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FORM 10-Q
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 July 2, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-7872
----------------------
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 August 2, 1995, the total number
of outstanding shares of registrant's
one class of common stock was 5,274,670.
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TRANSTECHNOLOGY CORPORATION
INDEX
PART I. Financial Information Page No.
--------
Item 1. Financial Statements........................................ 2
Statements of Consolidated Operations--
Three Month Periods Ended July 2, 1995
and June 26, 1994........................................... 3
Consolidated Balance Sheets--
July 2, 1995 and March 31, 1995............................. 4
Statements of Consolidated Cash Flow--
Three Months Ended July 2, 1995 and
June 26, 1994............................................... 5
Statements of Consolidated Stockholders' Equity--
Three Months Ended July 2, 1995............................. 6
Notes to Consolidated Financial Statements.................. 7 - 11
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition..................... 12 - 17
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K............................ 18
SIGNATURES.............................................................. 18
EXHIBI 11............................................................... 19
EXHIBIT 27.............................................................. 20
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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 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 July 2, 1995 are not
necessarily indicative of the results to be expected for the entire year. The
July 2, 1995 unaudited Consolidated Financial Statements include the assets and
liabilities of the Seeger Group of companies acquired by TransTechnology
Corporation on June 30, 1995. See Note 5 of the Notes to Unaudited Consolidated
Financial Statements for further discussion on this acquisition. 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, 1995.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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STATEMENTS OF CONSOLIDATED OPERATIONS
UNAUDITED
(In Thousands of Dollars Except Share Data)
THREE MONTHS ENDED
-----------------------------
7/02/95 6/26/94
----------- -----------
Total revenue $ 26,410 $ 22,437
Cost of sales 17,939 16,299
----------- -----------
Gross profit 8,471 6,138
----------- -----------
General, administrative
and selling expenses 4,697 3,174
Interest expense 886 427
----------- -----------
Total general, administrative,
selling and interest expenses 5,583 3,601
----------- -----------
Income from continuing operations
before income taxes 2,888 2,537
Income taxes 1,155 940
----------- -----------
Income from continuing operations 1,733 1,597
Discontinued operations:
Loss from operations (net of applicable
tax benefits of $172,000 and $379,000 for
the three months ended 7/2/95 and 6/26/94,
respectively) (259) (568)
Gain from disposal (includes a tax provision
of $58,000 and $29,000 for the three
months ended 7/2/95 and 6/26/94,
respectively) 87 43
----------- -----------
Net income $ 1,561 $ 1,072
=========== ===========
Earnings per share: (Note 1)
Income from continuing operations $ 0.34 $ 0.31
Income from discontinued operations (0.03) (0.10)
----------- -----------
Net income $ 0.31 $ 0.21
=========== ===========
Number of shares used in computation
of per share information 5,082,000 5,186,000
See accompanying notes to unaudited consolidated financial statements.
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CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars Except Share Data)
UNAUDITED
7/02/95 3/31/95
---------- -------
ASSETS
Current assets:
Cash and cash equivalents $ 3,296 $ 1,544
Accounts receivable:
United States Government 1,115 1,204
Commercial (net of allowance for doubtful
accounts of $575,000 at 7/2/95 and $103,000
at 3/31/95) 28,811 18,280
Notes receivable 1,195 836
Inventories 47,110 25,239
Prepaid expenses and other current assets 6,018 2,706
Deferred income taxes 2,589 2,592
Net assets of discontinued businesses 24,763 24,269
-------- --------
Total current assets 114,897 76,670
-------- --------
Property, Plant & Equipment 58,923 42,574
Less accumulated depreciation and amortization 13,863 13,040
-------- --------
Property, Plant & Equipment - net 45,060 29,534
-------- --------
Other assets:
Notes receivable 3,944 3,274
Costs in excess of net assets of acquired businesses
(net of accumulated amortization:
7/2/95, $2,896,000 and 3/31/95, $2,793,000) 29,639 12,813
Other 7,655 7,105
-------- --------
Total other assets 41,238 23,192
-------- --------
Total $201,195 $129,396
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 5,117 3,356
Accounts payable-trade 11,634 9,147
Accrued compensation 1,997 4,247
Accrued income taxes 1,519 591
Other current liabilities 14,569 6,267
-------- --------
Total current liabilities 34,836 23,608
-------- --------
Long-term debt payable to banks and others 84,347 37,021
-------- --------
Other long-term liabilities 16,182 4,265
-------- --------
Stockholders' equity:
Preferred stock-authorized, 300,000 shares;
none issued -- --
Common stock-authorized, 14,700,000 shares of
$.01 par value; issued 5,272,198 at 7/2/95,
and 5,242,316 at 3/31/95 53 52
Additional paid-in capital 46,134 45,802
Retained earnings 24,648 23,418
Other stockholders' equity (2,850) (2,680)
-------- --------
67,985 66,592
Less treasury stock, at cost - (177,500 shares
at 7/2/95) (2,155) (2,090)
-------- --------
Total stockholders' equity 65,830 64,502
-------- --------
Total $201,195 $129,396
======== ========
_____________________________
See accompanying notes to unaudited consolidated financial statements.
