SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File No. 0-6512
TRANSTECH INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 22-1777533
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Centennial Avenue, Piscataway, New Jersey 08854
(Address of principal executive offices)
(908) 981-0777
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act of 1934 during the past
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
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after
the distribution of securities under a plan confirmed by a court.
Yes______ No______
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
2,829,090 shares of common stock, $.50 par value, outstanding as of
November 7, 1995. In addition, at such date, the issuer held
1,885,750 shares of common stock, $.50 par value, in treasury.
Transitional Small Business Disclosure Format (Check One):
Yes No X
Page 1 of 95 pages
Exhibit index on page 32
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
I N D E X
Page(s)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of September
30, 1995 and December 31, 1994 3-4
Consolidated Statements of Operations for the
Nine Months Ended September 30, 1995 and 1994 5-6
Consolidated Statements of Operations for the
Three Months Ended September 30, 1995 and 1994 7-8
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1995 and 1994 9-10
Notes to Consolidated Financial Statements 11-17
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 18-28
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 29-30
Item 6. Exhibits and Reports on Form 8-K 30
SIGNATURES 31
EXHIBIT INDEX 32
EXHIBITS 33-95
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(In $000's)
(Unaudited)
ASSETS
September 30, December 31,
1995 1994
CURRENT ASSETS
Cash and cash equivalents $ 1,233 $ 874
Marketable securities 2,347 2,465
Accounts and notes receivable
(net of allowance for doubtful
accounts of $11) 217 461
Deferred income taxes 730 587
Prepaid expenses and other 506 472
Net assets of discontinued operations:
Valve mfg. segment 4,483 5,506
Alkali products segment - 173
Total current assets 9,516 10,538
PROPERTY, PLANT AND EQUIPMENT
Land 799 799
Buildings and improvements 327 327
Machinery and equipment 2,966 2,931
4,092 4,057
Less: accumulated depreciation 3,164 3,144
Net property, plant and equipment 928 913
OTHER ASSETS
Notes receivable 797 968
Investment in leveraged lease 280 885
Assets held for sale 2,410 2,421
Clay deposits 1,077 1,077
Other 40 39
Total other assets 4,604 5,390
TOTAL ASSETS $15,048 $16,841
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
CONSOLIDATED BALANCE SHEETS, Cont'd
(In $000's)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
September 30, December 31,
1995 1994
CURRENT LIABILITIES
Current portion of long-term debt $ 65 $ 93
Accounts payable 516 291
Accrued salaries and wages 35 26
Accrued income taxes 2,914 2,318
Accrued miscellaneous expenses 199 225
Total current liabilities 3,729 2,953
OTHER LIABILITIES
Long-term debt 360 388
Accrued remediation and closure
costs 12,740 14,355
Deferred income taxes 874 665
Total other liabilities 13,974 15,408
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.50 par value,
10,000,000 shares authorized:
4,714,840 shares issued 2,357 2,357
Additional paid-in capital 1,516 1,516
Retained earnings 4,396 5,420
Net unrealized gains on marketable
securities 90 201
Subtotal 8,359 9,494
Treasury stock, at cost -
1,885,750 shares (11,014) (11,014)
Total stockholders' equity
(deficit) (2,655) (1,520)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $15,048 $16,841
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
CONSOLIDATED STATEMENTS OF OPERATIONS
(In $000's, except per share data)
(Unaudited)
For the Nine Months Ended
September 30,
1995 1994
REVENUES $ 292 $ 449
COST OF OPERATIONS
Direct operating costs 227 340
Selling, general and
administrative expenses 2,090 1,608
Total cost of operations 2,317 1,948
INCOME (LOSS) FROM OPERATIONS (2,025) (1,499)
OTHER INCOME (EXPENSE)
Investment income (loss) 202 208
Interest expense (258) (117)
Gain (loss) of sale of securities 269 -
Income from (writedown of)
interest in leveraged lease (279) (774)
Remediation accrual reversal 1,451 -
Other income (expense) 227 67
Total other income (expense) 1,612 (616)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
(CREDIT) (413) (2,115)
Income taxes (credit) (76) (409)
INCOME (LOSS) FROM CONTINUING
OPERATIONS (337) (1,706)
DISCONTINUED OPERATIONS (NOTE 2):
Valve Manufacturing Segment
Income from discontinued operation,
net of taxes of $134 and $298,
respectively 166 1,430
Loss on disposal of segment, net of
tax credits of $256 (1,150) -
Alkali Products Segment
Income (loss) from discontinued
operation, net of taxes (credits)
of $18 and $(9), respectively 35 (17)
Gain on disposal of segment, net of
taxes of $155,000 262 -
(687) 1,413
NET INCOME (LOSS) $(1,024) $ (293)
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
CONSOLIDATED STATEMENTS OF OPERATIONS, Cont'd
(In $000's, except per share data)
(Unaudited)
For the Nine Months Ended
September 30,
1995 1994
INCOME (LOSS) PER COMMON SHARE:
INCOME (LOSS) FROM CONTINUING
OPERATIONS $(.12) $(.60)
DISCONTINUED OPERATIONS:
Income (loss) from discontinued
operations, net of taxes (credits) .07 .50
Gain (loss) on disposal of
discontinued operations (.31) -
NET INCOME (LOSS) $(.36) $(.10)
NUMBER OF SHARES USED IN
CALCULATION 2,829,090 2,829,090
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
CONSOLIDATED STATEMENTS OF OPERATIONS, Cont'd
(In $000's, except per share data)
(Unaudited)
For the Three Months Ended
September 30,
1995 1994
REVENUES $ 80 $ 134
COST OF OPERATIONS
Direct operating costs 79 96
Selling, general and
administrative expenses 803 513
Total cost of operations 882 609
INCOME (LOSS) FROM OPERATIONS (802) (475)
OTHER INCOME (EXPENSE)
Investment income (loss) 67 90
Interest expense (78) (38)
Gain (loss) of sale of securities - -
Income from (writedown of)
interest in leveraged lease (35) (166)
Remediation accrual reversal 1,451 -
Other income (expense) 126 26
Total other income (expense) 1,531 (88)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
(CREDIT) 729 (563)
Income taxes (credit) (210) (22)
INCOME (LOSS) FROM CONTINUING
OPERATIONS 939 (541)
DISCONTINUED OPERATIONS (NOTE 2):
Valve Manufacturing Segment
Income from discontinued operation,
net of taxes of $54 and $65,
respectively 77 82
Loss on disposal of segment,
net of tax credits of $256 (1,150) -
Alkali Products Segment
Income (loss) from discontinued
operation, net of taxes
of $15, - 29
Gain on disposal of segment,
net of taxes of $155 262 -
