SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
<X> QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 0-3905
TRANSMATION, INC.
(Exact name of registrant as specified in its charter)
OHIO 16-0874418
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Vantage Point Drive, Rochester, NY 14624
- ---------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 716-352-7777
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark (<X>) whether the registrant, (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes <X> No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Number of Shares Outstanding Date
- ----- ----------------------------- ----
Common 2,399,040 July 27, 1995
TOTAL PAGES - 11
Part I
Management's Discussion and Analysis of Financial Condition and Results of
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Operations
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Sales increases continue to result primarily from increases being achieved in
the company's Transcat division. Sales through the company's domestic Instrument
division and through its Australian and Singaporean subsidiaries have not yet
achieved planned levels and efforts are underway to correct this situation.
Corrective actions being undertaken will include efforts to increase sales of
recently introduced products which are not achieving forecast levels.
Financial Condition
- -------------------
The company's primary sources of liquidity and capital are its profitability,
funds provided through its borrowing agreement with a bank, and through
management of its balance sheet.
During the quarter ended June 30, 1995, trade accounts receivable were reduced
by more than $697,000 in the interval between June 30, 1995 and March 31, 1995.
This reduction, together with profits earned in the quarter, the use of $249,500
of cash balances which were on hand at March 31, 1995, and cash flow of nearly
$100,000 which resulted from depreciation in the quarter, enabled the company to
reduce existing trade accounts payable by $916,000, reduce accrued liabilities
by $174,000 and reduce bank debt by $144,000 at June 30, 1995 when compared to
March 31, 1995.
The company has negotiated a new more favorable loan agreement with its lender
which should close prior to September 30, 1995. Terms of the new borrowing
agreement will increase maximum funds available, reduce rates being paid for
interest and commitment fees and extend the maturity of the loan.
Results of Operations
- ---------------------
Comparison of April 1, 1995 - June 30, 1995
to
April 1, 1994 - June 30, 1994
Sales increased approximately 13% in 1995 compared to 1994. This increase is the
result of sales gains achieved in the company's Transcat division and resulted
from increased sales efforts including catalog mailings.
Cost of products sold increased by only approximately 11% and benefited from
improved margins in the company's Transcat division, specifically resulting from
improvements recognized in its Calibration Lab operations.
Selling and Administrative expenses totaled 29.3% of sales in 1995 compared to
35.4% of sales in 1994. This improvement resulted from lower amortizations of
catalog mailings during 1995. Catalog mailings are now being made to more
targeted lists so as to reduce overall cost and enhance the productivity of each
mailing.
Research and development expense totaled 2.8% of sales in 1995 compared to 4.3%
of sales in 1994. This expense has been reduced during the past year bringing
company spending more in line with industry norms than was previously the case.
Interest expense increased by 39.5% in 1995 compared to 1994. This increase is
the result of higher rates which presently exist versus rates which existed
during the first quarter last fiscal year.
TRANSMATION, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
June 30, March 31,
1995 1994
-------- ------
Current Assets
Cash $ 358,236 $ 607,763
Accounts Receivable, less allowance for
doubtful accounts of $501,500 at 6/30/95
and $473,000 at 3/31/95 4,798,435 5,524,244
Inventories 6,748,826 6,747,036
Prepaid Expenses and Deferred Charges 1,380,885 1,270,833
Deferred Tax Assets 132,026 132,026
----------- ----------
Current Assets 13,418,408 14,281,902
----------- -----------
Properties, at cost, less accumulated
depreciation and amortization 1,493,856 1,500,498
Deferred Charges 158,735 146,161
Deferred Income Taxes 154,611 154,926
Other Assets 209,920 209,920
----------- -----------
$15,435,530 $16,293,407
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 2,739,879 $ 3,655,934
Accrued Payrolls, Commissions and Other
Liabilities 1,014,424 1,187,992
Income Taxes Payable 102,389 2,610
----------- -----------
Current Liabilities 3,856,692 4,846,536
----------- -----------
Long-Term Debt 3,920,700 4,064,426
Deferred Compensation 759,744 780,880
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8,537,136 9,691,842
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Stockholders' Equity
Common Stock, par value $.50 per share - Authorized - 8,000,000 shares issued
and outstanding - 2,399,040 shares at 6/30/95 and
2,380,640 at 3/31/95 1,199,520 1,190,320
Capital in Excess of Par Value 928,996 849,829
Accumulated Translation Adjustment (103,876) (109,513)
Retained Earnings 4,873,754 4,670,929
----------- -----------
6,898,394 6,601,565
----------- -----------
$15,435,530 $16,293,407
=========== ===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TRANSMATION, INC.
