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EXHIBIT 13
[GRAPHIC]
[TRANSTECHNOLOGY LOGO]
ANNUAL REPORT
FISCAL YEAR ENDING
MARCH 31, 1996
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Photography by Kan
CONTENTS
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Selected Financial Data ............................................ 1
Letter to Shareholders ............................................. 2
Specialty Fastener Products ........................................ 6
Rescue Hoist and Cargo Hook Products ............................... 9
Financial Information .............................................. 11
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Selected Financial Data
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The following table provides selected financial data with respect to the
consolidated statements of operations of the Company for the fiscal years ended
March 31, 1996, 1995, 1994, 1993 and 1992 and the consolidated balance sheets of
the Company at the end of each such period.
SELECTED FINANCIAL DATA YEARS ENDED MARCH 31,
(in thousands except per share amounts) 1996 1995 1994 1993 1992
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Revenues from continuing operations $ 159,854 $ 102,692 $ 82,843 $64,671 $ 56,790
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Income (loss) from continuing
operations before income taxes $ 14,300 $ 10,842 $ 8,860 $ 4,285 $ (507)
Provision (credit) for income taxes 5,792 3,457 3,060 962 (77)
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Income (loss) from continuing operations 8,508 7,385 5,800 3,323 (430)
Income (loss) from discontinued operations (1,134) (4,852) 1,084 1,810 (8,985)
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Net income (loss) $ 7,374 $ 2,533 $ 6,884 $ 5,133 $ (9,415)
Earnings (loss) per share:
Income (loss) from continuing operations $ 1.67 $ 1.45 $ 1.13 $ 0.65 $ (0.08)
Income (loss) from discontinued operations (0.22) (0.95) 0.21 0.36 (1.77)
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Earnings (loss) per share $ 1.45 $ 0.50 $ 1.34 $ 1.01 $ (1.85)
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Dividends declared and paid per share $ 0.26 $ 0.255 $ 0.24 $ 1.56 --
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Total assets $ 199,367 $ 129,396 $125,857 $97,763 $ 104,905
Long-term debt $ 72,565 $ 37,021 $ 33,168 $12,387 $ 528
Shareholders' equity $ 72,470 $ 64,502 $ 65,953 $61,214 $ 63,735
Book value per share $ 14.21 $ 12.72 $ 12.71 $ 11.95 $ 12.54
Shares outstanding at year-end 5,099 5,070 5,189 5,122 5,084
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MARKET AND DIVIDEND DATA
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Market Price
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Quarter Ended High Low Dividends
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June 30, 1994 16-5/8 12-3/8 .060
September 30, 1994 13-5/8 10-3/4 .065
December 31, 1994 12-1/2 10-1/2 .065
March 31, 1995 13-5/8 10 .065
June 30, 1995 13-1/2 10-3/4 .065
September 30, 1995 14-7/8 12 .065
December 31, 1995 15-1/8 11-7/8 .065
March 31, 1996 15 12-1/2 .065
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Fellow Shareholders:
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The fiscal year ended March 31, 1996 was the fourth consecutive year of
increasing earnings for your company, with earnings from continuing operations
reaching $1.67 per share, a 15% increase over the prior year's $1.45 per share.
Even more important than a single year's earnings improvement, your company has
firmly established itself as one of the premier specialty fastener companies in
the world. The acquisition and integration of the companies we have acquired
over the past three years, capped by the June 1995 acquisition of the Seeger
Group, have built a solid base for the future of TransTechnology Corporation.
With number one rankings in global market share in two of our four product lines
(retaining rings and helicopter rescue hoists and cargo hooks) and positions of
leadership in the US in the other two (gear driven band fasteners and assembly
fasteners), our company now casts a long shadow over its markets.
Almost every aspect of fiscal year 1996 was an improvement over the prior fiscal
year. Revenues were up 56%, operating profit was up 72%, cash flow from
operating activities was up 43%, and net income was up 191% -- all the result of
our program of focused acquisitions and concentration on improvement in each of
our business units. Capital expenditures rose 29%, reflecting our commitment to
the future of our existing businesses and our desire to seek internally
generated as well as external sources of growth. From each of these
perspectives, it was, indeed, a very good year.
[GRAPH]
INCOME PER SHARE FROM CONTINUING OPERATIONS
(IN DOLLARS)
1992 (0.08)
1993 0.65
1994 1.13
1995 1.45
1996 1.67
At the risk of being repetitive, and boring, it is important to once again
evaluate our progress against the goals and strategy we have laid out for our
company. Our simple, straightforward strategy remains unchanged from 1992; to
grow through acquisitions which complement existing product lines with a
continuing focus upon a narrow range of industrial products sold to a wide range
of end-users. The acquisition of the Seeger Group perfectly exemplified this
strategy, vaulting us into the world-wide number one market position in
retaining rings while enhancing our Industrial Retaining Ring business. By the
end of fiscal 1996, specialty fasteners constituted 83% of TransTechnology's
annualized revenues. We expect, in the future, to continue our program of
strategic acquisitions in existing product lines, with a goal of achieving
global number one market positions in each of them. In fiscal 1996 we achieved
most of our financial goals. Our EPS increase of 15.2%, continuing operations'
return on average equity of 12.4%, and dividend payout of 15.6% of income from
continuing operations each met or exceeded our fiscal 1996 goals of 15%, 12% and
less than 25%, respectively. Since the
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installation of our management team in October 1992, EPS from continuing
operations have grown at a compound rate of 37% from the $.65 per share reported
for the fiscal year ended March 31, 1993 to the $1.67 reported for fiscal 1996.
[GRAPH]
NET SALES
($ IN MILLIONS)
1992 56,344
1993 63,999
1994 81,873
1995 101,122
1996 158,024
The only financial goal not achieved in the 1996 fiscal year was our debt to
total capitalization target of 35% or less. Total long and short term debt,
which finished the year at $78.6 million, or 52% of total capitalization, was
well above the objective. This higher than desired level of debt is entirely
attributable to the $43 million acquisition of the Seeger Group. At June 30,
1995, the closing date of that transaction, total debt was $89.5 million, or 58%
of total capitalization. While debt was reduced almost $10 million in the last
three quarters of the fiscal year, we recognize the importance of a strong
balance sheet and will continue our efforts to further reduce debt in the new
fiscal year.
As I said at our shareholders' meeting last year, now is the time to raise the
hurdle with regard to our goals. While our operating and acquisition strategies
remain unchanged, our target financial goals, to be achieved by the fiscal year
ending in 2001, have been moved upwards to $500 million in revenues with a 7%
net income margin and a 15% return on average equity. We continue to keep our
EPS growth goal at 15%, compounded annually over that same period, to limit our
dividend to 25% or less of continuing operations' income and to pursue a debt to
total capitalization ratio of 35% or less. We believe that, with hard work and
the avoidance of a calamity, all of these goals are achievable over the next
five years.
[GRAPH]
INCOME FROM CONTINUING OPERATIONS
($ IN MILLIONS)
1992 (430)
1993 3,323
1994 5,800
1995 7,385
1996 8,508
We also remain keenly focused on maintaining a flexible and diversified mix of
end-user markets for our fastener products. It is important to us that we not
become overly dependent upon a single geographic or end-user market. To this
end, we are attempting to develop a mix that includes diversification by
geographic (Europe, North America, and South America) and end-user markets, such
as automotive, heavy- truck, repair maintenance and overhaul, industrial
equipment, and consumer products. In fiscal year 1996 almost 40% of our revenues
were generated outside of the United States, and the largest single end-user
market, worldwide automotive OEM's, accounted for only 30% of global revenues.
This focus on diversified
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geographic and end-user markets impacts our analysis of acquisition candidates
as well as the utilization of our resources for capital expenditures, new
product development and marketing programs.
