31, 2000 and is subject to a borrowing base formula. The agreement provides for borrowings and letters of credit based on collateralized accounts receivable and inventory. In addition, all of the remaining assets of the Company and its subsidiaries are included as collateral. Letters of credit under the line at December 31, 1995 were $0.8 million. The total commitment from the international lines of credit are $6 million and have the same availability and collateral as the revolving credit line, but are not subject to a borrowing base formula. Interest on the revolver and the international lines of credit are tied to the primary lending bank's prime rate, or the London Interbank Offered Rate (LIBOR), with a margin, depending upon the Company's achievement of certain operating and financial goals. The $33.6 million and $25 million term loans are with the same lenders as the revolving and international lines of credit, are secured by the same collateral, and are due and payable on December 31, 2000 and June 30, 2002, respectively. The $33.6 million term loan has an additional $15 million available for future acquisitions. Principal payments on the $33.6 million term loan of $1.4 million, with escalations to $1.8 million and $2.8 million in June 1999 and June 2000, respectively, began on December 31, 1995, and are due and payable on the last day of each quarter through December 31, 2000. Interest on the $33.6 million term loan is tied to the primary lending bank's prime rate, or LIBOR, with a margin, depending upon the Company's achievement of certain operating and financial goals. Principal payments on the $25 million term loan of $0.5 million are due and payable annually, beginning on June 30, 1996 through June 30, 2000, with final balloon payments of $7.5 million and $15 million due and payable on June 30, 2001 and June 30, 2002, respectively. Interest on the $25 million term loan accrues at the primary lending bank's prime rate plus two percentage points. The agreement also gives the Company the option of using LIBOR plus three and one-quarter percentage points. At December 31, 1995, the Company had $64.4 million of borrowings utilizing LIBOR. On August 2, 1995, the Company entered into an interest rate swap agreement with its primary lending bank to reduce the impact of changes in interest rates on its floating-rate debt. The agreement has a notional amount of $25 million and terminates on August 2, 1998. The agreement effectively changes the Company's interest rate exposure on $25 million of its LIBOR-based debt to a fixed rate of 9.79%. The credit facility limits the Company's ability to pay dividends to 25% of net income and restricts capital expenditures to $6.5 million for the fiscal year ending March 31, 1996, 8 10 and $7 million thereafter for the life of the agreement, as well as containing other customary financial covenants. Other Other long-term debt is comprised principally of an obligation due under a collateralized borrowing arrangement with a fixed interest rate of 3% due December 2004 and loans on life insurance policies owned by the Company with a fixed interest rate of 5%. Debt Maturities 1996 (current) $ 6,141 1997 6,142 1998 6,143 1999 7,194 2000 10,695 Thereafter 44,671 --------- Total $ 80,986 =========
NOTE 4. Discontinued Operations In August 1995, the Company sold substantially all of the assets and business of its Electronics division, which included Electronic Connections and Assemblies, Inc., for $4.4 million in cash and $8.8 million of notes receivable. The sale of this operation resulted in an after-tax disposal gain of $0.2 million. In June 1995, the Company sold the domestic portion of its computer graphics service operation for book value. The Company received $0.7 million in cash and a $0.6 million note receivable for this sale. In November 1995, the Company sold the European portion of its graphics service operation for book value. The Company received $0.1 million in cash, with future contractual remittances to be made as receivables are collected and inventory sold. In March 1995, the Company sold substantially all of the assets and business of its chaff products operation. The sale of this operation resulted in an after-tax disposal loss of $0.4 million. In May 1995, the Company sold the remaining chaff avionics product line for $0.3 million in cash and a $0.7 million note receivable. This sale resulted in an after-tax disposal gain of $0.4 million. Through December 1995, the Company recorded an additional $0.8 million of after-tax disposal costs related to other previously discontinued businesses. These losses consisted primarily of disposal costs different from previous estimates associated primarily with legal, environmental and employee related matters. 9 11 Operating results of the discontinued business were as follows:
Three Months Ended Nine Months Ended ------------------------------- --------------------------------- 12/31/95 12/25/94 12/31/95 12/25/94 ----------- ------------- -------------- ------------- Total Revenues $ 66 $ 11,506 $ 7,646 $ 23,967 Loss before income taxes $ (195) $ (1,178) $ (969) $ (3,506) Income tax benefit 74 393 368 1,332 ----------- ------------- -------------- ------------- Loss from operations $ (121) $ (785) $ (601) $ (2,174) =========== ============= ============== =============
The loss from operations includes interest expense of $151 thousand for the three months ended 12/25/94, and $214 thousand and $430 thousand for the nine months ended 12/31/95 and 12/25/94, respectively. Net assets of the discontinued businesses at December 31, 1995 and March 31, 1995 were as follows:
12/31/95 3/31/95 ----------------- ------------------ Accounts Receivable $ 728 $ 6,344 Inventory 555 10,993 Property 9,190 10,109 Other Assets 1,050 1,755 Liabilities (1,137) (4,932) ----------------- ------------------ Net Assets of Discontinued Businesses $ 10,386 $ 24,269 ================= ==================
10 12 NOTE 5. Acquisitions On June 30, 1995 the Company acquired the Seeger Group of companies from a unit of AB SKF of Gothenburg, Sweden for approximately $43 million plus the assumption of trade debts and accrued expenses. The Seeger Group, headquartered in Konigstein, Germany manufactures circlips, snap rings and retaining rings used primarily in the automotive, heavy equipment and industrial machinery markets. The Seeger Group operates under the trade names of "Seeger", "Anderton", and "Waldes" with over 900 employees at its five manufacturing facilities. The following summarizes TransTechnology Corporation's combined Proforma Revenue, Net Income and Earnings per Share information as if the acquisition of the Seeger Group of companies had occurred at the beginning of the period presented. The Proforma results give effect to the amortization of goodwill and the effects on interest expense and taxes.
