1
FORM 10-Q
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 25, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 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) 964-5666
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 X No
----- -----
As of October 31, 1994, the total number
of outstanding shares of registrant's one
class of common stock was 5,290,065
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TRANSTECHNOLOGY CORPORATION
INDEX
PART I. Financial Information Page No.
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Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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Statements of Consolidated Operations--
Three and Six Month Periods Ended September 25, 1994
and September 26, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets--
September 25, 1994 and March 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Consolidated Cash Flow--
Six Months Ended September 25, 1994 and
September 26, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Consolidated Stockholders' Equity--
Six Months Ended September 25, 1994 . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 7-9
Item 2. Management's Discussion and Analysis of Results
------- of Operations and Financial Condition . . . . . . . . . . . . . . . . . . . . . . 10-16
PART II. Other Information
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Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
EXHIBIT 10.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-20
EXHIBIT 10.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21-26
EXHIBIT 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
EXHIBIT 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited Statements of Consolidated Operations,
Consolidated Balance Sheets and Statements of Consolidated Cash Flow and
Statements of Consolidated Stockholders' Equity are of TransTechnology
Corporation and its consolidated subsidiaries. These reports reflect all
adjustments of a normal recurring nature, which are, in the opinion of
management, necessary to a fair presentation of the results of operations
for the interim periods reflected therein. The results reflected in the
unaudited Statements of Consolidated Operations for the period ended
September 25, 1994 are not necessarily indicative of the results to be
expected for the entire year. The following unaudited Consolidated
Financial Statements should be read in conjunction with the notes
thereto, and Management's Discussion and Analysis set forth in Item 2 of
Part I of this report, as well as the audited financial statements and
related notes thereto contained in the Form 10-K filed for the fiscal
year ended March 31, 1994.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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4
STATEMENTS OF CONSOLIDATED OPERATIONS
UNAUDITED
(In Thousands of Dollars Except Share Data)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------ -----------------------------------
9/25/94 9/26/93 9/25/94 9/26/93
------------ -------------- --------------- --------------
Total Revenue $ 28,143 $ 27,160 $ 55,966 $ 48,617
Cost of Sales 20,218 19,388 40,680 34,270
------------ -------------- --------------- --------------
Gross Profit 7,925 7,772 15,286 14,347
------------ -------------- --------------- --------------
General, Administrative
and Selling Expenses 6,165 5,306 10,664 8,990
Interest Expense 677 115 1,196 465
------------ -------------- --------------- --------------
Total General, Administrative,
Selling and Interest Expenses 6,842 5,421 11,860 9,455
------------ -------------- --------------- --------------
Income from Continuing Operations
before Income Taxes 1,083 2,351 3,426 4,892
Income Taxes 335 941 1,197 1,894
------------ -------------- --------------- --------------
Income from Continuing Operations 748 1,410 2,229 2,998
Discontinued Operations:
Loss from Operations (net of applicable
tax benefits of $309,000 and $610,000 for
the quarter and six months ended 9/25/94,
respectively, and $123,000 and $168,000
for the quarter and six months ended
9/26/93, respectively) (400) (179) (852) (253)
Loss from Disposal (net of applicable tax
benefits of $107,000 and $78,000 for
the quarter and six months ended
9/25/94, respectively) (151) -- (108) --
------------ -------------- --------------- --------------
Net Income $ 197 $ 1,231 $ 1,269 $ 2,745
============ ============== =============== ==============
Earnings (Loss) per Share: (Note 1)
Income from Continuing Operations $ 0.15 $ 0.27 $ 0.43 $ 0.58
Loss from Discontinued Operations (0.11) (0.03) (0.19) (0.05)
------------ -------------- --------------- --------------
Net Income $ 0.04 $ 0.24 $ 0.25 (a) $ 0.54 (a)
============ ============== =============== ==============
Number of Shares Used in Computation
of Per Share Information 5,121,000 5,134,000 5,152,000 5,128,000
(a) Per share amounts do not always add because the figures are required to
be independently calculated.
See accompanying notes to unaudited consolidated financial statements.