Fiscal 1996 was a year of integration and foundation building for fiscal 1997
and beyond, as we stepped up the pace of inter-divisional cooperation and
assistance as a result of the Seeger Group's acquisition. As the only
multinational manufacturer of our fastener products, we are well positioned to
meet our customers' increasing demands for a single global source of supply. We
see significant opportunities to increase sales of fastener products through our
cross-selling program, begun in April 1996. Under this program, we expect our US
manufactured gear driven band and assembly fasteners to be marketed in Europe
and South America by our business units there, and for the products manufactured
in Europe and Brazil to be marketed in the US by our domestic units. In many
instances, prospective cross-selling customers are the same customers we already
call on for other TransTechnology products. We have also commenced a
manufacturing rationalization program, whereby manufacturing of specific parts
is centralized rather than having multiple factories manufacture the same
component. This rationalization lowers costs and working capital needs while
improving efficiency. A great amount of effort has gone into a program of
complete tooling review and upgrades at each of our factories, again with an eye
towards lower manufacturing costs through higher efficiencies and throughput. We
believe that each of these programs will be a key part of our effort to achieve
our internal revenue and margin improvement goals over the next five years.
[GRAPH]
YEAR-END MARKET PRICE OF STOCK
(IN DOLLARS)
1992 8.00
1993 10.50
1994 15.38
1995 11.38
1996 15.00
Much remains to be done, however, before we fully realize the potential which
lies within our company, and many challenges must be met along the way. We need
to become more proactive with our customers to meet their needs and we must
react more quickly in those instances where events seem to overtake us in the
market-place. A greater effort towards customer service, specifically product
engineering support and marketing resources, must continue as an internal focus
for improvement. The reduction of costs, at every level of the company, through
improved production efficiencies and investments in modern equipment, is
imperative to remaining competitive in the global marketplace. It is equally
important to have properly skilled people in the appropriate positions at every
level of the company to provide the resources for our new products and projects,
and the identification and development of these people is a "must do" to assure
our future.
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[PHOTO OF MICHAEL J. BERTHELOT]
I would like to thank each of our 1,500 employees and associates for their
efforts over the past fiscal year. The people at Breeze-Eastern, who have
achieved a solid turnaround of their business, worked hard and long for several
years and have emerged victorious. The people of our Breeze Industrial, Palnut
and Industrial Retaining Ring businesses have literally travelled about the
world on an almost continuous basis over the past year, performing due diligence
and then integration activities in Germany, England, the US and Brazil. Adapting
to a new system of objectives, management, data processing, and accounting and
finance rules is a daunting challenge, yet the people of the Seeger Group put
forth a yeoman's effort to ensure a smooth and seamless transition. Without the
enthusiasm and desire to succeed shown by our people around the world, the
results of the past year could not have been achieved. To each of you, I extend
the thanks of the Board of Directors, the shareholders, and my own personal
appreciation for your hard work and dedication.
We welcome Michel Glouchevitch, a managing director of a California based
investment firm, as the newest member of our Board of Directors. Michel's
observations and guidance as we move forward with acquisitions and financing
issues in the future will be greatly valued by the Board and the management
team.
On behalf of our Board of Directors and the management team, I express our
appreciation for the confidence and support shown by the shareholders over the
past year. Our goal is to enhance shareholder value, and we try to guide our
actions by that basic principle. I personally thank you for the opportunity to
participate in the revitalization and rebirth of this company, and I commit
myself to continuing our efforts to move TransTechnology to even greater heights
in the future.
/s/ Michael J. Berthelot
Michael J. Berthelot
Chairman and
Chief Executive Officer
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SPECIALTY FASTENER PRODUCTS
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TransTechnology Corporation derives over 80% of its revenues from the
manufacture and sale of specialty fasteners and is the seventh largest fastener
manufacturer in the United States. Operating in small niches within the $6
billion domestic and $30 billion global fastener markets, the company operates
under some of the most well known brand names in the world and is an
acknowledged market leader in each of its product lines. The company's specialty
fastener products are used in a myriad of industries, ranging from automotive
and heavy truck manufacturing to computer disk drives, toys and caskets.
Specialty fastener products are distributed through in-house sales forces,
distributors, and manufacturers' representatives around the world. Through
increased engineering and marketing resources, the company continues to search
for new applications for its products in new industries throughout the globe.
[GRAPHIC]
Breeze Industrial's Aero Seal clamps.
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GEAR DRIVEN BAND FASTENERS
TransTechnology's Breeze Industrial Products division is the only full-line
manufacturer of gear driven band clamps in the world. Worm gear,
constant-torque, T-Bolt and V-Band, as well as perforated and non-perforated
clamps are part of a broad line of products for automotive, heavy truck,
industrial and marine. "Breeze" stainless steel clamps, well known for their
quality and engineering, are specified by Caterpillar, Navistar, and other major
heavy equipment manufacturers for whom Breeze is a certified supplier. Breeze
"Aero-Seal(R)", "Power-Seal(R)" and "Euro-Seal(TM)" clamps are sold in hardware,
automotive and retail stores for use in repair, maintenance and overhaul
applications and are used by many manufacturers of industrial and consumer
products.
ASSEMBLY FASTENERS
TransTechnology's Palnut division is one of the leading manufacturers of
assembly fasteners in the United States, supplying "Palnut" highly engineered
custom fastening devices primarily to the automotive industry. Lock-nuts,
push-nuts, u-nuts, and a variety of single and multi-threaded stainless and
high-carbon steel fasteners are provided to the toy, appliance, casket, and
lighting industries for use in assembling products.
[GRAPHICS]
The Palnut Company's lock-nuts and pushnuts.
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RETAINING RINGS
TransTechnology is the world's largest manufacturer of retaining rings, with six
distinct operations in the United States, Germany, England, and Brazil. These
products are highly engineered, usually to a customer's exacting specifications,
and are used in engines, transmissions, drive trains, and braking systems on
automobiles, trucks, and off-road equipment. They also find application in
industrial equipment, computers, photographic equipment, appliances, marine
applications, and almost any situation where movement on a shaft must be
restricted. The company operates under the well known brand names "Seeger-Orbis"
(Germany), "Seeger- Reno" (Brazil), "Anderton" and "Anderton-United" (United
Kingdom and United States), "Waldes/Truarc" (United States) and "Industrial
Retaining Ring" (United States).
[GRAPHIC]
Seeger Group's retaining rings.
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Rescue Hoist and Cargo Hook Products
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TransTechnology's Breeze-Eastern division is the world's leading designer and
manufacturer of sophisticated helicopter rescue hoists and cargo hook systems.
These systems add significantly to the versatility of an aircraft for a
relatively small cost. They are used around the world by military and civilian
agencies to save lives, complete missions, and transport cargo. Most helicopter
manufacturers today, including Sikorsky, Bell, Aerospatiale, and Agusta specify
Breeze-Eastern's systems as standard equipment on their aircraft because of
Breeze-Eastern's record for safety, reliability, durability, and service.
Breeze-Eastern also manufactures handling systems for weapon's platforms and
motion control actuation devices.
Innovation and new product development remain an important focus at
Breeze-Eastern. Participation in the V-22 Osprey program presents the division
with an opportunity for substantial growth in the future on one of the first new
airframe projects in years. The use of computerized testing equipment, composite
materials, the integration of electronics into hoists and hooks, and the use of
lighter and faster motors are all Breeze-Eastern's accomplishments over the past
several years. Breeze-Eastern has made a substantial commitment to increased
engineering, new product, and research and development projects for the future
in order to maintain the confidence and trust of its customers and users and to
assure its continued position as the global market leader.
