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 December 31, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the transition period from to
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Commission file number 0-3905
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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 2,422,308 January 17, 1996
Part I
FINANCIAL INFORMATION
Item 1. Financial Statements
TRANSMATION
CONSOLIDATED BALANCE SHEET
ASSETS
Dec. 31, March 31,
1995 1995
-------- ---------
Current Assets:
Cash $ 468,071 $ 607,763
Accounts Receivable, less allowance for
doubtful accounts of $503,200 at 12/31/95
and $473,000 at 3/31/95 5,181,607 5,524,244
Inventories 6,652,040 6,747,036
Prepaid Expenses and Deferred Charges 1,117,227 1,270,833
Deferred Tax Assets 131,175 132,026
----------- ----------
Current Assets 13,550,120 14,281,902
----------- -----------
Properties, at cost, less accumulated
depreciation and amortization 1,745,897 1,500,498
Deferred Charges 128,427 146,161
Deferred Income Taxes 153,926 154,926
Other Assets 224,297 209,920
----------- -----------
$15,802,667 $16,293,407
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 3,364,152 $ 3,655,934
Accrued Payrolls, Commissions and Other
Liabilities 1,142,968 1,187,992
Income Taxes Payable 478,401 2,610
----------- -----------
Current Liabilities 4,985,521 4,846,536
----------- -----------
Long-Term Debt 2,432,100 4,064,426
Deferred Compensation 715,090 780,880
----------- -----------
8,132,711 9,691,842
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Stockholders' Equity
Common Stock, par value $.50 per share
Authorized - 8,000,000 shares issued
outstanding - 2,422,308 shares at 12/31/95 and
2,380,640 at 3/31/95 1,211,154 1,190,320
Capital in Excess of Par Value 1,009,747 849,829
Accumulated Translation Adjustment (89,919) (109,513)
Retained Earnings 5,538,974 4,670,929
----------- -----------
7,669,956 6,601,565
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$15,802,667 $16,293,407
=========== ===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TRANSMATION, INC.
CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1995 1994 1995 1994
----------------------------- -----------------------------
Net Sales $9,918,064 $10,293,625 $28,584,813 $27,249,354
----------------------------- -----------------------------
Costs and Expenses:
Cost of Product Sold 6,284,669 6,557,373 18,045,464 17,305,044
Selling & Admin. Expenses 2,610,327 2,833,743 8,094,237 8,571,033
Research & Develop. Costs 266,916 282,626 796,028 932,977
Interest Expense 81,741 117,706 300,739 304,893
----------------------------- -----------------------------
9,243,653 9,791,448 27,236,468 27,113,947
----------------------------- -----------------------------
Income Before Taxes 674,411 502,177 1,348,345 135,407
Provision for Income Taxes
State and Federal 197,775 42,000 480,300 55,000
----------------------------- -----------------------------
Net Income 476,636 460,177 868,045 80,407
Retained Earnings at
Beginning of Period 5,062,338 3,909,374 4,670,929 4,289,144
----------------------------- -----------------------------
Retained Earnings at
End of Period $5,538,974 $4,369,551 $5,538,974 $4,369,551
============================= =============================
Net Income Per Share $.19 $.19 $.34 $.03
============================= =============================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TRANSMATION, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
Three Months Nine Months
------------------------------- --------------------------------
Oct. 1, 1995 Oct. 1, 1994 April 1, 1995 April 1, 1994
to to to to
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994
------------------------------- --------------------------------
Cash Flows from Operating Activities:
Net Income $476,636 $460,177 $868,045 $80,407
Items Not Requiring (Providing) Cash
Included in Income
Depreciation and Amortization 115,631 97,909 323,379 301,292
Decrease(Increase) in Cash Surrender Value of
Insurance Policies (5,800) 128,085 (14,377) 119,369
Provision for Losses on Accounts Receivable (25,000) 20,625 30,200 30,525
Decrease(Increase) in Accounts Receivable (198,400) (1,308,290) 312,437 (340,449)
Decrease(Increase) in Inventories (143,569) 310,550 94,996 29,231
Decrease(Increase) in Prepaid Expenses and
Deferred Charges 163,141 (106,557) 171,340 766,328
(Decrease)Increase in Accounts Payable 1,284,774 709,886 (291,782) 129,301
(Decrease)Increase in Accrued Payrolls,
Commissions and Other Liabilities 201,954 183,022 (45,024) (266,081)
Increase in Income Taxes Payable 213,452 61,756 475,791 60,286
Decrease(Increase) in Deferred and Prepaid
Income Taxes (1,251) 8,841 1,851 10,427
Deferred Compensation (22,327) (65,790)
------------------------------- --------------------------------
Net Cash Provided (Used) by Operating Activities 2,059,241 566,004 1,861,066 920,636
------------------------------- --------------------------------
Cash Flows (Used in) Investing Activities:
Purchases of Properties (283,727) (65,594) (568,778) (334,224)
------------------------------- --------------------------------
Net Cash (Used in) Investing Activities (283,727) (65,594) (568,778) (334,224)
------------------------------- --------------------------------
Cash Flows from Financing Activities:
Exercise of Stock Options and Warrants and
Purchases under Stock Purchase Plan 18,135 9,450 180,752 11,700
Increase(Decrease) in Long-Term Debt (1,607,700) (490,000) (1,632,326) (458,074)
------------------------------- --------------------------------
Net Cash Provided(used) by Financing Activities (1,589,565) (480,550) (1,451,574) (446,374)
------------------------------- --------------------------------
Effect of Exchange Rate Changes on Cash (12,426) (38,117) 19,594 (21,969)
------------------------------- --------------------------------
Net Increase(Decrease) in Cash 173,523 (18,257) (139,692) 118,069
Cash at Beginning of Period 294,548 321,132 607,763 184,806
------------------------------- --------------------------------
Cash at End of Period $468,071 $302,875 $468,071 $302,875
=============================== ================================
Cash Paid for Interest and Income Taxes are as follows:
Interest Paid $84,160 $69,090 $294,750 $302,635
Taxes Paid $15,000 NONE $182,865 NONE
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TRANSMATION, INC.