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STATEMENTS OF CONSOLIDATED CASH FLOW
UNAUDITED
(In Thousands of Dollars)
THREE MONTHS ENDED
------------------------
7/02/95 6/26/94
-------- --------
Cash Flows From Operating Activities:
Net income $ 1,561 $ 1,072
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 912 1,311
Provision for losses on accounts receivable 32 15
(Gain) loss on sale or disposal of fixed assets and
discontinued businesses (91) 8
Change in assets and liabilities net of acquisitions
and dispositions:
Decrease in accounts receivable 3,149 1,314
(Increase) decrease in inventories (518) 202
Increase in net assets of discontinued businesses (1,487) (11)
Increase in other assets (1,978) (800)
Decrease in accounts payable (2,614) (389)
Decrease in accrued compensation (2,250) (962)
Decrease in other liabilities (234) (1,180)
Increase in income tax payable 928 330
-------- --------
Net cash (used in) provided by operating activities (2,590) 910
-------- --------
Cash Flows from Investing Activities:
Business acquisitions (43,655) --
Capital expenditures (787) (1,371)
Proceeds from sale of fixed assets and discontinued business 1,000 --
(Increase) decrease in notes receivable (1,029) 149
-------- --------
Net cash used in investing activities (44,471) (1,222)
-------- --------
Cash Flows from Financing Activities:
Proceeds from long-term borrowings 73,846 --
Payments on long-term debt (24,800) (9)
Proceeds from issuance of stock under stock option plan 164 --
Stock repurchases and other (66) (739)
Dividends paid (331) (311)
-------- --------
Net cash provided by (used in) financing activities 48,813 (1,059)
-------- --------
Net increase (decrease) in cash and cash equivalents 1,752 (1,371)
Cash and cash equivalents at beginning of year 1,544 3,027
-------- --------
Cash and cash equivalents at end of year $ 3,296 $ 1,656
======== ========
Supplemental Information:
Interest payments $ 900 $ 633
Income tax payments $ 250 $ 59
_____________________________
See accompanying notes to unaudited consolidated financial statements.
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STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
UNAUDITED
(In Thousands of Dollars Except Share Data)
COMMON STOCK TREASURY STOCK ADDITIONAL OTHER
FOR THE QUARTER -------------------- -------------------- PAID-IN RETAINED STOCKHOLDERS'
ENDED JULY 2, 1995 SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY TOTAL
------------------ --------- --------- -------- --------- --------- --------- ------------- -----
Balance, March 31, 1995 5,242,316 $ 52 (172,500) $ (2,090) $ 45,802 $ 23,418 $ (2,680) $ 64,502
Net Income -- -- -- -- -- 1,561 -- 1,561
Cash dividends
($.065 per share) -- -- -- -- -- (331) -- (331)
Unrealized investment
holding losses -- -- -- -- -- -- (2) (2)
Purchase of treasury stock -- -- (5,000) (65) -- -- -- (65)
Issuance of stock under
stock option plan 17,808 1 -- -- 163 -- -- 164
Issuance of stock under
incentive bonus plan 12,074 -- -- -- 169 -- (126) 43
Foreign translation
adjustments -- -- -- -- -- -- (42) (42)
--------- --------- -------- --------- --------- --------- --------- ---------
Balance, July 2, 1995 5,272,198 $ 53 (177,500) $ (2,155) $ 46,134 $ 24,648 $ (2,850) $ 65,830
========= ========= ======== ========= ========= ========= ========= =========
See accompanying notes to unaudited 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:
7/02/95 3/31/95
---------- ---------
Finished goods $ 22,472 $ 6,152
Work-in-process 6,800 3,867
Purchased and manufactured
parts 17,838 15,220
---------- ---------
Total inventories $ 47,110 $ 25,239
========== =========
NOTE 3. Long-term Debt Payable to Banks and Others
Long term debt payable, including current maturities, at July 2, 1995
and March 31, 1995 consisted of the following:
7/02/95 3/31/95
--------- -----------
Credit Agreement - 10% $ 28,479 --
Credit Agreement - 8.3125% -- $ 16,300
Term Loan - 10.0% 35,000 --
Term Loan - 9.0% -- 23,080
Term Loan - 11.0% 25,000 --
Other 985 997
--------- -----------
89,464 40,377
Less current maturities 5,117 3,356
--------- -----------
Total $ 84,347 $ 37,021
========= ===========
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Credit Agreement
Related to the Company's acquisition of the Seeger Group, on June 30,
1995 the Company refinanced all of its bank debt, so that on July 2,