[GRAPHIC]
Breeze-Eastern rescue hoist
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BOARD OF DIRECTORS AND CORPORATE OFFICERS
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[PHOTO OF BOARD OF DIRECTORS]
BOARD OF DIRECTORS
(From left to right)
Back Row: Gideon Argov, James A. Lawrence, Michel Glouchevitch,
Walter Belleville
Center Row: Thomas V. Chema, Patrick K. Bolger
Center Front: Michael J. Berthelot
[PHOTO OF CORPORATE OFFICERS]
CORPORATE OFFICERS
Standing from left to right:
Winston Lau, Vice President of Operations
Michael J. Berthelot, Chairman of the Board and Chief Executive Officer
Monica Aguirre, Assistant Secretary
Chandler J. Moisen, Senior Vice President, Chief Financial Officer and Treasurer
Sitting from left to right:
Gerald C. Harvey, Vice President, Secretary and General Counsel
Patrick K. Bolger, President and Chief Operating Officer
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Consolidated Balance Sheets
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March 31,
ASSETS 1996 1995
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Current assets:
Cash and cash equivalents $ 2,362,000 $ 1,544,000
Accounts receivable
(net of allowance for doubtful accounts
of $735,000 and $103,000 in 1996 and 1995, respectively) 28,368,000 19,484,000
Notes receivable 1,258,000 836,000
Inventories 50,551,000 25,239,000
Prepaid expenses and other current assets 1,726,000 2,706,000
Deferred income taxes 1,037,000 2,592,000
Net assets held for sale 9,980,000 24,269,000
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Total current assets 95,282,000 76,670,000
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Property:
Land 12,616,000 4,330,000
Buildings 20,523,000 13,268,000
Machinery and equipment 39,600,000 21,772,000
Furniture and fixtures 5,398,000 3,043,000
Leasehold improvements 189,000 161,000
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Total 78,326,000 42,574,000
Less accumulated depreciation and amortization 17,749,000 13,040,000
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Property-net 60,577,000 29,534,000
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Other assets:
Notes receivable 12,824,000 3,274,000
Costs in excess of net assets of acquired businesses (net of accumulated
amortization: $3,308,000 and $2,793,000 in 1996 and 1995, respectively 16,411,000 12,813,000
Other 14,273,000 7,105,000
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Total other assets 43,508,000 23,192,000
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TOTAL $ 199,367,000 $ 129,396,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Current portion of long-term debt $ 6,026,000 $ 3,356,000
Accounts payable-trade 14,719,000 9,147,000
Accrued compensation 6,473,000 4,247,000
Accrued income taxes 1,415,000 591,000
Other current liabilities 9,301,000 6,267,000
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Total current liabilities 37,934,000 23,608,000
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Long-term debt payable to banks and others 72,565,000 37,021,000
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Other long-term liabilities 16,398,000 4,265,000
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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, 5,276,463 and 5,242,316 shares in 1996 and 1995, respectively 53,000 52,000
Additional paid-in capital 46,188,000 45,802,000
Retained earnings 29,467,000 23,418,000
Other stockholders' equity (1,083,000) (2,680,000)
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74,625,000 66,592,000
Less treasury stock, at cost - 177,500 shares and 172,500 shares in
1996 and 1995, respectively (2,155,000) (2,090,000)
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Total stockholders' equity 72,470,000 64,502,000
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TOTAL $ 199,367,000 $ 129,396,000
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See accompanying notes to consolidated financial statements.
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STATEMENTS OF CONSOLIDATED OPERATIONS
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For the years ended March 31,
1996 1995 1994
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Revenues:
Sales $ 158,024,000 $ 101,122,000 $81,873,000
Interest income 1,010,000 760,000 675,000
Other income 820,000 810,000 295,000
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Total 159,854,000 102,692,000 82,843,000
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Cost of goods sold 107,426,000 71,968,000 57,887,000
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Gross profit 52,428,000 30,724,000 24,956,000
General, administrative and selling expenses 31,812,000 17,051,000 14,973,000
Interest expense 6,316,000 2,831,000 1,123,000
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Income from continuing operations
before income taxes 14,300,000 10,842,000 8,860,000
Provision for income taxes 5,792,000 3,457,000 3,060,000
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Income from continuing operations 8,508,000 7,385,000 5,800,000
Discontinued operations:
(Loss) income from operations
(net of applicable tax benefits of
$323,000, $1,619,000 and $213,000 for 1996,
1995 and 1994, respectively) (517,000) (2,602,000) 324,000
(Loss) gain from disposal (net of applicable
tax benefits of $1,077,000, $1,400,000 for 1996
and 1995, respectively, and net of
applicable tax provision of $306,000 for 1994) (617,000) (2,250,000) 760,000
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Net income $ 7,374,000 $ 2,533,000 $ 6,884,000
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Earnings per share
Income from continuing operations $ 1.67 $ 1.45 $ 1.13
(Loss) income from discontinued operations (0.22) (0.95) 0.21
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Income per share $ 1.45 $ 0.50 $ 1.34
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Number of shares used in computation of
per share information 5,093,000 5,109,000 5,143,000
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See accompanying notes to consolidated financial statements
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Statements of Consolidated Cash Flows
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For the years ended March 31,
1996 1995 1994
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Cash flows from operating activities:
Net income $ 7,374,000 $ 2,533,000 $ 6,884,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Loss recognized on write-down of
marketable securities 2,613,000 -- --
Depreciation and amortization 6,027,000 5,349,000 4,505,000
Provision for losses on accounts receivable 468,000 65,000 102,000
Gain (loss) on sale or disposal of fixed assets
and discontinued businesses (307,000) 704,000 (452,000)
Change in assets and liabilities net of
acquisitions and dispositions:
Decrease (increase) in accounts receivable 4,290,000 (2,672,000) 261,000
(Increase) decrease in inventories (6,098,000) 5,595,000 (200,000)
(Increase) in net assets held for sale (1,915,000) (3,672,000) (1,133,000)
Decrease (increase) in other assets 4,825,000 (2,521,000) (1,031,000)
Increase in accounts payable 462,000 3,211,000 506,000
Increase in accrued compensation 2,226,000 1,041,000 1,137,000
(Decrease) in income tax payable (676,000) (121,000) (928,000)
(Decrease) in other liabilities (8,577,000) (2,043,000) (2,895,000)
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Net cash provided by operating activities 10,712,000 7,469,000 6,756,000
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Cash flows from investing activities:
Business acquisitions (45,594,000) (15,952,000) (22,670,000)
Capital expenditures (6,471,000) (5,033,000) (4,973,000)
Proceeds from sale of fixed assets and
discontinued business 8,111,000 6,977,000 1,027,000
Decrease (increase) in notes receivable 1,055,000 2,515,000 (176,000)
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Net cash used in investing activities (42,899,000) (11,493,000) (26,792,000)
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Cash flows from financing activities:
Proceeds from long-term borrowings 107,363,000 42,019,000 34,400,000
Payments on long-term debt (73,156,000) (36,289,000) (12,178,000)
Proceeds from issuance of stock under
stock option plan 188,000 202,000 571,000
Stock repurchases increase (65,000) (2,090,000) --
Dividends paid (1,325,000) (1,301,000) (1,235,000)
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Net cash provided by financing activities 33,005,000 2,541,000 21,558,000
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Net increase (decrease) in cash and cash equivalents 818,000 (1,483,000) 1,522,000
Cash and cash equivalents at beginning of year 1,544,000 3,027,000 1,505,000
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Cash and cash equivalents at end of year $ 2,362,000 $ 1,544,000 $ 3,027,000
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Supplemental Information:
Interest payments $ 5,036,000 $ 3,054,000 $ 1,602,000
Income tax payments $ 1,989,000 $ 1,573,000 $ 4,476,000
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See accompanying notes to consolidated financial statements.
