SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 2004
[ ] OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to ____________
Commission file number 1-7872
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TRANSTECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-4062211
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
700 Liberty Avenue 07083
Union, New Jersey (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (908) 688-2440
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $0.01
(Title of class)
New York Stock Exchange
(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes [ ] No [X]
As of June 18, 2004, the aggregate market value of voting stock held by
non-affiliates of the registrant based on the last sales price as reported by
the New York Stock Exchange on such date was $42,201,635. (See Item 12)
As of June 18, 2004, the registrant had 6,498,143 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's Proxy Statement for the 2004 Annual Meeting of
Shareholders is incorporated by reference into Part III hereof.
PART I
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934:
Certain of the statements contained in the body of this Report are
forward-looking statements (rather than historical facts) that are subject to
risks and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. In the preparation of
this Report, where such forward-looking statements appear, the Company has
sought to accompany such statements with meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those described in the forward-looking statements. A description
of the principal risks and uncertainties inherent in the Company's business is
included herein under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Readers of this Report are
encouraged to read these cautionary statements carefully.
ITEM 1. BUSINESS.
GENERAL
TransTechnology Corporation designs, develops, manufactures and sells
sophisticated lifting equipment for specialty aerospace and defense
applications. TransTechnology Corporation was originally organized in 1962 as a
California corporation and reincorporated in Delaware in 1986. Unless the
context otherwise requires, references to the "Company" or the "Registrant"
refer to TransTechnology Corporation (including the California corporation prior
to the reincorporation) and its consolidated subsidiaries. The Company's fiscal
year ends on March 31. Accordingly, all references to years in this report refer
to the fiscal year ended March 31 of the indicated year.
DISCONTINUED OPERATIONS AND RESTRUCTURING
On January 19, 2001, the Company announced its intention to restructure
and divest its cold-headed products (TCR), retaining ring (Seeger-Orbis,
TransTechnology (GB), TT Brasil and TransTechnology Engineered Rings USA), hose
clamp (Breeze Industrial and Pebra) and aerospace rivet (Aerospace Rivet
Manufacturers Corp.) operations. In addition, on April 12, 2001, the Company
announced that it would divest TransTechnology Engineered Components (TTEC), a
manufacturer of spring steel engineered fasteners and headlight adjusters. For
business segment reporting purposes, these above-mentioned business units,
excluding ARM for 2002, have previously been classified as the "Specialty
Fasteners Segment." The Company has reclassified these business units as
discontinued operations for all periods presented.
A portion of the Company's interest expense for 2003 and 2002 has been
allocated to discontinued operations based upon the net asset balances
attributable to those operations. Interest expense allocated to discontinued
operations was $6.3 million and $20.1 million in 2003 and 2002, respectively.
Income taxes have been allocated to discontinued operations in 2003 and 2002
based on the estimated tax attributes of the income and assets of the underlying
discontinued businesses.
On July 10, 2001, the Company sold its Breeze Industrial and Pebra hose
clamp businesses to Industrial Growth Partners and members of Breeze
Industrial's management for $46.2 million, which was paid in cash. In a related
transaction, the Company sold the real estate occupied by Breeze Industrial to a
quasi-governmental organization for $2.0 million which the Company may, under
certain circumstances, be required to repurchase for $1.0 million in fiscal
2006. Proceeds from the sales were used to repay borrowings outstanding under
the Company's then current Credit Facility (the "Fleet Credit Facility").
On December 5, 2001, the Company sold its TTEC businesses to a company
formed by affiliates of Kohlberg & Company, L.L.C. for $98.5 million, of which
$96.0 million was cash and the balance the assumption of certain liabilities
related to the purchased businesses. The cash proceeds of the sale were used to
repay borrowings outstanding under the Fleet Credit Facility. In the fiscal
quarter ended September 30, 2001, as part of its restructuring program, the
Company reported a pre-tax asset impairment charge for TTEC in the amount of
$85.8 million to reduce the carrying value of these businesses to estimated fair
market value. This noncash charge was specifically related to the write-down of
goodwill. The sale proceeds of TTEC approximated its adjusted carrying value.
On February 21, 2002, the Company sold its Seeger-Orbis retaining ring
business in Germany to Barnes Group Inc. for $20.0 million cash. The net
proceeds of the sale were used to repay borrowings outstanding under the Fleet
Credit Facility.
On April 16, 2002, the Company sold its Aerospace Rivet Manufacturers
Corporation subsidiary to Allfast Fastening Systems, Inc. for $3.2 million cash.
The net proceeds of the sale were used to repay borrowings outstanding under the
Fleet Credit Facility.
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On May 30, 2002, the Company completed the sale of substantially all of
the net assets of its U.S. retaining ring business to SeaView Capital LLC for
$2.9 million of cash, a promissory note of $0.8 million and warrants for 5% of
the equity of the purchaser. The net proceeds of the sale were used to repay
borrowings outstanding under the Fleet Credit Facility.
On July 16, 2002, the Company completed the recapitalization of
TransTechnology (GB) Ltd., now known as Cirteq, Ltd., by selling 81% of its
shares to a new entity controlled by local management for $121 (one hundred
twenty-one dollars). The Company also converted $2.0 million of unsecured
intercompany debt into a $2.0 million loan secured by a first lien on Cirteq's
real property in Glusburn, England. In the third quarter of 2004, the Company
recorded a pre-tax gain of $0.9 million that is included in other income
relating to the sale of the remaining 19% interest in Cirteq, Ltd. and the
collection of the loan from Cirteq, Ltd.
On August 6, 2002, we completed the sale of all of the shares of
TransTechnology Brasil, Ltda. for $0.7 million, of which $0.3 million was paid
in cash and the balance in installment payments. We also will be paid $0.3
million of intracompany debt due from the Brazilian unit. We used the net
proceeds of the sale to repay borrowings outstanding under our prior senior
credit agreement.
On January 3, 2003, the Company completed the sale of TCR Corporation for
cash consideration of $10.0 million, plus the assumption of certain liabilities,
to an affiliate of MidMark Capital LLC. The net proceeds of the sale were used
to repay borrowings outstanding under the New Senior Credit Facility (as
detailed in Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources - Senior Credit
Facility".)
On February 24, 2003, the Company sold Norco, Inc. for $51.0 million cash
and a $1.0 million reimbursement for certain income taxes payable as a result of
the transaction to a wholly-owned subsidiary of TransDigm Inc. The net cash
proceeds were used to retire senior debt under the New Senior Credit Facility
and partially repay subordinated debt. On June 11, 2004, the Company sold the
NORCO real estate located in Ridgefield, Connecticut for $1.6 million, and
applied the net proceeds to reduce its Senior Debt under the Senior Credit
Facility.
In fiscal 2003 and 2002, the Company recognized charges of $2.7 million
and $1.6 million, respectively, for severance and other costs related to the
corporate office restructuring, substantially all of which costs were paid by
the end of each fiscal year.
CORE BUSINESS
As a result of the above referenced restructuring program, TransTechnology
Corporation's core business is aerospace and defense products.
The Company conducts its business under the trade-name "Breeze-Eastern".
Breeze-Eastern is the world's largest designer and leading supplier of
performance-critical rescue hoists and cargo-hook systems. Breeze-Eastern also
manufactures weapons-handling systems, cargo winches, tie-down equipment and
tow-hook assemblies. These products are sold primarily to military and civilian
agencies and aerospace contractors.
PRODUCTS
The Company's products are designed, developed and manufactured by
Breeze-Eastern. Breeze-Eastern specializes in the design, development and
manufacture of sophisticated lifting and restraining products, principally
helicopter rescue hoists, cargo winches, external hook systems and weapons
handling systems. Breeze-Eastern's weapons-handling systems range from cargo
handling on fixed-wing aircraft to hoisting weapons into position on
carrier-based aircraft. Management believes that Breeze-Eastern is the industry
market share leader in sales of personnel-rescue hoists and cargo hook
equipment. As a pioneer of helicopter hoist technology, Breeze-Eastern continues
to develop sophisticated helicopter hoist and winch systems, including systems
for the current generation of Blackhawk, Seahawk, Osprey, Chinook, Ecureuil,
Dolphin, Merlin/Cormorant and Super Stallion helicopters. Breeze-Eastern also
supplies equipment for the United States, Japanese and European Multiple-Launch
Rocket System and the United States High Mobility Artillery Rocket System, which
uses specialized hoists to load and unload rocket pod containers.
Breeze-Eastern's external cargo hook systems are original equipment on most
medium and heavy lift helicopters manufactured today. These hook systems range
from small 1,000-pound capacity models up to the largest 36,000-pound capacity
hooks employed on the Super Stallion helicopter. Breeze-Eastern also
manufactures aircraft and cargo tie-downs.
Breeze-Eastern sells its products through internal marketing
representatives and several independent sales representatives and distributors.
The Aerospace Product backlog varies substantially from time to time due
to the size and timing of orders. At March 31, 2004, the backlog of unfilled
orders was $41.0 million, compared to $46.2 million at March 31, 2003. The
majority of the March 31, 2004 backlog is expected to be shipped during fiscal
2005.
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DEFENSE INDUSTRY SALES
Approximately 61% of the Company's consolidated net sales in 2004, as
compared to 55% and 47% in 2003 and 2002, respectively, were derived from sales
to the United States Government, principally the military services of the
Department of Defense and its prime contractors. These contracts typically
contain precise performance specifications and are subject to customary
provisions which give the United States Government the contractual right of
termination for convenience. In the event of termination for convenience,
however, the Company is typically protected by provisions allowing reimbursement
for costs incurred as well as payment of any applicable fees or profits.
ENVIRONMENTAL MATTERS
Due primarily to Federal and State legislation which imposes liability,
regardless of fault, upon commercial product manufacturers for environmental
harm caused by chemicals, processes and practices that were commonly and
lawfully used prior to the enactment of such legislation, the Company may be
liable for all or a portion of the environmental clean-up costs at sites
previously owned or leased by the Company (or corporations acquired by the
Company). The Company's contingencies associated with environmental matters are
described in Note 13 of "Notes to Consolidated Financial Statements" included
elsewhere in this Form 10-K.
COMPETITION
The Company competes in some markets with entities that are larger and
have substantially greater financial and technical resources than the Company.
Generally, competitive factors include design capabilities, product performance,
delivery and price. The Company's ability to compete successfully in such
markets will depend on its ability to develop and apply technological
innovations and to expand its customer base and product lines. The Company is
successfully doing so both internally and through acquisitions. There can be no
assurance that the Company will continue to successfully compete in any or all
of the businesses discussed above. The failure of the Company to compete could
have a materially adverse effect on the Company's profitability.
RAW MATERIALS
The various components and raw materials used by the Company to produce
its products are generally available from more than one source. In those
instances where only a single source for any material is available, such items
can generally be redesigned to accommodate materials made by other suppliers. In
some cases, the Company stocks an adequate supply of the single source materials
for use until a new supplier can be approved. The Company's business is not
dependent upon a single supplier or a few suppliers, the loss of which would
have a materially adverse effect on the Company's consolidated financial
position.
EMPLOYEES
As of June 18, 2004, the Company employed 183 people. There were 177
persons employed with the Breeze-Eastern operation and 6 with the corporate
office.
FOREIGN OPERATIONS AND SALES
The Company has no foreign-based facilities. The Company had export sales
of $22.6 million, $21.9 million and $21.5 million in fiscal 2004, 2003 and 2002,
respectively, representing 35%, 40% and 45% of the Company's consolidated net
sales in each of those years, respectively. The risk and profitability attendant
to these sales is generally comparable to similar products sold in the United
States. Net export sales by geographic area and domicile of customers are set
forth in Note 14 of "Notes to Consolidated Financial Statements" which is
included elsewhere in this Form 10-K.
ITEM 2. PROPERTIES
The following table sets forth certain information concerning the
Company's principal facilities:
OWNED OR
LOCATION USE OF PREMISES LEASED SQ. FT
- ----------------- ------------------------ ------ --------
Union, New Jersey Executive offices, Owned 188,000
Breeze-Eastern offices
and manufacturing plant
The Company believes that such facilities are suitable and adequate for
the Company's foreseeable needs and that additional space, if necessary, will be
available. The Company continues to own property that it no longer needs in its
operations. These properties are located in Pennsylvania, New York and New
Jersey. On June 11, 2004, the Company sold its property in Connecticut. In some
instances, the properties are leased or subleased or are for sale or are under
contract for sale.
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ITEM 3. LEGAL PROCEEDINGS
The information required has been included in Note 13 of "Notes to
Consolidated Financial Statements" included elsewhere in this Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the three-month period ended March 31, 2004.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, par value $0.01, is traded on the New York
Stock Exchange under the symbol TT. The following table sets forth the range of
high and low closing sale prices of shares of the Company's Common Stock for the
calendar quarters indicated, as reported by the New York Stock Exchange.
HIGH LOW
---------- ---------
Fiscal 2003
First Quarter $ 11.39 $ 8.70
Second Quarter 13.59 9.98
Third Quarter 13.50 9.95
Fourth Quarter 10.48 5.30
Fiscal 2004
First Quarter $ 5.97 $ 4.38
Second Quarter 9.00 5.44
Third Quarter 9.00 6.50
Fourth Quarter 8.01 6.65
As of June 18, 2004, the number of stockholders of record of the Common
Stock was 1,519. On June 18, 2004, the closing sales price of the Common Stock
was $6.90 per share.
On January 19, 2001, the Company announced the suspension of its regular
quarterly dividend.
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ITEM 6. SELECTED FINANCIAL DATA
The following table provides selected financial data with respect to the
consolidated statements of operations of the Company for the fiscal five years
ended March 31, 2004 and the consolidated balance sheets of the Company at the
end of each such year.