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CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars Except Share Data)
UNAUDITED
9/25/94 3/31/94
-------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 711 $ 3,027
Accounts receivable:
United States Government 1,705 2,815
Commercial (net of allowance for doubtful accounts of $288 at 9/25/94
and $271 at 3/31/94) 18,567 19,500
Notes receivable 2,844 2,814
Inventories 38,342 35,786
Prepaid expenses and other current assets 2,259 2,932
Deferred income taxes 4,252 4,253
Net assets of discontinued businesses 13,566 4,309
-------------- -------------
Total current assets 82,246 75,436
Property:
Land 3,989 5,223
Buildings 12,767 15,657
Machinery and equipment 28,802 32,611
Furniture and fixtures 3,923 4,050
Leasehold improvements 990 671
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Total 50,471 58,212
Less accumulated depreciation and amortization 18,428 22,204
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Property-net 32,043 36,008
Other assets:
Notes receivable 3,729 4,061
Costs in excess of net assets of acquired businesses (net of
accumulated amortization:
September 25, 1994, $2,553; March 31, 1994, $2,423) 12,546 3,117
Other 7,481 7,235
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Total other assets 23,756 14,413
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Total $ 138,045 $ 125,857
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,480 $ 1,479
Accounts payable-trade 7,417 7,489
Accrued compensation 2,604 4,570
Accrued income taxes 119 943
Other current liabilities 4,384 7,109
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Total current liabilities 16,004 21,590
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Long-term debt payable to banks and others 50,486 33,168
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Other long-term liabilities 7,139 5,146
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Stockholders' equity:
Preferred stock-authorized, 300,000 shares; none issued -- --
Common stock-authorized, 14,700,000 shares of $.01 par value; issued 5,085,867
at September 25, 1994, and 5,189,104 at March 31, 1994 53 52
Additional paid-in capital 45,779 45,283
Retained earnings 22,809 22,186
Other stockholders' equity (2,360) (1,568)
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66,281 65,953
Less treasury stock, at cost (152,000 shares at 9/25/94) (1,865) --
-------------- -------------
Total stockholders' equity 64,416 65,953
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Total $ 138,045 $ 125,857
============== =============
See accompanying notes to unaudited consolidated financial statements.
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STATEMENTS OF CONSOLIDATED CASH FLOW
UNAUDITED
(In Thousands of Dollars)
SIX MONTHS ENDED
--------------------------------
9/25/94 9/26/93
----------- ------------
Cash Flows From Operating Activities:
Net income $ 1,269 $ 2,745
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,926 2,116
Provision for losses on accounts receivable 36 (4)
Loss (gain) on sale or disposal of fixed assets -- (1)
Change in assets and liabilities (net of the effect of purchases of
businesses) :
Decrease (increase) in accounts receivable 2,843 (90)
Decrease (increase) in inventories 427 (719)
Increase in net assets of discontinued operations (2,965) (800)
Decrease (increase) in prepaid and other assets 1,536 (506)
Decrease in accounts payable (133) (313)
Decrease in accrued compensation (2,047) (746)
Decrease in accrued income taxes (824) (385)
Decrease in other liabilities (2,573) (1,507)
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Net cash used in operations (505) (210)
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Cash Flow from Investing Activities:
Purchase of businesses (15,320) (22,430)
Capital expenditures (1,973) (2,127)
Proceeds from the sale of fixed assets 40 1
Decrease (increase) in notes receivables 302 (304)
----------- ------------
Net cash used in investing activities (16,951) (24,860)
----------- ------------
Cash Flow from Financing Activities:
Payments to acquire treasury stock (1,865) -
Payments on long-term debt (4,701) (6,607)
Proceeds from long-term debt 22,021 29,987
Proceeds from short-term debt -- 1,201
Proceeds from issuance of stock under stock option plan 331 233
Dividends paid (646) (616)
----------- ------------
Net cash provided by financing activities 15,140 24,198
----------- ------------
Net Decrease in Cash and Cash Equivalents (2,316) (872)
Cash and Cash Equivalents at Beginning of Year 3,027 1,505
----------- ------------
Cash and Cash Equivalents at End of Period $ 711 $ 633
=========== ============
Supplemental Information:
Interest payments $ 1,341 $ 479
Income tax payments $ 1,184 $ 2,092
See accompanying notes to consolidated financial statements.