Nine Months Ended ----------------------------------------------- 12/31/95 12/25/94 --------------------- --------------------- Revenue $ 134,972 $ 115,472 ========== ========== Net Income $ 6,741 $ 1,340 ========== ========== Earnings per share $ 1.32 $ 0.26 ========== ==========
The above Proforma information does not purport to be indicative of the financial results which actually would have occurred had the acquisition been made at the beginning of the periods presented or subsequent to that date. The Proforma net income for the nine month period ended December 31, 1995, includes a non-recurring real estate sale which resulted in an after tax gain of $1.3 million, recorded prior to the Company's acquisition of the Seeger Group. 11 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS All references to three and nine month periods in this Management's Discussion refer to the three and nine month periods ended December 31, 1995 for fiscal year 1996 and the three and nine month periods ended December 25, 1994 for fiscal year 1995. Also when referred to herein, operating profit means net sales less operating expenses, without deduction for general corporate expenses, interest and income taxes. The Consolidated Statement of Operations has been restated with respect to discontinued operations to provide a consistent basis for comparing the performance of the Company's continuing operations for the periods presented. Revenue from continuing operations for the nine month period in 1996 was $112.4 million, an increase of $41.3 million or 58% from the comparable period in 1995. For the three month period in 1996 total revenue was $41.6 million, a $15.3 million or 58% increase from the comparable period in 1995. As further discussed below, the increased revenue performance for both periods in 1996 resulted primarily from the Seeger Group acquisition on June 30, 1995. Gross profit for the nine month period in 1996 increased $13.6 million or 63% from the comparable period in 1995. For the three month period in 1996, gross profit increased $5.8 million or 67%. Operating profit from continuing operations for the nine month period in 1996 was $5.9 million, an increase of $0.7 million or 13% from the comparable period in 1995. For the three month period in 1996 operating profit from continuing operations was $2.8 million, an increase of $0.4 million or 15% from the comparable period in 1995. Changes in sales, operating profit and new orders from continuing operations are discussed below by segment. Net income, including discontinued operations, for the nine month period in 1996 was $5.1 million or $1.00 per share, compared to $2.6 million or $0.51 per share, for the comparable period of 1995. The three month period in 1996 experienced net income of $2.3 million or $0.46 per share compared to $1.4 million or $0.27 per share for the year earlier period. As further discussed below, the increased earnings performance in 1996 resulted primarily from the inclusion of Industrial Retaining Ring Company operations in the three and nine month 1996 periods and the Seeger Group acquisition. Interest expense increased $2.7 million for the nine month period in 1996, and $0.9 million for the three month period, primarily as a result of increased bank borrowings used for the acquisition of the Seeger Group. New orders received during the nine month period in 1996 totaled $118.1 million, an increase of $43.7 million or 59% from 1995's comparable period. For the three month period, new orders totaled $42.2 million, an increase of $12.5 million or 42% from last year's comparable period. At December 31, 1995, total backlog of unfilled orders was $66.7 million compared to $34.5 million at December 25, 1994. 12 14 DISCONTINUED OPERATIONS In August 1995, the Company sold substantially all of the assets and business of its Electronics division, which included Electronic Connections and Assemblies, Inc., for $4.4 million in cash and $8.8 million of notes receivable. The sale of this operation resulted in an after-tax disposal gain of $0.2 million. In June 1995, the Company sold the domestic portion of its computer graphics service operation for book value. The Company received $0.7 million in cash and a $0.6 million note receivable for this sale. In November 1995, the Company sold the European portion of its graphics service operation for book value. The Company received $0.1 million in cash, with future contractual remittances to be made as receivables are collected and inventory sold. In March 1995, the Company sold substantially all of the assets and business of its chaff products operation. The sale of this operation resulted in an after-tax disposal loss of $0.4 million. In May 1995, the Company sold the remaining chaff avionics product line for $0.3 million in cash and a $0.7 million note receivable. This sale resulted in an after-tax disposal gain of $0.4 million. Through