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Statements of Consolidated Stockholders' Equity
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For the years ended Common Stock Treasury Stock Additional
March 31, 1996, --------------------- ----------------------- Paid-In Retained
1995 and 1994 Shares Amount Shares Amount Capital Earnings
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Balance, March 31, 1993 5,121,604 $51,000 -- $ -- $44,616,000 $ 16,537,000
Net income -- -- -- -- -- 6,884,000
Cash dividends ($.24 per share) -- -- -- -- -- (1,235,000)
Issuance of stock under
stock option plan 57,415 1,000 -- -- 570,000 --
Issuance of stock under
incentive bonus plan - net 10,085 -- -- -- 97,000 --
Foreign translation adjustments -- -- -- -- -- --
Unrealized investment
holding losses -- -- -- -- -- --
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Balance, March 31, 1994 5,189,104 52,000 -- -- 45,283,000 22,186,000
Net Income -- -- -- -- -- 2,533,000
Cash dividends ($.255 per share) -- -- -- -- -- (1,301,000)
Purchase of treasury stock -- -- (172,500) (2,090,000) -- --
Issuance of stock under
stock option plan 24,789 -- -- -- 202,000 --
Issuance of stock under
incentive bonus plan - net 28,423 -- -- -- 317,000 --
Foreign translation adjustments -- -- -- -- -- --
Unrealized investment
holding losses -- -- -- -- -- --
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Balance, March 31, 1995 5,242,316 52,000 (172,500) (2,090,000) 45,802,000 23,418,000
Net income -- -- -- -- -- 7,374,000
Cash dividends ($.26 per share) -- -- -- -- -- (1,325,000)
Purchase of treasury stock -- -- (5,000) (65,000) -- --
Issuance of stock under
stock option plan 20,308 1,000 -- -- 187,000 --
Issuance of stock under
incentive bonus plan - net 13,839 -- -- -- 199,000 --
Foreign translation adjustments -- -- -- -- -- --
Realized investment
holding losses -- -- -- -- -- --
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Balance, March 31, 1996 5,276,463 $53,000 (177,500) $(2,155,00) $46,188,000 $ 29,467,000
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Other
Stockholders'
Equity Total
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Balance, March 31, 1993 $ 10,000 $ 61,214,000
Net income -- 6,884,000
Cash dividends ($.24 per share) -- (1,235,000)
Issuance of stock under
stock option plan -- 571,000
Issuance of stock under
incentive bonus plan - net (65,000) 32,000
Foreign translation adjustments 56,000 56,000
Unrealized investment
holding losses (1,569,000) (1,569,000)
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Balance, March 31, 1994 (1,568,000) 65,953,000
Net Income -- 2,533,000
Cash dividends ($.255 per share) -- (1,301,000)
Purchase of treasury stock -- (2,090,000)
Issuance of stock under
stock option plan -- 202,000
Issuance of stock under
incentive bonus plan - net (122,000) 195,000
Foreign translation adjustments 54,000 54,000
Unrealized investment
holding losses (1,044,000) (1,044,000)
- ----------------------------------------------------------------------------
Balance, March 31, 1995 (2,680,000) 64,502,000
Net income -- 7,374,000
Cash dividends ($.26 per share) -- (1,325,000)
Purchase of treasury stock -- (65,000)
Issuance of stock under
stock option plan -- 188,000
Issuance of stock under
incentive bonus plan - net (122,000) 77,000
Foreign translation adjustments (894,000) (894,000)
Realized investment
holding losses 2,613,000 2,613,000
- ----------------------------------------------------------------------------
Balance, March 31, 1996 $ (1,083,000) $ 72,470,000
- ----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING PRINCIPLES
TransTechnology Corporation (the "Company") develops, manufactures and sells a
wide range of products in two industry segments, Specialty Fastener Products,
and Rescue Hoist and Cargo Hook Products. The Company has manufacturing
facilities located in the United States, Germany, the United Kingdom and Brazil.
The Specialty Fastener Products Segment produces highly engineered precision
metal retaining rings, clamps, circlips, spring pins and other fasteners for
primarily the automotive, heavy truck, industrial and toy markets, and accounted
for approximately 81 percent of the Company's consolidated 1996 net sales.
Through its Rescue Hoist and Cargo Hook Products Segment, the Company develops,
manufactures, sells and services a complete line of sophisticated lifting and
restraining products - principally helicopter rescue hoist and cargo hook
systems, and winches and hoists for aircraft and weapons systems, and accounted
for approximately 19 percent of the Company's consolidated 1996 net sales.
14
17
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
PRINCIPLES OF CONSOLIDATION. The accompanying consolidated financial statements
include the accounts of TransTechnology Corporation and its subsidiaries, all of
which are wholly-owned. Intercompany balances and transactions are eliminated in
consolidation.
RELATED PARTY. Research Industries Incorporated owns approximately 22% of the
Company's outstanding common stock. Two former directors of the Company are the
only shareholders of Research Industries Incorporated, and each of these
directors had a consulting contract with the Company that expired during fiscal
1995. During fiscal 1995 and 1994, the Company expensed and paid $0.7 and $0.9
million, respectively, for these contracts.
ACCOUNTING FOR CONTRACTS. All of the Company's contracts are firm fixed-price.
Sales and cost of sales on such contracts are recorded as deliveries are made.
Losses on contracts are recorded in full as they are identified.
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.
ACCOUNTS RECEIVABLE. Accounts receivable from the United States Government
represent billed receivables and substantially all amounts are expected to be
collected within one year. The Company has no amounts billed under retainage
provisions of contracts.
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. Provisions for depreciation
are made on a straight-line basis over the estimated useful lives of depreciable
assets ranging from three to thirty years. Amortization of leasehold
improvements is computed on a straight-line basis over the shorter of the
estimated useful lives of the improvements or the terms of the leases.
COSTS IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES. The difference between the
purchase price and the fair value of the net assets of acquired businesses is
included in the accompanying Consolidated Balance Sheets under the caption
"Costs in Excess of Net Assets of Acquired Businesses" and is being amortized
over forty years, or shorter periods where deemed appropriate. The Company has
determined that there is no impairment in value since projected future operating
results on an undiscounted basis through the period such costs in excess of net
assets of acquired businesses is being amortized are expected to be sufficient
to absorb the amortization.
EARNINGS PER SHARE. Earnings per share are based on the weighted average number
of common shares and, if dilutive, common stock equivalents (stock options)
outstanding during each year.
RESEARCH, DEVELOPMENT AND ENGINEERING COSTS. Research and development costs and
engineering costs in support of active products, which are charged to expense
when incurred, amounted to $1.7 million, $1.4 million and $1.4 million in 1996,
1995 and 1994, respectively. Included in these amounts were expenditures of $0.9
million, $0.4 million and $0.6 million in 1996, 1995 and 1994, respectively,
which represent costs related to research and development activities.
FOREIGN CURRENCY TRANSLATION. Pursuant to Statement of Financial Accounting
Standards No. 52, the assets and liabilities of the Company's international
operations, other than the operations located in a highly inflationary country,
have been translated into U.S. Dollars at year-end exchange rates, with
resulting translation gains and losses accumulated as a separate component of
stockholders' equity. Income and expense items are converted into U.S. Dollars
at average rates of exchange prevailing during the year. Translation adjustments
of the operation located in a country with a highly inflationary economy, are
included as a component of operating income.
INCOME TAXES. Effective April 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". Statement
No. 109 requires a change from the deferred method of accounting for income
taxes of APB Opinion 11 to the asset and liability method of accounting for
income taxes. Under the asset and liability method of Statement No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
15
18
statement carrying amounts of existing assets and liabilities and their
respective tax bases. The adoption of Statement No. 109 had no material effect
on the financial statements.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. The Company makes contributions
toward the cost of providing certain health care and life insurance benefits to
certain retirees, their beneficiaries and covered dependents. The accrual method
of accounting for these benefits was adopted April 1, 1993 in accordance with
the provisions of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions."
INVESTMENTS. On March 1, 1994 the Company received 465,000 shares of Mace
Security International common stock, valued at $3.4 million, as partial
consideration for the sale of a division. In the fourth quarter of 1996 the
Company recorded a $2.6 million pre-tax charge to continuing operations to
write-down the carrying value of equity securities acquired from the sale of
this division to their current market value as the decline in value of those
securities was determined to be other than temporary.
FINANCIAL INSTRUMENTS. The Company does not hold or issue financial instruments
for trading purposes. Amounts to be paid or received under interest rate swap
agreements are recognized as increases or reductions in interest expense in the
periods in which they accrue. The company enters into off-balance sheet forward
foreign exchange instruments in order to hedge certain purchase commitments.
Gains and losses on these instruments are included in other income/expense in
the accompanying Statements of Consolidated Operations.
NEW ACCOUNTING STANDARDS. In March 1995, the Financial Accounting Standards
Board (FASB) issued SFAS No. 121, "Accounting for Impairment of Long-Lived
Assets and for Long- Lived Assets to Be Disposed Of," which the Company is
required to adopt during fiscal 1997. The adoption of SFAS No. 121 is not
expected to have a material impact on the Company's consolidated financial
statements. Also in 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation," which requires companies to measure employee stock
compensation plans based on the fair value method of accounting or to continue
to apply APB No. 25, "Accounting for Stock Issued to Employees," and provide pro
forma footnote disclosures under the fair value method in SFAS No. 123. The
Company will continue to apply the principles of APB No. 25 and provide pro
forma fair value disclosures starting in the 1997 Annual Report.
RECLASSIFICATIONS. Certain reclassifications have been made to prior years to
conform to the 1996 presentation.
2. DISCONTINUED OPERATIONS
In June 1995 and January 1996, the Company sold the domestic and European
portions of its computer graphics service operations, respectively, in two
separate transactions to two different buyers. These businesses operated under
the name TransTechnology Systems & Services and were classified as discontinued
operations in March 1995. The sale of the domestic portion for $0.7 million in
cash and $0.6 million in notes receivable was for book value, and the sale of
the European portion for $0.1 million in cash and $0.2 million in notes
receivable resulted in an after-tax gain on disposal of $0.1 million in 1996.