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CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
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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 41,668 20,834 159,918
Net Income 868,045
---------------------- --------------------- ----------------- -----------------
Balance, December 31, 1995 2,422,308 $1,211,154 $1,009,747 $5,538,974
====================== ===================== ================= =================
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, 1998 total $2,432,100 at December 31, 1995.
Maximum funds available under this credit agreement total $7,000,000. The
interest rate is the bank's prime lending rate or may be fixed for up to a
90-day period.
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 1/4% 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 December
31, 1995.
Note 2 - Inventories
The major classifications of inventory are as follows:
Dec. 31, March 31,
1995 1995
---------- ----------
Raw Materials and Purchased Parts $1,885,188 $1,510,425
Work in Process 897,360 767,522
Finished Products 3,869,492 4,469,089
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$6,652,040 $6,747,036
========== ==========
Note 3 - Stockholders' Equity
In August 1993, an incentive Stock Option plan was adopted; this plan was
amended in August 1995. Options are available to be granted to 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
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 164,600 4.25 699,550
Options Exercised During the Year ( 5,200) 2.25 ( 11,700)
Options Canceled During the Year ( 12,100) 2.25 ( 27,225)
--------------------------------------
Balance, 3/31/95 244,600 2.25-4.25 897,050
Options Exercised During the Year ( 13,400) 2.25 ( 30,150)
Options Canceled During the Year ( 9,000) 2.25-6.25 ( 40,250)
Options Granted During the Year 187,400 4.25-6.25 951,250
--------------------------------------
Balance, 12/31/95 409,600 $2.25-$6.25 $1,777,900
======= =========== ==========
59,600 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 $6.50 per share and aggregated $230,000.
On August 21, 1984, shareholders approved the Directors' Warrant Plan. On August
16, 1995, this plan was amended by shareholders. The Plan provides that warrants
may be granted thereunder to non-employee directors of Transmation to purchase
in the aggregate not more than 100,000 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)
Granted During the Year 14,000 6.500 91,000
Canceled During the Year ( 2,000) 3.875 ( 7,750)
-------- ------------ ---------
Balance - 12/31/95 30,000 $3.00-$6.50 $139,000
======== ============ =========
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.
On August 15, 1995, the Board of Directors granted the President of the
Company's Transcat division a non-qualified stock option contract for the
purchase of 30,000 shares of the Company's common stock at $6.25 per share, the
fair market value at the date of the grant. These shares are exercisable in
equal installments beginning at the date of the grant and expiring five years
later.
Note 4 - Net Income Per Share
The net income per share amounts in 1995 and 1994 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. Common and common equivalent shares averaged 2,541,917 in
1995 and 2,478,616 in 1994.
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Sales increases that have been achieved are the result of product, service and
repair sales within the Company's Transcat division. Shipments from the
Company's domestic Instrument division and through its Far East subsidiaries are
not presently achieving planned levels and efforts are under way to correct this
situation.
Financial Condition
The Company's primary sources of liquidity and capital are funds provided
through its borrowing agreement with a bank, its profitability and through
management of its balance sheet.
Trade accounts receivable, inventories and prepaid assets were reduced by nearly
$600,000 during the first nine months of the current fiscal year. This, together
with the Company's pre-tax profits which totaled $1,348,000 in the period, has
made possible the reduction in long-term debt of approximately $1,632,000 that
has been achieved through December 31, 1995.