September 1995, the Company recorded an additional $0.8 million of after-tax disposal costs related to other previously discontinued businesses. These losses consisted primarily of disposal costs different from previous estimates associated primarily with legal, environmental and employee related matters. ACQUISITIONS On June 30, 1995 the Company acquired the Seeger Group of companies from a unit of AB SKF of Gothenburg, Sweden for approximately $43 million plus the assumption of trade debts and accrued expenses. The Seeger Group, headquartered in Konigstein, Germany manufactures circlips, snap rings and retaining rings used primarily in the automotive, heavy equipment and industrial machinery markets. The Seeger Group operates under the trade names of "Seeger", "Anderton", and "Waldes" with over 900 employees at its five manufacturing facilities. 13 15 FINANCIAL SUMMARY BY PRODUCT SEGMENT (In Thousands of Dollars)
NINE MONTHS ENDED NET CHANGE --------------------------------------- ---------------------------- 12/31/95 12/25/94 $ % --------------- -------------- ----------- ---------- Sales: Speciality fastener products $ 90,145 $ 49,513 $ 40,632 82.1 Rescue hoist and cargo hook products 21,010 20,071 939 4.7 --------------- -------------- ----------- Total $ 111,155 $ 69,584 $ 41,571 59.7 =============== ============== =========== Operating profit: Speciality fastener products $ 15,729 $ 10,393 $ 5,336 51.3 Rescue hoist and cargo hook products 2,855 554 2,301 415.3 --------------- -------------- ----------- Total $ 18,584 $ 10,947 $ 7,637 69.8 Corporate expense (4,169)(a) (1,160)(a)(c) (3,009) (259.4) Interest expense (4,552)(b) (1,863)(b) (2,689) (144.3) --------------- -------------- ----------- Income from continuing operations before income taxes $ 9,863 $ 7,924 $ 1,939 24.5 =============== ============== ===========
a) The corporate expense for the nine months ended December 31, 1995 and the nine months ended December 25, 1994 has been reduced by $341 thousand and $1,311 thousand, respectively, to reflect an allocation made to discontinued operations. b) The interest expense for the nine months ended December 31, 1995 and the nine months ended December 25, 1994 has been reduced by $214 thousand and $430 thousand, respectively, to reflect an allocation made to discontinued operations. c) The corporate expense for the nine months ended December 25, 1994 has been reduced by $575 thousand for a favorable insurance settlement. 14 16 FINANCIAL SUMMARY BY PRODUCT SEGMENT (In Thousands of Dollars)
THREE MONTHS ENDED NET CHANGE ---------------------------------------- ---------------------------- 12/31/95 12/25/94 $ % ---------------- --------------- ------------ ---------- Sales: Speciality fastener products $ 33,779 $ 18,775 $ 15,004 79.9 Rescue hoist and cargo hook products 7,308 7,298 10 - --------------- -------------- ----------- Total $ 41,087 $ 26,073 $ 15,014 57.6 =============== ============== =========== Operating profit: Speciality fastener products $ 6,756 $ 4,490 $ 2,266 50.5 Rescue hoist and cargo hook products 1,341 618 723 117.0 --------------- -------------- ----------- Total $ 8,097 $ 5,108 $ 2,989 58.5 Corporate expense (1,409) (619)(a) (790) (127.6) Interest expense (1,787) (857)(b) (930) (108.5) --------------- -------------- ----------- Income from continuing operations before income taxes $ 4,901 $ 3,632 $ 1,269 34.9 =============== ============== ===========
a) The corporate expense for the three months ended December 25, 1994 has been reduced by $416 thousand to reflect an allocation made to discontinued operations. b) The interest expense for the three months ended December 25, 1994 has been reduced by $151 thousand to reflect an allocation made to discontinued operations. 15 17 SPECIALTY FASTENER PRODUCTS SEGMENT Sales for the specialty fastener products segment were $90.1 million for the nine month period in 1996, an increase of $40.6 million or 82% from the comparable period in 1995. Sales for the three month period in 1996 were $33.8 million, up $15 million, or 80% from the same period in 1995. The increase in specialty fastener sales for both 1996 periods was primarily due to the inclusion of operations of the Seeger Group and to a lesser extent the acquisition of Industrial Retaining Ring Company. Additionally, new product market penetration and increased industrial and truck fastener demand offset by a decrease in domestic automotive fastener demand, further increased 1996 sales performance. Operating profit for the segment was $15.7 million for the nine month period in 1996, an increase of $5.3 million or 51% from the comparable period in 1995. The three month period in 1996 showed an operating profit of $6.8 million, an increase of $2.3 million or 51% from the comparable period in 1995. The increases were primarily due to the inclusion of operations of the Seeger Group and Industrial Retaining Ring