In August 1995, the company sold its Electronics division for $4.4 million in
cash and $9.6 million in notes receivable. The sale of this operation resulted
in an after-tax gain on disposal of $0.2 million.
In March 1995, the Company sold substantially all of the assets and business of
its chaff products operation for $6.7 million in cash. The sale of this
operation resulted in an after-tax loss on disposal of $0.4 million. Additional
after-tax disposal costs of $0.2 million were recorded in 1996 in connection
with the sale. The Company retained the chaff avionics product line and
negotiated its sale separately in May 1995 for $0.3 million in cash and $0.7
million in notes receivable, resulting in an after-tax gain on disposal of $0.4
million. In the fourth quarter of 1996, the Company recorded an after-tax charge
of $0.4 million to record the anticipated loss on the sale of the facility, that
was formerly used by this operation.
In March 1994, the Company sold its tear-gas division which operates under the
name Federal Laboratories, for $1.0 million in cash, $1.2 million in notes
receivable and 465,000 shares of Mace Security International, Inc. common stock.
The sale of this division resulted in an after-tax gain on disposal of $0.5
million. Additional after-tax disposal costs of $0.1 million and $0.5 million
were recorded in 1996 and 1995, respectively, in connection with the sale.
16
19
Additional after-tax costs of $0.6 million and $1.4 million were recorded in
1996 and 1995, respectively, in connection with other previously discontinued
and sold operations, and an after-tax gain on disposal of $0.3 million was
recorded in 1994. These additional costs represent adjustments to previous
estimates related primarily to legal and environmental matters.
Operating results of the discontinued businesses were as follows:
1996 1995 1994
- ---------------------------------------------------------------------
Total revenues $ 7,951,000 $ 35,515,000 $43,661,000
---------------------------------------------------------------------
(Loss) income
before income
taxes $ (840,000) $ (4,221,000) $ 111,000
Income tax
benefit 323,000 1,619,000 213,000
---------------------------------------------------------------------
(Loss) income
from
operations $ (517,000) $ (2,602,000) $ 324,000
---------------------------------------------------------------------
The loss from operations includes interest expense of $206,000, $488,000 and
$523,000 in 1996, 1995 and 1994, respectively.
Net assets held for sale at March 31, 1996 and 1995 were as follows:
1996 1995
- ---------------------------------------------------------------------
Accounts receivable $ 143,000 $ 6,344,000
Inventory 529,000 10,993,000
Property 8,667,000 10,109,000
Other assets 1,269,000 1,755,000
Liabilities (628,000) (4,932,000)
- ---------------------------------------------------------------------
Net assets held for sale $ 9,980,000 $ 24,269,000
- ---------------------------------------------------------------------
3. ACQUISITIONS
On June 30, 1995, the Company acquired the Seeger Group of companies from a unit
of AB SKF of Goteborg, Sweden for approximately $43 million in cash plus direct
acquisition costs and the assumption of trade debts and accrued expenses. The
Seeger Group, headquartered in Konigstein, Germany, is the global leader in
manufacturing circlips, snap rings and retaining rings. The Seeger Group
operates under the trade names of "Seeger", "Anderton", and "Waldes" with over
900 employees at its five manufacturing facilities located in Germany, the UK,
Brazil and the U.S.A.
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 $15.3 million in cash and the assumption of liabilities.
Industrial Retaining Ring Company manufactures retaining rings and clips used
primarily in the heavy equipment and industrial machinery industries.
On August 2, 1993, the Company acquired substantially all of the assets of the
Palnut fastener operation ("Palnut") of TRW Inc. for a total purchase price of
$20.5 million in cash and the assumption of certain liabilities consisting
primarily of trade payables and accrued expenses aggregating approximately $1.4
million. The Palnut operation manufactures single and multi-thread metal
fasteners, for the automotive and industrial products industries.
The following summarizes TransTechnology Corporation's unaudited combined
Proforma Revenue, Net Income and Earnings (Loss) per Share information prepared
as if the acquisitions of the Seeger Group and Industrial Retaining Ring Company
had occurred at the beginning of the periods presented.
For the years ended March 31,
(Unaudited) 1996 1995
- ----------------------------------------------------------------------
Revenue $ 180,281,000 $ 165,646,000
- ----------------------------------------------------------------------
Income from continuing
operations $ 10,130,000 $ 8,387,000
Loss from discontinued
operations (1,134,000) (4,852,000)
- ----------------------------------------------------------------------
Net income $ 8,996,000* $ 3,535,000
- ----------------------------------------------------------------------
Earnings per share from
continuing operations $ 1.99 $ 1.64
Loss per share from
discontinued operations (0.22) (0.95)
- ----------------------------------------------------------------------
Earnings per share $ 1.77 $ 0.69
- ----------------------------------------------------------------------
* 1996 net income includes $2.1 million non-recurring income from the sale of
unused land to an affiliate of the former parent company.
4. INVENTORIES
- ----------------------------------------------------------------------
Inventories at March 31 consisted of the following:
1996 1995
- ----------------------------------------------------------------------
Finished goods $22,645,000 $ 6,152,000
Work in process 9,326,000 3,867,000
Purchased and
manufactured parts 18,580,000 15,220,000
- ----------------------------------------------------------------------
Total $50,551,000 $ 25,239,000
- ----------------------------------------------------------------------
17
20
5. INCOME TAXES
- --------------------------------------------------------------------------------
The components of total income (loss) from operations (including continuing and
discontinued operations) before income taxes were:
1996 1995 1994
- ----------------------------------------------------------------------
Domestic $8,124,000 $3,694,000 $11,010,000
Foreign 3,642,000 (723,000) (973,000)
- ----------------------------------------------------------------------
Total $11,766,000 $2,971,000 $10,037,000
- ----------------------------------------------------------------------
The provision (benefit) for income taxes is summarized below:
1996 1995 1994
- ----------------------------------------------------------------------
Currently payable:
Domestic $1,813,000 $140,000 $2,987,000
Foreign 656,000 - (109,000)
State 517,000 208,000 734,000
- ----------------------------------------------------------------------
2,986,000 348,000 3,612,000
Deferred 1,406,000 90,000 (459,000)
- ----------------------------------------------------------------------
Total $4,392,000 $438,000 $3,153,000
- ----------------------------------------------------------------------
The provision (benefit) for income taxes is allocated between continuing and
discontinued operations as summarized below:
1996 1995 1994
- ----------------------------------------------------------------------
Continuing $5,792,000 $3,457,000 $3,060,000
Discontinued (1,400,000) (3,019,000) 93,000
- ----------------------------------------------------------------------
Total $4,392,000 $ 438,000 $3,153,000
- ----------------------------------------------------------------------
The consolidated effective tax rates for continuing operations differ from the
federal statutory rates as follows:
1996 1995 1994
- ----------------------------------------------------------------------
Statutory federal rate 34.0% 34.0% 34.0%
State income taxes after
federal income tax 3.6% 4.6% 4.7%
Earnings of the foreign
sales corporation (2.6%) (2.6%) (3.7%)
Amortization of purchase
adjustments not
deductible for tax
purposes 1.9% 1.0% 1.5%
Revision of prior years'
tax accruals - (5.1%) (1.7%)
Foreign rate differential 2.6% - -
Other 1.0% - (0.3%)
- ----------------------------------------------------------------------
Consolidated effective
tax rate 40.5% 31.9% 34.5%
- ----------------------------------------------------------------------
The following is an analysis of accumulated deferred income taxes:
1996 1995
- ---------------------------------------------------------------------------
Assets
Current
Inventory $ 969,000 $2,307,000
Other 68,000 285,000
- ---------------------------------------------------------------------------
Total current 1,037,000 2,592,000
- ---------------------------------------------------------------------------
Non-current
Environmental 1,067,000 1,274,000
Purchase accounting
adjustments 3,820,000 --
Investment 1,049,000 --
Other 737,000 360,000
- ---------------------------------------------------------------------------
Total non-current 6,673,000 1,634,000
- ---------------------------------------------------------------------------
Total assets $7,710,000 $4,226,000
- ---------------------------------------------------------------------------
Liabilities
Non-current
Depreciation $1,200,000 $1,147,000
Purchase accounting
adjustments 2,097,000 --
Other 605,000 --
- ---------------------------------------------------------------------------
Total liabilities $3,902,000 $1,147,000
- ---------------------------------------------------------------------------
Summary-accumulated deferred income taxes
Net current assets $1,037,000 $2,592,000
Net non-current assets 2,771,000 487,000
- ---------------------------------------------------------------------------
Total $3,808,000 $3,079,000
- ---------------------------------------------------------------------------
6. LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS
- --------------------------------------------------------------------------------
Long-term debt payable, including current maturities, at March 31 consisted of
the following:
1996 1995
- -----------------------------------------------------------------
Credit Agreement - 8.3125% $ -- $16,300,000
Credit Agreement - 7.965% 21,420,000 --
Term Loan - 7.804% 31,320,000 --
Term Loan - 9.0% -- 8,080,000
Term Loan - 9.79% 25,000,000 --
Term Loan - 9.0% -- 15,000,000
Other 851,000 997,000
- ------------------------------------------------------------------
78,591,000 40,377,000
Less current maturities 6,026,000 3,356,000
- ------------------------------------------------------------------
Total $72,565,000 $37,021,000
- ------------------------------------------------------------------
CREDIT AGREEMENT
At March 31, 1996, the Company's debt consisted of $17.2 million of borrowings
under a revolving credit line, $4.2 million of borrowings under international
lines of credit, a $31.3 million term loan, a $25 million term loan and $0.9
million of other borrowings. The revolving bank credit line commitment is $33.4
million, will be available to the Company through December
18
21
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, which are included
in the borrowing base formula, are limited to $5 million. Letters of credit
under the line at March 31, 1996 were $0.8 million. The total commitment from
the international lines of credit are $6.6 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 international lines of
credit are tied to the primary bank's prime rate, or, at the Company's option,
the London Interbank Offered Rate (LIBOR) plus a margin that varies depending
upon the Company's achievement of certain operating and financial goals.