The Company signed an amendment to its existing credit facility during the
quarter which allows it to borrow at the prime rate of interest or at 250 basis
points over LIBOR for a predetermined period of time.
In December 1995, the Company announced that it had signed a letter of intent to
acquire Altek Industries Corp of Rochester, NY. The Company anticipates that the
transaction will close during the fourth quarter of the current fiscal year.
Results of Operations
Comparison of October 1, 1995 - December 31, 1995
to
October 1, 1994 - December 31, 1994
Sales in the current quarter were approximately 4% below the level of sales
achieved during the same period last year. During last year's third quarter, the
Company completed the shipment of a system valued at nearly $400,000. No similar
shipment occurred in the current fiscal year.
Cost of product sold and research and development costs were similar, as a
percentage of sales, in both 1995 and 1994. Selling and administrative expenses
totaled 26.3% of sales in 1995 compared to 27.5% of sales in 1994. This
reduction is primarily the result of lower catalog amortization costs in 1995
compared to 1994. Interest expense was reduced by more than 30% in 1995 compared
to the same period in 1994. This reduction is the result of lower borrowings in
1995 compared to 1994.
Comparison of April 1, 1995 - December 31, 1995
to
April 1, 1994 - December 31, 1994
Sales in the nine months ended December 31, 1995 have increased approximately 5%
compared to the same period last year. This increase is the result of increases
in the Company's Transcat division. Sales in the Instrument division and through
the Company's Far East subsidiaries have been disappointing and measures are
being undertaken to strengthen those areas.
Cost of products sold has totaled 63.1% of sales in 1995 compared to 63.5% of
sales in 1994. This improvement is the result of improved margins within the
Transcat division partially the result of increased billings through its
CalXPress operation as well as the result of Transcat being able to achieve more
favorable pricing from its vendors.
Sales and administrative expenses improved to 28.3% of sales compared to 31.5%
of sales in 1994. This improvement is the result of lower catalog mailing costs
in 1995 compared to 1994.
Research and development costs totaled 2.8% of sales in 1995 compared to 3.4% of
sales in 1994. Research spending has been reduced during 1995 bringing Company
spending in line with industry norms.
PART II
OTHER INFORMATION
Item 2. Changes in Securities
On December 15, 1995 Transmation amended its revolving credit
agreement with a bank. That amendment is filed as Exhibit 4(c) to this filing.
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.
TRANSMATION, INC.
Date: February 9, 1996 /s/ ROBERT G. KLIMASEWSKI
-------------------------
Robert G. Klimasewski
President
Date: February 9, 1996 /S/ JOHN A. MISIASZEK
-----------------------
John A. Misiaszek
Vice President, Finance
INDEX TO EXHIBITS
(2) Plan of acquisition, reorganization, arrangement, liquidation or succession
Not applicable.
(3) (a) Articles of Incorporation
Articles of Incorporation, as amended, are incorporated herein by reference
to Exhibit 4(a) to the Registrant's Registration Statement on Form S-8
(Registration No. 33-61665) as filed on August 8, 1995.
(b) By-laws
Code of Regulations, as amended, are incorporated herein by reference to
Exhibit 3 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended March 31, 1988.
(4) Instruments defining the rights of security holders, including indentures.
(a) The documents listed under Item (3) of this Index are incorporated
herein by reference.
(b) Revolving Credit Agreement between the Registrant and Manufacturers and
Traders Trust Company is incorporated herein to Exhibit 1 to the Registrant's
Form 10-Q for the quarter ended September 30, 1994.
(c) Agreement and Amendment No. 1 to an Existing Revolving Credit Facility
Agreement between the Registrant and Manufacturers and Trades Trust Company
dated September 8, 1995 is incorporated herein by reference to Exhibit 1 to the
Registrant's Form 10-Q for the quarter ended September 30, 1995.
*(d) Agreement and Amendment No. 2 to an Existing Revolving Credit Facility
Agreement between the Registrant and Manufacturers and Traders Trust Company
dated December 15, 1995, together with a brief identification of the contents of
all omitted exhibits thereto, is included herein as Exhibit 4(d). Upon written
request, the Registrant will provide to security holders copies of any of the
referenced omitted exhibits.
(10) Material Contracts
(a) The documents listed under Item (4) of this Index are incorporated
herein by reference.
(b) Compensation agreements between the Registrant and William J. Berk are
incorporated herein by reference to Exhibit 10 to the Registrant's Form 10-K for
the fiscal year ended March 31, 1984, and Exhibit 10(b) to the Registrant's Form
10-K for the fiscal year ended March 31, 1991.
(c) Non-Statutory Stock Option Agreement dated March 11, 1993 between the
Registrant and Thomas R. Crumlish is incorporated herein by reference to Exhibit
10 to the Registrant's Form 10-K for the fiscal year ended March 31, 1993.