YEARS ENDED MARCH 31,
(In thousands, except per share amounts) 2004 2003 2002 2001 2000
Net sales $ 64,606 $ 54,996 $ 47,786 $ 47,775 $ 40,818
--------- --------- --------- --------- ---------
Income (loss) from continuing operations
before income taxes 2,750 (7,439) (3,596) (13,947) (1,204)
Provision (benefit) for income taxes 1,006 (3,574) (1,366) (5,191) (456)
--------- --------- --------- --------- ---------
Income (loss) from continuing operations 1,744 (3,865) (2,230) (8,756) (748)
Income (loss) from discontinued operations - 13,099 (69,551) (64,214) 7,342
--------- --------- --------- --------- ---------
Net income (loss) $ 1,744 $ 9,234 $ (71,781) $ (72,970) $ 6,594
--------- --------- --------- --------- ---------
Earnings (loss) per share:
Basic:
Income (loss) from continuing operations $ 0.26 $ (0.61) $ (0.36) $ (1.42) $ (0.12)
Income (loss) from discontinued operations - 2.08 (11.25) (10.41) 1.19
--------- --------- --------- --------- ---------
Net income (loss) per share $ 0.26 $ 1.47 $ (11.61) $ (11.83) $ 1.07
--------- --------- --------- --------- ---------
Diluted:
Income (loss) from continuing operations $ 0.26 $ (0.61) $ (0.36) $ (1.42) $ (0.12)
Income (loss ) from discontinued operations - 2.08 (11.25) (10.41) 1.19
--------- --------- --------- --------- ---------
Net income (loss) per share $ 0.26 $ 1.47 $ (11.61) $ (11.83) $ 1.07
--------- --------- --------- --------- ---------
Dividends declared and paid per share $ - $ - $ - $ 0.195 $ 0.26
--------- --------- --------- --------- ---------
Total assets $ 77,209 $ 85,123 $ 144,746 $ 395,852 $ 482,752
Long-term debt $ 56,472 $ 53,487 $ 107,564 $ 658(a) $ 194,759
Redeemable common stock $ - $ 1,283 $ - $ - $ -
Stockholders' (deficit) equity $ (3,787) $ (7,923) $ (16,207) $ 51,875 $ 128,882
Book value per share $ (0.58) $ (1.23) $ (2.62) $ 8.40 $ 20.97
Shares outstanding at year-end 6,498 6,457 6,191 6,172 6,145
--------- --------- --------- --------- ---------
(a) Excluding callable debt of $271,307.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report constitute "forward-looking
statements" within the meaning of the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended (the "Acts"). Any statements
contained herein that are not statements of historical fact are deemed to be
forward-looking statements.
The forward-looking statements in this Annual Report are based on current
beliefs, estimates and assumptions concerning the operations, future results and
prospects of the Company. As actual operations and results may materially differ
from those assumed in forward-looking statements, there is no assurance that
forward-looking statements will proved to be accurate. Forward-looking
statements are subject to the safe harbors created in the Acts.
Any number of factors could affect future operations and results,
including, without limitation, the results of audits and inquiries into the
Company's business practices; the Company's ability to complete the refinancing
of its Senior and Subordinated Credit Facilities on terms and conditions
acceptable to the Company; the Company's ability to be profitable with a smaller
and less diverse base of operations that will generate less revenue; the
Company's ability to satisfy the listing requirements of the NYSE or any other
national exchange on which its shares are or will be listed or otherwise provide
a trading venue for its shares; the value of replacement operations, if any;
determination by the Company to dispose of additional existing assets; general
industry and economic conditions; events impacting the U.S. and world financial
markets and economies; interest rate trends; capital requirements; competition
from other companies, changes in applicable laws, rules and regulations
affecting the Company in the locations in which it conducts its business; the
availability of equity and/or debt financing in the amounts and on the terms
necessary to support the Company's future business and those specific risks that
are discussed in this Annual Report.
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The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information or future
events.
GENERAL
We design, develop and manufacture sophisticated lifting equipment for
specialty aerospace and defense applications. With over 50% of the global
market, we have long been recognized as the world's largest designer and leading
supplier of performance-critical rescue hoists and cargo-hook systems. We also
manufacture weapons-handling systems, cargo winches, tie-down equipment and
tow-hook assemblies. Marketed under the trade name "Breeze-Eastern", our
products are designed to be efficient and reliable in extreme operating
conditions. Our equipment is used to complete rescue operations and military
insertion/extraction operations, move and transport cargo, and load weapons onto
aircraft and ground-based launching systems.
Beginning in fiscal 2001, we implemented a restructuring plan to focus our
resources and capital on our aerospace and defense products business and exit
the specialty fastener segment. On February 24, 2003, we completed the sale of
the business and substantially all of the assets of our subsidiary, Norco, Inc.,
to Marathon Power Technologies Company, a division of TransDigm Inc., for cash
consideration of $51.0 million, subject to post-closing adjustments. This
transaction completed our divestiture program. As a result, our discontinued
operations for fiscal 2003 and 2002 include Norco, Inc. and all of the
operations related to our Specialty Fastener segment, including the
TransTechnology Engineered Rings retaining rings businesses, Aerospace Rivet
Manufacturers Corp. and TCR Corporation. Of the operations included in
discontinued operations prior to fiscal 2003, only the operations of
TransTechnology Engineered Rings USA, Inc., TransTechnology (GB) Limited,
TransTechnology Brasil Ltda., Aerospace Rivet Manufacturers Corporation, TCR
Corporation and Norco, Inc. were carried into fiscal 2003.
All discussions related to our ongoing operations, or to TransTechnology
Corporation, which include our results of operations, refer only to continuing
operations, which consists of our Breeze-Eastern business. We discuss our
discontinued operations separately under the heading " -- Divestitures and
Discontinued Operations."
All references to years in this Management's Discussion and Analysis of
Financial Condition and Results of Operations refer to the fiscal year ended
March 31 of the indicated year unless otherwise specified.
As previously reported, we are subject to an investigation being conducted
by the Newark, New Jersey office of the United States Attorney with respect to
Breeze-Eastern's overhaul and repair operations. We have, to date, cooperated
fully and will continue to cooperate fully with the government's investigation.
In addition, the Board of Directors retained a fact finding and forensic
accounting firm, The Bradlau Group of Morristown, New Jersey, to perform an
independent review of the overhaul and repair operations of our Breeze-Eastern
business. The Board of Directors has shared the preliminary and follow-on
reports of the findings of this independent review with the United States
Attorney's office. The investigation has had no impact, and we do not expect an
impact, on our ability to manufacture and ship products and meet customer
delivery schedules. As of this date, the United States Attorney's investigation
is continuing and we have not been made aware of any specific statutory or
regulatory violations resulting from that investigation.
CRITICAL ACCOUNTING POLICIES
Revenue Recognition. We recognize revenue at the later of 1) when products
are shipped to customers or 2) when title passes to customers.
Inventory. We purchase materials to manufacture components for use in our
products and for use by our engineering, repair and overhaul business. Our
decision to purchase a set quantity of a particular item is influenced by
several factors including current and projected cost, future estimated
availability, lead time for production of the materials, existing and projected
contracts to produce certain items and the estimated needs for our repair and
overhaul business.
We value our inventories using the lower of cost or market on a first-in
first-out (FIFO) basis. We reduce the carrying amount of these inventories to
net realizable value based on our assessment of inventory that is considered
excess or obsolete using a formula based on firm sales orders and historical
usage. Since all of our products are produced to meet firm sales orders, our
focus for reserves is on the purchased and manufactured parts.
Environmental Reserves. We provide for environmental reserves when, after
consultation with our internal and external counsel and other environmental
consultants, we determine that a liability is both probable and estimable. In
many cases, we do not fix or cap the liability for a particular site when we
first record it. Factors that affect the recorded amount of the liability in
future years include our participation percentage due to a settlement by, or
bankruptcy of, other potentially responsible parties, a change in the
environmental laws requiring more stringent requirements, a change in the
estimate of future costs that will be incurred to remediate the site, changes in
technology related to environmental remediation and appropriate discount factors
to reflect the net present value of expected expenditures.
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We discuss current estimated exposure to environmental claims under the
caption " -- Environmental Matters."
Financial Derivatives. Until July 5, 2002, we had outstanding interest
rate swaps in association with our prior senior credit agreement. We valued
these swaps using estimates based on then-prevailing interest rates and the
amount we were required to pay was impacted significantly by changes in interest
rates. We no longer hold any such agreements. Additionally, we were required to
treat our outstanding warrants as financial derivatives and mark these
securities to market at the end of each accounting period, resulting in the
recognition of a gain or loss in each period. This mark-to-market requirement
terminated at the end of the first quarter of fiscal 2004 as the put feature
causing the warrants to be treated as derivatives expired during that period.
Deferred Tax Assets. This asset, for which no valuation allowance was
needed, represents income tax benefits expected to be realized in the future,
primarily as a result of the use of net operating loss carry-forwards. Because
we expect to generate adequate amounts of taxable income prior to the expiration
of the tax loss carry-forwards in 2006 through 2024, no valuation allowance is
considered necessary. If we do not generate adequate taxable earnings, some or
all of our deferred tax assets may not be realized. Additionally, changes to the
federal and state income tax laws also could impact our ability to use the net
operating loss carryforwards. The State of New Jersey, in response to a budget
crisis, has suspended through fiscal 2004 the ability of a corporation to use a
net operating loss carryforward against taxable income earned in the state. As a
result, we are required to pay New Jersey income taxes (if any) for fiscal years
2003 and 2004 in spite of losses being carried forward. It is possible that the
State of New Jersey could extend the suspension.
Impairment of Long-Lived Assets. Long-lived assets (excluding financial
instruments and deferred tax assets) and certain identifiable intangibles with
finite useful lives to be held and used are reviewed by us for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Such circumstances include, but are not limited
to, a significant decrease in the market value of an asset, a significant change
in the extent or manner in which an asset is used or a significant physical
change in an asset, a significant adverse change in legal factors or in the
business climate that could affect the value of an asset, or an adverse action
or assessment by a regulator. If a review for recoverability is necessary, we
estimate the future cash flows expected to result from the use of the asset. In
performing these estimates, we group our assets at the lowest level for which
there are identifiable cash flows (including divestitures of certain businesses
in prior years). If the sum of the expected future cash flows (undiscounted and
without interest charges) is less than the carrying amount of the asset, an
impairment loss is recognized. Otherwise, an impairment loss is not recognized.
Any impairment loss recognized is measured as the excess of carrying amount of
the asset over the fair value of the asset.
RESULTS OF OPERATIONS
Fiscal 2004 Compared to Fiscal 2003
Net sales. Our sales increased to $64.6 million for fiscal 2004, a 17%
increase over sales of $55.0 million for fiscal 2003. This increase in sales is
the result of higher shipments of rescue hoists and cargo hooks for military and
civil rescue agencies and shipments of our HLU-196 Bomb Hoist to the U.S. Navy.
The HLU-196 Bomb Hoist is a newly developed product for which we were under
contract to the U.S. Navy to deliver approximately 550 units with 13 units
remaining which will be shipped in the first quarter of fiscal 2005.
Gross profit. Gross profit increased 14% to $28.1 million for fiscal 2004
from $24.6 million for fiscal 2003. Generally, repair and overhaul services and
spare parts sales have higher gross margins than sales of new equipment or
engineering services. Notwithstanding improved gross margins realized in fiscal
2004 for new equipment versus 2003, the change in product mix to one that was
more heavily weighted in favor of new equipment led to a decrease in gross
margin to 43.5% in fiscal 2004 from 44.7% in fiscal 2003. Generally, we cannot
predict changes in our product mix between aftermarket sales and new equipment
sales for any given period because the changes result primarily from the timing
of our customers' orders, over which we have little control.
General, administrative and selling expenses. General, administrative and
selling expenses decreased 8% to $16.2 million in fiscal 2004 from $17.6 million
in fiscal 2003. This decrease was primarily due to lower corporate office
expenses resulting from the completion of the restructuring of the corporate
office that began in the fourth quarter of fiscal 2001. This decrease was offset
partially by approximately $1.0 million of legal and other costs associated with
the ongoing investigation by the Newark, New Jersey office of the United States
Attorney of our overhaul and repair operations
Operating income. Operating income (gross profit less general,
administrative and selling expenses) increased 71% to $11.9 million in fiscal
2004 from $7.0 million in fiscal 2003. This increase mainly was due to higher
sales volume, the benefit of spreading fixed costs over a larger sales volume
and the reduction in corporate office expenses.
Interest expense. Interest expense increased $1.2 million to $10.4 million
in fiscal 2004 from $9.2 million in fiscal 2003 as a result of the allocation
formula we used to apportion interest expense between continuing and
discontinued operations in fiscal 2003. We based this allocation formula for
fiscal 2003 upon the net asset balances attributable to continuing and
discontinued operations. Total
8
interest expense for fiscal 2004 decreased $5.0 million to $10.4 million from
$15.4 million for fiscal 2003 due to the retirement of debt with the proceeds
from divestitures and other internally generated sources of cash.
Interest and other income. In fiscal 2004 we recorded a pre-tax gain of
$0.9 million relating to the sale of our remaining 19% interest in Cirteq, Ltd.
and the collection of a note from Cirteq, Ltd. There was no such transaction in
fiscal 2003.
Forbearance fees. During fiscal 2004, we incurred no expense for
forbearance fees versus the $0.8 million we paid in fiscal 2003 to our lenders
under our prior senior credit agreement in exchange for their agreement not to
pursue any actions against us for violating certain financial covenants. The
elimination of this expense was the result of the refinancing of our prior
senior credit agreement in August 2002, which cured all defaults and ended the
forbearance agreements.
Corporate office restructuring charge. In fiscal 2003 we recognized a $2.7
million charge associated with severance and other costs related to the
elimination of several positions and restructuring in our corporate office, all
of which was paid in fiscal 2003 and 2004. There was no such charge in fiscal
2004.
Unrealized gain on warrants. As we discuss in Note 7 to the financial
statements included in this report, the warrants associated with our senior
subordinated notes due 2006 were deemed to be derivative financial instruments
for purposes of U.S. generally accepted accounting principles at the end of
fiscal 2003. As required by those principles, changes in the value of our share
price between August 7, 2002 and the end of fiscal 2003 resulted in our
recognizing a noncash, non-taxable gain of $2.0 million during fiscal 2003. We
recognized no similar gain or loss in fiscal 2004.
Net income. We earned net income of $1.7 million in fiscal 2004, versus
net income of $9.2 million (including a gain from discontinued operations of
$13.1 million - see "Divestitures and Discontinued Operations") in fiscal 2003,
which primarily resulted from the reasons discussed above.
New orders. New orders received in fiscal 2004 totaled $59.4 million,
which represents a 12% decrease from new orders of $67.3 million in fiscal 2003.
The rescue hoist and cargo winch product line was particularly strong in fiscal
2003 and accounted for virtually all of the decrease in fiscal 2004. Increases
in orders for cargo hooks and overhaul and repair were offset by decreases in
spares orders and engineering. Generally, new equipment sales are the subject of
high-value, long-term contracts, while repair, overhaul and spare parts sales
have much shorter lead times and a less predictable order pattern.