CONSOLIDATED STATEMENT OF INCOME (LOSS)
UNAUDITED
Three Months Ended
June 30, June 30,
1995 1994
-------- --------
Net Sales $9,566,497 $8,477,339
---------- ----------
Costs and Expenses:
Cost of Product Sold 6,033,964 5,432,739
Selling and Administrative Expenses 2,801,684 2,996,951
Research and Development Costs 267,925 364,390
Interest Expense 112,099 80,376
---------- ----------
9,215,672 8,874,456
---------- ----------
Income(Loss) Before Taxes 350,825 (397,117)
Provision for Income Taxes State and Federal 148,000
---------- ---------
Net Income(Loss) 202,825 (397,117)
Retained Earnings at Beginning of Period 4,670,929 4,289,144
---------- ----------
Retained Earnings at End of Period $4,873,754 $3,892,027
========== ==========
Net Income(Loss) Per Share $.08 ($.17)
==== ======
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TRANSMATION, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
Three Months Ended
June 30, June 30,
1995 1994
-------- --------
Cash Flows from Operating Activities
Net Income(Loss) $202,825 ($397,117)
Items Not Requiring (Providing) Cash
Included in Income
Depreciation and Amortization 99,724 94,276
Provision for Losses on Accounts Receivable 28,500 (25,700)
(Increase) Decrease in Accounts Receivable 697,309 785,549
(Increase) in Inventories (1,790) (320,761)
Decrease (Increase) in Prepaid Expenses &
Deferred Charges (122,626) 578,972
(Decrease) Increase in Accounts Payable (916,055) (163,211)
(Decrease) in Accrued Payrolls, Commissions
and Other Liabilities (173,568) (293,421)
Increase (Decrease) in Income Taxes Payable 99,779 (3,363)
(Decrease) in Deferred Compensation (21,136)
(Decrease) in Deferred Income Taxes 315 (1,781)
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Net Cash Provided (used) by Operating Activities (106,723) 253,443
--------- ---------
Cash Flows from Investing Activities:
Purchases of Properties (93,082) (155,294)
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Net Cash (used in) Investing Activities (93,082) (155,294)
---------- -----------
Cash Flows from Financing Activities:
Exercise of Stock Options & Warrants 88,367
(Decrease) Increase in Long-Term Debt (143,726)
----------- -----------
Net Cash Provided by Financing Activities (55,359)
Effect of Exchange Rate Changes on Cash 5,637 (7,420)
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Net Increase (Decrease) in Cash (249,527) 90,729
Cash at Beginning of Period 607,763 184,806
----------- -----------
Cash at End of Period $358,236 $275,535
======== ========
Cash Paid for Interest and Income Taxes are as follows:
Interest Paid $105,957 $75,865
Taxes Paid $131,943 None
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE
TRANSMATION, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Number of Shares
of $.50 Par Value Common Stock Capital
Common Stock Issued and in Excess Retained
Outstanding Outstanding of Par Value Earnings
----------------- ------------ ------------ -----------
Balance, March 31, 1993 2,374,040 1,187,020 834,679 4,875,378
Issuance of Stock 200 100 350
Net Loss (586,234)
---------- ---------- ---------- --------
Balance, March 31, 1994 2,374,240 1,187,120 835,029 4,289,144
Issuance of Stock 6,400 3,200 14,800
Net Income 381,785
--------- --------- ------- --------
Balance, March 31, 1995 2,380,640 1,190,320 849,829 4,670,929
Issuance of Stock 18,400 9,200 79,167
Net Income 202,825
--------- --------- ------- ----------
Balance, June 30, 1995 2,399,040 1,199,520 928,996 4,873,754
========= ========= ======== =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Revolving Credit Agreement
Borrowings under a secured revolving credit agreement with a bank which extends
through July 31, 1996 total $3,920,700 at June 30, 1995.
Maximum funds available under this credit agreement total $6,250,000 and are
based on a formula. The interest rate is 1% over the bank's prime lending rate.
The revolving credit agreement contains, among other provisions, restrictions on
the annual amount of capital expenditures, restrictions on the annual amount of
expenditures made for the purpose of printing and distributing catalogs and
requirements for minimum amounts of tangible net worth.