(d) Transmation, Inc. Directors' Stock Plan is incorporated herein by
reference to Exhibit 10(i) to the Registrant's Form 10-K for the fiscal year
ended March 31, 1995.
(e) Employment Agreement dated as of April 1, 1995 between the Registrant
and Robert G. Klimasewski is incorporated herein by reference to Exhibit 10(ii)
to the Registrant's Form 10-K for the fiscal year ended March 31,1995.
(f) Transmation, Inc. Amended and Restated Directors' Warrant Plan is
incorporated herein by reference to Exhibit 99(b) to the Registrant's
Registration Statement on Form S-8 (Registration No. 33-61665) as filed on
August 8, 1995.
(g) Transmation, Inc. Amended and Restated 1993 Stock Option Plan is
incorporated herein by reference to Exhibit 99(c) to the Registrant's
Registration Statement on Form S-8 (Registration No. 33-61665) as filed on
August 8, 1995.
(h) Transmation, Inc. Employees' Stock Purchase Plan is incorporated herein
by reference to Exhibit 99(e) to the Registrant's Registration Statement on Form
S-8 (Registration No. 33-61665) as filed on August 8, 1995.
(i) Amendment No. 1 to Transmation, Inc. Directors' Stock Plan is included
herein by reference to Exhibit 10(i) to the Registrant's Form 10-Q for the
quarter ended September 30, 1995.
(j) Non-Statutory Stock Option Agreement dated August 15, 1995 between
Transmation, Inc. and Eric W. McInroy is included by reference to Exhibit 10(j)
to the Registrant's Form 10-Q for the quarter ended September 30, 1995.
(11) Statement re computation of per share earnings
Not applicable.
(15) Letter re unaudited interim financial information
Not applicable.
(18) Letter re change in accounting principles
Not applicable.
(19) Report furnished to security holders
Not applicable.
(22) Published report regarding matters submitted to vote of security holders
Not applicable.
(23) Consents of experts and counsel
Not applicable.
(24) Power of attorney
Not applicable.
*(27)Financial Data Schedule
The Financial Data Schedule is included herein as Exhibit 27.
(99) Additional Exhibits
Not applicable.
- -----------------
* Exhibit filed with this Report
EXHIBIT 4(d)
AGREEMENT AND AMENDMENT NO. 2
TO AN EXISTING REVOLVING
CREDIT FACILITY AGREEMENT
THIS AGREEMENT AND AMENDMENT NO. 2 TO AN EXISTING REVOLVING CREDIT FACILITY
AGREEMENT is made December , 1995, by and between MANUFACTURERS AND TRADERS
TRUST COMPANY ("Bank"), a domestic corporation with an office and principal
place of business located at One M&T Plaza, Buffalo, New York 14240, and
TRANSMATION, INC. ("Borrower"), an Ohio corporation authorized to do business in
New York State, with an office and principal place of business located at 977
Mt. Read Blvd., Rochester, New York 14606.
R E C I T A L S
A. On or about September 13, 1994, Bank and Borrower entered into a
Revolving Credit Facility Agreement.
B. In connection with its execution of the Revolving Credit Facility
Agreement, Borrower and other Entities also executed and delivered to Bank
various Documents.
C. The Revolving Credit Facility Agreement was amended pursuant to an
Amendment No. 1 to an Existing Facility Agreement, entered into by Borrower and
Bank on or about September 8, 1995 ("Amendment").
D. Bank and Borrower desire to make certain additional changes to the
Revolving Credit Facility Agreement as amended by the Amendment, which changes
are set forth below.
NOW, THEREFORE, in consideration of the promises set forth below, and/or in
consideration of any prior extension of credit by Bank to Borrower and/or in
consideration of Bank entering into the Agreement, Bank and Borrower hereby
agree as follows:
1. This Agreement and Amendment No. 2 to an Existing Revolving Credit
Facility Agreement is referred to below as the "Amendment No. 2". Except as
otherwise specified in this Amendment No. 2, capitalized terms used in this
Amendment No. 2 and in the Documents executed in connection with this Amendment
No. 2, have the definition given to them in the September 13, 1994 Revolving
Credit Facility Agreement between Bank and Borrower, as amended by the Amendment
and by this Amendment No. 2 and as hereafter amended from time to time
("Agreement").
2. Effective as the date this Amendment No. 2 is executed by Bank and
Borrower ("Amendment 2 Date"), Section 1.19 of the Agreement is deleted and
replaced with the following:
1.19 The term "Note" shall mean the $7,000,000.00 Grid Note executed by
Borrower on the Amendment 2 Date pursuant to Section 2 of the Agreement, as
extended, supplemented, modified, amended or replaced from time to time.