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STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
(In Thousands of Dollars Except Share Data)
ADDITIONAL OTHER
FOR THE SIX MONTHS COMMON STOCK TREASURY STOCK PAID-IN RETAINED STOCKHOLDERS'
ENDED SEPTEMBER 25, 1994 SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY TOTAL
- - ------------------------- --------- ------- -------- ---------- ---------- --------- --------- ---------
Balance, March 31, 1994 5,189,104 $ 52 -- $ -- $ 45,283 $ 22,186 $ (1,568) $ 65,953
Net Income -- -- -- -- -- 1,269 -- 1,269
Cash dividends
($.125 per share) -- -- -- -- -- (646) -- (646)
Unrealized investment
holding losses -- -- -- -- -- -- (648) (648)
Purchase of treasury stock -- -- (152,500) (1,865) -- -- -- (1,865)
Issuance of stock under
stock option plan 17,877 1 -- -- 205 -- -- 206
Issuance of stock under
incentive bonus plan 31,386 -- -- -- 291 -- (166) 125
Foreign translation
adjustments -- -- -- -- -- -- 22 22
- - ------------------------- --------- ------- -------- ---------- ---------- --------- --------- ---------
Balance, September 25, 1994 5,238,367 $ 53 (152,500) $ (1,865) $ 45,779 $ 22,809 $ (2,360) $ 64,416
========= ======= ======== ========== ========== ========= ========= =========
See accompanying notes to consolidated financial statements.
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars)
NOTE 1. Earnings Per Share:
Earnings per share are based on the weighted average number
of common shares and common stock equivalents (stock
options) outstanding during each period. In computing
earnings per share, common stock equivalents were either
anti-dilutive because of the market value of the stock or
not material, and, therefore, have been excluded from the
calculation.
NOTE 2. Inventories:
Inventories are summarized as follows:
9/25/94 3/31/94
------- -------
Finished goods $ 6,723 $ 5,057
Work-in-process 5,877 7,589
Purchased and manufactured
parts 25,742 23,140
--------- ----------
Total inventories $ 38,342 $ 35,786
========= ==========
NOTE 3. Long-term Debt Payable to Banks and Others
In connection with the Industrial Retaining Ring Company
acquisition, on September 9, 1994, the Company obtained a $15
million term loan with the same lender as the revolving
credit line andsecured by the same collateral. This term
loan is due and payable in equal quarterly installments of
$937,500 commencing on December 31, 1995. Interest accrues
at the lending bank's prime rate and is payable monthly.
NOTE 4. Discontinued Operations:
In March 1994, the Company completed the sale of its Federal
Laboratories division. Pursuant to such sale, the Company
recorded an after-tax disposal gain of $71 thousand for the
six month period ended September 25, 1994. This gain was
offset by $121 thousand of after-tax disposal costs, recorded
for the six months ended September 25, 1994, related to other
previously discontinued businesses. For the three month
period ended September 25, 1994, the Company recorded $88
thousand of after-tax disposal costs related to other
previously discontinued businesses. The gain and losses
consisted primarily of disposal costs different from previous
estimates associated primarily with legal and related matters.
7
9
The three and six month periods ended September 26, 1993 have
been restated to reflect Federal Laboratories as a
discontinued operation.
In September 1994, the Company discontinued its chaff and
related products division. At September 25, 1994, this
division was classified for financial reporting purposes as a
discontinued operation. Accordingly, the results of
consolidated operations at September 26, 1993, have been
restated.
The loss from disposal for the three and six months ended
September 25, 1994 include a $58 thousand after-tax charge
consisting primarily of estimated legal and selling costs
related to disposal of the chaff product operation.
Operating results of the discontinued business were as follows:
Three Months Ended Six Months Ended
--------------------- ----------------------
9/25/94 9/26/93 9/25/94 9/26/93
------- ------- ------- -------
Total Revenues $ 1,613 $ 3,703 $ 3,115 $ 7,002
Loss before income
taxes $ (709) $ (302) $ (1,462) $ (421)
Income tax benefit (309) (123) (610) (168)
------- ------- -------- -------
Loss from operations $ (400) $ (179) $ (852) $ (253)
======= ======= ======== =======
The loss from operations includes interest expense of $45 thousand and
$89 thousand for the three months ended 9/25/94 and 9/26/93,
respectively, and $75 thousand and $146 thousand for the six months
ended 9/25/94 and 9/26/93, respectively.