1995 it consisted of $24.2 million of borrowings under a revolving
credit line, $3.6 million of borrowings under international lines of
credit, a $35 million term loan and a $25 million term loan. The
revolving bank credit line commitment is $34 million, which includes $5
million available for letters of credit. This commitment will be
available to the Company through December 31, 2000 and is subject to a
borrowing base formula. The agreement provides for borrowings and
letters of credit based on collateralized accounts receivable and
inventory. In addition, all of the remaining assets of the Company and
its subsidiaries are included as collateral. Letters of credit under
the line at July 2, 1995 were $1.1 million. The total commitment from
the international lines of credit are $6 million and have the same
availability and collateral as the revolving credit line, but are not
subject to a borrowing base formula. Interest on the revolver and the
international lines of credit are tied to the primary lending bank's
prime rate, or the London Interbank Offered Rate (LIBOR), with a
margin, depending upon the Company's achievement of certain operating
and financial goals.
The $35 million and $25 million term loans are with the same lenders as
the revolving and international lines of credit, are secured by the
same collateral, and are due and payable on December 31, 2000 and June
30, 2002, respectively. The $35 million term loan provides that an
additional $15 million will be available for future acquisitions.
Principal payments on the $35 million term loan of $1.4 million, with
escalations to $1.8 million and $2.8 million in June, 1999 and June,
2000, respectively, begin on December 31, 1995, and are due and payable
on the last day of each quarter through December 31, 2000. Interest on
the $35 million term loan is tied to the primary lending bank's prime
rate, or LIBOR, with a margin, depending upon the Company's achievement
of certain operating and financial goals. Principal payments on the $25
million term loan of $0.5 million are due and payable annually,
beginning on June 30, 1996 through June 30, 2000, with final balloon
payments of $7.5 million and $15 million due and payable on June 30,
2001 and June 30, 2002, respectively. Interest on the $25 million term
loan accrues at the primary lending bank's prime rate plus two
percentage points. The agreement also gives the Company the option of
using LIBOR plus three and one-quarter percentage points. At July 2,
1995, the Company had no borrowings utilizing LIBOR.
The credit facility limits the Company's ability to pay dividends to
25% of net income and restricts capital expenditures to $6.5 million
for the fiscal year ending March 31, 1996, and $7 million thereafter
for the life of the agreement, as well as containing other customary
financial covenants.
Other
Other long-term debt is comprised principally of an obligation due
under a collateralized borrowing arrangement with a fixed interest rate
of 3% due December 2004 and loans on life insurance policies owned by
the Company with a fixed interest rate of 5%.
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Debt Maturities
1996 (current) $ 5,117
1997 6,518
1998 6,144
1999 6,496
2000 8,597
Thereafter 56,592
-------
Total $89,464
=======
NOTE 4. Discontinued Operations
In March 1995, the Company sold substantially all of the assets and
business of its chaff products operation. The sale of this operation
resulted in an after-tax disposal loss of $0.4 million. In May 1995,
the Company sold its chaff avionics product line for $0.3 million in
cash and a $0.7 million note receivable. This sale resulted in an
after-tax disposal gain of $0.4 million. The Company has retained one
product line from the former chaff products operations, and is
negotiating its sale separately.
Also, in March 1995, the Company discontinued and is currently
negotiating the sale of its Electronics division, which includes
Electronic Connections and Assemblies, Inc., and its foreign portions
of the computer graphics service operations which operate under the
name TransTechnology Systems & Services. The domestic portion of the
computer graphics service operations was sold for book value in June
1995, the consideration was $0.7 million in cash and a $0.6 million
note receivable.