(811) 111
NET INCOME (LOSS) $ 128 $ (430)
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
CONSOLIDATED STATEMENTS OF OPERATIONS, Cont'd
(In $000's, except per share data)
(Unaudited)
For the Three Months Ended
September 30,
1995 1994
INCOME (LOSS) PER COMMON SHARE:
INCOME (LOSS) FROM CONTINUING
OPERATIONS $ .33 $(.19)
DISCONTINUED OPERATIONS:
Income (loss) from discontinued
operations net of taxes (credits) .03 .04
Gain (loss) on disposal of
discontinued operations (.31) -
NET INCOME (LOSS) $ .05 $(.15)
NUMBER OF SHARES USED IN
CALCULATION 2,829,090 2,829,090
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In $000's)
(Unaudited)
For the Nine Months Ended
September 30,
1995 1994
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 433 $13,494
Cash paid to suppliers and employees (2,150) (12,745)
Interest and dividends received 152 181
Interest paid (35) (1,326)
Other income received 112 58
Cash received from discontinued
operations 553 -
Net cash provided by (used in)
operating activities (935) (338)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale and maturity
of marketable securities 2,851 2,469
Purchase of marketable securities (2,604) (1,961)
Purchase of property, plant and
equipment (51) (210)
Proceeds from sale of property,
plant and equipment 8 33
Collections of notes receivable 352 192
Rent sharing payments from
computer leases 325 159
(Increase) decrease in other assets (2) 11
Cash proceeds from sale of
discontinued segment 600 -
Net cash provided by (used in)
investing activities 1,479 693
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (94) (871)
Proceeds from issuance of long-term debt 39 -
Payment of remediation and closure costs (130) (23)
Net cash provided by (used in)
financing activities (185) (894)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 359 (539)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF THE YEAR 874 1,625
CASH AND CASH EQUIVALENTS AT END
OF THE QUARTER $ 1,233 $ 1,086
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
CONSOLIDATED STATEMENTS OF CASH FLOWS, Cont'd
(In $000's)
(Unaudited)
For the Nine Months Ended
September 30,
1995 1994
RECONCILIATION OF NET INCOME (LOSS)
TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
NET INCOME (LOSS) $(1,024) $ (293)
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES:
Loss on disposal of discontinued
segments 869 -
Extraordinary gain on elimination
of debt - (95)
Depreciation and amortization 41 1,063
(Gain) loss on sale of marketable
securities (269) -
(Gain) loss on sale of property,
plant and equipment (114) (12)
Increase (decrease) in deferred
income taxes 122 (166)
Leveraged lease (revenue) charge 279 774
Increase (decrease) in minority
interest in consolidated subsidiary - 285
(Increase) decrease in assets:
Accounts and notes receivable,
trade-net 174 (423)
Inventories - (561)
Prepaid expenses and other (85) (93)
Increase (decrease) in liabilities:
Accounts payable and accrued
expenses 216 219
Accrued taxes 307 120
Accrued remediation costs (1,451) -
Accrued retiree health care
benefit liability - (1,156)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ (935) $ (338)
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements are presented in
accordance with the requirements of Form 10-QSB and consequently do
not include all of the disclosures normally required by generally
accepted accounting principles or those normally made in the
Company's annual Form 10-KSB filing. Accordingly, the reader of
this Form 10-QSB may wish to refer to the Company's Form 10-KSB for
the year ended December 31, 1994 for further information.
The financial information has been prepared in accordance with
the Company's customary accounting practices except for certain
reclassifications to the 1994 financial statements in order to
conform to the presentation followed in preparing the 1995
financial statements. Quarterly financial information has not been
audited. In the opinion of management, the information presented
reflects all adjustments necessary for a fair statement of interim
results. All such adjustments are of a normal and recurring nature
except as disclosed herein.
NOTE 2 - DISCONTINUED OPERATIONS
The consolidated statements of operations have been restated to
report the net results of the Company's Alkali Products and Valve
Manufacturing Segments as discontinued operations. The net assets
of the discontinued segments have been classified as current assets
in the accompanying restated consolidated balance sheets.
Alkali Products Segment
On August 31, 1995, the Company sold certain machinery,
equipment, and contract rights, thereby effectively selling the on-
going operations, of its wholly-owned subsidiary, Cal-Lime, Inc.
for $600,000 in cash plus future payments of up to an additional
$25,000 which are contingent upon the availability of lime slurry
from a specified source to the purchaser. The sale resulted in a
gain of $281,000 after transaction costs and a provision for taxes
of $165,000.
The net assets of Cal-Lime sold have been classified as current
assets in the accompanying restated consolidated balance sheet as
of December 31, 1994. The Company intends to liquidate the
remaining assets of the subsidiary and has included the property,
buildings and equipment excluded from this transaction, having an
aggregate book value of $365,000 and $374,000, under the caption of
assets held for sale on the balance sheet as of September 30, 1995
and December 31, 1994, respectively. Such value approximates the
estimated net realizable value of those assets. The consolidated
statements of operations report the net results of Cal-Lime's
operations as income (loss) from discontinued operations.
Summarized results of Cal-Lime's operations for the period of
January 1 through September 30, 1995 and 1994 are as follows (in
$000's):
1995 1994
Year-to-date Eight Months Nine Months
Revenues $582 $629
Income (loss) before income tax 23 (26)
Income (tax) credit (8) 9
Net income (loss) 15 (17)
Third Quarter Two Months Three Months
Revenues $ 94 $280
Income (loss) before income tax (30) 56
Income (tax) credit 10 (19)
Net income (loss) (20) 37
Valve Manufacturing
On October 24, 1995, the Company executed a stock purchase
agreement pursuant to which the Company's wholly-owned subsidiary,
THV Acquisition Corp. ("THV"), agreed to sell all of the issued and
outstanding stock of HVHC, Inc. ("HVHC"), the parent of Hunt Valve
Company, Inc. ("Hunt"). The assets of Hunt may be deemed to
represent substantially all of the assets of the Company;
therefore, the sale is subject to approval by the Company's
shareholders.