8
10
Net assets of the discontinued businesses at September 25, 1994 and
March 31, 1994 were as follows:
9/25/94 3/31/94
------- -------
Accounts Receivable $ 1,351 $ 25
Inventory 1,767 186
Property 9,495 3,203
Other Assets 2,137 1,198
Liabilities (1,184) (303)
-------- -------
Net Assets of
Discontinued Businesses $ 13,566 $ 4,309
======== =======
NOTE 5. Acquisitions
Effective August 31, 1994, the Company acquired Industrial
Retaining Ring Company and its affiliatedcompanies for a
total purchase price of $15.3 million in cash and the
assumption of $219 thousand of liabilities. Industrial
Retaining Ring Company manufactures retaining rings used in
heavy equipment and industrial machinery.
The following summarizes TransTechnology Corporation's
combined Proforma Revenue, Net Income and Earnings per Share
information as if the acquisition of Industrial Retaining
Ring Company and itsaffiliated companies had occurred at the
beginning of the period presented.
Six Months Ended
---------------------------------
9/25/94 9/26/93
------- -------
Revenue $59,858 $52,751
======= =======
Net Income $ 2,271 $ 3,623
======= =======
Earnings per share $ 0.44 $ 0.71
====== ======
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
All references to three month and six month periods in this
Management's Discussion refer to the three and six month periods
ended September 25, 1994 for fiscal year 1995 and the three and
six month periods ended September 26, 1993 for fiscal year 1994.
Also when referred to herein, operating profit means net sales
less operating expenses, without deduction for general corporate
expenses, interest and income taxes. The Consolidated Statement
of Operations has been restated with respect to discontinued
operations to provide a consistent basis for comparing the
performance of the Company's continuing operations for the
periods presented.
Revenue from continuing operations for the six month period in
1995 was $56.0 million, an increase of $7.3 million or 13% from
the comparable period in 1994. For the three month period in
1995 total revenue was $28.1 million, an increase of $1.0 million
or 4% from the comparable period of 1994. The increases occurred
primarily in the Industrial Products segment for both periods.
Gross profit for the six month period in 1995 increased $0.9
million or 7% from the comparable period in 1994. For the three
month period in 1995, gross profit increased $0.2 million or 2%
from the comparable period of 1994. Operating profit from
continuing operations for the six month period in 1995 was $5.7
million, a decrease of $1.5 million or 21% from the comparable
period in 1994. For the three month period in 1995 operating
profit from continuing operations was $2.8 million, a decrease of
$1.0 million or 27% from the comparable period in 1994. Changes
in sales, operating profit and new orders from continuing
operations are discussed below by segment.
Net income, including discontinued operations, for the six month
period in 1995 was $1.3 million or $.25 per share, compared to
$2.7 million or $.54 per share, for the comparable period in
1994. The three month period in 1995 experienced net income of
$0.2 million or $.04 per share compared to $1.2 million or $.24
per share for the year earlier period. Discontinued operations,
which are discussed in more detail below, accounted for losses of
$1.0 million and $0.6 million in the 1995 six month and three
month periods, respectively, and $0.3 million and 0.2 million for
the comparable six month and three month periods in 1994.
Interest expense increased $0.6 million for the three month
period in 1995, and $0.7 million for the six month period,
primarily as a result of increased bank borrowings used for the
acquisition of the Palnut fastener business and the Electrical
Specialties wiring harness business in the second quarter of the
1994 fiscal year, and the Industrial Retaining Ring business in
the second quarter of the 1995 fiscal year.
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12
New orders received during the six month period in 1995 totaled
$52.6 million, an increase of $2.7 million or 6% from 1994's
comparable period. For the three month period, new orders
totaled $27.6 million, an increase of $2.9 million or 12% from
last year's comparable period. At September 25, 1994, total
backlog of unfilled orders was $45 million. compared to
$37.4 million at September 26, 1993.