The $31.3 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 $31.3 million term loan has an additional $15 million available through
March 1997 for future acquisitions. Quarterly principal payments on the $31.3
million term loan of $1.4 million, with escalations to $1.8 million and $2.8
million in June 1999 and June 2000, respectively, began on December 31, 1995,
and are due and payable on the last day of each quarter through December 31,
2000. Interest on the $31.3 million term loan is tied to the lending bank's
prime rate, or LIBOR, plus a margin that varies, depending on 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 March 31, 1996, the Company had $53.8 million of 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
ended March 31, 1996, and $7 million annually 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%.
Debt maturities
- -----------------------------------------------------------------
1997 (current) $ 6,026,000
1998 5,993,000
1999 5,995,000
2000 7,359,000
2001 30,146,000
Thereafter 23,072,000
- -----------------------------------------------------------------
Total $78,591,000
- -----------------------------------------------------------------
7. STOCKHOLDERS' EQUITY AND EMPLOYEE/DIRECTOR STOCK OPTIONS
Under the Company's stock option plan, options to purchase shares of the
Company's common stock have been granted to directors, officers and key
employees at prices determined by the Board of Directors which may not be less
than 100% of the fair market value at date of grant.
At March 31, 1996, there were 408,596 options outstanding, of which 177,253 were
exercisable at that date. The remaining options for 231,343 shares become
exercisable on various dates through February 1999.
The table below summarizes stock option transactions:
1996 1995 1994
- --------------------------------------------------------------------------------
Options outstanding,
beginning of year
($5.50-$18.53
per share) 375,015 230,537 169,679
Options granted
($9.63-$15.13
per share) 109,000 234,836 146,500
Options exercised
($5.50-$13.44
per share) (20,308) (24,789) (57,415)
Options expired
and cancelled (55,111) (65,569) (28,227)
- --------------------------------------------------------------------------------
Options outstanding,
end of year
($5.50-$18.53
per share) 408,596 375,015 230,537
- --------------------------------------------------------------------------------
Aggregate
option price $ 5,156,300 $ 4,637,517 $ 2,406,531
- --------------------------------------------------------------------------------
Options exercisable
($7.50-$18.53
per share) 177,253 72,843 63,914
- --------------------------------------------------------------------------------
19
22
8. EMPLOYEE BENEFIT PLANS
The Company has an incentive bonus plan which provides for cash payments to
selected employees based upon formulas approved by the Board of Directors.
Provisions for awards under the plan approximated $1,745,000, $1,220,000 and
$1,301,000 in 1996, 1995 and 1994, respectively. The Company has two defined
contribution plans covering substantially all domestic employees. Contributions
are based on certain percentages of an employee's eligible compensation.
Expenses related to these plans were $1,823,000, $1,373,000, and $1,786,000 in
1996, 1995, and 1994, respectively. Two divisions of the Company also make
contributions to union-sponsored multi-employer pension plans in accordance with
the negotiated labor contracts. Contributions to the plans were $373,000,
$275,000 and $226,000 in 1996, 1995 and 1994, respectively.
Effective April 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106 ("SFAS No. 106") on Employers' Accounting for Postretirement
Benefits Other Than Pensions. This statement requires that the cost of these
benefits, which are primarily health care related, be recognized in the
financial statements during the employee's active working career. The Company's
previous practice was to recognize expense as claims were paid. The plan
maintained by the Company provides postretirement benefits to union employees at
one of the Company's divisions. Adopting the new standard created a previously
unrecognized obligation covering prior years. This transition obligation,
estimated at $2.9 million, before tax effects, is being amortized on a
straight-line basis over the average remaining service life of active employees,
estimated by the Company to be approximately 20 years. During fiscal year 1994,
the Company adopted an amendment to the plan resulting in a decrease of $859,000
to the transition obligation.
The components of net postretirement benefit cost for the years ended March 31
were as follows:
1996 1995 1994
- --------------------------------------------------------------------------------
Service cost (benefits
earned during the
year) $ 88,000 $ 94,000 $124,000
Interest cost
on projected
postretirement
benefit obligation 168,000 168,000 196,000
Amortization of
transition obligation 101,000 101,000 123,000
Amortization of
net gain (10,000) -- --
- --------------------------------------------------------------------------------
Total
postretirement
benefit cost $ 347,000 $363,000 $443,000
- --------------------------------------------------------------------------------
The accumulated postretirement benefit obligation and funded status at March 31
were as follows:
Accumulated postretirement benefit obligation:
1996 1995
- -------------------------------------------------------------------------------
Retirees $ (774,000) $ (711,000)
Fully eligible plan participants (365,000) (364,000)
Other active plan participants (1,161,000) (958,000)
- -------------------------------------------------------------------------------
Accumulated postretirement
benefit obligation (2,300,000) (2,033,000)
Plan assets at fair value -- --
- -------------------------------------------------------------------------------
Accumulated postretirement
benefit obligation in
excess of plan assets (2,300,000) (2,033,000)
Unrecognized net (gain) loss (217,000) (356,000)
Unrecognized transition
obligation 1,724,000 1,826,000
- -------------------------------------------------------------------------------
Accrued postretirement
benefit liability $ (793,000) $ (563,000)
- -------------------------------------------------------------------------------
Accrued postretirement benefit cost is included in other liabilities on the
balance sheet.
The assumed health care cost trend rates used for measurement purposes were 12%
and 13% for 1996 and 1995, respectively, trending down 1% each year to 10% in
1998 and then decreasing .5% each year to 6.0% in 2006 and beyond, for
substantially all participants. The weighted-average discount rates used were
7.5% and 8.5% at March 31, 1996 and 1995, respectively.
A 1% increase in health care trend rate would increase the annual expense by
approximately 12.2% for the year ended March 31, 1996 and accumulated
postretirement benefit obligation by approximately 13.5% at March 31, 1996.
20
23
In addition, the Company maintains several defined benefit retirement plans for
certain non-U.S. employees. Funding policies are based on local statutes. Net
periodic pension cost for the plans at March 31, 1996 includes the following:
Service cost $ 40,000
Interest cost 343,000
Net deferral and amortization 34,000
- -------------------------------------------------------------------------------
Net periodic pension cost $ 417,000
- -------------------------------------------------------------------------------
The following table sets forth the funded status of the plan at March 31, 1996:
Total accumulated benefit obligation $6,370,000
- -------------------------------------------------------------------------------
Projected benefit obligation $6,615,000
Unrecognized net loss 245,000
- -------------------------------------------------------------------------------
Unfunded accrued pension cost
(included in other long term liabilities) $6,370,000
- -------------------------------------------------------------------------------
In determining the projected benefit obligation, the discount rate was 7.5% and
the rate of salary increases was 3% in 1996.
9. FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
INTEREST RATE SWAP AGREEMENTS
The Company periodically enters into interest rate swap agreements to
effectively convert all or a portion of its floating-rate debt to fixed-rate
debt in order to reduce the Company's risk to movements in interest rates. Such
agreements involve the exchange of fixed and floating interest rate payments
over the life of the agreement without the exchange of the underlying principal
amounts. Accordingly, the impact of fluctuations in interest rates on these
interest rate swap agreements is fully offset by the opposite impact on the
related debt. Swap agreements are only entered into with strong creditworthy
counterparties. The swap agreements in effect were as follows:
Interest Rate
- -------------------------------------------------------------------------------
Notional Amount Maturities Receive(1) Pay
- -------------------------------------------------------------------------------
March 31,
1996... $25,000,000 8/98 5.88%(1) 6.54%
- -------------------------------------------------------------------------------
DM15,315,000 12/98 3.36% 4.57%
- -------------------------------------------------------------------------------
(1) Three-month LIBOR.
FOREIGN CURRENCY EXCHANGE AGREEMENTS
The Company enters into off-balance sheet forward foreign exchange instruments
in order to hedge certain purchase commitments. At March 31, 1996 the company
had outstanding forward foreign exchange contracts totalling DM 1,500,000
($1,015,000) maturing through September 1996.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of cash and cash equivalents, receivables and notes receivables
approximate their carrying values due to the short-term nature of the
instruments.
The fair value of the Company's long-term notes receivables and debt
approximates their carrying values due to the variable interest-rate feature of
the instruments. The fair values of the Company's interest rate swaps and
forward foreign exchange agreements are the estimated amounts the Company would
have to pay or receive, ($1,397,000) and $30,000, respectively to terminate the
agreements based upon quoted market prices as provided by financial institutions
which are counterparties to the agreements.
10. COMMITMENTS
- --------------------------------------------------------------------------------
Rent expense under operating leases, net of sub-leases, for the years ended
March 31, 1996, 1995, and 1994 was $1,979,000, $1,802,000 and $1,450,000,
respectively. The Company has no material capital leases.
The Company and its subsidiaries have minimum rental commitments under
noncancellable operating leases (relating primarily to leased buildings) which
are as follows:
Year ending March 31:
- ------------------------------------------------------------------
1997 $2,864,000
1998 2,482,000
1999 1,853,000
2000 873,000
2001 455,000
Thereafter 497,000
- -------------------------------------------------------------------
Total $9,024,000
- -------------------------------------------------------------------
Included in the above amounts is the aggregate lease commitment associated with
the Company's former corporate office which has been sub-leased. Future
sub-lease rentals receivable at March 31, 1996 totalled $1,017,000.
Other-long-term liabilities at March 31, 1996, include a $0.2 million obligation
associated with the lease which expires in July 1998.
21
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11. CONTINGENCIES
- --------------------------------------------------------------------------------
The Company has commenced environmental site assessments and cleanup feasibility
studies to determine the presence, extent and sources of any environmental
contamination at sites in Pennsylvania and Illinois which continue to be owned
although the related businesses have been sold. Although no governmental action
requiring remediation has been taken at this time, the Company is working in
cooperation with the relevant state authorities and any remedial work required
to be performed would be subject to their approval. At the Pennsylvania sites, a
feasibility study has been prepared and submitted to the state. Based upon that
study and upon claims for recovery which the Company has against others, a
pre-tax charge of $3.6 million (net of $1.2 million in probable recoveries from
third parties) was recorded in March 1993 for future cleanup costs at the
Pennsylvania sites. At March 31, 1996, the balance of this clean-up reserve was
$2.4 million. In addition, the Company is pursuing recovery of a portion of
clean-up costs in litigation with several of its insurance carriers. The Company
expects that remediation work at the Pennsylvania site will not be completed
until fiscal 1999.
In addition, the Company has been named as a potentially responsible party in
various environmental remediation recovery proceedings pending in several other
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 several sites, it is
alleged that the Company was an owner or operator. Such properties generally
relate to businesses which have been sold or discontinued. It is not possible to
reliably estimate the costs associated with any remedial work to be performed
until studies at these sites have been completed, the scope of work defined and
a method of remediation selected and approved by the relevant state authorities.
The Company is also engaged in various other legal proceedings incidental to its
business.
It is the opinion of the management that, after taking into consideration
information furnished by its counsel, the above matters will not have a material
effect on the consolidated financial position of the Company.
12. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
On May 15, 1996, the Company sold real property in Florida formerly occupied by
its chaff division, and terminated the lease of the property, for total
consideration of $1,984,000, paid in cash.
On May 25, 1996, the Company entered into a definitive agreement to acquire the
assets and business of the hose clamp product line of Pebra GmbH Paul Braun i.K.
This business, located in Frittlingen, Germany, manufactures heavy-duty hose
clamps used primarily by heavy truck OEM's in Germany. Revenues for the year
ended December 31, 1995, were approximately $6.5 million. The transaction is
expected to be completed in June 1996 with a purchase price of $3 million
provided by the Company's existing revolving credit line.
13. SEGMENT AND GEOGRAPHIC INFORMATION
- --------------------------------------------------------------------------------
The Company develops, manufactures and sells primarily specialty fastener
products and rescue hoist and cargo hook products. Specialty Fastener Products
include gear- driven band fasteners, threaded fasteners and retaining rings for
the marine, auto, toy, aircraft, heavy equipment and industrial machinery
industries. Rescue Hoist and Cargo Hook Products include lifting, control, and
restraint devices principally helicopter rescue hoists and external hook
systems, winches and hoists for aircraft and weapon-handling systems, and
aircraft and cargo tie-downs.
Operating profit is net sales less operating expenses. General corporate
expenses, interest and income taxes have not been deducted in determining
operating profit. Assets, depreciation and amortization, and capital
expenditures are those identifiable to a particular segment by their use.
Approximately 8%, 18% and 23% of sales from continuing operations in 1996, 1995
and 1994, respectively, were derived from sales to the United States Government
and its prime contractors which are attributable primarily to the Rescue Hoist
and Cargo Hook Products Segment.
22
25
Operating Depreciation/
Fiscal Profit Capital Amortization Identifiable
Year Sales (Loss)(1) Expenditures(2) Expense(2) Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Specialty fastener 1996 $127,487,000 $23,702,000 $5,171,000 $4,710,000 $138,001,000
products 1995 71,103,000 16,500,000 3,193,000 1,906,000 60,986,000
1994 52,319,000 10,018,000 2,289,000 1,545,000 38,669,000
- ----------------------------------------------------------------------------------------------------------------------------------
Rescue hoist and 1996 30,537,000 4,928,000 901,000 756,000 26,334,000
cargo hook products 1995 30,019,000 160,000 469,000 605,000 24,493,000
1994 29,554,000 3,772,000 661,000 675,000 32,249,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total segments 1996 158,024,000 28,630,000 6,072,000 5,466,000 164,335,000
1995 101,122,000 16,660,000 3,662,000 2,511,000 85,479,000
1994 81,873,000 13,790,000 2,950,000 2,220,000 70,918,000
- ----------------------------------------------------------------------------------------------------------------------------------
Corporate 1996 - (8,987,000)(3) 399,000 438,000 35,032,000
1995 - (3,882,000) 64,000 260,000 43,917,000
1994 - (4,646,000) 56,000 283,000 54,939,000
- ----------------------------------------------------------------------------------------------------------------------------------
Corporate interest 1996 - 973,000 - - -
and other income 1995 - 895,000 - - -
1994 - 839,000 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Interest expense 1996 - (6,316,000) - - -
1995 - (2,831,000) - - -
1994 - (1,123,000) - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Consolidated 1996 $158,024,000 $14,300,000 $6,471,000 $5,904,000 $199,367,000
1995 101,122,000 10,842,000 3,726,000 2,771,000 129,396,000
1994 81,873,000 8,860,000 3,006,000 2,503,000 125,857,000
- ----------------------------------------------------------------------------------------------------------------------------------
(1) Operating profit represents net sales less operating expenses which include
all costs and expenses related to the Company's operations in each segment.