The purchase agreement provides that at the closing the
purchaser shall purchase the HVHC common stock from THV for $18.0
million in cash, reduced by the sum of (i) the amount of Hunt's
indebtedness for borrowed money as of the closing of the proposed
sale ("Funded Debt"), (ii) the amount required to redeem the
warrants held by Hunt's senior secured note holders, (iii) the
amount required to be paid by Hunt to THV upon the redemption by
Hunt of its issued and outstanding 7% preferred stock, without par
value, all of which is owned by THV, (iv) the amount required to be
paid by Hunt to THV in repayment of the senior subordinated note
issued by Hunt to THV in the original principal amount of $500,000
and (v) any other intercompany payments required to be made by Hunt
or HVHC on or prior to the closing of the transactions contemplated
by the purchase agreement. A portion of the net proceeds,
$750,000, is to be placed in escrow to secure the Company's
indemnification obligations to the purchaser under the purchase
agreement, including indemnification for any payments made by Hunt
after the closing in respect of income taxes owed by the Company
during the period that Hunt was a member of the Company's
consolidated tax group. The escrow will terminate upon
the earlier to occur of (i) the release of all funds from escrow in
accordance with the terms thereof or (ii) the later to occur of (x)
the expiration of the applicable statute of limitations for the
assessment of federal income taxes for all taxable years with
respect to which Hunt or HVHC were members of the Company's
consolidated tax group and (y) the satisfaction by the Company of
all assessments or other claims by the Service for taxes of the
consolidated tax group during such years.
The Company expects the sale to be completed on or before
December 31, 1995 and anticipates net cash proceeds from the
proposed sale of approximately $4,187,000 if closed on or around
that date. The Company has estimated a loss on the proposed sale,
of approximately $1,150,000 for financial reporting purposes. The
loss has been reported as of September 30, 1995 and includes (i)
estimates of costs to be incurred in connection with the sale, (ii)
operating results through the date of disposition, (iii) a $675,000
charge, net of minority interest and taxes of $431,000, related to
the write-off of unamortized debt issuance costs and debt discounts
on Hunt's senior secured loan in connection with the sale, (iv) an
adjustment to the Company's deferred tax valuation allowance, (v)
a provision for the loss on redemption of Hunt's warrant, and (vi)
$280,000 payable to Hunt's lenders due to the early prepayment of
amounts borrowed under such loan and revolving credit facility.
Summarized results of Hunt's operations for the nine and three
month periods ended September 30, 1995 and 1994 are as follows (in
$000):
1995 1994
Nine Months
Revenues $13,497 $12,823
Income (loss) before income taxes (82) 1,662
Income (tax) credit (134) (298)
Extraordinary item - 95
Minority interest 42 (285)
Net income (loss) (174) 1,174
Three Months
Revenues $4,662 $4,293
Income (loss) before income taxes 10 61
Income (tax) credit (53) (66)
Minority interest 9 1
Net income (loss) (34) (4)
Certain intercompany charges have been eliminated in the amount
presented as income (loss) from discontinued operations on the
accompanying consolidated statements of operations.
The net assets of Hunt as of September 30, 1995 and December 31,
1994 consisted of:
1995 1994
Current assets $ 8,471 $ 7,323
Current liabilities (3,065) (6,073)
Net fixed assets 6,168 6,504
Other non-current assets 10,145 11,327
Non-current liabilities (17,176) (13,575)
Net Assets 4,543 5,506
The Company's President and Chairman of the board of directors,
and the Company's Vice President and Chief Financial Officer, who
is also a member of the board, as well as a director of Hunt and
Hunt's President and Chief Operating Officer are to acquire 15% of
the equity of the purchaser for $150,000. These four individuals
together with certain other members of senior management of Hunt,
will also have the opportunity to acquire up to an additional 15%
of the common stock of the purchaser pursuant to the exercise of
performance and value based options that will be issued to them.
In addition, the four directors and executive officers of the
Company and Hunt will be employed as officers and/or directors of
Hunt after the proposed sale.
In September and October 1995, representatives of the Company,
Hunt, Hunt's senior term lenders ("Term Lenders") and the purchaser
conducted negotiations with respect to the repurchase of the
warrants for Hunt's stock ("Lender Warrants") and Hunt's senior
term debt ("Term Debt"), and with respect to the amount payable to
the Term Lenders upon the prepayment of the Term Debt prior to
September 27, 2001 (the "Prepayment Premium"). The Prepayment Premium
was determined by the Term Lenders to the approximately $1,700,000. On
October 24, 1995 (the "Term Debt Assignment Date"), the Term
Lenders entered into an agreement to assign their entire interests
in the Term Debt and the Lender Warrants (the "Term Debt and
Warrant Assignment") to a designee of the purchaser (the "Term Debt
Purchaser"), in consideration for a total of $11,822,480 paid to
the Term Lenders. Of this amount, (x) $10,822,480 represented
principal plus accrued and unpaid interest on the Term Debt through
the Term Debt Assignment Date, (y) $500,000 represented payment for
the Lender Warrants and (z) $500,000 was a transaction fee payable
to the Term Lenders in lieu of the Payment Premium. Such transaction
fee is to be shared equally by the Term Debt Purchaser and THV.
In connection with the Term Debt and Warrant Assignment, the Company,
THV, the Term Debt Purchaser and the purchaser entered into an
agreement on the Term Debt Assignment Date (the "Recapitalization
Agreement") pursuant to which the parties agreed as follows: On
or before the earlier of (i) the closing of the proposed sale and
(ii) December 26, 1995, the Company will cause Hunt to merge with and into
HVHC, with HVHC being the surviving corporation in the merger (the
"Merger"). If a closing of the proposed sale has not occurred by
December 27, 1995, the Term Debt Purchaser will exercise the Lender
Warrants to purchase such number of shares of HVHC Common Stock as
represents an equivalent percentage of HVHC Common Stock as the
Term Debt Purchaser would have acquired upon exercise of the Lender
Warrants to purchase shares of common stock of Hunt. Concurrently
with such exercise, the Term Debt Purchaser shall purchase from the
Seller a number of shares representing 2% of the common stock of
HVHC at a price of $50,000. Accordingly, after giving effect to the
exercise by the Term Debt Purchaser of the Lender Warrants and the
purchase by the Term Debt Purchaser of the foregoing percentage of
HVHC common stock, the Company will own less than 80%
of the outstanding HVHC common stock, thereby relieving HVHC and
Hunt from joint and several liability for the Company's taxes
for periods beyond 1995. Furthermore, if the proposed sale is
consummated, the Term Debt Purchaser will waive its right to collect
the Prepayment Premium. However, if the proposed sale is not
consummated and a person or entity other than the purchaser acquires
the business of Hunt, the Term Debt Purchaser need not waive the
Prepayment Premium. In such event, if the Term Debt Purchaser is
paid a premium for the Term Debt and $500,000 for the Lender Warrants,
then THV will be entitled to recover from the Term Debt Purchaser
that portion of the Prepayment Premium which exceeds $250,000, up to
a maximum of $250,000.