In June 1995, the Company recorded an additional $0.3 million of
after-tax disposal costs related to other previously discontinued
businesses. These losses consisted primarily of disposal costs
different from previous estimates associated primarily with legal,
environmental and employee related matters.
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Operating results of the discontinued businesses were as follows:
Three Months Ended
----------------------------
7 /02/95 6/26/94
-------- -------
Total Revenues $ 5,304 $ 6,888
======= =======
Loss Before Income Taxes $ (431) $ (947)
Income Tax Benefit 172 379
------- -------
Loss From Operations $ (259) $ (568)
======= =======
The loss from operations includes interest expense of $126 thousand and
$136 thousand for the three months ended 7/2/95 and 6/24/94,
respectively.
Net assets of the discontinued businesses at July 2, 1995 and June 26,
1994 were as follows:
7/02/95 3/31/95
-------- --------
Accounts Receivable $ 3,922 $ 6,344
Inventory 10,813 10,993
Property 10,898 10,109
Other Assets 2,124 1,755
Liabilities (2,994) (4,932)
-------- --------
Net Assets of Discontinued
Businesses $ 24,763 $ 24,269
======== ========
NOTE 5. Acquisitions
On June 30, 1995 the Company acquired the Seeger Group of companies
from a unit of AB SKF of Gothenburg, Sweden for approximately $43
million plus the assumption of trade debts and accrued expenses. The
allocation of the purchase price to the fair value of the assets and
liabilities acquired has not been completed, pending completion of
asset valuations and appraisals, therefore the difference between the
purchase price and the actual book value of the assets and liabilities
purchased has been classified in "costs in excess of net assets of
acquired businesses" in the accompanying Consolidated Balance Sheet as
of July 2, 1995. The Seeger Group, headquartered in Konigstein, Germany
manufactures circlips, snap rings and retaining rings used primarily in
the automotive, heavy equipment and industrial machinery markets. The
Seeger Group operates under the trade names of "Seeger", "Anderton",
and "Waldes" with over 900 employees at its five manufacturing
facilities.
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The following summarizes TransTechnology Corporation's combined
Proforma Revenue, Net Income and Earnings per Share information as if
the acquisition of the Seeger Group of companies had occurred at the
beginning of the period presented. The Proforma results give effect to
the amortization of goodwill and the effects on interest expense and
taxes.
7/02/95 6/26/94
--------- ---------
Revenue $ 47,932 $ 39,145
========= =========
Net Income $ 2,868 $ 615
========= =========
Earnings per Share $ 0.56 $ 0.12
========= =========
The above Proforma information does not purport to be indicative of the
financial results which actually would have occurred had the
acquisition been made at the beginning of the periods presented or
subsequent to that date. The information is preliminary and subject to
change as the Company completes the fair market value evaluation of the
fixed assets acquired.
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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 periods in this Management's Discussion refer to
the three-month period ended July 2, 1995 for fiscal year 1996 and the
three-month period ended June 26, 1994 for fiscal year 1995. 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 three-month period in 1996 was $26.4
million, a $4.0 million or 18% increase from the $22.4 million reported in the
comparable period in 1995. Gross profit was $8.5 million for the three-month
period in 1996, up 2.3 million or 38% from the comparable period in 1995.
Operating profit from continuing operations for the three-month period in 1996
was $5.1 million, an increase of $2.4 million or 85% from the comparable period
in 1995. Changes in sales, operating profit and new orders from continuing
operations are discussed below by segment.
Net income, including discontinued operations, for the three-month period in
1996 was $1.6 million or $.31 per share, compared to $1.1 million or $.21 per
share for the comparable period of 1995. As further discussed below, the
increased earnings performance in 1996 resulted primarily from the inclusion of
Industrial Ring Company operations in the three-month 1996 period.
Interest expense increased $0.5 million for the three-month period in 1996, from
$0.4 million in the comparable 1995 period, primarily as a result of increased
bank borrowings used for the acquisition of the Industrial Retaining Ring
Company in the second quarter of the 1995 fiscal year.
New orders received during the three-month period in 1996 totaled $28.2 million,
an increase of $3.7 million or 15% from 1995's comparable period. At July 2,
1995, total backlog of unfilled orders was $32.6 million compared to $29.4
million at June 26, 1994.
DISCONTINUED OPERATIONS
In March 1995, the Company sold substantially all of the assets and business of
its chaff products operation. The sale of this operation resulted in an
after-tax disposal loss of $0.4 million. In May 1995, the Company sold its chaff
avionics product line for $0.3 million in cash and a $0.7 million note
receivable. This sale resulted in an after-tax disposal gain of $0.4 million.