Backlog. Backlog at March 31, 2004 was $41.0 million, down $5.2 million
from $46.2 million at March 31, 2003. The decrease in the backlog is primarily
attributable to shipments of the HLU-196 Bomb Hoist for the U. S. Navy mentioned
above. We measure backlog by the amount of products or services that our
customers have committed by contract to purchase from us as of a given date. Our
book to bill ratio for fiscal 2004 was 0.92, compared to 1.22 for fiscal 2003.
Cancellations of purchase orders or reductions of product quantities in existing
contracts could substantially and materially reduce our backlog. Therefore, our
backlog may not represent the actual amount of shipments or sales for any future
period.
Fiscal 2003 Compared to Fiscal 2002
Net sales. Our sales increased to $55.0 million for fiscal 2003, a 15%
increase over sales of $47.8 million for fiscal 2002. This increase in sales was
the result of higher shipments of cargo hooks and weapons handling equipment for
military and civil agencies, as well as increases in sales of spare parts,
repair and overhaul of equipment already in the field and the initial shipments
of our HLU-196 Bomb Hoist to the U.S. Navy. The HLU-196 Bomb Hoist is a newly
developed product for which we are under contract to the U.S. Navy to deliver
approximately 550 units through fiscal 2004.
Gross profit. Gross profit increased 18% to $24.6 million for fiscal 2003
from $20.9 million for fiscal 2002. Generally, repair and overhaul services and
spare parts sales have higher gross margins than sales of new equipment or
engineering services. As a result of a sales mix that was more heavily weighted
in favor of aftermarket sales due to the timing of customer orders, we recorded
slightly higher gross margins for fiscal 2003. These improvements in product
mix, combined with fixed-cost absorption on a generally higher sales volume led
to an increase in gross margin to 44.7% in fiscal 2003 from 43.7% in fiscal
2002. These margin improvements from product mix, however, were partially offset
by lower than normal gross margins on the HLU-196 Bomb Hoist, a product that was
shipped for the first time during the third quarter of fiscal 2003. While the
gross margins recognized on the initial shipments of the HLU-196 were lower than
historical gross margins, they were higher than the budgeted gross margins due
to the realization of manufacturing efficiencies not originally expected in the
initial production lots. As a result of the lower gross margins experienced on
the HLU-196, we expect future gross margins to be lower than those historically
reported. Generally, we cannot predict changes in our product mix between
aftermarket sales and new equipment sales for any given period because the
changes result primarily from the timing of our customers' orders, over which we
have little control.
General, administrative and selling expenses. General, administrative and
selling expenses increased 4.7% to $17.6 million in fiscal 2003 from $16.8
million in fiscal 2002. This increase was primarily due to higher general,
administrative and selling expenses due to our higher sales volume and a
significant increase in the cost of aircraft product liability insurance, the
write-off of $0.7 million
9
of costs associated with our efforts to restructure the balance sheet, and a
provision of $0.4 million associated with a product liability claim from a
business sold several years ago offset by $1.2 million on a 14% reduction in
corporate office expense. The decrease in corporate office expenses during
fiscal 2003 was primarily due to the restructuring of the corporate office that
began in the fourth quarter of fiscal 2001.
Operating income. Operating income increased 71% to $7.0 million in fiscal
2003 from $4.1 million in fiscal 2002. This increase mainly was due to a more
favorable mix of repair, overhaul and spare parts business, a higher sales
volume, the benefit of spreading fixed costs over a larger sales volume and the
reduction in corporate office expenses.
Interest expense. Interest expense increased $4.2 million to $9.2 million
in fiscal 2003 from $4.9 million in fiscal 2002 as a result of the allocation
formula we use to apportion interest expense between continuing and discontinued
operations. We base this allocation formula upon the net asset balances
attributable to continuing and discontinued operations. Total interest expense
for fiscal 2003 decreased $9.6 million to $15.4 million from $25.1 million for
fiscal 2002 due to the retirement of debt with the proceeds from divestitures
and other internally generated sources of cash. Assets held for sale also were
reduced substantially, however, causing a higher percentage of assets to be
allocated to continuing operations in fiscal 2003 compared to fiscal 2002, which
resulted in an increased allocation of interest expense to continuing operations
in fiscal 2003. The sale of our Norco subsidiary in February 2003 completed our
divestiture program and, accordingly, all interest expense is now charged to
continuing operations.
Interest and other income. In March 2002, we sold excess real estate and
recorded a pre-tax gain of $1.3 million. There was no such transaction in fiscal
2003.
Forbearance fees. During fiscal 2003, we incurred an expense of $0.8
million for forbearance fees we paid to our lenders under our prior senior
credit agreement in exchange for their agreement not to pursue any actions
against us for violating certain financial covenants. In fiscal 2002, we
incurred $2.7 million of such expenses. The reduction in these expenses was the
result of lower overall levels of debt during the current fiscal year and the
refinancing of our prior senior credit agreement in August 2002, which cured all
defaults and ended the forbearance agreements.
Corporate office restructuring charge. In fiscal 2003 we recognized a $2.7
million charge associated with severance and other costs related to the
elimination of several positions and restructuring in our corporate office, 90%
of which was paid by the end of the first quarter of 2004. In fiscal 2002, we
recognized a $1.6 million charge associated with the restructuring of our
corporate office, related primarily to severance costs following the elimination
of several positions, all of which amounts have been paid.
Unrealized gain on warrants. As we discuss in Note 7 to the financial
statements included in this report, the warrants associated with our senior
subordinated notes due 2006 were deemed to be derivative financial instruments
for purposes of U.S. generally accepted accounting principles in fiscal 2003. As
required by those principles, changes in the value of our share price between
August 7, 2002 and the end of fiscal 2003 resulted in our recognizing a noncash,
non-taxable gain of $2.0 million during fiscal 2003. We recognized no similar
gain or loss in fiscal 2002. As the put feature of the warrants expired during
the first quarter of fiscal 2004, no future gains or losses on the warrants were
recognized.
Net income. We earned net income of $9.2 million in fiscal 2003, versus a
loss of $71.8 million in fiscal 2002, which primarily resulted from the reasons
discussed above.
New orders. New orders received in fiscal 2003 totaled $67.3 million,
which represents a 28% increase from new orders of $52.4 million in fiscal 2002.
The rescue hoist and cargo winch product line was particularly strong,
accounting for $14.3 million of the increase. We derived a significant portion
of fiscal 2003 orders from long-term contracts. Generally, new equipment sales
are the subject of high-value, long-term contracts, while repair, overhaul and
spare parts sales have much shorter lead times and a less predictable order
pattern.
Backlog. Backlog at March 31, 2003 was $46.2 million, up $12.4 million
from $33.8 million at March 31, 2002. We measure backlog by the amount of
products or services that our customers have committed by contract to purchase
from us as of a given date. Our book to bill ratio for fiscal 2003 was 1.22,
compared to 1.10 for fiscal 2002. Cancellations of purchase orders or reductions
of product quantities in existing contracts could substantially and materially
reduce our backlog. Therefore, our backlog may not represent the actual amount
of shipments or sales for any future period.
Liquidity and Capital Resources
Our liquidity requirements depend on a number of factors, many of which
are beyond our control, including the timing of production under our long-term
contracts with the U.S. Government. Although we have infrequently received
payments on these government contracts based on performance milestones, as is
the case with our contract with the U.S. Navy for the HLU-196 Bomb Hoist, our
working capital needs fluctuate between periods as a result of changes in
program status and the timing of payments by program. Additionally, as our sales
are generally made on the basis of individual purchase orders, our liquidity
requirements vary based on the timing and volume of these orders.
10
Our restructuring and divestiture program has had a substantial impact
upon our financial condition through March 31, 2004, as we reduced debt with the
proceeds from the divestitures and lowered costs as a result of the corporate
office restructuring. At March 31, 2004 and 2003, there was no indebtedness
outstanding under our New Senior Credit Facility. The loan agreements prohibit
the payment of dividends.
As previously reported, the New York Stock Exchange (NYSE) has notified us
that the Company has fallen below the NYSE continued listing standards requiring
total market capitalization of not less than $50 million over a 30-day trading
period and total stockholders' equity of not less than $50 million. We have
submitted to the NYSE a plan to comply with the listing standards, which was
accepted by the NYSE on July 7, 2003. The Company periodically updates the NYSE
on developments with respect to the plan. In the event of delisting from the
NYSE, we believe an alternate trading venue would be available.
Working Capital
Our working capital at March 31, 2004, was $22.2 million, compared to
$11.2 million at the beginning of fiscal 2004. The ratio of current assets to
current liabilities was 2.6 to 1.0 at March 31, 2004, compared to 1.4 to 1.0 at
the beginning of fiscal 2004.
Working capital changes during fiscal 2004 resulted from an increase in
accounts receivable of $2.0 million, an increase in inventories of $0.8 million,
a decrease in prepaid expenses of $0.5 million and an increase in real estate
held for sale of $1.4 million. The increase in accounts receivable was due to
strong shipments in March of fiscal 2004 versus the same month in fiscal 2003.
The increase in inventory was largely due to the purchase of long lead time
materials and the manufacture of work in progress needed to fulfill customers'
long-term purchase orders. The decrease in prepaid expenses was due primarily to
the receipt of an escrow deposit related to a divestiture. The increase in real
estate held for sale is due to a pending sale of the land and building retained
from a previous divestiture. The number of days that sales were outstanding in
accounts receivable increased to 35.2 days at March 31, 2004, from 31.8 days at
March 31, 2003. Inventory turnover improved to 1.79 turns from 1.55 turns over
the same time period. Current liabilities decreased $11.4 million, primarily due
to the payment of state income taxes relating to the sale of Norco, Inc. of $2.2
million, off-set by an increase of $1.1 million for income taxes due resulting
from the disposition of a former foreign affiliate, payments due to the
corporate office restructuring of $0.8 million, settlement of obligations from
divestitures of $7.5 million, reduction in customer advances of $1.5 million and
other items of $0.5 million.
Capital Expenditures
Our capital expenditures were $0.5 million for fiscal 2004, compared to
$0.6 million for fiscal 2003. The Company initiated the implementation of a new
enterprise resource planning system late in fiscal 2004 and expects to complete
the project in early fiscal 2006. In fiscal 2005, total capital expenditures are
expected to be in a range of $2.6 million to $3.3 million.
Senior Credit Facility
At March 31, 2004, we had a senior credit facility consisting of an $8.0
million asset based revolving credit facility which was established in August
2002 (the "New Senior Credit Facility") to refinance all remaining obligations
outstanding under our prior senior credit facility. The New Senior Credit
Facility was amended on August 5, 2003 and was amended again on January 30,
2004. The maturity date of this facility, as amended, is July 31, 2004. The
current interest rate is approximately 5.0%. The New Senior Credit Facility is
secured by all of our assets. We are in compliance with the provisions of the
facility. There were no borrowings outstanding under the facility at March 31,
2004.
Senior Subordinated Notes
On August 30, 2000, we completed a private placement of $75 million of
senior subordinated notes (the "Notes") and warrants to purchase shares of our
common stock (the "Warrants") to a group of institutional investors
(collectively, the "Purchasers"). We used the proceeds of the private placement
to retire, in full, a $75 million bridge loan held by a group of lenders led by
Fleet National Bank. The Notes, as amended in August 2002, are due on August 29,
2005 and bear interest at a rate of 18% per annum consisting of 13% cash
interest on principal, payable quarterly, and 5% interest on principal, payable
quarterly in "payment-in-kind" ("PIK") promissory notes. The PIK portion of the
interest rate increases 0.25% each quarter, commencing December 31, 2002 until
the Notes are retired. We may prepay the Notes after August 29, 2001, at a
premium initially of 9%, declining to 5%, 3% and 1% on each of the next
succeeding anniversaries of that date. The Notes contain customary financial
covenants and events of default, including a cross-default provision to our
senior debt obligations. We are in compliance with the provisions of the Notes.
At March 31, 2004, the principal balance outstanding on the Notes amounted to
$56.4 million, which included the original principal amount plus the PIK notes.
At March 31, 2003, we reported redeemable common stock in the amount of $1.3
million representing the per share put right (257,000 shares at $5.00 per share)
held by certain Purchasers who had exercised their Warrants and recorded a $2.0
million noncash, non-taxable gain relating to the mark-to-market accounting of
the Warrants as a derivative. The put right on approximately 211,000 shares
expired on June 24, 2003 and, accordingly, we reclassified in the first quarter
of 2004, $1.1 million from redeemable common stock to additional paid in capital
with the remainder of the redeemable common stock being reclassified to
long-term debt to reflect the
11
exercise of the put by a Purchaser. Subsequent to the end of the first quarter
of 2004, the Purchaser revoked its put exercise and that portion was
reclassified to additional paid in capital in the second quarter. In addition,
the put right on 171,041 Warrants expired and, accordingly, $0.9 million
representing the cash value of the put right on these Warrants was reclassified
from a liability account to additional paid-in capital in the first quarter of
2004. At March 31, 2004, there were 171,041 Warrants outstanding which are each
convertible into common stock at the price of $.01 per warrant. These Warrants
are considered to be common stock equivalents for the purpose of calculating
basic earnings per share at March 31, 2004.
We have long-term debt maturities of $0.1 million and $56.5 million in
fiscal 2005 and fiscal 2006, respectively.
Our operations require significant amounts of cash, and we may be required
to seek additional capital, whether from selling equity or borrowing money, for
the future growth and development of our business or to fund our operations and
inventory, particularly in the event of a market downturn. Although currently we
have the ability to borrow additional sums under the New Senior Credit Facility,
this facility contains a borrowing base provision and financial covenants which
may limit the amount we can borrow. Also, while we continue to have on-going
discussions with prospective lenders, we may not be able to replace or renew the
New Senior Credit Facility upon its expiration on terms that are favorable to
us. In addition, a number of factors could affect our ability to access debt or
equity financing, including our financial strength and credit rating, the
financial market's confidence in our management team and financial reporting,
general economic conditions, the conditions in the defense and aerospace
industries and overall capital market conditions.
Even if available, additional financing could be costly or have adverse
consequences. If we raise additional funds by issuing stock, dilution to
stockholders may result. If we raise additional funds by incurring debt, we will
incur increased debt servicing costs and may become subject to additional
restrictive financial and other covenants. We can give no assurance as to the
terms or availability of additional capital. If we were not successful in
obtaining sufficient capital, it could reduce our sales and earnings and
adversely impact our financial position and we may not be able to expand or
operate our business as planned.