ACQUISITIONS
Effective August 31, 1994, the Company acquired all of the
outstanding capital stock of Industrial Retaining Ring Company
and its affiliated companies for a total purchase price of $14.8
million in cash and the assumption of liabilities. Additionally,
the Company purchased the life insurance contracts existing on
the former officers of Industrial Retaining Ring Company for
approximately $0.5 million in cash. Industrial Retaining Ring
Company manufactures retaining rings used in heavy equipment and
industrial machinery.
DISCONTINUED OPERATIONS
In March 1994, the Company completed the sale of its Federal
Laboratories division. Pursuant to such sale, the Company
recorded an after-tax disposal gain of $71 thousand for the six
month period ended September 25, 1994. This gain was offset by
$121 thousand of after-tax disposal costs, recorded for the six
months ended September 25, 1994, related to other previously
discontinued businesses. For the three month period ended
September 25, 1994, the Company recorded $88 thousand of after-
tax disposal costs related to other previously discontinued
businesses. The gain and losses consisted primarily of disposal
costs different from previous estimates associated primarily with
legal and related matters.
The three and six month periods ended September 26, 1993 have
been restated to reflect Federal Laboratories as a discontinued
operation.
In September 1994, the Company discontinued its chaff and related
products division. At September 25, 1994, this division was
classified for financial reporting purposes as a discontinued
operation. Accordingly, the results of consolidated operations
at September 26, 1993, have been restated.
The loss from disposal for the three and six months ended
September 25, 1994 include a $58 thousand after-tax charge
consisting primarily of estimated legal and selling costs related
to disposal of the chaff product operation.
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13
FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
SIX MONTHS ENDED NET CHANGE
--------------------- ----------------------
9/25/94 9/26/93 $ %
------- ------- ------- -------
Operating Revenue:
Industrial Products $37,061 $25,594 $11,467 44.8
Aerospace Products 17,678 22,538 (4,860) (21.6)
------- ------- -------
Total $54,739 $48,132 $ 6,607 13.7
======= ======= =======
Operating Profit:
Industrial Products $ 4,996 $ 4,191 $ 805 19.2
Aerospace Products 748 3,055 (2,307) (75.5)
------- ------- -------
Total $ 5,744 $ 7,246 $(1,502) (20.7)
Corporate Expense (1,122)(a) (1,889)(b) 767 40.6
Interest Expense (1,196) (465) (731) (157.2)
------- ------- -------
Income from Continuing
Operations before
Income Taxes $ 3,426 $ 4,892 $(1,466) (30.0)
======= ======= =======
a) The corporate expense for the six months ended September 25, 1994
has been reduced by $740 thousand from a favorable insurance
settlement.
b) The corporate expense for the six months ended September 25, 1994
and the six months ended September 26, 1993 has been reduced by
$310 thousand and $437 thousand, respectively, to reflect an
allocation made to discontinued operations.
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FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
THREE MONTHS ENDED NET CHANGE
--------------------- ---------------------
9/25/94 9/26/93 $ %
------- ------- ------- -------
Operating Revenue:
Industrial Products $18,469 $16,063 $ 2,406 15.0
Aerospace Products 8,696 10,815 (2,119) (19.6)
------- ------- -------
Total $27,165 $26,878 $ 287 1.1
======= ======= =======
Operating Profit:
Industrial Products $ 2,392 $ 2,362 $ 30 1.3
Aerospace Products 392 1,425 (1,033) (72.5)
------- ------- -------
Total $ 2,784 $ 3,787 $(1,003) (26.5)
Corporate Expense (1,024)(a) (1,321)(b) 297 22.5
Interest Expense (677) (115) (562) (488.7)
------- ------- -------
Income from Continuing
Operations before
Income Taxes $ 1,083 $ 2,351 $(1,268) (53.9)
======= ======= =======
a) The corporate expense for the three months ended September 25, 1994
has been reduced by $165 thousand from a favorable insurance
settlement.
b) The corporate expense for the three months ended September 25, 1994
and the three months ended September 26, 1993 has been reduced by
$155 thousand and $219 thousand, respectively, to reflect an
allocation made to discontinued operations.
