FORM 10-Q/A-1
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 September 28, 2003
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
| Delaware (State or other jurisdiction of incorporation or organization) 700 Liberty Avenue Union, New Jersey (Address of principal executive offices) | 95-4062211 (I.R.S. employer identification no.) 07083 (Zip Code) |
Registrant’s telephone number, including area code: (908) 688-2440
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 | No | X | ||||
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
| Yes | No | X | ||||
As of November 10, 2003, the total number of outstanding shares of registrant’s one class of common stock was 6,498,143.
TRANSTECHNOLOGY CORPORATION
FORM 10-Q/A-1
The following items of the Form 10-Q for the quarterly period ended September 28, 2003, previously filed by the registrant on November 12, 2003, are hereby amended and supplemented as follows:
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
| Exhibit | Description | |
| 31.1 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
ITEM 1. FINANCIAL STATEMENTS
The following unaudited Statements of Consolidated Operations, Consolidated Balance Sheets, and Statements of Consolidated Cash Flows are of TransTechnology Corporation and its consolidated subsidiaries (collectively, the “Company”). These reports reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods reflected therein. The results reflected in the unaudited Statements of Consolidated Operations for the period ended September 28, 2003, are not necessarily indicative of the results to be expected for the entire year. The following unaudited Consolidated Financial Statements should be read in conjunction with the notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 2 of Part I of this report, as well as the audited financial statements and related notes thereto contained in the Company’s Annual Report on Form 10-K filed for the fiscal year ended March 31, 2003.
Information provided herein for the three and six month periods ended September 29, 2002, has been reclassified to give effect to the reporting of the Company’s former wholly-owned subsidiary, Norco, Inc., as discontinued operations as discussed in Note 5 to the Financial Statements.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
STATEMENTS OF CONSOLIDATED OPERATIONS
UNAUDITED
(In Thousands of Dollars, Except Share Data)
| THREE MONTHS ENDED | SIX MONTHS ENDED | |||||||||||||||
| SEPTEMBER 28, 2003 | SEPTEMBER 29, 2002 | SEPTEMBER 28, 2003 | SEPTEMBER 29, 2002 | |||||||||||||
| Net sales | $ | 16,333 | $ | 11,854 | $ | 32,452 | $ | 25,741 | ||||||||
| Cost of sales | 9,575 | 6,380 | 18,347 | 14,056 | ||||||||||||
| Gross profit | 6,758 | 5,474 | 14,105 | 11,685 | ||||||||||||
| General, administrative and selling expenses | 3,531 | 4,266 | 7,302 | 7,868 | ||||||||||||
| Interest expense | 2,568 | 2,004 | 5,071 | 4,120 | ||||||||||||
| Interest and other (income) expense — net | (159 | ) | 10 | (206 | ) | (27 | ) | |||||||||
| Unrealized loss on warrants | — | 1,219 | — | 1,219 | ||||||||||||
| Forbearance fees | — | — | — | 764 | ||||||||||||
| Income (loss) from continuing operations before income taxes | 818 | (2,025 | ) | 1,938 | (2,259 | ) | ||||||||||
| Provision for income taxes (benefit) | 310 | (315 | ) | 736 | (406 | ) | ||||||||||
| Income (loss) from continuing operations | 508 | (1,710 | ) | 1,202 | (1,853 | ) | ||||||||||
| Discontinued operations: | ||||||||||||||||
| Loss on disposal of discontinued businesses (less applicable income tax benefit of $1,587 and $1,975 for the three and six month periods ended September 29, 2002, respectively) | — | (3,523 | ) | — | (4,130 | ) | ||||||||||
| Net income (loss) | $ | 508 | $ | (5,233 | ) | $ | 1,202 | $ | (5,983 | ) | ||||||
| Basic earnings (loss) per share: | ||||||||||||||||
| Income (loss) from continuing operations | $ | 0.08 | $ | (0.28 | ) | $ | 0.18 | $ | (0.30 | ) | ||||||
| Loss from discontinued operations | — | (0.57 | ) | — | (0.67 | ) | ||||||||||
| Net income (loss) | $ | 0.08 | $ | (0.85 | ) | $ | 0.18 | $ | (0.97 | ) | ||||||