NOTE 3 - MARKETABLE SECURITIES
Effective January 1, 1994, the Company adopted FASB Statement
No. 115 ("Accounting for Certain Investments in Debt and Equity
Securities"). In accordance with the statement, the Company
classifies all debt securities purchased with remaining maturities
of less than one year as securities held to maturity which are
carried at amortized cost. All other debt and equity securities
are classified as securities available for sale which are carried
at fair value as determined by quoted market prices. The aggregate
excess of fair value over cost of such securities as of September
30, 1995, of $138,000, net of deferred income taxes of $48,000 is
included as a separate component of stockholders' equity.
NOTE 4 - LONG-TERM DEBT
At September 30, 1995, long-term debt consisted of the following
(in $000's):
10.5% and 11% mortgages payable due in $390
monthly and semi-annual installments
through July 1996 and April 2000;
secured by land and buildings
Other 36
Total long-term debt 426
Less: current portion (66)
$360
NOTE 5 - REMEDIATION AND CLOSURE COSTS
The Company and certain subsidiaries were previously active in
the resource recovery and waste management industries. These
activities included the operation of three landfills. Although
the sites are now closed, the Company continues to own and/or
remediate them and has both incurred and accrued for the
substantial costs associated therewith.
The Company's accruals for closure and remediation activities
equal the present value of its allocable share of the estimated
future costs related to a site less funds held in trust for such
purposes. Such estimates require a number of assumptions, and
therefore may differ from the ultimate outcome. The costs of
litigation associated with a site are expensed as incurred.
As of September 30, 1995, the Company has accrued $22.0
million for its estimated share of remediation and closure costs
in regard to the Company's former landfills, $9.2 million of
which is held in trusts and maintained by trustees for financing
of the $11.3 million closure plan related to the landfill owned
by the Company's subsidiary, Kinsley's Landfill,Inc.
The most significant portion of the balance of the accrual
relates to remediation efforts at the landfill owned by the
Company's subsidiary, Kin-Buc, Inc. ("Kin-Buc Landfill"). The
Company and other respondents have been remediating the Kin-Buc
Landfill under an Amended Unilateral Administrative Order issued
by the United States Environmental Protection Agency ("EPA") in
September 1990. In November 1992, EPA issued an Administrative
Order for the remediation of certain areas neighboring the Kin-
Buc Landfill. (For a discussion of this matter, see Remediation
and Closure Costs contained in Management's Discussion and
Analysis of Financial Condition and Results of Operations of this
Form 10-QSB).
As previously reported, the Company was named, along with a
group of waste generators, to an order issued by the EPA which
required remediation of a site in Carlstadt, New Jersey. In
September 1995, the Court approved a settlement agreement which
allocated remediation costs for the site among the Company and
substantially all of the waste generators who have been
remediating the site. This agreement substantially relieves the
Company from future obligations for the site in exchange for a
cash payment, proceeds from the settlement of certain insurance
claims and an assignment of Carlstadt-related claims filed
against the Company's excess insurance carriers. The Company has
reversed the balance of the accrual for future expenditures
related to this site, and recognized income of $1,451,000
associated with such adjustment in the period ended September 30,
1995. (See Part II, Item 1 of this Form 10-QSB for a further
discussion of this matter).
The impact of future events or changes in environmental laws
and regulations, which cannot be predicted at this time, could
result in material increases in remediation and closure costs
related to the Company's past waste handling activities, possibly
in excess of the Company's available financial resources.
NOTE 6 - LEGAL PROCEEDINGS
See Item 1 of Part II of this Form 10-QSB for a discussion of
legal matters.
Results of operations for the nine months ended September
30, 1995 compared to the nine months ended September 30, 1994
Consolidated revenues by business segment for the nine months
ended September 30, 1995 and 1994 were as follows (in $000):
1995 1994
Electricity Generation $ 150 $ 249
Environmental Services 380 393
Intercompany (238) (193)
Total $ 292 $ 449
Consolidated revenues for the nine months ended September 30,
1995, were $292,000, a decrease of $157,000, or 35%, compared to
the same period of 1994.
Revenues from operations which generate electricity from
methane gas were $150,000, a decrease of $99,000 or 40% compared
to the same period last year. The decrease is the result of a
series of unrelated equipment failures which subjected two of the
four electric generating units to significant down-time for
repairs. Normal capacity was restored during September 1995.
The environmental services subsidiary contributed $142,000 to
revenues, after elimination of intercompany sales, compared to
$200,000 for the same period last year. Approximately $238,000
or 63% of the environmental services subsidiary's revenues for
the period, compared to $193,000 or 49% for the same period last
year, were either to other members of the consolidated group or
to third parties providing services to another member of the
consolidated group, and were therefore eliminated in
consolidation.
Consolidated direct operating costs for the nine months ended
September 30, 1995 were $227,000, a decrease of 33%, or $113,000,
when compared to the same period of 1994, due primarily to the
decrease in sales volume and expenses incurred during 1994 for
the overhaul of certain electric generation equipment.
Consolidated selling, general and administrative expenses for
the nine months ended September 30, 1995 increased $482,000, or
30%, from the same period last year to $2,090,000, due to a
$453,000 increase in professional fees primarily relating to the
Company's ongoing environmental and tax litigation, and a $50,000
charge related to an increase in the bad debt reserve pertaining
to a note held by the Company.
The Company's consolidated operating loss for the nine months
ended September 30, 1995 increased to $2,025,000 from a loss of
$1,499,000 in 1994.
Investment income decreased by $6,000 to $202,000 for the nine
months ended September 30, 1995 from the comparable period last
year.
Consolidated interest expense increased $141,000 to $258,000
for the nine months ended September 30, 1995 compared to the same
period last year, due to an increase in the amount of interest
accrued during the period on amounts reserved for income taxes,
as discussed below.