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INDUSTRIAL PRODUCTS SEGMENT
Sales for the industrial products segment were $37.1 million for
the six month period in 1995, an increase of $11.5 million or 45%
from the comparable period in 1994. Sales for the three month
period in 1995 were $18.5 million, up $2.4 million or 15% from
the comparable period in 1994. The increase for the six month
period was primarily due to the inclusion of six months of
operations of the Palnut fastener business and Electrical
Specialties Company industrial wiring harness business in the
1995 period compared to only two months of operations in the
comparable 1994 period. Additionally, the six and three month
periods in 1995 included one month of Industrial Retaining Ring
Company fastener operations. In the six and three month periods
in 1995, specialty fastener sales other than Palnut and
Industrial Retaining Ring were up slightly over the comparable
six month and three month periods in 1994. Offsetting these
increases, TransTechnology Systems & Services maintenance
contract sales decreased 28% and 24% in the six and three month
periods in 1995 from the comparable periods in 1994. These
decreases are largely due to reduced domestic and foreign third
party maintenance contract demand.
Operating profit for the segment was $5.0 million for the six
month period in 1995, an increase of $0.8 million or 19% from the
comparable period in 1994. The three month period showed an
operating profit of $2.4 million, which is unchanged from the
comparable period in 1994. Primary factors contributing to the
segment's increased operating profit for the six month period was
the inclusion of six months of Palnut fastener operations in the
1995 six month period versus two months of operations in the 1994
six month period, the inclusion of one month of operations of the
Industrial Retaining Ring Company and increased shipment volume
and higher product margin mix of other specialty fasteners.
These increases were largely offset in the six and three month
periods by losses incurred due to the start-up of the Electrical
Connector and Assemblies Company, low margin sales of electrical
wiring harness product and reduced third party maintenance
contract sales.
New orders increased by 20% for the six month period in 1995,
primarily due to the acquisitions mentioned above. New orders
for the three month period in 1995 were down 16% primarily due to
customer timing and placement of orders.
Backlog of unfilled orders at September 25, 1994 was $18 million,
while at September 26, 1993 backlog was $13.9 million.
AEROSPACE PRODUCTS SEGMENT
Sales for the Aerospace Products segment were $17.7 million for
the six month period in 1995, a decrease of $4.9 million or 22%
from the comparable six month period in 1994. Sales for the
three month period in 1995 were $8.7 million, down $2.1 million
or 20% from the comparable period in 1994. Hoists and winches
and related spare parts, and electrical cable and conduit sales
were down 24% and 39%, respectively, for the six month period in 1995,
and 19% and 46% for the three month period, respectively, primarily
due to delays in the timing of customers placing new orders in the
current year periods and reduced overall demand for rescue hoist and
winch products. Cargo hook, tie-down and electrical connector sales
in the six and three month periods in 1995 were relatively unchanged
from the comparable 1994 periods.
14
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Operating profit for the segment was $0.7 million for the six
month period in 1995, a decrease of $2.3 million or 76% from the
comparable period in 1994. The three month period had an
operating profit of $0.4 million, a decrease of $1.0 million or
73% over the comparable period in 1993. The primary factors
contributing to the segment's decrease in operating profit in the
current year periods were the lower hoist and winch and related
spare parts sales, the lower cable and conduit sales and reduced
margins in the hoist and winch and related spare parts and cargo
hook lines. The reduced margins were due mainly to shipments of
low margin contracts during the current six and three month
periods.
New orders decreased 12% for the six month period in 1995, and
increased 47% for the three month period. New orders in the six
month period for hoists and winches and related spare parts
decreased 35%, and new orders for electrical cables decreased
14%, primarily due to customer timing and placement of new orders
and the general slowdown in the military and aerospace
industries. New orders for all other aerospace products lines
increased in the six month period and all of the aerospace
product lines experienced new order increases in the three month
period, primarily due to customer timing and placement of new
orders.
Backlog of unfilled orders at September 25, 1994 was $26.9
million, while at September 26, 1993 backlog was $29.4 million.
Sales related to United States Government contracts, which
consist primarily of defense contracts and represented
approximately 20% of the Company's total sales in fiscal year
1994, have been declining in recent years. Management remains
concerned with the continued trend toward reductions in defense
spending by the United States government. However, many of the
Company's programs, as well as spare parts requirements for these
programs, are expected to continue for several years, and the
Company continues to pursue and is currently implementing its
strategy of developing its non-defense businesses through
acquisitions and refocused foreign and commercial market
attention.