| Diluted earnings (loss) per share: | ||||||||||||||||
| Income (loss) from continuing operations | $ | 0.08 | $ | (0.28 | ) | $ | 0.18 | $ | (0.30 | ) | ||||||
| Loss from discontinued operations | — | (0.57 | ) | — | (0.67 | ) | ||||||||||
| Net income (loss) | $ | 0.08 | $ | (0.85 | ) | $ | 0.18 | $ | (0.97 | ) | ||||||
| Number of shares used in computation of per share information: (Note 1) | ||||||||||||||||
| Basic | 6,647,000 | 6,197,000 | 6,647,000 | 6,194,000 | ||||||||||||
| Diluted | 6,676,000 | 6,197,000 | 6,662,000 | 6,194,000 | ||||||||||||
See accompanying notes to unaudited consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share Data)
| (UNAUDITED) | ||||||||
| SEPTEMBER 28, 2003 | MARCH 31, 2003 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 757 | $ | 7,104 | ||||
| Accounts receivable (net of allowance for doubtful accounts of $71 at September 28, 2003 and $65 at March 31, 2003) | 9,777 | 6,701 | ||||||
| Inventories | 19,332 | 19,683 | ||||||
| Prepaid expenses and other current assets | 898 | 1,364 | ||||||
| Income tax receivable | 226 | 363 | ||||||
| Deferred income taxes | 1,289 | 1,289 | ||||||
| Total current assets | 32,279 | 36,504 | ||||||
| Property, plant and equipment | 12,869 | 12,721 | ||||||
| Less accumulated depreciation | 10,583 | 10,372 | ||||||
| Property, plant and equipment — net | 2,286 | 2,349 | ||||||
| Other assets: | ||||||||
| Deferred income taxes | 30,053 | 30,712 | ||||||
| Other | 14,848 | 15,558 | ||||||
| Total other assets | 44,901 | 46,270 | ||||||
| Total | $ | 79,466 | $ | 85,123 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term debt | $ | 79 | $ | 79 | ||||
| Accounts payable — trade | 4,628 | 4,954 | ||||||
| Accrued compensation | 1,813 | 2,847 | ||||||
| Accrued income taxes | 174 | 2,460 | ||||||
| Other current liabilities | 10,219 | 15,003 | ||||||
| Total current liabilities | 16,913 | 25,343 | ||||||
| Long-term debt payable to banks and others | 54,930 | 53,487 | ||||||
| Deferred income taxes | 1,598 | 1,332 | ||||||
| Other long-term liabilities | 10,478 | 11,601 | ||||||
| Redeemable common stock | — | 1,283 | ||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock — authorized, 300,000 shares; none issued | — | — | ||||||
| Common stock — authorized, 14,700,000 shares of $.01 par value; issued 7,059,107 at September 28, 2003, and 7,018,299 at March 31, 2003 | 71 | 70 | ||||||
| Additional paid-in capital | 76,728 | 74,283 | ||||||
| Accumulated deficit | (71,791 | ) | (72,993 | ) | ||||
| Unearned compensation | (221 | ) | (43 | ) | ||||
| 4,787 | 1,317 | |||||||
| Less treasury stock, at cost — (560,964 shares at September 28, 2003 and March 31, 2003) | (9,240 | ) | (9,240 | ) | ||||
| Total stockholders’ deficit | (4,453 | ) | (7,923 | ) | ||||
| Total | $ | 79,466 | $ | 85,123 | ||||
See accompanying notes to unaudited consolidated financial statements.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(In Thousands of Dollars)
| SIX MONTHS ENDED | ||||||||
| SEPTEMBER 28, 2003 | SEPTEMBER 29, 2002 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | 1,202 | $ | (5,983 | ) | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Loss from discontinued operations | — | 4,130 | ||||||
| Depreciation and amortization | 1,009 | 873 | ||||||
| Net change in assets of discontinued companies | — | 753 | ||||||
| Warrant mark to market adjustment | — | 1,219 | ||||||
| Noncash interest expense | 1,537 | 1,358 | ||||||
| Increase (decrease) in provision for bad debt | 6 | (198 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| (Increase) decrease in accounts receivable and other receivables | (2,938 | ) | 7,032 | |||||
| Decrease (increase) in inventories | 351 | (1,270 | ) | |||||
| Decrease (increase) in deferred taxes net | 659 | (2,509 | ) | |||||
| Decrease (increase) in other assets | 428 | (4,153 | ) | |||||
| (Decrease) increase in accounts payable | (326 | ) | 110 | |||||
| Decrease in accrued compensation | (1,034 | ) | (462 | ) | ||||
| Decrease in income taxes payable | (2,020 | ) | (449 | ) | ||||