The Company has retained one product line from the former chaff products
operation, and is negotiating its sale separately.
Also, in March 1995, the Company discontinued and is currently negotiating the
sale of its Electronics division, which includes Electronic Connections and
Assemblies, Inc., and its computer graphics service operations which operate
under the name TransTechnology Systems & Services. The domestic portion of the
computer graphics service operations was sold for book value in June 1995, the
consideration was $0.7 million in cash and a $0.6 million note receivable.
In June 1996, the Company recorded an additional $0.3 million of after-tax
disposal costs related to other previously discontinued businesses. These losses
consisted primarily of disposal costs
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different from previous estimates associated primarily with legal, environmental
and employee related matters.
ACQUISITIONS
On June 30, 1995 the Company acquired the Seeger Group of companies from a unit
of AB SKF of Gothenburg, Sweden for approximately $43 million plus the
assumption of trade debts and accrued expenses. The Seeger Group, headquartered
in Konigstein, Germany manufactures circlips, snap rings and retaining rings
used primarily in the automotive, heavy equipment and industrial machinery
markets. The Seeger Group operates under the trade names of "Seeger",
"Anderton", and "Waldes" with over 900 employees at its five manufacturing
facilities. In calendar year 1994 the Seeger Group reported consolidated
revenues and operating income of approximately $73 million and $4.4 million,
respectively.
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FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
THREE MONTHS ENDED NET CHANGE
----------------------------- ----------------------
7/02/95 6/26/94 $ %
----------- ---------- -------- --------
Sales:
Speciality fastener products $ 19,196 $ 15,544 $ 3,652 23.5
Rescue hoist and cargo hook products $ 7,012 6,570 442 6.7
----------- ---------- --------
Total $ 26,208 $ 22,114 $ 4,094 18.5
=========== ========== ========
Operating profit (loss):
Speciality fastener products $ 4,497 $ 2,821 $ 1,676 59.4
Rescue hoist and cargo hook products 628 (51) 679 1,331.4
----------- ---------- --------
Total $ 5,125 $ 2,770 $ 2,355 85.0
Corporate expense (1,351)(a) 194 (a)(c) (1,545) (796.4)
Interest expense (886)(b) (427)(b) (459) (107.5)
----------- ---------- --------
Income from continuing
operations before income taxes $ 2,888 $ 2,537 $ 351 13.8
=========== ========== ========
(a) The corporate expense for the three months ended July 2, 1995 and
the three months ended June 26, 1994 has been reduced by $211
thousand and $448 thousand, respectively, to reflect an allocation
made to discontinued operations.
(b) The interest expense for the three months ended July 2, 1995 and
the three months ended June 26, 1994 has been reduced by $126
thousand and $136 thousand, respectively, to reflect an allocation
made to discontinued operations.
(c) The corporate expense for the three months ended June 26, 1994 has
been reduced by $575 thousand for a favorable insurance
settlement.
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SPECIALTY FASTENER PRODUCTS SEGMENT
Sales for the specialty fastener products segment were $19.2 million for the
three-month period in 1996, an increase of $3.7 million, or 24% from the same
period in 1995. The increase in specialty fastener sales was primarily due to
the inclusion of operations of the Industrial Retaining Company for the 1996
three-month period, new product market penetration and increased industrial and
truck fastener demand offset by a slight decrease in domestic automotive
fastener demand.
Operating profit for the three-month period in 1996 was $4.5 million, an
increase of $1.7 million or 59% from the comparable period of 1995. The increase
was primarily due to the inclusion of operations of the Industrial Retaining
Ring Company for the 1996 three-month period, new product market penetration and
increased industrial and truck fastener demand offset by a slight decrease in
domestic automotive fastener sales volume, as mentioned above.
New orders for the three-month period in 1996 increased $1.4 million or 8% from
the comparable period in 1995, primarily due to the inclusion of operations of
the Industrial Retaining Ring Company for the 1996 three-month period, new
product market penetration and increased industrial and truck fastener demand.
These increases were offset by reduced automotive fastener demand during the
three-month period in 1996, primarily due to an overall slowdown in production
by domestic automotive manufacturers. Backlog of unfilled orders at July 2,
1996, was $8.8 million compared to $7.9 million at June 26, 1995.