Additionally, the company has pledged its personal property and fixtures,
including inventory and equipment, and its accounts receivable as collateral
security for the loan. Further, the company has agreed to pay to the lender an
amount equal to 3/8% of the unused portion of the total credit available. The
fee is payable quarterly. Total commitment fees paid on any unused lines of
credit under revolving credit agreements were immaterial in 1995 and 1994.
The company is in compliance with provisions of its loan agreement at June 30,
1995.
Note 2 - Inventories
The major classifications of inventory are as follows:
June 30, March 31,
1995 1995
---------- ----------
Raw Materials and Purchased Parts $1,455,481 $1,510,425
Work in Process 872,093 767,522
Finished Products 4,421,252 4,469,089
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$6,748,826 $6,747,036
========== ==========
Note 3 - Stockholders' Equity
In August 1993, an incentive Stock Option plan was adopted. Options were
available to be granted to key employees under the 1993 Plan at prices not less
than fair market value at the date of grant and are exercisable in annual
installments beginning at the date of grant and expiring up to ten years later.
A plan adopted in August 1981 has now expired; however, certain options remain
exercisable under that plan.
The following table summarizes the transactions under the plans during 1995,
1994, and 1993:
Option Price
-------------
<c<
Shares Per Share Aggregate
Options ------ --------- ---------
Outstanding - 3/31/93 88,500 $ 2.25 $199,125
_________________________________________
Options Granted During the Year 10,000 4.00 40,000
Options Canceled During the Year ( 1,000) 2.25 ( 2,250)
Options Exercised During the Year ( 200) 2.25 ( 450)
_________________________________________
Balance, 3/31/94 97,300 2.25-4.00 236,425
_________________________________________
Options Granted During the Year 163,600 4.25 695,300
Options Exercised During the Year ( 5,200) 2.25 ( 11,700)
Options Canceled During the Year (12,100) 2.25 ( 27,225)
_________________________________________
Balance, 3/31/95 243,600 2.25-4.25 892,800
Options Exercised During the Year ( 1,200) 2.25 ( 2,700)
Options Canceled During the Year ( 200) 2.25 ( 450)
---------- ----------- ------------
Balance, 6/30/95 242,200 $2.25-$4.25 $889,650
======= =========== ========
59,200 shares are eligible to be exercised under the 1981 and 1993 plans. The
market value of these shares at the date they first became eligible for exercise
ranged from $2.00 to $4.75 per share and aggregated $185,350.
On August 21, 1984, shareholders approved the Directors' Warrant Plan. The Plan
provides that warrants may be granted thereunder to non-employee directors of
Transmation to purchase in the aggregate not more than 50,000 shares of the
company's Common Stock. The purchase price for shares issued under the
Directors' Warrant Plan shall be equal to the fair market value of the stock on
the date of the grant of the warrant. A summary of activity under the 1984
Directors' Warrant Plan is as follows:
Warrant
Shares Price Aggregate
------ -------- ---------
Balance - 3/31/94 32,500 $3.00-$3.875 $110,625
_________________________________________
Balance - 3/31/95 32,500 3.00-3.875 110,625
_________________________________________
Exercised During the Year (14,500) 3.00 -3.875 (54,875)
Canceled During the Year ( 2,000) 3.875 ( 7,750)
--------- ------ ---------
Balance - 6/30/95 16,000 $3.00 $ 48,000
====== ====== ========
On March 11, 1993, the Board of Directors granted the President of the company's
Instrument Division a non-qualified stock option contract for the purchase of
25,000 shares of the company's common stock at $3.00 per share, the fair market
value at the date of the grant. These shares are exercisable in equal annual
installments beginning at the date of the grant and expiring five years later.
Note 4 - Net Income (Loss) Per Share
The net income per share amounts in 1995 were computed by dividing the net
income by the average number of shares actually outstanding plus common
equivalent shares resulting from the assumed conversion of the dilutive stock
options and warrants. The net loss per share amount in 1994 was computed by
dividing the net loss by the number of shares actually outstanding. Common and
common equivalent shares averaged 2,461,455 in 1995 and 2,374,240 in 1994.
PART II
OTHER INFORMATION
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Item 1. Legal Proceedings
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Not Applicable.
Item 2. Changes in Securities
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Not Applicable.
Item 3. Default Upon Senior Securities
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Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
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Not Applicable.
Item 5. Other Information
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Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Not Applicable
(b) Not Applicable
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSMATION, INC.
Date: August 11, 1995 /s/ Robert G. Klimasewski
Robert G. Klimasewski, President
Date: August 11, 1995 /s/ John A. Misiazek
John A. Misiaszek
Vice President, Finance