| Decrease in other liabilities | (5,100 | ) | (580 | ) | ||||
| Net cash used in operating activities | (6,226 | ) | (129 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Capital expenditures | (159 | ) | (437 | ) | ||||
| Proceeds from sales of businesses | — | 6,425 | ||||||
| Decrease in notes and other receivables | — | (223 | ) | |||||
| Net cash (used in) provided by investing activities | (159 | ) | 5,765 | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayments on debt, net | — | (4,414 | ) | |||||
| Exercise of stock options and other | 38 | (95 | ) | |||||
| Net cash provided by (used in) financing activities | 38 | (4,509 | ) | |||||
| (Decrease) increase in cash and cash equivalents | (6,347 | ) | 1,127 | |||||
| Cash and cash equivalents at beginning of period | 7,104 | 97 | ||||||
| Cash and cash equivalents at end of period | $ | 757 | $ | 1,224 | ||||
| Supplemental information: | ||||||||
| Interest payments | $ | 3,480 | $ | 10,283 | ||||
| Income tax payments | $ | 2,098 | $ | 188 | ||||
| Increase in senior subordinated note for paid-in-kind interest expense | $ | 1,443 | $ | 1,263 | ||||
| Increase in additional paid-in capital from warrant put expiration | $ | 2,184 | $ | — | ||||
| Noncash charge to equity from classification of warrants as financial derivatives | $ | — | $ | 4,550 | ||||
See accompanying notes to unaudited consolidated financial statements.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
NOTE 1. Earnings (Loss) Per Share
Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted-average number of shares outstanding. Diluted earnings (loss) per share is computed by dividing net income (loss) by the sum of the weighted-average number of shares outstanding plus the dilutive effect of shares issuable through the exercise of stock options and warrants.
The components of the denominator for basic earnings (loss) per common share and diluted earnings (loss) per common share are reconciled as follows:
| Three Months Ended | Six Months Ended | |||||||||||||||
| September 28, | September 29, | September 28, | September 29, | |||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||
| Basic Earnings (Loss) per Common Share: | ||||||||||||||||
| Weighted-average common stock out- standing for basic earnings (loss) per share calculation | 6,647 | 6,197 | 6,647 | 6,194 | ||||||||||||
| Diluted Earnings (Loss) per Common Share: | ||||||||||||||||
| Weighted-average common shares outstanding | 6,647 | 6,197 | 6,647 | 6,194 | ||||||||||||
| Stock options and warrants* | 29 | — | 15 | — | ||||||||||||
| Weighted-average common stock outstanding for diluted earnings (loss) per share calculation | 6,676 | 6,197 | 6,662 | 6,194 | ||||||||||||
| * | Not including anti-dilutive stock options totaling 194 and 606 for the three and six month periods ended September 28, 2003, respectively, and 53 and 135 for the three and six month periods ended September 29, 2002, respectively. Also excluding anti-dilutive warrants totaling 428 for the three and six month periods ended September 29, 2002. |
NOTE 2. Comprehensive Income (Loss)
Comprehensive income (loss) for the three and six month periods ended September 28, 2003 and September 29, 2002 is summarized below.
| Three Months Ended | Six Months Ended | |||||||||||||||
| September 28, | September 29, | September 28, | September 29, | |||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||
| Net income (loss) | $ | 508 | $ | (5,235 | ) | $ | 1,202 | $ | (5,983 | ) | ||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||||||
| Foreign currency translation adjustment arising during period | — | 77 | — | (86 | ) | |||||||||||
| Reclassification adjustment for sale of investment in foreign entity | — | 3,306 | — | 3,306 | ||||||||||||
| Total comprehensive income (loss) | $ | 508 | $ | (1,852 | ) | $ | 1,202 | $ | (2,763 | ) | ||||||
NOTE 3. Stock Based Compensation
Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations. Accordingly, the Company records expense in an amount equal to the excess, if any, of the quoted market price on the grant date over the option price.