Company for the 1996 periods, new product market penetration and increased industrial and truck fastener demand offset by a decrease in domestic automotive fastener sales volume, as mentioned above. New orders increased by $33.3 million or 63% for the nine month period in 1996, primarily due to the acquisitions mentioned above. New orders for the three month period in 1996 increased $13.9 million or 72% from the comparable period in 1995, also primarily due to the acquisitions mentioned above. These increases were offset by reduced automotive fastener demand during the three and nine month periods in 1996, primarily due to an overall slowdown in production by domestic automotive manufacturers. Backlog of unfilled orders at December 31, 1996, was $85.7 million compared to $52.5 million at December 25, 1995. RESCUE HOIST AND CARGO HOOK PRODUCTS SEGMENT Sales of the rescue hoist and cargo hook products segment were $21 million for the nine month period in 1996, an increase of $0.9 million or 5% from the comparable period in 1995. Sales for the three month period in 1996 were $7.3 million, unchanged from the comparable period in 1995. The nine month increase was primarily due to the timing of customers placing new orders. Operating profit for the nine month period in 1996 was $2.9 million, an increase of $2.3 million or 415% from the comparable period in 1995. The three month period had an operating profit of $1.3 million, an increase of $0.7 or 117% from the comparable period in 1995. The primary factors contributing to the increase in the segment's operating profit in the 1996 nine and three month periods were the increases in the sales volume, mentioned above, product sales mix and sales price increases. 16 18 New orders for the nine month period in 1996 increased by $10.5 million or 48% from the comparable period in 1995. New orders for the three month period in 1996 decreased by $1.4 million or 13% from the comparable period in 1995. New order fluctuations in both 1996 periods were primarily due to a large multi-year order for hoist and winch products and customers timing and placement of new orders. Backlog of unfilled orders at December 31, 1995 was $32.4 million compared to $21.8 million at December 25, 1994. Sales related to United States government contracts, which consist primarily of defense contracts and represented approximately 18% of the Company's total 1995 sales from continuing operations, have been declining in recent years. While management remains concerned with the continued trend toward reductions in defense spending, many of the Company's defense related programs, as well as spare parts requirements for these programs, will continue for several years, though there can be no assurances in that regard. Moreover, the Company is well on its way in implementing its strategy of developing its non-defense businesses through acquisitions and refocused foreign and commercial market attention. LIQUIDITY AND CAPITAL RESOURCES The Company's debt-to-capitalization ratio was 54% as of December 31, 1995, compared to 38% as of March 31, 1995. The current ratio at December 31, 1995, stood at 2.91 compared to 3.25 at March 31, 1995. Working Capital was $58.9 million at December 31, 1995, up $5.8 million from March 31, 1995. These changes were primarily the result of the Seeger Group acquisition on June 30, 1995 and the sale of discontinued operations. Related to the Company's acquisition of the Seeger Group, on June 30, 1995 the Company refinanced all of its bank debt, so that on December 31, 1995 it consisted of $17.3 million of borrowings under a revolving credit line, $4.1 million of borrowings under international lines of credit, a $33.6 million term loan and a $25 million term loan. The revolving bank credit line commitment is $34 million, will be available to the Company through December 31, 2000 and is subject to a borrowing base formula. The agreement provides for borrowings and letters of credit based on collateralized accounts receivable and inventory. In addition, all of the remaining assets of the Company and its subsidiaries are included as collateral. Letters of credit under the line at December 31, 1995 were $0.8 million. The total commitment from the international lines of credit are $6 million and have the same availability and collateral as the revolving credit line, but are not subject to a borrowing base formula. Interest on the revolver and the international lines of credit are tied to the primary lending bank's prime rate, or the London Interbank Offered Rate (LIBOR), with a margin, depending upon the Company's achievement of certain operating and financial goals. The $33.6 million and $25 million term loans are with the same lenders as the revolving and international lines of credit, are secured by the same collateral, and are due and payable on December 31, 2000 and June 30, 2002, respectively. The $33.6 million