TAX BENEFITS FROM NET OPERATING LOSSES
At March 31, 2004, we had federal and state net operating loss
carryforwards, or NOLs, of approximately $58.0 million and $77.4 million,
respectively, which are due to expire in fiscal 2006 through fiscal 2024. These
NOLs may be used to offset future taxable income through their respective
expiration dates and thereby reduce or eliminate our federal and state income
taxes otherwise payable. The Internal Revenue Code of 1986, as amended (the
"Code") imposes significant limitations on the utilization of NOLs in the event
of an "ownership change" as defined under section 382 of the Code (the "Section
382 Limitation"). The Section 382 Limitation is an annual limitation on the
amount of pre-ownership NOLs that a corporation may use to offset its
post-ownership change income. The Section 382 Limitation is calculated by
multiplying the value of a corporation's stock immediately before an ownership
change by the long-term tax-exempt rate (as published by the Internal Revenue
Service). Generally, an ownership change occurs with respect to a corporation if
the aggregate increase in the percentage of stock ownership by value of that
corporation by one or more 5% shareholders (including specified groups of
shareholders who in the aggregate own at least 5% of that corporation's stock)
exceeds 50 percentage points over a three-year testing period. We believe that
we have not gone through an ownership change that would cause our NOLs to be
subject to the Section 382 Limitation.
DIVESTITURES AND DISCONTINUED OPERATIONS
During fiscal 2001, we implemented a restructuring plan to focus our
resources and capital on our aerospace and defense products business and exit
the specialty fastener segment. As a result, our discontinued operations in
fiscal 2003 and 2002 include all of the operations related to our specialty
fastener segment, which includes all of the divested operations we describe
below.
On July 10, 2001, we sold our Breeze Industrial and Pebra hose clamp
businesses to Industrial Growth Partners and members of Breeze Industrial's
management for $46.2 million in cash. In a related transaction, we sold the real
estate occupied by Breeze Industrial to a quasi-governmental organization for
$2.0 million which we may, under certain circumstances, be required to
repurchase for $1.0 million in fiscal 2006. We used the proceeds from these
sales to repay borrowings outstanding under the Fleet Credit Facility.
On December 5, 2001, we sold TransTechnology Engineered Components to a
company formed by affiliates of Kohlberg & Company, L.L.C. for $98.5 million, of
which $96.0 million was cash and the balance the assumption of certain
liabilities related to the purchased businesses. We used the cash proceeds of
the sale to repay borrowings outstanding under the Fleet Credit Facility. In the
fiscal quarter ended September 30, 2001, as part of our restructuring program,
we reported a pre-tax asset impairment charge for TransTechnology Engineered
Components, Inc. in the amount of $85.8 million to reduce the carrying value of
these businesses to estimated fair market value. This noncash charge was related
specifically to the write-down of goodwill. The sale proceeds of TransTechnology
Engineered Components approximated our adjusted carrying value.
On February 21, 2002, we sold Seeger-Orbis to Barnes Group Inc. for $20.0
million cash. We used the net proceeds of the sale to repay borrowings
outstanding under the Fleet Credit Facility. Our balance sheet contains a
noncurrent asset and a noncurrent liability
12
in the amount of $3.7 million relating to the pension plan of Seeger-Orbis.
These amounts represent our legal liability under German law and the
indemnification we received from the buyer of the business for that liability.
On April 16, 2002, we sold Aerospace Rivet Manufacturers Corporation to
Allfast Fastening Systems, Inc. for $3.2 million in cash. We used the net
proceeds of the sale to repay borrowings outstanding under the Fleet Credit
Facility.
On May 30, 2002, we completed the sale of substantially all of the net
assets of TransTechnology Engineered Rings (USA) to a newly formed affiliate of
Sea View Capital LLC for $2.9 million in cash, a promissory note of $0.8 million
and warrants for 5% of the equity of the purchaser. We used the net proceeds of
the sale to repay borrowings outstanding under the Fleet Credit Facility.
On July 16, 2002, we completed the recapitalization of our TransTechnology
(GB) Ltd. subsidiary, now known as Cirteq, Ltd., by selling 81% of its shares to
a new entity controlled by local management for $121 (one hundred twenty-one
dollars). We also converted $2.0 million of unsecured intercompany debt into a
$2.0 million loan secured by a first lien on Cirteq's real property in Glusburn,
England. In the third quarter of 2004, the Company recorded a pre-tax gain of
$0.9 million that is included in other income relating to the sale of the
remaining 19% interest in Cirteq, Ltd. and the collection of the loan from
Cirteq, Ltd.
On August 6, 2002, we completed the sale of all of the shares of
TransTechnology Brasil, Ltda. for $0.7 million, of which $0.3 million was paid
in cash and the balance in installment payments. We also will be paid $0.3
million of intracompany debt due from the Brazilian unit. We used the net
proceeds of the sale to repay borrowings outstanding under the Fleet Credit
Facility.
On January 3, 2003, we completed the sale of the business and
substantially all of the assets of our wholly owned subsidiary, TCR Corporation,
to a newly formed affiliate of Mid-Mark Capital LLC for $10.0 million in cash.
We used the net proceeds of the sale to repay borrowings outstanding under our
New Senior Credit Facility.
On February 24, 2003, we sold Norco, Inc. for $51.0 million cash and a
$1.0 million reimbursement for certain income taxes payable as a result of the
transaction to a wholly owned subsidiary of TransDigm Inc. We used the net cash
proceeds to retire senior debt under the New Senior Credit Facility and
partially repay subordinated debt.
For fiscal 2003, the $13.1 million gain from discontinued operations
included actual operating income of $7.0 million from discontinued operations, a
gain of $28.5 million from the sale of our Norco subsidiary, allocated interest
expense of $6.3 million, an $8.2 million charge to reflect the amounts
ultimately realized from sales of discontinued business units, a cash charge of
$0.2 million from the final settlement of our interest rate swap contracts, a
noncash charge of $4.6 million associated with the recognition of accumulated
currency translation losses from the sale of our Brazilian operation and a tax
provision of $3.1 million.
For fiscal 2002, the $69.6 million loss from discontinued operations
included $110.3 million of impairment charges related to reducing the carrying
values of the discontinued businesses to their estimated net realizable values,
$12.0 million of actual operating income of the discontinued businesses through
their expected divestiture dates, $20.1 million of allocated interest expense;
$8.4 million from the write-off of capitalized loan fees and the mark-to-market
of interest rate swaps required under the terms of our credit agreements, $24.7
million of gains recognized on the sale of certain business units; and $0.2
million of other income or credits associated with the discontinued operations.
These gains and losses, which aggregated $101.9 million, were reduced by a tax
benefit of $32.3 million.
SUMMARY DISCLOSURE ABOUT CONTRACTUAL
OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following table reflects a summary of our contractual cash obligations
for the next several years:
(Dollars in thousands)
2005 2006 2007 2008 2009 Total
-------- -------- -------- -------- -------- --------
Long-term debt $ 79 $ 56,472 $ - $ - $ - $ 56,551
Operating leases 116 115 102 35 - 368
-------- -------- -------- -------- -------- --------
Total $ 195 $ 56,587 $ 102 $ 35 $ - $ 56,919
======== ======== ======== ======== ======== ========
In addition, we have divested ten businesses since March 31, 2001. Under
the terms of the agreements associated with the sales of those businesses, we
have agreed to indemnify the purchasers for certain damages that might arise in
the event that a representation we made with respect to the divested business is
found to have contained a material misstatement, subject in each case to a
customary cap on the indemnification amount and customary limitations on the
survivability of the representations made. As of the date of this report, we
have unresolved claims for indemnification with respect to these divested
businesses that aggregate less than $0.1 million. Additionally, the terms of
these divestiture agreements generally require the calculation of purchase price
adjustments based upon the
13
amount of working capital or net assets transferred at the closing date. In the
case of each divestiture completed as of the filing date purchase price
adjustments have been agreed and paid.
INFLATION
While neither inflation nor deflation has had, and we do not expect it to
have, a material impact upon operating results, we cannot assure you that our
business will not be affected by inflation or deflation in the future.
CONTINGENCIES
Environmental Matters - The environmental cleanup plan presented by the
Company during the fourth quarter of fiscal 2000 for a portion of a site in
Pennsylvania which continues to be owned although the related business has been
sold was approved during the third quarter of fiscal 2004. This plan was
submitted pursuant to the Consent Order and Agreement with the Pennsylvania
Department of Environmental Protection ("PaDEP") concluded in fiscal 1999.
Pursuant to the Consent Order, upon its execution the Company paid $0.2 million
for past costs, future oversight expenses and in full settlement of claims made
by PaDEP related to the environmental remediation of the site with an additional
$0.2 million paid in fiscal 2001. A second Consent Order was concluded with
PaDEP in the third quarter of fiscal 2001 for another portion of the site, and a
third Consent Order for the remainder of the site was concluded in the third
quarter of fiscal 2003. An environmental cleanup plan for the portion of the
site covered by the 2003 Consent Order was presented by the Company during the
second quarter of fiscal 2004. The Company is also administering an agreed
settlement with the Federal government under which the government pays 50% of
the direct and indirect environmental response costs associated with a portion
of the site. The Company has also reached an agreement in principle with the
Federal government and is in the process of finalizing the necessary
documentation under which the Federal government will pay 45% of the direct and
indirect environmental response costs associated with another portion of the
site. At March 31, 2004, the Company's cleanup reserve was $2.0 million based on
the net present value of future expected cleanup costs. The Company expects that
remediation at the Pennsylvania site will not be completed for several years.
The Company also continues to participate in environmental assessments and
remediation work at nine other locations, including former facilities of the
Company. The Company estimates that its potential cost for implementing
corrective action at these sites will not exceed $0.5 million payable over the
next several years, and has provided for the estimated costs in its accrual for
environmental liabilities. In addition, in the first quarter of fiscal 2003, the
Company entered into a consent order for a former facility in New York pursuant
to which it is developing a remediation plan for review and approval by the New
York Department of Environmental Conservation. The Company has established a
reserve of $2.4 million which it believes is adequate.
In addition, the Company has been named as a potentially responsible party
in five environmental proceedings pending in several states in which it is
alleged that the Company was a generator of waste that was sent to landfills and
other treatment facilities and, as to one site, it is alleged that the Company
was an owner or operator. Such properties generally relate to businesses which
have been sold or discontinued. The Company estimates that its expected future
costs, and its estimated proportional share of remedial work to be performed,
associated with these proceedings will not exceed $0.2 million and has provided
for these estimated costs in its accrual for environmental liabilities.
Litigation - The Company is also engaged in various other legal
proceedings incidental to its business. It is the opinion of management that,
after taking into consideration information furnished by its counsel, these
matters will have no material effect on the Corporation's consolidated financial
position or the results of the Corporation's operations in future periods.
RECENTLY ISSUED ACCOUNTING STANDARDS
In May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity," that improves the accounting for certain financial
instruments that, under previous guidance, issuers could account for as equity.
SFAS No. 150 requires that those instruments be classified as liabilities in
statement of financial position. The adoption of this standard did not have any
impact on our financial position or results of operations.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities" that amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under Statement 133.
With certain exceptions, SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designed after June
30, 2003. The adoption of this standard will not have any impact on our
financial position or results of operations.
In December 2003, the FASB issued Interpretation No. 46R, a revision to
Interpretation No. 46, "Consolidation of Variable Interest Entities", which
addresses how a business enterprise should evaluate whether it has a controlling
financial interest in an entity through means other than voting rights and
accordingly should consolidate the entity. Interpretation No. 46R clarifies some
of the provisions of Interpretation No. 46 and exempts certain entities from its
requirements. Interpretation No. 46R is effective at the end of
14
the first interim period ending March 15, 2004. The adoption of this statement
did not have a material impact on our financial position or results of
operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure" which amends SFAS No. 123.
This statement provides alternative methods of transition for a voluntary change
to the fair value-based method of accounting for stock-based employee
compensation and amends the disclosure requirements of SFAS No. 123. The
transition guidance and disclosure requirements are effective for fiscal years
ending after December 15, 2002. The adoption of this statement did not have a
material effect on our financial position or results of operations.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." This interpretation requires a guarantor
to recognize, at the inception of the guarantee, a liability for the fair value
of the obligation undertaken in issuing the guarantee. It also enhances
guarantor's disclosure requirements to be made in its interim and annual
financial statements about its obligations under certain guarantees it has
issued. The initial recognition and initial measurement provisions of this
interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002. In the normal course of business, we do not issue guarantees to third
parties; accordingly, this interpretation will not have any effect on our
financial position or results of operations.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," effective for fiscal years beginning after June 15,
2002. This statement addresses the diverse accounting practices for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. The adoption of this statement did not have any effect
on our financial position or results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various market risks, primarily changes in interest
rates associated with the New Senior Credit Facility under which there were no
borrowings at March 31, 2004.
15
ITEM 8. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of TransTechnology Corporation:
We have audited the accompanying consolidated balance sheets of TransTechnology
Corporation and subsidiaries (the "Company") as of March 31, 2004 and 2003, and
the related statements of consolidated operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended March
31, 2004. Our audits also included the financial statement schedules listed in
the Index at Item 15. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of TransTechnology Corporation and
subsidiaries at March 31, 2004 and 2003, and the results of their operations and
their cash flows for each of the three years in the period ended March 31, 2004
in conformity with accounting principles generally accepted in the United States
of America. Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
Deloitte & Touche LLP
Parsippany, New Jersey
June 21, 2004
16
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
MARCH 31,
2004 2003
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 960 $ 7,104
Accounts receivable (net of allowance for doubtful accounts of
$10 and $65 in 2004 and 2003, respectively) 8,720 6,701
Inventories 20,449 19,683
Prepaid expenses and other current assets 842 1,364
Income tax receivable 395 363
Deferred income taxes 3,334 1,289
Real estate held for sale 1,432 -
--------- ---------
Total current assets 36,132 36,504
--------- ---------
PROPERTY:
Land 534 534
Buildings 4,099 4,004
Machinery and equipment 4,565 4,544
Furniture and fixtures 4,024 3,639
--------- ---------
Total 13,222 12,721
Less accumulated depreciation and amortization 10,794 10,372
--------- ---------
Property - net 2,428 2,349
--------- ---------
OTHER ASSETS:
Deferred income taxes 27,035 30,712
Other 11,614 15,558
--------- ---------
Total other assets 38,649 46,270
--------- ---------
TOTAL $ 77,209 $ 85,123
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt $ 79 $ 79
Accounts payable - trade 5,224 4,954
Accrued compensation 2,890 2,847
Accrued income taxes 1,566 2,460
Other current liabilities 4,200 15,003
--------- ---------
Total current liabilities 13,959 25,343
--------- ---------
LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS 56,472 53,487
--------- ---------
DEFERRED INCOME TAXES - 1,332
--------- ---------
OTHER LONG-TERM LIABILITIES 10,565 11,601
--------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 12 and 13)
REDEEMABLE COMMON STOCK - 1,283
--------- ---------
STOCKHOLDERS' DEFICIT:
Preferred stock - authorized, 300,000 shares; none issued - -
Common stock - authorized, 14,700,000 shares of $.01 par value, issued,
7,059,107 and 7,018,299 shares in 2004 and 2003, respectively 71 70
Additional paid-in capital 76,728 74,283
Accumulated deficit (71,249) (72,993)
Unearned compensation (97) (43)
--------- ---------
5,453 1,317
Less treasury stock, at cost - 560,964 shares in 2004 and 2003 (9,240) (9,240)
--------- ---------
Total stockholders' deficit (3,787) (7,923)
--------- ---------
TOTAL $ 77,209 $ 85,123
========= =========
See notes to consolidated financial statements.