RESCUE HOIST AND CARGO HOOK PRODUCTS SEGMENT
Sales of the rescue hoist and cargo hook products segment were $7 million for
the three-month period in 1996, up $0.4 million or 7% from the comparable period
in 1995. The increases were primarily due to the timing of customers placing new
orders.
Operating profit for the three-month period in 1996 was $0.6 million, an
increase of $0.7 million from the slight loss experienced in the comparable
period in 1995. The primary factors contributing to the increase in the
segment's operating profit in the 1996 three-month period were the increases in
the sales volume, mentioned above, product sales mix and sales price increases.
New orders increased for the three-month period in 1996 by $2.3 million or 35%
from the comparable period in 1995 primarily due to customer timing and
placement of new orders. Backlog of unfilled orders at July 2, 1995 was $23.8
million compared to $21.5 million at June 26, 1994.
Sales related to United States government contracts, which consist primarily of
defense contracts and represented approximately 18% of the Company's total 1995
sales from continuing operations, have been declining in recent years. While
management remains concerned with the
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continued trend toward reductions in defense spending, many of the Company's
defense related programs, as well as spare parts requirements for these
programs, will continue for several years, though there can be no assurances in
that regard. Moreover, the Company is well on its way in 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 58% as of June 2, 1995, compared
to 38% as of March 31, 1995. The current ratio at July 2, 1995, stood at 3.30
compared to 3.25 at March 31, 1995. Working Capital was $80.1 million at July 2,
1995, up $32 million from March 31, 1995. These increases were primarily the
result of the Seeger Group acquisition on June 30, 1995.
Related to the Company's acquisition of the Seeger Group, on June 30, 1995 the
Company refinanced all of its bank debt, so that on July 2, 1995 it consisted of
$24.2 million of borrowings under a revolving credit line, $3.6 million of
borrowings under international lines of credit, a $35 million term loan and a
$25 million term loan. The revolving bank credit line commitment is $34 million,
will be available to the Company through December 31, 2000 and is subject to a
borrowing base formula. The agreement provides for borrowings and letters of
credit based on collateralized accounts receivable and inventory. In addition,
all of the remaining assets of the Company and its subsidiaries are included as
collateral. Letters of credit under the line at July 2, 1995 were $1.1 million.
The total commitment from the international lines of credit are $6 million and
have the same availability and collateral as the revolving credit line, but are
not subject to a borrowing base formula. Interest on the revolver and the
international lines of credit are tied to the primary lending bank's prime rate,
or the London Interbank Offered Rate (LIBOR), with a margin, depending upon the
Company's achievement of certain operating and financial goals.
The $35 million and $25 million term loans are with the same lenders as the
revolving and international lines of credit, are secured by the same collateral,
and are due and payable on December 31, 2000 and June 30, 2002, respectively.
The $35 million term loan provides that an additional $15 million will be
available for future acquisitions. Principal payments on the $35 million term
loan of $1.4 million, with escalations to $1.8 million and $2.8 million in June,
1999 and June, 2000, respectively, begin on December 31, 1995, and are due and
payable on the last day of each quarter through December 31, 2000. Interest on
the $35 million term loan is tied to the primary lending bank's prime rate, or
LIBOR, with a margin, depending upon the Company's achievement of certain
operating and financial goals. Principal payments on the $25 million term loan
of $0.5 million are due and payable on the last day of each year beginning on
June 30, 1996 through June 30, 2000, with final balloon payments of $7.5 million
and $15 million due and payable on June 30, 2001 and June 30, 2002,
respectively. Interest on the $25 million term loan accrues at the primary
lending bank's prime rate plus two percentage points. The agreement also gives
the Company the option of using LIBOR plus three and one-quarter percentage
points. At July 2, 1995, the Company had no borrowings utilizing LIBOR.
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The credit facility limits the Company's ability to pay dividends to 25% of net
income and restricts capital expenditures to $6.5 million for the fiscal year
ending March 31, 1996, and $7 million thereafter for the life of the agreement,
as well as containing other customary financial covenants.
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 three-month period in 1996 were $0.8 million as
compared with $1.4 million in the comparable period in 1995. 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
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
(b) A report on Form 8-K was filed on July 14, 1995 to report the June 30,
1995 acquisition by the company's wholly owned subsidiaries of (i)
substantially all of the assets of SKF USA Inc.'s Seeger Division and
(ii) all of the outstanding stock of SKF GmbH's subsidiaries,
Seeger-Orbis GmbH.
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: August 15, 1995 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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