The Company charged $279,000 against income for the nine
months ended September 30, 1995 to reflect a reduction in the
carrying value of its investment in computer equipment. The
charge reflects a decline in the current market value for IBM
mainframe computer equipment. The Company incurred a $774,000
charge related to the revaluation of this equipment during the
comparable period in 1994.
In September 1995, the Court approved a settlement of
litigation regarding the allocation of the cost of remediation of
a site in Carlstadt, New Jersey, on which the Company had
operated a solvents recovery facility. The settlement agreement
substantially relieves the Company from future obligations with
respect to the site in exchange for cash payment,
proceeds of the settlement of certain insurance claims and an
assignment of Carlstadt-related claims that had been filed
against the Company's excess insurance carriers. The Company has
recognized income of $1,451,000 in September 1995 due to the
reversal of the balance of amounts previously accrued for future
expenditures related to the site.
Consolidated miscellaneous income for the nine months ended
September 30, 1995 increased $160,000 to $227,000 when compared
to the same period of 1994 due primarily to the recognition in
1995 of $106,000 of deferred gain related to the sale of real
property in 1992.
The consolidated loss from continuing operations before income
tax credits was $413,000 for the nine months ended September 30,
1995, compared to income of $2,115,000 for the same period last
year.
Income tax credit for the nine months ended September 30, 1995
equalled $76,000, a $333,000 decrease over the $409,000 credit
for 1994. The current period's credit is less than that
calculated using the statutory rates since the recognition of
deferred tax benefits have been limited because realization is
not assured.
Income (loss) from discontinued operations relates to the
Company's subsidiaries which manufactures commercial valves and
hydraulic systems, and marketed alkali products.
On August 31, 1995, the Company sold certain machinery and
equipment, and contract rights, and thereby effectively selling
the on-going operations of the subsidiary which markets alkali
products to a competitor. The decision to sell the segment was
influenced by the recent loss of two contracts (effective May 1,
1995 and July 1, 1995) which accounted for approximately 64% of
the subsidiary's revenues for the twelve months ended June 30,
1995. Management believes the loss of such revenues would likely
have resulted in the need to infuse capital into the segment in
order to meet its on-going expenses. The Company received a cash
payment of $600,000 for certain machinery and equipment, contract
rights, rights to the subsidiary's name and a non-compete
covenant, and is entitled to additional payments of up to $25,000
which are contingent upon the availability of lime slurry from a
specified source to the purchaser. The Company has reported a
gain from the sale of $262,000 which is net of taxes of $155,000.
The Company intends to liquidate the remaining fixed assets of
the subsidiary and has included the book value of the property,
buildings and equipment not part of this transaction under the
caption assets held for sale on the accompanying balance sheet.
The amount reported as income (loss) from discontinued operations
of $35,000 and $(17,000) for the nine months ended September 30,
1995 and 1994, respectively, is reported net of a provision for
income taxes (credit) of $18,000 and $(9,000), respectively.
On October 24, 1995, the Company executed a stock purchase
agreement pursuant to which the Company's wholly-owned
subsidiary, THV Acquisition Corp. ("THV") agreed to sell all of
the issued and outstanding stock of HVHC, Inc. ("HVHC"), the
parent of Hunt Valve Company, Inc. ("Hunt"). The assets of Hunt
may be deemed to represent substantially all of the assets of the
Company; therefore, the sale is subject to approval by the
Company's shareholders.
The purchase agreement provides that at the closing the
purchaser shall purchase the HVHC common stock from THV for $18.0
million in cash, reduced by the sum of (i) the amount of Hunt's
indebtedness for borrowed money as of the closing of the proposed
sale ("Funded Debt"), (ii) the amount required to redeem the
lender warrants held by Hunt's senior secured note holders, (iii)
the amount required to be paid by Hunt to THV upon the redemption
by Hunt of its issued and outstanding 7% preferred stock, without
par value, all of which is owned by THV, (iv) the amount required
to be paid by Hunt to THV in repayment of the senior subordinated
note issued by Hunt to THV in the original principal amount of
$500,000 and (v) any other intercompany payments required to be
made by Hunt or HVHC on or prior to the closing of the
transactions contemplated by the purchase agreement. A portion
of the net proceeds, $750,000, is to be placed in escrow to
secure the Company's indemnification obligations to the purchaser
under the purchase agreement, including indemnification for any
payments made by Hunt after the closing in respect of income
taxes owed by the Company during the period that Hunt was a
member of the Company's consolidated tax group. The escrow
will terminate upon the earlier to occur of (i) the
release of all funds from escrow in accordance with the terms
thereof or (ii) the later to occur of (x) the expiration of the
applicable statute of limitations for the assessment of federal
income taxes for all taxable years with respect to which Hunt or
HVHC were members of the Company's consolidated tax group and (y)
the satisfaction by the Company of all assessments or other
claims by the Service for taxes of the consolidated tax group
during such years (See Note 2 of Notes to Consolidated Financial
Statements contained herein for information regarding interested
parties to the transaction and the acquisition of Hunt's senior
term loan by a designee of the purchaser).
The Company expects the sale to be completed on or before
December 31, 1995 and anticipates net cash proceeds from the
proposed sale of approximately $4,187,000 if closed on or around
that date. The Company has estimated a loss on the proposed
sale of approximately $1,150,000 for financial reporting
purposes. The loss has been reported as of September 30, 1995
and includes estimates of costs to be incurred in connection with
the sale, operating results through the date of disposition, a
charge related to the write-off of unamortized debt issuance
costs and debt discounts on Hunt's senior secured loan in
connection with the sale, and amounts payable to Hunt's lenders
due to the early prepayment of amounts borrowed under such loan
and revolving credit facility.
Consolidated net loss for the nine months ended September 30,
1995 was $1,024,000 or $.36 per share, compared to net loss of
$293,000, or $.10 per share, for the nine months ended September
30, 1994.
Results of operations for the three months ended September 30,
1995 compared to the three months ended September 30, 1994
Consolidated revenues by business segment for the three months
ended September 30, 1995 and 1994 were as follows (in $000):
1995 1994
Electricity Generation $ 36 $ 74
Environmental Services 92 131
Intercompany (48) (71)
Total $ 80 $134
Consolidated revenues decreased 40%, or $54,000 for the three
months ended September 30, 1995, compared to the same period of
1994.