STATEMENTS OF CONSOLIDATED OPERATIONS
(In thousands, except share data)
Years ended March 31,
2004 2003 2002
------------ ------------ ------------
Net sales $ 64,606 $ 54,996 $ 47,786
Cost of sales 36,503 30,426 26,900
------------ ------------ ------------
Gross profit 28,103 24,570 20,886
General, administrative and selling expenses 16,211 17,605 16,807
Interest expense 10,431 9,158 4,931
Interest and other (income) expense - net (1,289) 18 (1,536)
Unrealized gain on warrants - (1,967) -
Forbearance fees - 764 2,651
Charges related to debt reduction - 3,735 -
Corporate office restructuring charge - 2,696 1,629
------------ ------------ ------------
Income (loss) from continuing operations before income taxes 2,750 (7,439) (3,596)
Income tax provision (benefit) 1,006 (3,574) (1,366)
------------ ------------ ------------
Income (loss) from continuing operations 1,744 (3,865) (2,230)
Discontinued operations:
Income from sale of businesses and income from operations of discontinued
businesses (less applicable income taxes
of $8,012 for 2002). - - 16,414
Income (loss) on disposal of discontinued businesses including
provision for operating losses during phase out periods (less
applicable income taxes (benefit) of $3,083 and ($40,271)
for 2003 and 2002, respectively). - 13,099 (85,965)
------------ ------------ ------------
Net income (loss) $ 1,744 $ 9,234 $ (71,781)
------------ ------------ ------------
Earnings (loss) per share:
Basic:
Income (loss) from continuing operations $ 0.26 $ (0.61) $ (0.36)
Income (loss) from discontinued operations - 2.08 (11.25)
------------ ------------ ------------
Net income (loss) per share $ 0.26 $ 1.47 $ (11.61)
------------ ------------ ------------
Diluted:
Income (loss) from continuing operations $ 0.26 $ (0.61) $ (0.36)
Income (loss) from discontinued operations - 2.08 (11.25)
------------ ------------ ------------
Net income (loss) per share $ 0.26 $ 1.47 $ (11.61)
------------ ------------ ------------
Weighted - average basic shares outstanding 6,658,000 6,303,000 6,181,000
Weighted - average diluted shares outstanding 6,679,000 6,303,000 6,181,000
See notes to consolidated financial statements
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In thousands)
Years ended March 31,
2004 2003 2002
---------- ---------- ----------
Cash flows from operating activities:
Net income (loss) $ 1,744 $ 9,234 $ (71,781)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Net (income) loss from discontinued operations, including
asset impairments - (13,099) 85,965
Gain on sale of discontinued businesses, net of tax - - (16,414)
Depreciation and amortization 2,279 2,367 2,546
Change in net assets of discontinued companies - (5,857) 17,463
Write-off of unamortized loan fees - 2,199 -
Warrant mark-to-market adjustment - 1,967 -
Noncash interest expense 3,256 3,263 2,528
(Reduction of) provision for losses on accounts and notes
receivable (55) (276) 321
Loss (gain) on sale or disposal of fixed assets - 7 (1,352)
Changes in assets and liabilities - excluding the effects
of dispositions:
(Increase) decrease in accounts receivable and other receivables (1,976) 8,602 (816)
Increase in inventories (766) (2,814) (1,923)
Decrease (increase) in deferred taxes, net 35 (2,608) (22,041)
Increase in real estate held for sale (1,432) - -
Decrease (increase) in other assets 1,785 (4,524) (849)
Increase in accounts payable 270 451 463
Increase (decrease) in accrued compensation 43 616 (38)
(Decrease) increase in income taxes payable (629) 2,011 (2,745)
(Decrease) increase in other liabilities (11,130) (2,263) 8,877
---------- ---------- ----------
Net cash (used in) provided by operating activities (6,576) (724) 204
---------- ---------- ----------
Cash flows from investing activities:
Capital expenditures (539) (588) (184)
Proceeds from sale of businesses - 67,425 162,200
Proceeds from sale of fixed assets - 1 2,233
Decrease (increase) in notes and other receivables 1,012 (980) 75
---------- ---------- ----------
Net cash provided by investing activities 473 65,858 164,324
---------- ---------- ----------
Cash flows from financing activities:
Payments on long-term debt - (49,729) (38,750)
Proceeds from long-term debt borrowings and bridge loan - 20,500 -
Repayments of other debt (79) (28,819) (128,097)
Exercise of stock options and other 38 (79) 79
---------- ---------- ----------
Net cash used in financing activities (41) (58,127) (166,768)
(Decrease) increase in cash and cash equivalents (6,144) 7,007 (2,240)
Cash and cash equivalents at beginning of year 7,104 97 2,337
---------- ---------- ----------
Cash and cash equivalents at end of year $ 960 $ 7,104 $ 97
---------- ---------- ----------
Supplemental information:
Interest payments $ 7,088 $ 16,975 $ 24,573
Income tax payments $ 2,105 $ 266 $ 919
Increase in senior subordinated note for paid-in-kind
interest expense $ 3,064 $ 2,672 $ 2,316
---------- ---------- ----------
See notes to consolidated financial statements
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
Notes
Years ended Additional Receivable
March 31, 2004, Common Stock Treasury Stock Paid-In Accumulated from
2003 and 2002 Shares Amount Shares Amount Capital Deficit Officers
- -------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, MARCH 31, 2001 6,718,614 $ 67 (546,428) $ (9,070) $ 78,091 $ (10,446) $ (191)
Net loss - - - - - (71,781) -
Other comprehensive loss:
Reclassification adjustment for
minimum pension liability from
sale of business - - - - - - -
Currency translation
adjustment (net of taxes
of $349) - - - - - - -
Less: reclassification adjustment
for sale of foreign subsidiaries - - - - - - -
Issuance of stock under
stock option plan/other 10,356 - - - 92 - 68
Issuance of stock under
bonus plan 10,294 - (1,758) (16) 103 - -
---------- ---------- -------- ---------- ---------- ---------- ----------
BALANCE, MARCH 31, 2002 6,739,264 67 (548,186) (9,086) 78,286 (82,227) (123)
Net income - - - - - 9,234 -
Other comprehensive income:
Currency translation
adjustment - - - - - - -
Less: reclassification adjustment
on deferred tax on currency
translation adjustment - - - - - - -
Less: reclassification adjustment
for sale of foreign subsidiaries - - - - - - -
Loan repayment by officer - - - - - - 123
Warrant adjustment - - - - (4,547) - -
Issuance of stock from
warrant exercise 256,561 3 - - 393 - -
Issuance of stock under
stock option plan/other 14,066 - (5,138) (56) 63 - -
Issuance of stock under
bonus plan 8,408 - (7,640) (98) 88 - -
---------- ---------- -------- ---------- ---------- ---------- ----------
BALANCE, MARCH 31, 2003 7,018,299 70 (560,964) (9,240) 74,283 (72,993) -
Net income and other
comprehensive income - - - - - 1,744 -
Warrant put option expired - - - - 2,184 - -
Issuance of stock under
stock option plan/other 7,400 - - - 38 - -
Issuance of stock under
compensation and bonus plan 33,408 1 - - 223 - -
---------- ---------- -------- ---------- ---------- ---------- ----------
BALANCE, MARCH 31, 2004 7,059,107 $ 71 (560,964) $ (9,240) $ 76,728 $ (71,249) $ -
========== ========== ======== ========== ========== ========== ==========
Accumulated
Years ended Other Total
March 31, 2004, Comprehensive Unearned Comprehensive
2003 and 2002 Income (Loss) Compensation Income (Loss)
- -------------------------------------- ------------- ------------ -------------
BALANCE, MARCH 31, 2001 $ (6,323) $ (253)
Net loss - - $ (71,781)
Other comprehensive loss:
Reclassification adjustment for
minimum pension liability from
sale of business 1,141 - 1,141
Currency translation
adjustment (net of taxes
of $349) (647) - (647)
Less: reclassification adjustment
for sale of foreign subsidiaries 2,941 - 2,941
Issuance of stock under
stock option plan/other - - -
Issuance of stock under
bonus plan - 17 -
------------- ------------ -------------
BALANCE, MARCH 31, 2002 (2,888) (236) $ (68,346)
=============
Net income - - $ 9,234
Other comprehensive income:
Currency translation
adjustment (86) - (86)
Less: reclassification adjustment
on deferred tax on currency
translation adjustment (1,555) - (1,555)
Less: reclassification adjustment
for sale of foreign subsidiaries 4,529 - 4,529
Loan repayment by officer - - -
Warrant adjustment - - -
Issuance of stock from
warrant exercise - - -
Issuance of stock under
stock option plan/other - - -
Issuance of stock under
bonus plan - 193 -
------------- ------------ -------------
BALANCE, MARCH 31, 2003 - (43) $ 12,122
=============
Net income and other
comprehensive income - - $ 1,744
Warrant put option expired - - -
Issuance of stock under
stock option plan/other - - -
Issuance of stock under
compensation and bonus plan - (54) -
------------- ------------ -------------
BALANCE, MARCH 31, 2004 $ - $ (97) $ 1,744
============= ============ =============
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING PRINCIPLES
BUSINESS - The fiscal year for TransTechnology Corporation (the "Company") ends
on March 31. Accordingly, all references to years in the Notes to Consolidated
Financial Statements refer to the fiscal year ended March 31 of the indicated
year unless otherwise specified.
As a result of a restructuring program completed by the Company during 2003, the
Company has reclassified all of the business units that made up its Specialty
Fastener segment in prior years and its Aerospace Rivet Manufacturers
Corporation and Norco, Inc. businesses, which had been included in its Aerospace
Products segment, as discontinued operations. All references related to ongoing
operations, or the Company, refer only to continuing operations, which consists
of the Breeze-Eastern business.
The Company, which has one manufacturing facility in the United States,
develops, manufactures, sells and services a complete line of sophisticated
lifting and restraining products, principally performance critical helicopter
rescue hoist and cargo hook systems, winches and hoists for aircraft and weapons
systems.
USE OF ESTIMATES - The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
amounts reported in its consolidated financial statements and accompanying
notes. These estimates are based on historical experience and information that
is available to management about current events and actions the Company may take
in the future. Significant items subject to estimates and assumptions include
the carrying value of long-lived assets; valuation allowances for receivables,
inventories and deferred tax assets; environmental liabilities; litigation
contingencies; and obligations related to employee benefit plans. Actual results
could differ from those estimates.
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries.
Intercompany balances and transactions are eliminated in consolidation.
REVENUE RECOGNITION - Revenue is recognized at the later of 1) when products are
shipped to customers, or 2) when title passes to customers.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid investments
with a maturity at date of acquisition of three months or less to be cash
equivalents.
INVENTORIES - Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Cost includes material, labor
and manufacturing overhead costs.
PROPERTY AND RELATED DEPRECIATION AND AMORTIZATION - Property is recorded at
cost. Provisions for depreciation are made on a straight-line basis over the
estimated useful lives of depreciable assets ranging from three to thirty years.
Depreciation expense for the years ended March 31, 2004, 2003 and 2002 was $0.5
million, $0.5 million and $0.6 million, respectively. During 2002 the Company
sold excess real estate realizing a gain of $1.3 million that is included in
other income.
EARNINGS PER SHARE ("EPS") - The computation of basic earnings per share is
based on the weighted-average number of common shares outstanding. The
computation of diluted earnings per share assumes the foregoing and, in
addition, the exercise of all dilutive stock options using the treasury stock
method.
The components of the denominator for basic earnings per common share and
diluted earnings per common share are reconciled as follows:
2004 2003 2002
Basic earnings per common share:
Weighted-average common shares outstanding 6,658,000 6,303,000 6,181,000
========= ========= =========
Diluted earnings per common share:
Weighted-average common shares outstanding 6,658,000 6,303,000 6,181,000
Stock options 21,000 - -
--------- --------- ---------
Denominator for diluted earnings per
common share 6,679,000 6,303,000 6,181,000
========= ========= =========
21
Options to purchase 230,135 shares of common stock at prices between $8.84 and
$19.38 were outstanding during 2004 but were not included in the computation of
diluted EPS because the options' exercise prices were greater than the average
market price of the common shares. Similarly, during 2003, options to purchase
311,411 shares of common stock at prices between $8.84 and $27.88 were
outstanding but were not included in the computation of diluted EPS. During
2002, options to purchase 450,183 shares of common stock at prices between $8.84
and $27.88 were outstanding but were not included in the computation of diluted
EPS.
RESEARCH, DEVELOPMENT AND ENGINEERING COSTS - Research and development costs and
engineering costs, which are charged to the statements of consolidated
operations when incurred, amounted to $2.3 million, $2.3 million and $1.7
million in 2004, 2003 and 2002, respectively. Included in these amounts were
expenditures of $2.0 million, $1.7 million and $1.2 million in 2004, 2003 and
2002, respectively, which represent costs related to research and development
activities.
INCOME TAXES - Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of assets and liabilities and their respective tax bases. The
Company periodically assesses recoverability of deferred tax assets and
provisions for valuation allowances are made as required.
FINANCIAL INSTRUMENTS - The Company does not hold or issue financial instruments
for trading purposes. The estimated liability relating to interest rate swap
agreements was accrued during 2002. These agreements were terminated and settled
in 2003.
STOCK-BASED COMPENSATION - Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-Based Compensation", encourages, but does not
require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. Accordingly, the Company records expense
in an amount equal to the excess, if any, of the quoted market price on the
grant date over the option price.