The following table includes as reported and proforma information required by Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure. Proforma information is based on the fair value method under SFAS No. 123.
| Three Months Ended | Six Months Ended | |||||||||||||||
| September 28, | September 29, | September 28, | September 29, | |||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||
| Net income (loss) as reported | $ | 508 | $ | (5,235 | ) | $ | 1,202 | $ | (5,983 | ) | ||||||
| Deduct: Total stock-based compensation expense determined under fair value based method, net of taxes | (47 | ) | (56 | ) | (86 | ) | (112 | ) | ||||||||
| Proforma net income (loss) | $ | 461 | $ | (5,291 | ) | $ | 1,116 | $ | (6,095 | ) | ||||||
| Basic earnings (loss) per share: | ||||||||||||||||
| As reported | $ | 0.08 | $ | (0.85 | ) | $ | 0.18 | $ | (0.97 | ) | ||||||
| Proforma | $ | 0.07 | $ | (0.85 | ) | $ | 0.17 | $ | (0.98 | ) | ||||||
| Diluted earnings (loss) per share: | ||||||||||||||||
| As reported | $ | 0.08 | $ | (0.85 | ) | $ | 0.18 | $ | (0.97 | ) | ||||||
| Proforma | $ | 0.07 | $ | (0.85 | ) | $ | 0.17 | $ | (0.98 | ) | ||||||
NOTE 4. Inventories
Inventories are summarized as follows:
| September 28, 2003 | March 31, 2003 | |||||||
| Finished goods | $ | 1 | $ | 2 | ||||
| Work in process | 5,822 | 6,105 | ||||||
| Purchased and manufactured parts | 13,509 | 13,576 | ||||||
| Total | $ | 19,332 | $ | 19,683 | ||||
NOTE 5. Discontinued Operations
During fiscal 2001, the Company implemented a restructuring plan to focus its resources and capital on the aerospace and defense products business and exit the specialty fastener segment. As a result, discontinued operations include all of the remaining operations related to its specialty fastener segment and Norco, Inc., the net assets of which were sold on February 24, 2003. There were no operating results from discontinued operations in fiscal 2004.
Net sales and losses from the discontinued operations for the comparable periods in fiscal 2003 were as follows:
| Three Months | Six Months | |||||||
| Ended | Ended | |||||||
| September 29, 2002 | September 29, 2002 | |||||||
| Net sales | $ | 11,876 | $ | 31,482 | ||||
| Loss from discontinued operations before income taxes | (5,110 | ) | (6,105 | ) | ||||
| Income tax benefits | 1,587 | 1,975 | ||||||
| Loss from discontinued operations | $ | (3,523 | ) | $ | (4,130 | ) | ||
The $4.1 million loss from discontinued operations for the six months ended September 29, 2002 included actual operating income of $4.5 million from discontinued operations, allocated interest expense of $3.6 million, a $1.9 million charge to reflect the amounts ultimately realized from sales of discontinued business units, a noncash charge of $4.9 million associated with the recognition of accumulated currency translation losses from the sale of our Brazilian operation, a cash charge of $0.2 million from the final settlement of our interest rate swap contracts, and a tax benefit of $2.0 million.
NOTE 6. Long-Term Debt Payable to Banks and Others
Long-term debt payable to banks and others, including current maturities, consisted of the following:
| September 29, | March 31, | |||||||
| 2003 | 2003 | |||||||
| Senior Subordinated Notes 18.5% | $ | 54,772 | $ | 53,329 | ||||
| Other | 237 | 237 | ||||||
| 55,009 | 53,566 | |||||||
| Less current maturities | 79 | 79 | ||||||
| Total long-term debt | $ | 54,930 | $ | 53,487 | ||||
SENIOR CREDIT FACILITY
At September 28, 2003, the Company had a senior credit facility consisting of an $8.0 million asset based revolving credit facility which was established in August 2002 (the “New Senior Credit Facility”) to refinance all remaining obligations outstanding under our prior senior credit facility. The New Senior Credit Facility was amended on August 5, 2003. The maturity date of this facility is January 31, 2004. The current interest rate is approximately 5.0%. The New Senior Credit Facility is secured by all of the Company’s assets. The Company is in compliance with the provisions of the facility. There were no borrowings outstanding under the facility at September 28, 2003.