Revenues from operations which generate electricity from
methane gas were $36,000, a decrease of $38,000 or 51% compared
to the same period last year. The decline is the result of down-
time for repairs to the electric generating equipment due to the
continuation of a series of equipment failures. The
environmental services subsidiary contributed $44,000 to
consolidated revenues versus $60,000 for the same period last
year. Approximately 52% of the environmental services
subsidiary's revenues for the period were to either other members
of the consolidated group or third parties providing services to
another member of the consolidated group, and, were, therefore,
eliminated in consolidation, versus 54% for the same period last
year.
Consolidated direct operating costs for the three months ended
September 30, 1995 were $79,000, a decrease of 18%, or $17,000,
when compared to the same period of 1994, due primarily to the
decrease in sales volume.
Consolidated selling, general and administrative expenses for
the three months ended September 30, 1995 increased $290,000 or
57%, from the same period last year to $803,000, due primarily to
a $215,000 increase in professional fees and a $50,000 charge
related to an increase in the bad debt reserve pertaining to a
note held by the Company.
The Company's consolidated operating income for the three
months ended September 30, 1995 decreased to a loss of $802,000,
from a loss of $475,000 in 1994.
Investment income decreased by $23,000 to $67,000 for the
three months ended September 30, 1995 from the comparable period
last year.
Consolidated interest expense increased $40,000 to $78,000 for
the three months ended September 30, 1995 compared to the same
period last year, due primarily to an increase in the amount of
interest accrued during the period on amounts reserved for income
taxes, as discussed below.
The Company charged $35,000 and $166,000 against income for
the three months ended September 30, 1995 and 1994, respectively,
to reflect a reduction in the carrying value of its investment in
computer equipment. The charges reflect a decline in the current
market value of IBM mainframe computer equipment.
In September 1995, the Court approved a settlement of
litigation regarding the allocation of the cost of remediation of
a site in Carlstadt, New Jersey, on which the Company had
operated a solvents recovery facility. The settlement agreement
substantially relieves the Company from future obligations with
respect to the site in exchange for a cash payment of $81,000,
proceeds of the settlement of certain insurance claims and an
assignment of Carlstadt-related claims that had been filed
against the Company's excess insurance carriers. The Company has
recognized income of $1,451,000 in September 1995 due to the
reversal of the balance of amounts previously accrued for future
expenditures related to the site.
Consolidated miscellaneous income for the three months ended
September 30, 1995 increased $100,000 to $126,000 when compared
to the same period of 1994 due primarily to the recognition in
1995 of $106,000 of deferred gain related to the sale of real
property in 1992.
The consolidated income from continuing operations before
income tax (credits), was $729,000 for the three months ended
September 30, 1995, compared to a loss of $563,000 for the same
period last year.
Income tax credit for the three months ended September 30,
1995 equalled $210,000, a $188,000 increase over the $22,000
credit for 1994.
Income (loss) from discontinued operations relates to the
operations of the Company's subsidiaries which manufactures
commercial valves and hydraulic systems and markets alkali
products (see discussion regarding sale of these segments in
management's discussion of the results of operations for the nine
months ended September 30, 1995).
Consolidated net income for the three months ended September
30, 1995 was $128,000, or $.05 per share, compared to a net loss
of $430,000, or $.15 per share, for the three months ended
September 30, 1994.
Liquidity and Capital Resources
Liquidity
Net cash used by operating activities for the nine months
ended September 30, 1995 increased to $935,000 from $338,000 when
compared to the same period last year, due in part to the
inclusion of activities of the discontinued segments in 1994.
Net cash provided by investing activities increased for the
current period to $1,479,000 from $693,000, due in part to
$600,000 in proceeds from the sale of a discontinued segment in
the current period. The amount of cash used in financing
activities decreased to $185,000 from a use of $894,000 for the
same period last year. Funds held by the Company in the form of
cash and cash equivalents increased as of September 30, 1995 to
$1,233,000 from $1,086,000. The sum of cash, cash equivalents
and marketable securities as of September 30, 1995 increased
$241,000 to $3,580,000 when compared to last year.
Working capital was $5.8 million and the ratio of current
assets to current liabilities was 2.6 to 1 as of September 30,
1995, versus $7.5 million and 3.5 to 1 as of December 31, 1994.
The Company will be facing significant cash requirements due
to (i) the settlement of certain issues in the litigation before
the United States Tax Court as described below, (ii) the
recognition in 1995 to 1997 of deferred taxable income generated
from the Company's investment in computer equipment, and (iii)
expenses associated with environmental remediation activity and
related litigation. In light of its need for liquidity to
address these obligations, the Company has been required to
initiate sales of significant assets, including operations of
Cal-Lime and the capital stock of Hunt, the Company's principal
operating subsidiary.
In addition, the uncertainty of the outcome of the Company's
ongoing tax and environmental litigation, discussed below and in
the notes to the Company's consolidated financial statements for
the year ended December 31, 1994, in the Company's Annual Report
on Form 10-KSB, and the impact of future events or changes in
environmental laws or regulations, which cannot be predicted at
this time, could result in material increases in remediation and
closure costs, tax and other potential liabilities. The Company
may ultimately incur costs and liabilities in excess of its
available financial resources.
Taxes
In 1991, the Internal Revenue Service (the "Service") asserted
numerous adjustments to the tax liability of the Company and its
subsidiaries for tax years 1980 through 1988, along with interest
and penalties thereon. In 1993, after the conclusion of
administrative proceedings before the Service, the Service issued
a deficiency notice to the Company, asserting adjustments to
income of $33.3 million, and a corresponding deficiency in
federal income taxes of approximately $13.5 million, as well as
penalties of $2.5 million and interest on the asserted deficiency
and penalties. In addition, the Service challenged the carryback
of losses incurred by the Company in taxable years 1989 through
1991, thereby bringing those years, which had been the subject of
an ongoing audit, into the Tax Court case. The 1989-1991 tax
audit is discussed below. The Company filed a petition with the
Tax Court contesting many of the proposed adjustments asserted in
the deficiency notice. On June 5, 1995 and August 14, 1995,
respectively, the Company and the Service executed a stipulation
of settlement and a revised stipulation of settlement covering
most of the adjustments asserted in the deficiency notice. On
September 18, 1995, the Company's Board of Directors approved a
proposed settlement of additional issues for which the Service
had sought adjustments to income totalling approximately $5.8
million. The Service has agreed in principle to the proposed
settlement. Taking into account the proposed settlement, the
Company has accepted approximately $5.2 million of the $33.3
million of total proposed adjustments to income. Many of the
adjustments accepted by the Company relate to issues on which the
Service would likely have prevailed in court. If the Service
accepts the recent settlement proposal that was approved by the
Company's board and agreed to in principle by the Service, the
Service will have conceded adjustments totalling $27.4 million of
taxable income as well as penalties.