The following table includes as reported and proforma information required by
SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure." Proforma information is based on the fair value method under SFAS
No. 123 (in thousands except per share amounts):
2004 2003 2002
Net income (loss) $ 1,744 $ 9,234 $ (71,781)
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax effects (119) (224) (660)
-------- -------- ----------
$ 1,625 $ 9,010 $ (72,441)
======== ======== ==========
Net income (loss) per share:
Basic and diluted - as reported $ 0.26 $ 1.47 $ (11.61)
-------- -------- ----------
Basic and diluted - proforma $ 0.24 $ 1.43 $ (11.72)
======== ======== ==========
NEW ACCOUNTING STANDARDS - In May 2003, the Financial Accounting Standards Board
("FASB") issued SFAS No. 150, "Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity," that improves the accounting
for certain financial instruments that, under previous guidance, issuers could
account for as equity. SFAS No. 150 requires that those instruments be
classified as liabilities in statement of financial position. The adoption of
this standard did not have any impact on the Company's financial position or
results of operations.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" that amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under Statement 133.
With certain exceptions, SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designed after June
30, 2003. The adoption of this standard did not have any impact on the Company's
financial position or results of operations.
In December 2003, the FASB issued Interpretation No. 46R, a revision to
Interpretation No. 46, "Consolidation of Variable Interest Entities", which
addresses how a business enterprise should evaluate whether it has a controlling
financial interest in an entity through means other than voting rights and
accordingly should consolidate the entity. Interpretation No. 46R clarifies some
of the provisions of Interpretation No. 46 and exempts certain entities from its
requirements. Interpretation No. 46R is effective at the end of the first
22
interim period ending March 15, 2004. The adoption of this statement did not
have a material impact on the Company's financial position or results of
operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" which amends SFAS No. 123. This
statement provides alternative methods of transition for a voluntary change to
the fair value-based method of accounting for stock-based employee compensation
and amends the disclosure requirements of SFAS No. 123. The transition guidance
and disclosure requirements are effective for fiscal years ending after December
15, 2002. The adoption of this statement did not have a material effect on the
Company's financial position or results of operations.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." This interpretation requires a guarantor to recognize,
at the inception of the guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. It also enhances guarantor's
disclosure requirements to be made in its interim and annual financial
statements about its obligations under certain guarantees it has issued. The
initial recognition and initial measurement provisions of this interpretation
are applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The disclosure requirements are effective for financial
statements of interim or annual periods ending after December 15, 2002. In the
normal course of business, the Company does not issue guarantees to third
parties; accordingly, this interpretation will not have any effect on the
Company's financial position or results of operations.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," effective for fiscal years beginning after June 15, 2002. This
statement addresses the diverse accounting practices for obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs. The adoption of this statement did not have any effect on the
Company's financial position or results of operations.
IMPAIRMENT OF LONG-LIVED ASSETS - Long-lived assets (excluding financial
instruments and deferred tax assets) and certain identifiable intangibles with
finite useful lives to be held and used are reviewed by the Company for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Such circumstances include,
but are not limited to, a significant decrease in the market value of an asset,
a significant change in the extent or manner in which an asset is used or a
significant physical change in an asset, a significant adverse change in legal
factors or in the business climate that could affect the value of an asset, or
an adverse action or assessment by a regulator. If a review for recoverability
is necessary, the Company estimates the future cash flows expected to result
from the use of the asset. In performing these estimates, the Company groups its
assets at the lowest level for which there are identifiable cash flows. If the
sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, an impairment loss is
recognized. Otherwise, an impairment loss is not recognized. Any impairment loss
recognized is measured as the excess of the carrying amount of the asset over
the fair value of the asset.
2. DISCONTINUED OPERATIONS AND RESTRUCTURING
On January 19, 2001, the Company announced its intention to restructure and
divest its cold-headed products (TCR), retaining ring (Seeger-Orbis,
TransTechnology (GB), TT Brasil and TransTechnology Engineered Rings USA), hose
clamp (Breeze Industrial and Pebra) and aerospace rivet (Aerospace Rivet
Manufacturers Corp.) operations. In addition, on April 12, 2001, the Company
announced that it would divest TransTechnology Engineered Components (TTEC), a
manufacturer of spring steel engineered fasteners and headlight adjusters. For
business segment reporting purposes, these above-mentioned business units,
excluding ARM for 2002, have previously been classified as the "Specialty
Fasteners Segment." The Company has reclassified these business units as
discontinued operations for all periods presented.
A portion of the Company's interest expense for 2003 and 2002 has been allocated
to discontinued operations based upon the net asset balances attributable to
those operations. Interest expense allocated to discontinued operations was $6.3
million and $20.1 million in 2003 and 2002, respectively. Income taxes have been
allocated to discontinued operations in 2003 and 2002 based on the estimated tax
attributes of the income and assets of the underlying discontinued businesses.
On July 10, 2001, the Company sold its Breeze Industrial and Pebra hose clamp
businesses to Industrial Growth Partners and members of Breeze Industrial's
management for $46.2 million, which was paid in cash. In a related transaction,
the Company sold the real estate occupied by Breeze Industrial to a
quasi-governmental organization for $2.0 million which the Company may, under
certain circumstances, be required to repurchase for $1.0 million in fiscal
2006. Proceeds from the sales were used to repay borrowings outstanding under
the Company's then current Credit Facility (the "Fleet Credit Facility").
On December 5, 2001, the Company sold its TTEC businesses to a company formed by
affiliates of Kohlberg & Company, L.L.C. for $98.5 million, of which $96.0
million was cash and the balance the assumption of certain liabilities related
to the purchased businesses. The cash proceeds of the sale were used to repay
borrowings outstanding under the Fleet Credit Facility. In the fiscal quarter
ended September 30, 2001, as part of its restructuring program, the Company
reported a pre-tax asset impairment charge for TTEC in the amount of $85.8
million to reduce the carrying value of these businesses to estimated fair
market value. This noncash charge was specifically related to the write-down of
goodwill. The sale proceeds of TTEC approximated its adjusted carrying value.
23
On February 21, 2002, the Company sold its Seeger-Orbis retaining ring business
in Germany to Barnes Group Inc. for $20.0 million cash. The net proceeds of the
sale were used to repay borrowings outstanding under the Fleet Credit Facility.
On April 16, 2002, the Company sold its Aerospace Rivet Manufacturers
Corporation subsidiary to Allfast Fastening Systems, Inc. for $3.2 million cash.
The net proceeds of the sale were used to repay borrowings outstanding under the
Fleet Credit Facility.
On May 30, 2002, the Company completed the sale of substantially all of the net
assets of its U.S. retaining ring business to SeaView Capital LLC for $2.9
million of cash, a promissory note of $0.8 million and warrants for 5% of the
equity of the purchaser. The net proceeds of the sale were used to repay
borrowings outstanding under the Fleet Credit Facility.
On July 16, 2002, the Company completed the recapitalization of TransTechnology
(GB) Ltd., now known as Cirteq, Ltd., by selling 81% of its shares to a new
entity controlled by local management for $121 (one hundred twenty-one dollars).
The Company also converted $2.0 million of unsecured intercompany debt into a
$2.0 million loan secured by a first lien on Cirteq's real property in Glusburn,
England. In the third quarter of 2004, the Company recorded a pre-tax gain of
$0.9 million that is included in other income relating to the sale of the
remaining 19% interest in Cirteq, Ltd. and the collection of the loan from
Cirteq, Ltd.
On August 6, 2002, we completed the sale of all of the shares of TransTechnology
Brasil, Ltda. for $0.7 million, of which $0.3 million was paid in cash and the
balance in installment payments. We also will be paid $0.3 million of
intracompany debt due from the Brazilian unit. We used the net proceeds of the
sale to repay borrowings outstanding under our prior senior credit agreement.
On January 3, 2003, the Company completed the sale of TCR Corporation for cash
consideration of $10.0 million, plus the assumption of certain liabilities, to
an affiliate of MidMark Capital LLC. The net proceeds of the sale were used to
repay borrowings outstanding under the New Senior Credit Facility (as defined in
Note 7).
On February 24, 2003, the Company sold Norco, Inc. for $51.0 million cash and a
$1.0 million reimbursement for certain income taxes payable as a result of the
transaction to a wholly-owned subsidiary of TransDigm Inc. The net cash proceeds
were used to retire senior debt under the New Senior Credit Facility and
partially repay subordinated debt.
Net sales and income (losses) from the discontinued operations were as follows
(in thousands):
2003 2002
Net sales $ 48,146 $ 185,888
========= =========
Loss on disposal of discontinued businesses
including provision for operating losses
during phase out period $ - $(126,236)
Income from sale of businesses and income
from operations of discontinued
businesses prior to phase out period 16,182 24,426
Income tax provision (benefit) 3,083 (32,259)
--------- ---------
Net income (loss) from discontinued operations $ 13,099 $ (69,551)
========= =========
The 2003 gain was comprised of $8.2 million of charges to reflect the amounts
ultimately realized from the sales of discontinued businesses; $7.0 million of
actual operating income of the discontinued businesses; a gain of $28.5 million
from the sale of Norco, Inc.; $6.3 million of allocated interest expense; $0.2
million for the final settlement of interest rate swap contracts; and a noncash
charge of $4.6 million associated with the recognition of accumulated currency
translation losses from the sale of the Brazilian operation. These gains and
losses, which aggregated a net gain of $16.2 million, were reduced by a tax
provision of $3.1 million. The 2002 loss was comprised of $110.3 million of
impairment charges related to reducing the carrying values of the discontinued
businesses to their estimated net realizable values; $12.0 million of actual
operating income of the discontinued businesses through their expected
divestiture dates; $20.1 million of allocated interest expense; $8.4 million
from the write-off of capitalized loan fees and the mark-to-market of interest
rate swaps; $24.7 million of gains recognized on the sale of certain business
units; and, $0.2 million of other income or credits associated with the
discontinued operations. These gains and losses, which aggregated a net loss of
$101.9 million, were reduced by a tax benefit of $32.3 million.
24
In fiscal 2003 and 2002, the Company recognized charges of $2.7 million and $1.6
million, respectively, for severance and other costs related to the corporate
office restructuring, substantially all of which costs were paid by the end of
each fiscal year.
3. INVENTORIES
Inventories at March 31, consisted of the following (in thousands):
2004 2003
Finished goods $ 1 $ 2
Work in process 7,037 6,105
Purchased and manufactured parts 13,411 13,576
------- -------
Total $20,449 $19,683
======= =======
4. OTHER ASSETS
Other assets at March 31, consisted of the following (in thousands):
2004 2003
Real estate held for sale $ 4,000 $ 5,800
Other 7,614 9,758
------- -------
Total $11,614 $15,558
======= =======
5. OTHER CURRENT LIABILITIES
Other current liabilities at March 31, consisted of the following (in
thousands):
2004 2003
Accrued interest $ 1,811 $ 1,749
Customer advances 231 1,741
Obligations from divestitures 164 7,035
Accrued medical benefits cost 753 557
Other 1,241 3,921
------- -------
Total $ 4,200 $15,003
======= =======
6. INCOME TAXES
The components of total income (loss) from operations (including continuing and
discontinued operations) before income taxes were (in thousands):
2004 2003 2002
Domestic $ 2,750 $ 7,011 $ (86,453)
Foreign - 1,732 (18,952)
--------- --------- ---------
Total $ 2,750 $ 8,743 $(105,405)
========= ========= =========
25
The provision (benefit) for income taxes is summarized below (in thousands):
2004 2003 2002
Currently payable (receivable):
Federal $ (396) $ (1,038) $ (9,372)
Foreign 1,062 - 46
State 40 1,599 400
-------- -------- --------
706 561 (8,926)
-------- -------- --------
Deferred 300 (1,052) (29,556)
Valuation allowance - - 4,857
-------- -------- --------
300 (1,052) (24,699)
-------- -------- --------
Total $ 1,006 $ (491) $(33,625)
======== ======== ========
The provision (benefit) for income taxes is allocated between continuing and
discontinued operations as summarized below (in thousands):
2004 2003 2002
Continuing $ 1,006 $ (3,574) $ (1,366)
Discontinued - 3,083 (32,259)
-------- -------- --------
Total $ 1,006 $ (491) $(33,625)
======== ======== ========
The consolidated effective tax rates for continuing operations differ from the
federal statutory rates as follows:
2004 2003 2002
Statutory federal rate 35.0% (35.0%) (35.0%)
State income taxes after federal income tax 1.0 - 0.6
Earnings of the foreign sales corporation - (0.9) -
Gain on warrants - (9.4) -
Amortization of purchase price and
impairment not deductible for tax purposes - 3.0 (0.3)
Other 0.6 (5.7) (3.3)
---- ----- -----
Effective tax rate 36.6% (48.0%) (38.0%)
==== ===== =====
26
The following is an analysis of deferred income taxes (in thousands):
2004 2003
Assets:
Current:
Bad debts $ 1,066 $ 25
Employee benefit accruals 103 569
Inventory 558 524
Other 1,607 171
-------- --------
Total current 3,334 1,289
======== ========
Noncurrent:
Employee benefit accruals 497 (961)
Environmental 70 1,363
Accrued liabilities (1,281) (1,225)
Net operating loss carryforward 25,282 30,537
Other 1,981 998
Property 486 -
-------- --------
Total noncurrent 27,035 30,712
======== ========
Total assets $ 30,369 $ 32,001
======== ========
Liabilities:
Property $ - $ 1,332
======== ========
Total liabilities $ - $ 1,332
======== ========
Net deferred tax asset $ 30,369 $ 30,669
======== ========
The Company has federal and state net operating loss carryforwards of $58.0
million and $77.4 million, respectively, which will be available to offset
taxable income during the carryforward period. The tax benefits of these items
are reflected in the above analysis of deferred tax assets and liabilities. If
not used, some of these carryforwards begin to expire in fiscal 2006 through
fiscal 2024.
7. LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS
Long-term debt payable to banks and others, including current maturities, at
March 31 consisted of the following (in thousands):
2004 2003
Senior Subordinated Notes - 19% $56,393 $53,329
Other 158 237
------- -------
56,551 53,566
Less current maturities 79 79
------- -------
Total long-term debt $56,472 $53,487
======= =======
CREDIT FACILITIES - At March 31, 2004, the Company had a senior credit facility
consisting of an $8.0 million asset-based revolving credit facility which was
established in August 2002 (the "New Senior Credit Facility") to refinance all
remaining obligations outstanding under our prior senior credit facility. The
New Senior Credit Facility was amended on August 5, 2003 and was amended again
on January 30, 2004. The maturity date of this facility, as amended, is July 31,
2004. The current interest rate is approximately 5.0%. The New Senior Credit
Facility is secured by all of the Company's assets. The Company is in compliance
with the provisions of the facility. There were no borrowings outstanding under
the facility at March 31, 2004.