3. Effective as of the Amendment 2 Date, the following are added as
Sections 1.29, 1.30, 1.31, 1.32, 1.33, 1.34 and 1.35 of the Agreement:
"1.29 The term "Amendment No. 2" shall mean an Agreement and Amendment No.
2 to an Existing Revolving Credit Facility Agreement entered into by Bank and
Borrower on the Amendment 2 Date.
1.30 The term "Amendment 2 Date" shall mean the date Amendment No. 2 is
executed by Bank and Borrower.
1.31 "Eurocurrency Reserve Rate" means, for any LIBOR Loan for any Interest
Period therefor, the daily average of the stated maximum rate (expressed as a
decimal) at which reserves (including any marginal, supplemental, or emergency
reserves) are required to be maintained by Bank during such Interest Period (or
any part thereof) under Regulation D issued by the Federal Reserve ("Regulation
D"), against "Eurocurrency liabilities" (as such term is used in Regulation D),
but without the benefit or credit of proration, exemptions, or offsets that
might otherwise be available to Bank from time to time under Regulation D.
Without limiting the effect of the foregoing, the Eurocurrency Reserve Rate
shall reflect any other reserves required to be maintained by Bank against any
category of liabilities that includes deposits by reference to which the LIBOR
Base Rate for LIBOR Loans is determined, or any category of extension or credit
or other assets that include LIBOR Loans.
1.32 "Increased Cost" means any additional amounts sufficient to compensate
Bank for any increased cost of funding or maintaining a LIBOR Loan as a result
of any law (other than changes in tax laws imposed on the overall net income or
similar measures of profitability of Bank) or guideline adopted pursuant to or
arising out of the July, 1988 report of the Basle Committee on Banking
Regulations and Supervisory Practices entitled "International Conversions of
Capital Measurement and Capital Standards", or the adoption after the date of
this Agreement of any law or guideline regarding capital adequacy, or any change
in any of the foregoing or in the interpretation or the administration of any of
the foregoing by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by Bank
or Bank's holding company, if any, with any request or direction regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, which has or would have the effect of
reducing the rate of return of Bank's capital or the capital of Bank's holding
company, if any, as a direct consequence of the
transactions contemplated by this Agreement and related documents and
agreements, the existence of Bank's commitment to provide LIBOR Loans to a level
below that which Bank or Bank's holding company, if any, would have achieved but
for such adoption, change or compliance (taking into consideration Bank's
policies on capital adequacy).
1.33 "Interest Period" means, with respect to any LIBOR Loan, each period
commencing on the date such LIBOR Loan is made or the last day of the
immediately preceding Interest Period for a LIBOR Loan which Borrower chooses to
renew as a LIBOR Loan, and thirty, sixty or ninety days thereafter as the
Borrower may select as provided in Section 2.1.6. Notwithstanding the foregoing,
(i) if any Interest Period would otherwise end after the Revolver Expiration
Date, such Interest Period shall end on the Revolver Expiration Date; (ii) each
Interest Period that would otherwise end on a day which is not a Business Day,
shall end on the next succeeding Business Day; and (iii) notwithstanding clauses
(i), or (ii) above, no Interest Period shall have a duration of less than thirty
days without Bank's consent and, if the Interest Period for any LIBOR Loan would
otherwise be a shorter period, such loan shall not be available hereunder for
such period.
1.34 "LIBOR Base Rate" means, with respect to any Interest Period for a
LIBOR Loan, the rate per annum equal to the quotient obtained by dividing (and
rounded upward to the nearest 1/100 of 1%) (i) LIBOR (as determined below) on a
date two Business Days (or less, if acceptable to Bank), prior to the beginning
of an Interest Period ("Interest Setting Date"), at which deposits in United
States Dollars for a period and in an amount, comparable to the Interest Period
and the principal amount of the LIBOR Loan are offered to prime banks in the
London Interbank market at 11:00 a.m. (London time) on that day ("Reference
Bank") by (ii) a percentage equal to 100% minus the Eurocurrency Reserve Rate.
LIBOR shall be determined by the Bank on the Interest Setting Date from Telerate
Page 3750 as of 11:00 a.m. (London time) on such date, or if such page or such
service ceases to display such information, from such other service or method as
Bank may select. The LIBOR Base Rate shall be further adjusted on the first day
of each Interest Period to reflect any Increased Cost.
1.35 "LIBOR Loan" means a loan made by Bank under the Revolver which
accrues interest for the selected Interest Period at the LIBOR Base Rate plus
2.5%.
1.36 "LIBOR Rate" means, for the selected Interest Period, the LIBOR Base
Rate plus 2.5% per annum.