term loan has an additional $15 million available for future acquisitions. Principal payments on the $33.6 million term loan of $1.4 million, with escalations to $1.8 million and $2.8 million in June 1999 and 17 19 June 2000, respectively, began on December 31, 1995, and are due and payable on the last day of each quarter through December 31, 2000. Interest on the $33.6 million term loan is tied to the primary lending bank's prime rate, or LIBOR, with a margin, depending upon the Company's achievement of certain operating and financial goals. Principal payments on the $25 million term loan of $0.5 million are due and payable annually beginning on June 30, 1996 through June 30, 2000, with final balloon payments of $7.5 million and $15 million due and payable on June 30, 2001 and June 30, 2002, respectively. Interest on the $25 million term loan accrues at the primary lending bank's prime rate plus two percentage points. The agreement also gives the Company the option of using LIBOR plus three and one-quarter percentage points. At December 31, 1995, the Company had $64.4 million of borrowings utilizing LIBOR. On August 2, 1995, the Company entered into an interest rate swap agreement with its primary lending bank to reduce the impact of changes in interest rates on its floating-rate debt. The agreement has a notional amount of $25 million and terminates on August 2, 1998. The agreement effectively changes the Company's interest rate exposure on $25 million of its LIBORbased debt to a fixed rate of 9.79%. The credit facility limits the Company's ability to pay dividends to 25% of net income and restricts capital expenditures to $6.5 million for the fiscal year ending March 31, 1996, and $7 million thereafter for the life of the agreement, as well as containing other customary financial covenants. Management believes that the Company's anticipated cash flow from operations, combined with the bank credit described above, will be sufficient to support current and forecasted working capital requirements and dividend payments. Capital expenditures in the nine month period in 1996 were $4.1 million as compared with $3.0 million in the comparable period in 1995. The Company's two segments have similar cash flow requirements. 18 20 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 11 Statement of Computation of Per Share Earnings 27 Financial Data Schedule (b) A report on Form 8-K was filed on July 14, 1995 to report the June 30, 1995 acquisition by the company's wholly owned subsidiaries of (i) substantially all of the assets of SKF USA Inc.'s Seeger Division and (ii) all of the outstanding stock of SKF GmbH's subsidiaries, Seeger-Orbis GmbH. This report on Form 8-K was amended by the filing of a report on Form 8-K/A dated September 11, 1995. This report on Form 8-K/A was amended by the filing of another report on Form 8-K/A dated November 30, 1995. (c) A report on Form 8-K was filed on November 16, 1995, reporting the disposition of the company's business and assets of its TransTechnology Electronics Division. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRANSTECHNOLOGY CORPORATION (Registrant) Dated: February 13, 1996 By: /s/ Chandler J. Moisen -------------------------- CHANDLER J. MOISEN, Senior Vice President and Chief Financial Officer* * On behalf of the Registrant and as Principal Financial Officer. 19 21 EXHIBIT INDEX Exhibit No. Description ----------- ----------- 11 Statement of Computation of Per Share Earnings 27 Financial Data Schedule EX-11 2 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 STATEMENT OF THE COMPUTATION OF PER SHARE EARNINGS IN ACCORDANCE WITH INSTRUCTION 4(g)
THREE MONTHS ENDED NINE MONTHS ENDED ------------------------------------- ------------------------------------- 12/31/95 12/25/94 12/31/95 12/25/94 ---------------- ---------------- ---------------- ---------------- Primary earnings per share: Weighted average number of common shares outstanding 5,099,338 5,082,321 5,092,146 5,124,221 Dilutive effect of stock option plan - (a) - (a) - (a) - (a) --------------- --------------- --------------- --------------- 5,099,338 5,082,321 5,092,146 5,124,221 =============== =============== =============== =============== Net income $ 2,346,000 $ 1,354,000 $ 5,101,000 $ 2,623,000 ================ ================ ================= ================= Primary earnings per share $ 0.46 $ 0.27 $ 1.00 $ 0.51 ================ ================ ================= =================
(a) The inclusion of stock options in the calculation of primary earnings per share was either anti-dilutive or not material as per APB 15. 20 EX-27 3 FINANCIAL DATA SCHEDULE
5 1000 9-MOS MAR-31-1996 DEC-31-1995 2,867 0 37,612 607 47,492 88,548 76,530 16,480 193,485 30,894 80,986 0 0 53 5,329 193,485 111,155 112,445 77,180 25,402 0 182 4,552 9,863 3,994 5,869 (768) 0 0 5,101 1.00 1.00
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