The Company has incurred net operating loss and tax credit
carryforwards that will partly offset the taxable income
resulting from the settled adjustments. This will reduce the
federal liability that will result from the settlements,
including the recently proposed settlement, to approximately
$1,280,000 ($94,000 of taxes and $1,186,000 of interest as of
September 30, 1995). The settlements also will result in
approximately $495,000 of state liabilities ($211,000 of state
income tax and $284,000 of interest as of September 30, 1995),
not including penalties and penalty interest that may be assessed
by the states involved. Payment of the federal tax liability and
interest resulting from both the settled adjustments and any
issues litigated before the Tax Court will be due after the
conclusion of the Tax Court case. The date for payment of the
state tax liabilities varies by state. The first of such
payments, in the amount of approximately $284,000 including
interest to September 30, 1995, will be made in full by the end
of the first quarter of 1996 absent an agreement permitting
payment in installments.
The use of the Company's net operating loss and tax credit
carryforwards to offset the settled adjustments will reduce the
net operating loss and tax credit carryforwards that otherwise
would have been available to offset the future tax liabilities
that will arise when the Company recognizes an estimated $15.8
million of taxable income attributable to deferred tax
liabilities generated by the Company's investment in leased
computer equipment. Approximately $5.8, $6.5 and $3.5 million of
taxable income is anticipated for 1995, 1996 and the first seven
months of 1997, respectively, on account of the deferred taxes.
The Company's accrual of $2,634,000 as of September 30, 1995
for taxes and interest relating to the Tax Court litigation does
not give affect to the pending settlement because the settlement
has not yet been formally accepted by the Service.
The Service has concluded an audit of the Company's federal
income tax returns for 1989 through 1991, and has questioned
certain deductions claimed by the Company in connection with its
investment in leased computer equipment. The Service also
challenged certain real property deductions and certain expenses
that were deducted by the Company, but that the Service believes
should have been capitalized. The deductions challenged by the
Service for 1989 through 1991 will be addressed in the pending
Tax Court litigation because those deductions resulted in net
operating losses that were carried back and deducted in years
covered by the Tax Court litigation. Settlement discussions on
the 1989-1991 issues are just beginning. If the Service prevails
in disallowing the computer equipment deductions, the Company's
taxable income for 1989 through 1992 would be materially
increased and its taxable income from the computer equipment for
1994 through 1997 would be reduced by a corresponding amount.
Remediation and Closure Costs
The Company and other responsible parties have been
remediating the Kin-Buc Landfill under an Amended Unilateral
Administrative Order issued by the United States Environmental
Protection Agency ("EPA") in September 1990 (the "1990 Order").
In November 1992, EPA issued an Administrative Order (the "1992
Order", and, together with the 1990 Order, the "Orders") for the
remediation of certain areas neighboring the Kin-Buc Landfill.
During May 1993, a $22 million contract was awarded for the
construction of a containment system and leachate treatment plant
at the Kin-Buc Landfill in accordance with the engineered design
and standards accepted by the EPA in satisfaction of certain
requirements of the 1990 Order. The contract was to be financed
with funds available in the trust established in 1993 from
proceeds provided from a negotiated settlement with certain
parties to a suit the Company initiated in 1990 with the intent
of obtaining contribution toward the cost of remediation. During
May 1994, the Company met with representatives of EPA to discuss
the impact delays in securing settlement proceeds would have on
the Company's ability to finance the construction within the time
frame required by EPA. In July 1994, after meeting with EPA, SCA
Services, Inc. ("SCA"), an affiliate of WMX Technologies, Inc.
("WMX") and a respondent to the Orders, entered into a contract
with the contractor installing the containment system and
treatment plant, thereby alleviating the potential for delays in
this phase of the construction due to financial limitations.
WMX, formerly known as Waste Management, Inc., had previously
provided EPA with a financial guaranty of SCA's and the Company's
obligations under the Orders. In August 1994, a contract was
awarded by SCA for certain activities mandated by the 1992 Order.
The execution of the contracts between SCA and the contractors
has not relieved the Company of liability for such costs since
the Company entered into an agreement with SCA and certain
affiliates ("SCA Group") in 1986 which allocated 75% of the
costs incurred by the parties for the remediation of the site to
the Company. The Company filed a demand for arbitration in 1993
seeking rescission or reformation of the agreement with the SCA
Group. During March 1995, the SCA Group filed a demand for
arbitration seeking reimbursement from the Company of $10.7
million, which equals 75% of the $14.3 million of remediation
expenses purportedly funded by WMX through December 31, 1994.
The status of such arbitration demands, as yet unresolved, is
described in Part II, Item 1 of this report.
The contractors have essentially completed the construction
required under the Orders, and the Company is awaiting EPA's
acknowledgment of same. Operation of the treatment plant and
maintenance of the facilities is being conducted by an affiliate
of SCA.
A study of an approximating one acre area, adjacent to the
enclosed mound is about to begin with the intent to determine the
extent of apparent contamination as well as the nature and
possible source of the possible contamination. Such property may
be added to the scope of remediation addressed in the Orders.
Other areas within the vicinity of the site may become the
subject of future studies due to the historic use of the area for
disposal.
Additional material adjustments to the Company's current
accrual may become necessary as the allocations to all
respondents and potentially responsible parties are determined.
Accounting Principles
Effective January 1, 1994, the Company adopted Financial
Accounting Standards Board ("FASB") Statement No. 115
("Accounting for Certain Investments in Debt and Equity
Securities"). In accordance with the statement, the Company
classifies all debt securities purchased with remaining
maturities of less than one year as securities held to maturity
which are carried at amortized cost. All other debt and equity
securities are classified as securities available for sale which
are carried at fair value as determined by quoted market prices.
The aggregate excess of fair value over cost of such securities
as of September 30, 1995, of $138,000, net of deferred income
taxes of $48,000, is included as a separate component of
stockholders' equity.