4. Effective as of the Amendment 2 Date, Section 2.1 of the Agreement is
deleted and replaced with the following:
"2.1 $7,000,000.00 Revolver
2.1.1 Effective as of the Amendment 2 Date, Bank hereby establishes for
Borrower a Revolver, the unpaid principal balance of which shall not at any time
exceed the Maximum Credit. This Revolver replaces and supersedes the
$7,000,000.00 Revolver previously provided to Borrower by Bank in the Amendment.
Within such limit, Borrower may borrow, repay and reborrow, for working capital
purposes only, on and after the Amendment 2 Date through the Revolver Expiration
Date, provided that the following conditions are met at the time of each
borrowing request:
2.1.1.1 Borrower is not in default under this Agreement, and no condition
exists, which, with notice, lapse of time or both, would constitute a default
under this Agreement.
2.1.1.2 All representations and warranties contained in Section 4 of this
Agreement and elsewhere in the Agreement and/or in any Document are true and
correct as of the date of the requested borrowing.
2.1.2 Unless sooner accelerated, all loans made under this Revolver shall
be repayable on the Revolver Expiration Date, pursuant to the terms of
Borrower's Note, which shall be in the form of Exhibit A to Amendment No. 2,
with blanks appropriately completed.
2.1.3 Each borrowing under this Revolver shall be processed by debiting
this Revolver and crediting Borrower's checking account with Bank for the amount
of the borrowing or otherwise making the loan proceeds available to Borrower.
The loan shall be deemed made immediately upon the crediting of the loan
proceeds to Borrower's checking account with Bank or by Bank otherwise making
the loan proceeds available to Borrower. Each loan, together with the unpaid
principal balance of all previous loans made under this Revolver, shall be
deemed automatically refinanced and consolidated into one loan, which shall be
payable to Bank as indicated in the Note.
2.1.4 So long as Bank receives notice of a proposed borrowing by 1:00 p.m.
on a Business Day, and the conditions precedent set forth in Sections 2.1.1.1
and 2.1.1.2 are satisfied, Bank will make advances duly authorized and permitted
under this Revolver available to Borrower by crediting Borrower's checking
account maintained at Bank's main office on that date. If Bank receives notice
of a proposed borrowing after 1:00 p.m. on a Business Day, it will endeavor to
make the advance available on that date, but if Bank is unable to do so, Bank
will make the advance to Borrower by crediting Borrower's checking account
maintained at Bank's office no later than 10:00 a.m. of the next Business Day.
2.1.5 Except for LIBOR Loans made by Bank at Borrower's request under this
Revolver, which shall accrue interest as specified in Section 2.1.6 below, the
unpaid principal balance of the Note, shall at all times prior to acceleration,
accrue interest, computed on the basis of a 360 day year for the actual number
of days elapsed, at the floating rate of Bank's Prime Rate per annum. If any
payment due under the Note is not made within five days of the date when due,
Borrower shall pay a late charge equal to the greater of 5% of the delinquent
amount or $50.00, or Bank's then current late charge. In the event Bank
accelerates payment of the Note, interest shall accrue on the unpaid principal
balance of the Note (including the then unpaid principal balance of all LIBOR
Loans), at the floating rate of Bank's Prime Rate plus 5.0% per annum, computed
on the basis of a 360 day year for the actual number of days elapsed, until the
Note is paid in full. In the event there is a change in Bank's Prime Rate, the
change in the accruing interest rate on the unpaid principal balance of the
Note, which is not accruing interest at a LIBOR Rate shall be effective on the
day when the change in Bank's Prime Rate is made by Bank, without notice to
Borrower. Payments of all accrued interest on the Note (whether such interest is
accruing at Bank's Prime Rate or at a LIBOR Rate), shall be due and payable on
the first Business Day of each month, commencing January 2, 1996, and when Bank
has accelerated payment of the Note, and on the Revolver Expiration Date, and
when the Note is paid in full.
2.1.6. So long as the conditions precedent set forth in Sections 2.1.1.1
and 2.1.1.2 are satisfied at the time of the request, Borrower may on two
Business Days'(or less notice, at Bank's sole option), prior written notice to
Bank, request that an advance under the Revolver accrue interest at the
applicable LIBOR Rate for a designated Interest Period or Borrower may convert
all or a portion of the unpaid principal balance of the Note which is then
accruing interest at the floating rate of Bank's Prime Rate, to a LIBOR Loan for
the selected Interest Period, or Borrower may renew a LIBOR Loan at the end of
an Interest Period at a LIBOR Rate determined by Bank for an additional
designated Interest Period. The written notice from Borrower shall specify the
requested amount of the LIBOR Loan plus the requested Interest Period. Once
Borrower requests a LIBOR Loan, the request shall be irrevocable. Upon receipt
of the written request, Bank shall determine the LIBOR Base Rate for the
designated Interest Period. After Bank determines the LIBOR Base Rate, Bank
shall notify Borrower of the LIBOR Rate for the requested LIBOR Loan, which
LIBOR Rate shall be the LIBOR Base Rate determined by Bank, plus 2.5% per annum.