SENIOR SUBORDINATED NOTES
On August 30, 2000, the Company completed a private placement of $75 million of senior subordinated notes (the “Notes”) and warrants to purchase shares of the Company’s common stock (the “Warrants”) to a group of institutional investors (collectively, the “Purchasers”). The Company used the proceeds of the private placement to retire, in full, a $75 million bridge loan held by a group of lenders led by Fleet National Bank. The Notes, as amended in August 2002, are due on August 29, 2005 and bear interest at a rate of 18% per annum consisting of 13% cash interest on principal, payable quarterly, and 5% interest on principal, payable quarterly in “payment-in-kind” (“PIK”) promissory notes. The PIK portion of the interest rate increases 0.25% each quarter until we retire the notes. The Company may prepay the Notes after August 29, 2001, at a premium initially of 9%, declining to 5%, 3%, and 1% on each of the next succeeding anniversaries of that date. The Notes contain customary financial covenants and events of default, including a cross-default provision to our senior debt obligations. The Company is in compliance with the provisions of the Notes. At September 28, 2003, the principal balance outstanding on the notes amounted to $54.8 million, which included the original principal amount plus the PIK notes. At March 31, 2003, the Company reported redeemable common stock in the amount of $1.3 million representing the per share put right (257,000 shares at $5.00 per share) held by certain Purchasers who had exercised their Warrants. The put right on approximately 211,000 shares expired on June 24, 2003 and, accordingly, the Company reclassified $1.1 million from redeemable common stock to additional paid-in capital with the remainder of the redeemable common stock being reclassified to long-term debt to reflect the exercise of the put by a Purchaser. Subsequent to the end of the first quarter of fiscal 2004, the Purchaser in question revoked its put exercise and that portion was reclassified to additional paid in capital in the second quarter. In addition, the put right on 171,041 Warrants expired and, accordingly, $0.9 million representing the cash value of the put right on these Warrants was reclassified from a liability account to additional paid-in capital in the first quarter of fiscal 2004. At September 28, 2003, there were 171,041 Warrants outstanding which are each convertible into common stock at the price $.01 per warrant. All of the Warrants were considered to be common stock equivalents for the purpose of calculating earnings per share at September 28, 2003.
The Company has long-term debt maturities of $0.1 million, $54.9 million and $0.1 million in 2004, 2005 and 2006, respectively.
NOTE 7. New Accounting Standards
In December 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” (“SFAS 148”) which amends SFAS No. 123. This statement provides alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation and amends the disclosure requirements of SFAS No. 123. The transition guidance and disclosure requirements are effective for fiscal years ending after December 15, 2002. The Company has adopted the disclosure requirements and expects that the adoption of this statement will not have a material effect on the Company’s financial position or results of operations.
NOTE 8. Contingencies
As previously reported, the Company is subject to an investigation being conducted by the Newark, New Jersey office of the United States Attorney with respect to the Company’s overhaul and repair operations. The Company has to date and will continue to cooperate fully with the government’s investigation. In addition, the Board of Directors has retained a fact finding and forensic accounting firm, The Bradlau Group, Morristown, New Jersey, to perform an independent process review and evaluation of the overhaul and repair operations the Company’s Breeze-Eastern business. The Board of Directors has indicated that it intends to share the findings of this independent process review and evaluation with the United States Attorney’s office. The findings of The Bradlau Group were not complete as of the date of this filing. The investigation has had no impact, and the Company does not expect an impact, on its ability to manufacture and ship products and meet customer delivery schedules. As of this date, the US Attorney’s investigation is continuing and the Company has not been made aware of any specific violations resulting from that investigation.
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: June 21, 2004 | By: | /s/ Joseph F. Spanier | ||
| Joseph F. Spanier, Vice President | ||||
| Treasurer and Chief Financial Officer* | ||||
| * | On behalf of the Registrant and as Principal Financial and Accounting Officer. |