27
SENIOR SUBORDINATED NOTES - On August 30, 2000, the Company completed a private
placement of $75 million of senior subordinated notes (the "Notes") and warrants
to purchase shares of the Company's common stock (the "Warrants") to a group of
institutional investors (collectively, the "Purchasers"). The Company used the
proceeds of the private placement to retire, in full, a $75 million bridge loan
held by a group of lenders led by Fleet National Bank. The Notes, as amended in
August 2002, are due on August 29, 2005 and bear interest at a rate of 18% per
annum consisting of 13% cash interest on principal, payable quarterly, and 5%
interest on principal, payable quarterly in "payment-in-kind" ("PIK") promissory
notes. The PIK portion of the interest rate increases 0.25% each quarter,
commencing December 31, 2002 until the Notes are retired. The Company may prepay
the Notes after August 29, 2001, at a premium initially of 9%, declining to 5%,
3% and 1% on each of the next succeeding anniversaries of that date. The Notes
contain customary financial covenants and events of default, including a
cross-default provision to the Company's senior debt obligations. The Company is
in compliance with the provisions of the Notes. At March 31, 2004, the principal
balance outstanding on the Notes amounted to $56.4 million, which included the
original principal amount plus the PIK notes. At March 31, 2003, the Company
reported redeemable common stock in the amount of $1.3 million representing the
per share put right (257,000 shares at $5.00 per share) held by certain
Purchasers who had exercised their Warrants and recorded a $2.0 million noncash,
non-taxable gain relating to the mark-to-market accounting of the Warrants as a
derivative. The put right on approximately 211,000 shares expired on June 24,
2003 and, accordingly, the Company reclassified in the first quarter of 2004,
$1.1 million from redeemable common stock to additional paid in capital with the
remainder of the redeemable common stock being reclassified to long-term debt to
reflect the exercise of the put by a Purchaser. Subsequent to the end of the
first quarter of 2004, the Purchaser revoked its put exercise and that portion
was reclassified to additional paid in capital in the second quarter. In
addition, the put right on 171,041 Warrants expired and, accordingly, $0.9
million representing the cash value of the put right on these Warrants was
reclassified from a liability account to additional paid-in-capital in the first
quarter of 2004. At March 31, 2004, there were 171,041 Warrants outstanding
which are each convertible into common stock at the price of $.01 per warrant.
These Warrants are considered to be common stock equivalents for the purpose of
calculating basic earnings per share at March 31, 2004.
Amortization of loan origination fees on the Credit Facilities and the Senior
Subordinated Notes amounted to $1.6 million, $1.7 million and $1.7 million in
2004, 2003 and 2002, respectively. The loan agreements prohibit the payment of
dividends.
The Company has long-term debt maturities of $0.1 million and $56.5 million in
fiscal 2005 and fiscal 2006, respectively.
8. OTHER LIABILITIES
Other liabilities at March 31 consisted of the following (in thousands):
2004 2003
Environmental Reserves $ 5,557 $ 5,813
Other 5,008 5,788
---------- ----------
Total $ 10,565 $ 11,601
---------- ----------
9. STOCKHOLDERS' EQUITY AND EMPLOYEE/DIRECTOR STOCK OPTIONS
The Company maintains the amended and restated 1992 long-term incentive plan
(the "1992 Plan"), the 1998 non-employee directors stock option plan (the "1998
Plan") and the 1999 long-term incentive plan (the "1999 Plan").
Under the terms of the 1999 plan, 300,000 of the Company's common shares may be
granted as stock options or awarded as restricted stock to officers, directors
and certain employees of the Company through July 2009. Under both the 1992 and
1999 Plans, option exercise prices equal the fair market value of the common
shares at their grant dates. For grants made prior to May 1999, options expire
not later than five years after the date of the grant. Options granted beginning
in May 1999 to officers and employees expire not later than 10 years after the
date of the grant. Options granted to directors and to officers and employees
with the annual cash bonus vest ratably over three years beginning one year
after the date of the grant. Restricted stock is payable in equivalent number of
common shares. The shares are distributable in a single installment and, with
respect to officers and employees, restrictions lapse ratably over a three-year
period from the date of the award, and with respect to directors, the
restrictions lapse six months after the director ceases to be a member of the
board of directors.
Under the terms of the 1998 Plan, non-employee directors are entitled to receive
matching options for a) each share of the Company's common stock which they hold
at the end of a 60-day period following initial election as a director, but not
to exceed 25,000 shares, with the strike price of the option being the fair
market value of the shares at their grant dates, and b) thereafter, for each
share of the Company's common stock that they purchase on the open market, with
the strike price of the option being the purchase price of the share, up to a
maximum of 5,000 options in any twelve month period or 15,000 options over a
three-year period. Options granted under the 1998 Plan vest on the first
anniversary of the grant. Options expire not later than five years after the
date of the grant.
28
The following table summarizes stock option activity over the past three years
under the plans:
WEIGHTED-
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
Outstanding at March 31, 2001 542,171 $ 18.25
Granted 159,000 7.63
Exercised (10,356) 8.84
Canceled or expired (150,268) 18.86
--------
Outstanding at March 31, 2002 540,547 16.30
Granted - -
Exercised (14,066) 4.45
Canceled or expired (130,540) 18.68
--------
Outstanding at March 31, 2003 395,941 14.42
Granted 69,500 5.38
Exercised (7,400) 5.11
Cancelled or expired (99,491) 23.32
========
Outstanding at March 31, 2004 358,550 10.39
========
Options exercisable at March 31, 2002 318,189 19.00
Options exercisable at March 31, 2003 286,446 16.88
Options exercisable at March 31, 2004 246,378 12.25
In 2004, 2003 and 2002 the Company awarded restricted stock totaling 33,408
shares, 8,408 shares and 10,294 shares, respectively. The weighted-average fair
value of this restricted stock was $6.69, $10.15 and $10.12 in 2004, 2003 and
2002, respectively. The expense recorded in 2004, 2003 and 2002 for restricted
stock was $170,000, $88,000 and $98,000, respectively.
The weighted-average Black-Scholes value per option granted in 2004 and 2002 was
$3.41 and $4.22, respectively. No options were granted in 2003. The following
assumptions were used in the Black-Scholes option pricing model for options
granted in 2004 and 2002:
2004 2002
Dividend yield 0.0% 0.0%
Volatility 56.6% 75.6%
Risk-free interest rate 3.1% 3.3%
Expected term of options (in years) 7.0 4.0
29
For options outstanding and exercisable at March 31, 2004, the exercise price
ranges and average remaining lives were:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------- ----------------------------------
NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING AVERAGE AVERAGE EXERCISABLE AVERAGE
EXERCISE AT REMAINING EXERCISE AT EXERCISE
PRICES MARCH 31, 2004 LIFE PRICE MARCH 31, 2004 PRICE
$ 5-10 256,500 7 $ 7.21 144,328 $ 7.91
15-20 102,050 4 18.37 102,050 18.37
------- -------- ------- --------
358,550 5 $ 10.39 246,378 $ 12.25
======= ======== ======= ========
10. EMPLOYEE BENEFIT PLANS
The Company has a defined contribution plan covering all eligible employees.
Contributions are based on certain percentages of an employee's eligible
compensation. Expenses related to this plan were $0.7 million, $0.6 million and
$0.6 million in 2004, 2003 and 2002, respectively.
The Company provides postretirement benefits to certain union employees. The
Company funds these benefits on a pay-as-you-go basis. On December 8, 2003, the
Medicare Prescription Drug Improvement and Modernization Act of 2003 was enacted
that introduces a prescription drug benefit under Medicare as well as a subsidy
to sponsors of retiree health care benefit plans. The Company has elected to
defer the recognition of the Act until such time when the authoritative guidance
is issued. Any measures of the accumulated postretirement benefit obligation or
net periodic postretirement benefit cost in the Company's financial statements
do not reflect the effect of the Act.
(In thousands)
POSTRETIREMENT BENEFITS
----------------------------------
YEAR ENDED MARCH 31,
----------------------------------
2004 2003 2002
COMPONENTS OF NET
PERIODIC BENEFIT COST:
Interest cost $ 97 $ 114 $ 86
Amortization of
net loss 97 51 53
----- ----- -----
Net periodic
benefit cost $ 194 $ 165 $ 139
===== ===== =====
WEIGHTED-AVERAGE
ASSUMPTION AS OF
MARCH 31:
Discount rate 5.00% 5.75% 7.25%
30
POSTRETIREMENT BENEFITS
-----------------------------------
YEAR ENDED MARCH 31,
-----------------------------------
2004 2003
CHANGE IN BENEFIT
OBLIGATION:
Benefit obligation at
beginning of year $1,628 $1,205
Interest cost 97 114
Actuarial loss 11 440
Benefits paid (186) (131)
------ ------
Benefit obligation at
end of year $1,550 $1,628
====== ======
POSTRETIREMENT BENEFITS
------------------------------------
YEAR ENDED MARCH 31,
------------------------------------
2004 2003
RECONCILIATION OF
FUNDED STATUS:
Funded status $(1,550) $(1,628)
Unrecognized actuarial
loss 561 648
------- -------
Accrued liability $ (989) $ (980)
======= =======
For measurement purposes, a 13.5% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 2004 and 2003. The rate was
assumed to decrease gradually to 4.75% by 2011 and remain at that level
thereafter. Under the Plan, the actuarially determined effect of a
one-percentage point change in the assumed health care cost trend would be as
follows:
ONE ONE
PERCENTAGE PERCENTAGE
POINT POINT
INCREASE DECREASE
Effect on interest cost components $ 7 $ (7)
Effect on accumulated postretirement benefit obligation 130 (114)
Included in the balance sheet are a noncurrent asset and a noncurrent liability
in the amount of $3.7 million relating to the pension plan of a divested
company. These amounts represent the legal liability of the Company under German
law and the indemnification received from the buyer of the business for that
liability.
11. FINANCIAL INSTRUMENTS
CASH AND CASH EQUIVALENTS - The carrying amount reported in the balance sheet
for cash and cash equivalents approximates its fair value.
ACCOUNTS RECEIVABLE, DEBT, ACCOUNTS PAYABLE AND OTHER LIABILITIES - The carrying
amounts of these items approximates their fair value.
CONCENTRATION OF CREDIT RISK - The Company is subject to concentration of credit
risk primarily with its trade and notes receivable. The Company grants credit to
certain customers who meet pre-established credit requirements and generally
requires no collateral from its customers. Estimates of potential credit losses
are provided for in the Company's consolidated financial statements and are
within management's expectations and industry averages. As of March 31, 2004,
the Company had no other significant concentrations of risk.
31
12. COMMITMENTS
The Company and its subsidiaries have minimum rental commitments under
noncancelable operating leases, primarily for leased equipment, as follows (in
thousands):
2005 $116
2006 115
2007 102
2008 35
2009 -
----
Total $368
====
Rent expense under operating leases for the years ended March 31, 2004, 2003 and
2002 was $0.2 million, $0.4 million and $0.6 million, respectively.
13. CONTINGENCIES
ENVIRONMENTAL MATTERS - The environmental cleanup plan presented by the Company
during the fourth quarter of fiscal 2000 for a portion of a site in Pennsylvania
which continues to be owned, although the related business has been sold, was
approved during the third quarter of fiscal 2004. This plan was submitted
pursuant to the Consent Order and Agreement with the Pennsylvania Department of
Environmental Protection ("PaDEP") concluded in fiscal 1999. Pursuant to the
Consent Order, upon its execution the Company paid $0.2 million for past costs,
future oversight expenses and in full settlement of claims made by PaDEP related
to the environmental remediation of the site with an additional $0.2 million
paid in fiscal 2001. A second Consent Order was concluded with PaDEP in the
third quarter of fiscal 2001 for another portion of the site, and a third
Consent Order for the remainder of the site was concluded in the third quarter
of fiscal 2003. An environmental cleanup plan for the portion of the site
covered by the 2003 Consent Order was presented by the Company during the second
quarter of fiscal 2004. The Company is also administering an agreed settlement
with the Federal government under which the government pays 50% of the direct
and indirect environmental response costs associated with a portion of the site.
The Company has also reached an agreement in principle with the Federal
government and is in the process of finalizing the necessary documentation under
which the Federal government will pay 45% of the direct and indirect
environmental response costs associated with another portion of the site. At
March 31, 2004, the Company's cleanup reserve was $2.0 million based on the net
present value of future expected cleanup costs. The Company expects that
remediation at the Pennsylvania site will not be completed for several years.
The Company also continues to participate in environmental assessments and
remediation work at nine other locations, including former facilities of the
Company. The Company estimates that its potential cost for implementing
corrective action at these sites will not exceed $0.5 million payable over the
next several years, and has provided for the estimated costs in its accrual for
environmental liabilities. In addition, in the first quarter of fiscal 2003, the
Company entered into a consent order for a former facility in New York pursuant
to which it is developing a remediation plan for review and approval by the New
York Department of Environmental Conservation. The Company has established a
reserve of $2.4 million which it believes is adequate.
In addition, the Company has been named as a potentially responsible party in
five environmental proceedings pending in several states in which it is alleged
that the Company was a generator of waste that was sent to landfills and other
treatment facilities and, as to one site, it is alleged that the Company was an
owner or operator. Such properties generally relate to businesses which have
been sold or discontinued. The Company estimates that its expected future costs,
and its estimated proportional share of remedial work to be performed,
associated with these proceedings will not exceed $0.2 million and has provided
for these estimated costs in its accrual for environmental liabilities.
LITIGATION - The Company is also engaged in various other legal proceedings
incidental to its business. It is the opinion of management that, after taking
into consideration information furnished by its counsel, these matters will have
no material effect on the Company's consolidated financial position or the
results of the Company's operations in future periods.
UNITED STATES ATTORNEY INVESTIGATION - As previously reported, the Company is
subject to an investigation being conducted by the Newark, New Jersey office of
the United States Attorney with respect to Breeze-Eastern's overhaul and repair
operations. The Company has, to date, cooperated fully and will continue to
cooperate fully with the government's investigation. In addition, the Board of
Directors retained a fact finding and forensic accounting firm, The Bradlau
Group of Morristown, New Jersey,
32
to perform an independent review of the overhaul and repair operations of the
Company's Breeze-Eastern business. The Board of Directors has shared the
preliminary and follow-on reports of the findings of this independent review
with the United States Attorney's office. The investigation has had no impact,
and the Company does not expect an impact, on the Company's ability to
manufacture and ship products and meet customer delivery schedules. As of this
date, the United States Attorney's investigation is continuing and the Company
has not been made aware of any specific statutory or regulatory violations
resulting from that investigation.
14. SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in only one business segment, the design, manufacture and
sale of equipment for use in the aerospace industry. Approximately 60.7%, 55.1%
and 47.3% of sales in 2004, 2003 and 2002 were derived from sales to the United
States Government and its prime contractors.
Net sales below show the geographic location of customers (in thousands):
LOCATION 2004 2003 2002
United States $42,052 $33,110 $26,264
Europe 15,860 9,238 13,367
Pacific and Far East 3,461 8,406 5,523
Other non-United States 3,233 4,242 2,632
------- ------- -------
Total $64,606 $54,996 $47,786
======= ======= =======
33
15. UNAUDITED QUARTERLY FINANCIAL DATA
(In thousands except per share amounts)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
2004
Net sales $16,119 $16,333 $16,679 $15,475 $64,606
Gross profit 7,347 6,758 6,997 7,001 28,103
------- ------- ------- ------- -------
Net income (loss) $ 694 $ 508 $ 664 $ (122) $ 1,744
======= ======= ======= ======= =======
Basic earnings (loss) per share $ 0.10 $ 0.08 $ 0.10 $ (0.02) $ 0.26
======= ======= ======= ======= =======
Diluted earnings (loss) per share $ 0.10 $ 0.08 $ 0.10 $ (0.02) $ 0.26
======= ======= ======= ======= =======
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
2003
Net sales $13,887 $11,854 $15,562 $13,693 $54,996
Gross profit 6,211 5,474 7,486 5,399 24,570
(Loss) income from continuing
operations (143) (1,710) 1,437 (3,449) (3,865)
Income (loss) from discontinued
operations (607) (3,523) (3,126) 20,355 13,099
------- ------- ------- ------- -------
Net income (loss) $ (750) $(5,233) $(1,689) $16,906 $ 9,234
======= ======= ======= ======= =======
Basic earnings (loss) per share:
(Loss) income from continuing
operations $ (0.02) $ (0.28) $ 0.23 $ (0.52) $ (0.61)
Income (loss) from discontinued
operations (0.10) (0.57) (0.51) 3.07 2.08
------- ------- ------- ------- -------
Net income (loss) per share $ (0.12) $ (0.85) $ (0.28) $ 2.55 $ 1.47
======= ======= ======= ======= =======
Diluted earnings (loss) per share:
(Loss) income from continuing
operations $ (0.02) $ (0.28) $ 0.23 $ (0.52) $ (0.61)
Income (loss) from discontinued
operations (0.10) (0.57) (0.50) 3.07 2.08
------- ------- ------- ------- -------
Diluted income (loss) per share $ (0.12) $ (0.85) $ (0.27) $ 2.55 $ 1.47
======= ======= ======= ======= =======
34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. DISCLOSURE CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the Company's Exchange
Act reports is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to the Company's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
With 90 days prior to the date of this report, the Company carried out an
evaluation under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Company's
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the forgoing, the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date the Company completed its evaluation.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is contained in the Registrant's
Proxy Statement for the 2004 Annual Meeting of Shareholders and is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is contained in the Registrant's
Proxy Statement for the 2004 Annual Meeting of Shareholders and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Certain of the information required by this item is contained in the
Registrant's Proxy Statement for the 2004 Annual Meeting of Shareholders and is
incorporated herein by reference.
SECURITIES AUTHORIZED/ISSUED UNDER EQUITY COMPENSATION PLANS:
NUMBER OF SECURITIES TO WEIGHTED AVERAGE
BE ISSUED UPON EXERCISE EXERCISE PRICE OF NUMBER OF SECURITIES
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, REMAINING AVAILABLE
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS FOR FUTURE ISSUANCE
- -------------------------------- ----------------------- -------------------- --------------------
Equity Compensation Plans
Approved by Security Holders 358,550 $ 10.39 221,975
Equity Compensation Plans Not
Approved by Security Holders (1) -- -- --
--------- -------- --------
Total 358,550 $ 10.39 221,975
========= ======== ========
(1) Each of the Company's compensation plans has been previously approved by
security holders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained in the Registrant's
Proxy Statement for the 2004 Annual Meeting of Shareholders and is incorporated
herein by reference.
35
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is contained in the Registrant's
Proxy Statement for the 2004 Annual Meeting of Shareholders and is incorporated
herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements, Schedules and Exhibits:
1. Financial Statements:
Consolidated Balance Sheets at March 31, 2004 and 2003
Statements of Consolidated Operations for the years ended March 31, 2004,
2003 and 2002
Statements of Consolidated Cash Flows for the years ended March 31, 2004,
2003 and 2002
Statements of Consolidated Stockholders' Equity (Deficit) for the years
ended March 31, 2004, 2003 and 2002
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
2. Financial Statement Schedules
Schedule II - Consolidated Valuation and Qualifying Accounts for the years
ended March 31, 2004, 2003 and 2002
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
3. Exhibits:
The exhibits listed on the accompanying Index to Exhibits are filed as
part of this report.
(b) Reports on Form 8-K:
1. On January 16, 2004, the Company filed a Form 8-K reporting, under Item
7 thereof, the issuance of a press release dated January 14, 2004, attached
thereto as Exhibit 99.1, reporting the financial results of the Company for the
third quarter of its fiscal year ending March 31, 2004, as referenced in Item 12
thereof.
2. On January 16, 2004, the Company filed a Form 8-K reporting, under Item
7 thereof, the issuance of a press release dated January 15, 2004, attached
thereto as Exhibit 99.1, reporting certain events summarized in Item 9 thereof.
3. On February 3, 2004, the Company filed a Form 8-K reporting, under
Item 5 thereof, the issuance of a press release dated February 3, 2004 attached
thereto as Exhibit 99.1, reporting an amendment of its financing agreement with
The CIT Group/Business Credit, extending the maturity date of the agreement,
which amendment was attached as Exhibit 10.60 thereto.
36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: June 21, 2004
TRANSTECHNOLOGY CORPORATION
By: /s/ Michael J. Berthelot
-------------------------------------
Michael J. Berthelot,
Chairman of the Board of Directors
/s/ Robert L.G. White
-------------------------------------
Robert L.G. White
President and Chief Executive Officer
37
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------ -------------------------------------------- -------------
/s/ MICHAEL J. BERTHELOT Chairman of the Board of Directors June 21, 2004
- ------------------------
MICHAEL J. BERTHELOT
/s/ JOSEPH F. SPANIER Vice President, Chief Financial Officer June 21, 2004
- ------------------------ and Treasurer
JOSEPH F. SPANIER (Principal Financial and Accounting Officer)
/s/ ROBERT L.G. WHITE President and Chief Executive Officer June 21, 2004
- ------------------------ (Principal Executive Officer)
ROBERT L.G. WHITE Director
/s/ GIDEON ARGOV Director June 21, 2004
- ------------------------
GIDEON ARGOV
/s/ THOMAS V. CHEMA Director June 21, 2004
- ------------------------
THOMAS V. CHEMA
/s/ JAN NAYLOR COPE Director June 21, 2004
- ------------------------
JAN NAYLOR COPE
/s/ JOHN H. DALTON Director June 21, 2004
- ------------------------
JOHN H. DALTON
/s/ WILLIAM J. RECKER Director June 21, 2004
- ------------------------
WILLIAM J. RECKER
38
TRANSTECHNOLOGY CORPORATION
SCHEDULE II
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
FOR YEARS ENDED MARCH 31, 2004, 2003 AND 2002
(IN THOUSANDS)
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING OF COSTS AND OTHER AT END
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- ----------------- ------------ ---------- ---------- ---------- ---------
2004
Allowances for
doubtful accounts
and sales returns $ 65 $ 10 $ -- $ 65 $ 10
Inventory
reserves $ 1,490 $ 300 $ -- $ 213 $ 1,577
Environmental
reserves $ 5,888 $ 348 $ -- $ 604 $ 5,632
Allowance for tax
loss valuation
2003
Allowances for
doubtful accounts
and sales returns $ 341 $ 53 $ -- $ 329 $ 65
Inventory
reserves $ 1,759 $ 50 $ -- $ 319 $ 1,490
Environmental
reserves $ 5,734 $ 612 $ -- $ 458 $ 5,888
Allowance for tax
loss valuation $ 14,503 $ -- $ -- $ 14,503 $ --
2002
Allowances for
doubtful accounts
and sales returns $ 25 $ 322 $ -- $ 6 $ 341
Inventory
reserves $ 1,744 $ 300 $ -- $ 285 $ 1,759
Environmental
reserves $ 5,892 $ 199 $ -- $ 357 $ 5,734
Allowance for tax
loss valuation $ 9,646 $ 4,857 $ -- $ -- $ 14,503
39
INDEX TO EXHIBITS
2.1 Asset Purchase Agreement dated as of January 24, 2003, among the
Company, NORCO, Inc. and Marathon Power Technologies Company. (12)
3.1 Certificate of Incorporation of the Company. (1)
3.2 Bylaws of the Company Amended and Restated as of July 17, 2003.
10.1 Amended and Restated 1992 Long Term Incentive Plan of the Company. (2)
10.2 Form of Incentive Stock Option Agreement. (2)
10.3 Form of Director Stock Option Agreement. (3)
10.4 Form of Restricted Stock Award Agreement used under the Company's
Amended and Restated 1992 Long Term Incentive Plan. (4)
10.5 Executive Life Insurance Plan. (5)
10.6 Consulting Agreement with John Dalton. (7)
10.7 1999-2001 Incentive Compensation Plan of the Company. (7)
10.8 1998 Non-Employee Directors' Stock Option Plan of the Company. (6)
10.9 Form of Stock Option Agreement used under the Company's 1998
Non-Employee Directors' Stock Option Plan. (7)
10.10 1999 Long Term Incentive Plan of the Company. (7)
10.11 Form of Stock Option Agreement used under the Company's 1999 Long
Term Incentive Plan. (8)
10.12 Form of Restricted Stock Award Agreement used under the Company's
1999 Long Term Incentive Plan. (8)
10.13 Securities Purchase Agreement dated as of August 29, 2000 by and
among the Company; J.H. Whitney Mezzanine Fund, L.P.; Albion
Alliance Mezzanine Fund I, L.P.; Albion Alliance Mezzanine Fund II,
L.P.; the Equitable Life Assurance Society of the United States;
Fleet Corporate Finance, Inc.; and Citizens Capital, Inc. (9)
10.14 Registration Rights Agreement dated as of August 29, 2000 by and
among the Company and the Purchasers referred to therein. (9)
10.15 Subordinated Indebtedness Intercreditor Agreement dated as of August
29, 2000 among the Company, the Existing Guarantors named therein,
and the Purchasers referred to therein. (9)
10.16 Indemnification Agreement dated January 13, 2000 between the Company
and each of its officers and directors. (8)
10.17 Amended and Restated Share and Limited Liability Company Membership
Interest Purchase Agreement, dated as of August 23, 2001, between the
Company and KTIN Acquisition, LLC (10)
10.18 First Amendment Agreement dated as of August 7, 2002 by and among
the Company; J.H. Whitney Mezzanine Fund, L.P.; Albion Alliance
Mezzanine Fund I, L.P.; Albion Alliance Mezzanine Fund II, L.P.; the
Equitable Life Assurance Society of the United States; Fleet
Corporate Finance, Inc.; and Citizens Capital, Inc. (11)
10.19 Amended and Restated Warrant dated as of August 7, 2002 and issued
by the Company to J.H. Whitney Mezzanine Fund, L.P. for 171,041
shares of the Company's common stock. (11)
10.20 Intercreditor and Subordination Agreement dated as of August 7, 2002
by and among The CIT Group/Business Credit, Inc., Ableco Finance
LLC, as Lender and Agent for the Lenders as defined therein, the
Company, and the Purchasers referred to therein. (11)
10.21 Financing Agreement by and among the Company, NORCO, Inc., TCR
Corporation and The CIT Group/Business Credit, Inc., dated as of
August 7, 2002. (11)
10.22 Letter Agreement, dated as of January 1, 2003, by and among the
Company, TT Connecticut Corporation (f/k/a NORCO, Inc.), TT
Minnesota Corporation (f/k/a TCR Corporation) and The CIT
Group/Business Credit, Inc. (13)
10.23 Severance and Services Agreement dated as of February 4, 2003 by and
between Michael J. Berthelot and the Company. (13)
10.24 Employment Agreement dated as of March 28, 2003 by and between
Joseph F. Spanier and the Company. (13)
40
10.25 Amendment dated as of January 30, 2004 by and among the Company,
TT Connecticut Corporation, TT Minnesota Corporation and The CIT
Group/Business Credit, Inc. (14)
10.26 Amendment dated as of August 5, 2003 by and among the Company, TT
Connecticut Corporation, TT Minnesota Corporation and The CIT
Group/Business Credit, Inc.
10.27 Executive Severance Agreement as of February 10, 2004 by and between
Robert L. G. White and the Company.
10.28 Executive Severance Agreement as of February 10, 2004 by and between
Gerald C. Harvey and the Company.
21.1 List of Subsidiaries of the Company.
31.1 Certification of Chief Executive Officer pursuant to Sarbanes-Oxley Act
of 2002 Section 302.
31.2 Certification of Chief Financial Officer pursuant to Sarbanes-Oxley Act
of 2002 Section 302
32.1 Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to Sarbanes Oxley Act of 2002 Section 906.
- ------------
(1) Incorporated by reference from the Company's Form 8-A Registration
Statement No. 2-85599 dated February 9, 1987.
(2) Incorporated by reference from the Company's Registration Statement on
Form S-8 No. 333-45059 dated January 28, 1998.
(3) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year ended March 31, 1995.
(4) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year ended March 31, 1994.
(5) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year ended March 31, 1989.
(6) Incorporated by reference from the Company's Registration Statement on
Form S-8 No. 333-70877 dated January 20, 1999.
(7) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year ended March 31, 1999.
(8) Incorporated by reference from the Company's Annual Report on Form 10-K
for he Fiscal Year ended March 31, 2000.
(9) Incorporated by reference from the Company's Report on Form 8-K filed on
September 14, 2000.
(10) Incorporated by reference from the Company's Current Report on Form 8-K
filed on December 21, 2001.
(11) Incorporated by reference from the Company's Current Report on Form 8-K
filed on August 22, 2002.
(12) Incorporated by reference from the Company's Current Report on Form 8-K
filed on March 11, 2003.
(13) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year ended March 31, 2003.
(14) Incorporated by reference from the Company's Current Report on Form 8-K
filed on February 5, 2004.
41