LIQUIDITY AND CAPITAL RESOURCES
The Company's debt-to-capitalization ratio was 45% as of
September 25, 1994, compared to 34% as of March 31, 1994. The
current ratio at September 25, 1994, stood at 5.14 compared to
3.49 at March 31, 1994. Working Capital was $66.2 million at
September 25, 1994, up $12.4 million from March 31, 1994.
At September 25, 1994, the Company's debt consisted of $27.2
million of borrowings under a revolving bank credit line, bank
term loans of $15 million and $8.8 million, and $1.0 million of
other borrowings. In connection with the Industrial Retaining
Ring Company acquisition, in September, 1994, the Company
obtained a $15 million term loan with the same lenders as the
revolving credit line and secured by the same collateral. This
term loan is due and payable in equal quarterly installments of
$938 thousand commencing on December 31, 1995. Interest accrues
at the lending bank's prime rate and is payable monthly. The
revolving bank credit line lending commitment is $35 million.
This commitment will be available to the Company through
September 30, 1995 and is subject to a borrowing base formula.
The agreement provides for borrowings and letters of credit based
on collateralized accounts receivable and inventory. All fixed
assets other than real property with the exception of certain
real property located in Mountainside, New Jersey, are also
included as collateral. Letters of credit, which are included
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in the borrowing base formula, are limited to $5 million. Letters
of credit under the line at September 25, 1994 were $2.1 million.
Interest is accrued at the lending bank's prime rate or, at the
Company's option, the London Interbank Offered Rate (LIBOR) plus
two percentage points, which the Company utilized for $25 million
of its outstanding debt. The agreement contains customary
operating and financial covenants typical to this form of
financing and further provides that the sum of each fiscal year's
quarterly dividend payments cannot exceed 25% of the Company's
annual net income in that year. The $8.8 million term loan is
with the same lenders as the revolving credit line, is secured by
the same collateral, and is due and payable on August 31, 1998.
Principal payments of $360 thousand are due and payable on the
last day of each quarter through June 30, 1998, with a final
balloon payment of $3 million due and payable on August 31, 1998.
Interest accrues at the lending bank's prime rate and is payable
monthly.
On May 13, 1994, the Company obtained authorization from its
lender to repurchase up to 200,000 shares of the Company's common
stock at an aggregate price not to exceed $2.5 million. Through
September 25, 1994, the Company had repurchased 152,500 shares.
Management believes that the Company's anticipated cash flow from
operations, combined with the bank credit described above, will
be sufficient to support current and forecasted working capital
requirements and dividend payments. Capital expenditures in the
six month period in 1995 were $2.0 million as compared with $2.1
million in the comparable period in 1994. The Company's two
segments have similar cash flow requirements.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 TransTechnology Corporation Amended and Restated 1992
Long Term Incentive Plan. (Incorporated by reference
to registrant's Proxy Statement dated August 9, 1994.)
10.2 Director Stock Option Agreement.
10.3 Restricted Stock Award Agreement.
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
(b) A report on Form 8-K was filed on September 12, 1994, as amended
by Form 8-CIA filed on November 4, 1994, reporting the Company's
acquisition of all of the outstanding stock of Industrial
Retaining Ring Company and of Retainers, Inc. and substantially
all of the assets of Industrial Advertising. Industrial
Retaining Ring Company manufactures retaining rings used in heavy
equipment and industrial machinery.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
TRANSTECHNOLOGY CORPORATION
(Registrant)
Dated: November 9, 1994 By: /s/ Chandler J. Moisen
--------------------------------
CHANDLER J. MOISEN,
Senior Vice President
and Chief Financial
Officer*
* On behalf of the Registrant and as Principal Financial Officer.
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EXHIBIT INDEX
-------------
Exhibit No. Description
- - ----------- -----------
10.1 TransTechnology Corporation Amended and Restated 1992
Long Term Incentive Plan. (Incorporated by reference
to registrant's Proxy Statement dated August 9, 1994.)
10.2 Director Stock Option Agreement.
10.3 Restricted Stock Award Agreement.
11 Statement of Computation of Per Share Earnings.
27 Financial Data Schedule.