All loans made under the Revolver shall accrue interest on the basis of a 360
day year for the actual number of days elapsed, regardless of whether the loan
is accruing interest at Bank's Prime Rate or at a LIBOR Rate.
At the end of an Interest Period, unless Borrower has timely requested in
writing to renew the LIBOR Loan at a new LIBOR
Rate for an additional specified Interest Period, the LIBOR Loan shall
thereafter automatically accrue interest at the floating rate of Bank's Prime
Rate per annum. Principal on LIBOR Loans may not be prepaid in whole or in part
prior to the end of an Interest Period without the prior written consent of
Bank. Bank may, at its sole option, refuse to allow such prepayment or allow
such prepayment upon payment to Bank of a prepayment premium satisfactory to
Bank.
2.1.7. In the event that the unpaid principal balance of the Note at any
time exceeds the Maximum Credit for any reason, including but not limited to a
change in the Borrowing Base and/or a decrease in the value of Eligible Accounts
Receivable and/or Eligible Inventory, then Borrower shall, without notice,
demand or protest, pay to Bank within ten days of the date the unpaid principal
balance of the Note exceeds the Maximum Credit, a sum sufficient to reduce the
principal balance of the Note to an amount equal to or less than the Maximum
Credit. Any unpaid principal balance of the Note which is in excess of the
Maximum Credit shall, until such excess is paid in full, or until Bank
accelerates payment of the Note, accrue interest at the floating rate of Bank's
Prime Rate plus 3% per annum, calculated on the basis of a 360 day year for the
actual number of days elapsed.
2.1.8 Bank is authorized to act on the telephone requests for borrowing
and/or prepayment, of any person identifying himself as an Authorized Person and
Borrower will be bound by such instructions. Borrower hereby indemnifies and
holds Bank harmless from any liability (including Bank's reasonable attorneys'
fees), which may arise as a result of Bank's good faith reliance on telephone
requests for borrowing and/or prepayment from any person identifying himself as
an Authorized Person.
2.1.9 Borrower shall pay to Bank a commitment fee equal to 1/4 of 1% per
annum (calculated on the basis of a 360 day year), on the daily average of the
difference between $7,000,000.00 (subject to permanent reduction, as specified
in Section 2.1.10 below), and the aggregate principal amount outstanding under
the Revolver. This commitment fee shall be payable in arrears and calculated by
Bank as of the first Business Day of each January (commencing January 2, 1996),
April, July and October, on the Revolver Expiration Date and when payment of the
Note is accelerated. The commitment fees shall be due and payable by Borrower
within ten days of the date that Bank bills Borrower for the commitment fee.
2.1.10 On five Business Days written notice to Bank, Borrower may elect to
reduce the number "$7,000,000.00" in the definition of Maximum Credit to a
lesser amount selected by Borrower. Upon such election, the reduction shall be
permanent and irrevocable, and if the then unpaid principal balance of the Note
exceeds the revised Maximum Credit, Borrower shall immediately pay
to Bank a sum sufficient to reduce the unpaid principal balance of the Note to
the new Maximum Credit."
5. Except as set forth above, all terms and conditions of the Agreement, as
amended by this Amendment No. 2, and the Documents remain the same.
6. Bank's obligation to enter into this Amendment is contingent upon the
execution of this Amendment No. 2 by Borrower, and the performance by Borrower
of all terms and conditions specified in this Amendment No. 2, and upon the
following additional terms and conditions.
a. Borrower shall deliver to Bank a Certificate executed by its
Secretary, containing the duly adopted resolutions of its directors, consenting
to the adoption of resolutions authorizing among other things, the execution by
Borrower of this Amendment, and all Documents to be executed by Borrower in
connection therewith. The Certificate shall be in the form of Exhibit "B", with
blanks appropriate completed.
b. Within thirty days of the Amendment 2 Date, all Guarantors shall
execute and deliver to Bank an Agreement and Acknowledgement pursuant to which
they acknowledge to Bank that all Documents executed by them in connection with
the Agreement, including but not limited to their respective Guaranties, remain
in full force and effect ("Acknowledgement"). The form of the Acknowledgements
shall be satisfactory to Bank and its attorneys.
c. All legal details in connection with this Amendment No. 2 and the
Documents executed in connection therewith, shall have met with the approval of
Bank and Woods, Oviatt, Gilman, Sturman & Clarke, counsel for Bank.
Bank, at is sole option, may extend past the Amendment 2 Date, the time
in which Borrower and/or any Guarantor and/or any other Entity is required to
provide any of the Documents required to be delivered under this Amendment No.