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In 1991, the Internal Revenue Service (the "Service") asserted
numerous and, in some cases, significant adjustments in
connection with its audit of the Company's federal income tax
returns for the years 1982 through 1988. In 1993, the Service
issued a deficiency notice to the Company, asserting a deficiency
in federal income taxes of approximately $13.5 million, penalties
of $2.5 million and a significant amount of accrued interest. The
Company filed a petition with the tax court contesting many of
the proposed adjustments in the deficiency notice. On June 5,
1995 and August 14, 1995, respectively, the Company and the
Service executed a stipulation of settlement and a revised
stipulation of settlement covering most of the adjustments
asserted in the deficiency notice. On September 18, 1995, the
Company's Board of Directors approved a proposed settlement of
additional issues for which the Service had sought adjustments to
income totalling approximately $5.8 million. The Service has
agreed in principle to the proposed settlement. Taking into
account the proposed settlement, the Company has accepted
approximately $5.2 million of the $33.3 million of total proposed
adjustments to income. The adjustments accepted by the Company
relate principally to issues on which the Service would likely
have prevailed in court. If the Service accepts the Company's
September 18 settlement proposal, the Service will have conceded
adjustments totalling $27.4 million of taxable income and
penalties. (See Part I, Item 2, Management's Discussion and
Analysis of Financial Condition and Results of Operations -
Taxes, for further information about this matter.)
The Company has previously reported in its Form 10-KSB for the
year ended December 31, 1994 about litigation brought by a group
of generators and transporters of waste handled at a site in
Carlstadt, New Jersey (the "Carlstadt Site") against the Company,
Inmar Associates, Inc. ("Inmar"), a company owned and controlled
by Marvin H. Mahan, a former officer, director and principal
shareholder of the Company, and Mr. Mahan, the purpose of which
was to allocate to the Company, Inmar and Mr. Mahan a portion of
the costs of remediating the Carlstadt Site under orders of the
EPA mandating such remediation. In September 1995, the Court
approved a settlement among Transtech, Inmar and these generators
and transporters and other parties who have contributed to the
costs of the remediation pursuant to which Transtech, Inmar and
Mr. Mahan agreed to (i) pay $4.1 million of proceeds from
settlements with primary insurers of a coverage action brought by
the Company and Inmar against their primary and excess insurers,
(ii) pay an additional $145,000, $72,500 from Transtech and
$72,500 from Inmar and Mr. Mahan, and (iii) assign their
Carlstadt Site-related insurance claims against an excess
insurer, in exchange for a complete release from these parties of
all liability arising from or on account of environmental
contamination at the Carlstadt Site and the parties' remediation
of the same.
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART II. OTHER INFORMATION, Cont'd
In 1993, the Company's demand for arbitration concerning,
(among other things), the enforceability of provisions of the
1986 agreement among the Company, the SCA Group and others
allocating the costs of the remediation of the Kin-Buc Landfill
75% to the Company (jointly and severally with others), and 25%
to the SCA Group was stayed pending a decision by the Supreme
Court of New York County (the "Court"), on motion of the SCA
Group, that the Company's demand for arbitration was barred by
the statute of limitations. In October 1995, a referee appointed
by the Court to determine when the Company knew or should have
known facts giving rise to its legal right to challenge the 1986
agreement (that is, what the cost to remediate the Kin-Buc
Landfill would be), found that the Company knew or should have
known such facts as early as 1986. The Company plans to object
to the adoption by the Court of the referee's report, but if the
Court should accept it, it could permanently enjoin the Company's
arbitration.
In March 1995, while the Court's referral on the Company's
arbitration was pending, the SCA Group demanded that an
arbitrator enforce the cost allocation provisions of the 1986
agreement by ordering the Company to reimburse it $10.7 million,
or 75% of the $14.3 million of remediation expenses purportedly
funded by it through December 31, 1994. On the Company's motion,
the Court narrowed the issues to be arbitrated to the amount of
funds expended on the remediation and the reasonableness of such
expenditures. The Court also made any findings on such issues
subject to resolution of the Company's arbitration as to the
enforceability of the 1986 agreement. The arbitrators have
scheduled discovery, which is ongoing, and a hearing is
tentatively set for March 1996.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 10 - Material Contracts
Exhibit 11 - Computation of Earnings (Loss) Per Common
Share
Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K
None
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
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.
TRANSTECH INDUSTRIES, INC.
(Registrant)
Date: November 14, 1995 By: /s/ Robert V. Silva
Robert V. Silva, President
and Chief Executive Officer
and
Date: November 14, 1995 By: /s/ Andrew J. Mayer, Jr.
Andrew J. Mayer, Jr.
Vice President-Finance, Chief
Financial Officer and Secretary
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
EXHIBIT INDEX
EXHIBIT PAGE
NO. NO.
10 Material Contracts
10(aq) Amendment No. 14 dated as of July 27, 1995
between Hunt Valve Company, Inc. and LaSalle
Business Credit, Inc. to Loan and Security
Agreement dated January 30, 1987, as amended
through Amendment No. 5 and Restatement of Loan
and Security Agreement dated September 27, 1991,
and as amended through Amendment No. 13 dated as
of June 27, 1995; 33-37
10(ar) Letter Agreement dated as of July 27, 1995
between Hunt Valve Company, Inc., Rhode Island
Hospital Trust National Bank, as Trustee for the
Textron Collective Investment Trust B, Balboa
Life Insurance Company and Balboa Insurance
Company, as consented to by LaSalle Business
Credit, Inc. 38-40
10(as) Amendment No. 15 dated as of August 28, 1995
between Hunt Valve Company, Inc. and LaSalle
Business Credit, Inc. to Loan and Security
Agreement dated January 30, 1987, as amended
through Amendment No. 5 and Restatement of Loan
and Security Agreement dated September 27, 1991,
and as amended through Amendment No. 14 dated as
of July 27, 1995; 41-49
10(at) Third Amendment Agreement dated as of August 1,
1995 between Hunt Valve Company, Inc., Rhode
Island Hospital Trust National Bank, as Trustee
for the Textron Collective Investment Trust B,
Balboa Life Insurance Company and Balboa
Insurance Company, to the Note Agreement dated as
of August 15, 1991; 50-57
10(au) Settlement Agreement approved in September 1995
among Transtech Industries, Inc., Inmar
Associates, Inc., Marvin H. Mahan and certain
members of the 216 Paterson Plank Road
Cooperating PRP Group. 58-94
11 Computation of Earnings (Loss) Per Common Share 95
27 Financial Data Schedule N/A