2. The extension may be written or oral, expressed or implied, such as where
Bank executes this Amendment No. 2 on the Amendment 2 Date without one or more
of the Documents required under this Amendment No. 2 having been provided. Such
extension shall not operate as a waiver of the requirement that such Documents
be provided, and Borrower's and/or Guarantors' and/or any other Entities'
failure to provide such Documents to Bank after the Amendment 2 Date, shall at
Bank's option, constitute a default under Section 6.1.4 of the Agreement. The
requirement that Borrower and/or any Guarantor and/or any other Entity deliver
to Bank any Documents called for under this Amendment No. 2 may only be waived
in a writing signed by Bank.
7. On the Amendment No. 2 Date, Borrower shall pay all of Bank's attorneys'
fees and disbursements incurred and to be incurred in connection with the
preparation, negotiation and execution of this Amendment No. 2, the Documents
executed in connection with this Amendment No. 2, and all related matters.
8. This Amendment No. 2 is governed by New York law, and may not be amended
or terminated orally. Any litigation involving this Amendment No. 2 and/or the
Agreement and/or any of the Documents shall at Bank's sole option, be triable
only in a court located in Monroe County, New York. BORROWER WAIVES THE RIGHT TO
A JURY TRIAL IN ANY LITIGATION OF ANY NATURE OR KIND IN WHICH BORROWER AND BANK
ARE PARTIES. No other Entity is a third party beneficiary of this jury trial
waiver. Borrower also waives the right to require Bank to post an undertaking in
any action commenced by Bank against Borrower, or in any action in which Bank
and Borrower are both parties, including but not limited to an action under
Article 71 of the CPLR.
IN WITNESS WHEREOF, Bank and Borrower have executed this Amendment No. 2 on
the date first written above.
MANUFACTURERS AND TRADERS
TRUST COMPANY
By: /s/ J. THEODORE SMITH
-----------------------------------
J. Theodore Smith
Assistant Vice President
TRANSMATION, INC.
By: /s/ ROBERT G. KLIMASEWSKI
-----------------------------------
Robert G. Klimasewski
President
STATE OF NEW YORK )
COUNTY OF MONROE )ss:
On this 19th day of December, 1995, before me personally came J. Theodore
Smith, to me known, who, being by me duly sworn, did depose and say that he is
an Assistant Vice President of MANUFACTURERS AND TRADERS TRUST COMPANY, the
corporation described in and which executed the above instrument; and that he
signed his name thereto by order of the board of directors of said corporation.
/s/ BRIAN D. CALLAHAN
-----------------------------------
Notary Public
STATE OF NEW YORK )
COUNTY OF MONROE )ss:
On this 15th day of December, 1995, before me personally came Robert G.
Klimasewski, to me known, who, being by me duly sworn, did depose and say that
he is an Assistant Vice President of TRANSMATION, INC., the corporation
described in and which executed the above instrument; and that he signed his
name thereto by order of the board of directors of said corporation.
/s/ [illegible]
-----------------------------------
Notary Public
EXHIBIT A
Grid Note (omitted)
EXHIBIT B
Certificate of Secretary (omitted)
EXHIBIT 27
TRANSMATION, INC.
FINANCIAL DATA SCHEDULE
This schedule contains summary financial information extracted from the
Company's September 30, 1995 Form 10-Q and is qualified in its entirety by
reference to such financial statements.
Period 9 months
Fiscal year-end March 31, 1996
Period-end December 31, 1995
Cash and cash items $468,071
Marketable securities 0
Notes and accounts receivable-trade $5,684,807
Allowances for doubtful accounts $503,200
Inventory $6,652,040
Total current assets $13,550,120
Property, plant and equipment $5,476,881
Accumulated depreciation $3,730,984
Total assets $15,802,667
Total current liabilities $4,985,521
Bonds, mortgages and similar debt $2,432,100
Preferred stock-mandatory redemption 0
Preferred stock-no mandatory redemption 0
Common stock $1,211,154
Other stockholders' equity $6,458,802
Total liabilities and stockholders' equity $15,368,745
Net sales of tangible products $24,677,681
Total revenues $28,584,813
Cost of tangible goods sold $16,319,564
Total costs and expenses applicable to sales and revenues $18,045,464
Other costs and expenses $8,890,265
Provision for doubtful accounts and notes $30,200
Interest and amortization of debt discount $300,739
Income before taxes and other items $1,348,345
Income tax expense $480,300
Income/loss continuing operations $868,045
Discontinued operations 0
Extraordinary items 0
Cumulative effect-changes in accounting principles 0
Net income or loss $868,045
Earnings per share-primary $.34
Earnings per share-fully diluted $.34