General corporate expenses and investments and other income earned at the
corporate level are included in the corporate section. Interest expense is also
separately reported. The amount of the "Consolidated" line represents "Income
from Continuing Operations Before Income Taxes." Loss from discontinued
operations is not included.
(2) The capital expenditures and depreciation/amortization expense from
discontinued operations are excluded from the above schedule.
(3) Corporate operating profit in 1996 includes a pre - tax charge of $2.6
million for marketable equity securities write-down.
In 1996, 1995 and 1994, the Company had revenues from export sales as follows:
Location 1996 1995 1994(a)
- --------------------------------------------------------------------------------------------------------
Western Europe $ 7,230,000 $ 6,641,000 $ 6,221,000
Canada 6,323,000 5,896,000 3,630,000
Pacific and Far East 2,312,000 1,638,000 4,159,000
Mexico, Central and South America 851,000 1,015,000 657,000
Middle East 167,000 114,000 142,000
Other 22,000 136,000 141,000
- --------------------------------------------------------------------------------------------------------
Total $16,905,000 $15,440,000 $14,950,000
- --------------------------------------------------------------------------------------------------------
(a) Restated to reflect only continuing operations.
23
26
Results set forth below for international operations represents sales and
operating income of foreign based Company members:
1996
- ------------------------------------------------------------------------------------------------
Net sales
Domestic operations $ 112,860,000
International operations (1) 45,164,000
- ------------------------------------------------------------------------------------------------
Net sales $ 158,024,000
- ------------------------------------------------------------------------------------------------
Operating income
Domestic operations $ 22,454,000
International operations (1) 6,176,000
- ------------------------------------------------------------------------------------------------
Operating income 28,630,000
Interest expense (6,316,000)
Corporate expense and other (8,014,000)
- ------------------------------------------------------------------------------------------------
Income from continuing operations before tax $ 14,300,000
- ------------------------------------------------------------------------------------------------
Identifiable assets
Domestic operations $ 96,944,000
International operations (1) 67,391,000
Corporate 35,032,000
- ------------------------------------------------------------------------------------------------
Total assets $ 199,367,000
- ------------------------------------------------------------------------------------------------
In prior years the Company had no significant international operations.
(1) International operations are primarily located in Europe.
14. UNAUDITED QUARTERLY FINANCIAL DATA (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
- ---------------------------------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
- ---------------------------------------------------------------------------------------------------------------------
1996
- ---------------------------------------------------------------------------------------------------------------------
Total revenues $ 26,410 $ 44,434 $ 41,601 $ 47,409 $ 159,854
Gross profit 8,471 12,462 14,332 17,163 52,428
Income from continuing operations 1,733 1,343 2,793 2,639 8,508
Loss from discontinued operations (172) (149) (447) (366) (1,134)
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 1,561 $ 1,194 $ 2,346 $ 2,273 7,374
- ---------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share:
Income from continuing operations $ 0.34 $ 0.26 $ 0.55 $ 0.52 $ 1.67
Loss from discontinued operations (0.03) (0.03) (0.09) (0.07) (0.22)
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 0.31 $ 0.23 $ 0.46 $ 0.45 $ 1.45
- ---------------------------------------------------------------------------------------------------------------------
1995
- ---------------------------------------------------------------------------------------------------------------------
Total revenues $ 22,437 $ 22,411 $ 26,328 $ 31,516 $ 102,692
Gross profit 6,138 6,951 8,569 9,066 30,724
Income from continuing operations 1,597 1,169 2,434 2,185 7,385
Loss from discontinued operations (525) (972) (1,080) (2,275) (4,852)
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) 1,072 197 1,354 (90) 2,533
- ---------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share:
Income from continuing operations $ 0.31 $ 0.23 $ 0.48 $ 0.43 $ 1.45
Loss from discontinued operations (0.10) (0.19) (0.21) (0.45) (0.95)
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 0.21 $ 0.04 $ 0.27 $ (0.02) $ 0.50
- ---------------------------------------------------------------------------------------------------------------------
24
27
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Stockholders and the Board of Directors of TransTechnology Corporation:
We have audited the accompanying consolidated balance sheets of TransTechnology
Corporation and subsidiaries as of March 31, 1996 and 1995 and the related
statements of consolidated operations, stockholders' equity, and cash flows for
each of the three years in the period ended March 31, 1996. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on the financial statements based on our
audits. We did not audit the financial statements of The New Seeger Group (whose
members are consolidated subsidiaries) for the period ending March 31, 1996,
which statements reflect total assets and total revenues constituting 32% and
28%, respectively, of the related consolidated totals for the year. These
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to the amounts included for The New
Seeger Group for the period ended March 31, 1996, is based solely on the report
of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. 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, based on our audits and the report of the other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of TransTechnology Corporation and subsidiaries at March 31,
1996 and 1995, and the results of their operations and their cash flows for each
of the three years in the period ended March 31, 1996 in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
May 28, 1996
25
28
Management's Discussion and Analysis of Financial Condition and Results of
Operations
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
The Company's fiscal year ends on March 31. Accordingly, all references to years
in this Management's Discussion refer to the fiscal year ended March 31 of the
indicated year. Also when referred to herein, operating profit means net sales
less operating expenses, without deduction for general corporate expenses,
interest and income taxes.
Revenue from continuing operations in 1996 was $159.9 million, an increase of
$57.2 million or 56% from 1995, compared with a $19.8 million or 24% increase
from 1994 to 1995. Gross profit in 1996 increased $21.7 million or 71% from
1995, compared with an increase of $5.8 million or 23% from 1994 to 1995.
Operating profit from continuing operations for 1996 was $28.6 million, an
increase of $12 million or 72% from 1995, compared with an increase of $2.9
million or 21% from 1994 to 1995. Changes in sales, operating profit and new
orders from continuing operations are discussed below by segment, and additional
information regarding industry segments is contained in Note 13 of the Notes to
Financial Statements.
Net income, including discontinued operations, for 1996 was $7.4 million or
$1.45 per share, compared to $2.5 million or $.50 per share in 1995. These
changes in net income were affected both by operating profit, as discussed in
the Business Segment sections below, and by discontinued operations, as
discussed in the Discontinued Operations section below. Net loss from
discontinued operations, including disposal losses, was $1.1 million or $.22 per
share in 1996 and $4.9 million or $.95 per share in 1995.
In the fourth quarter of 1996 the Company recorded a $2.6 million pre-tax charge
to continuing operations to write-down the carrying value of equity securities
acquired from the sale of its tear gas division to their current market value
when the decline in value of those securities was determined to be other than
temporary. Unrealized holding losses on these securities had previously been
recorded as a direct reduction to stockholders' equity. In 1996 the company sold
the domestic and European portions of its computer graphics service operations,
which operated under the name TransTechnology Systems & Services, its
Electronics division and the chaff avionics product line as discussed below in
the Discontinued Operations section. On June 30, 1995 the Company acquired the
Seeger Group of companies as discussed below in the Acquisitions section and the
Business Segment section.
In the fourth quarter of 1995 the Company sold primarily all of the assets and
business of its chaff products operation as discussed below in the Discontinued
Operations section. In August, 1994 the Company acquired Industrial Retaining
Ring Company as discussed below in the Acquisitions section and the Business
Segment section.
In the fourth quarter of 1994, the Company recorded a reduction of $0.8 million
of Federal income tax provisions. Also in the fourth quarter of 1994 the Company
sold its tear gas division as discussed below in the discontinued operations
section. In August 1993, the Company acquired the Palnut fastener division as
discussed below in the Acquisitions section and the Business Segment section.
Interest expense increased $3.5 million in 1996 primarily as a result of
increased bank borrowings used for the acquisition of the Seeger Group of
companies, as discussed below in the Liquidity and Capital Resources section.
Interest expense increased $1.7 million from 1994 to 1995 primarily as a result
of increased bank borrowings used for the acquisition of Industrial Retaining
Ring Company, as discussed below in the Liquidity and Capital Resources section,
and higher interest rates on the Company's debt in fiscal 1995 due to increases
in the prime interest rate throughout the year.
New orders received during 1996 by continuing operations totaled $162.6 million,
an increase of $58.1 million or 56% from 1995. New orders received during 1995
by continuing operations totaled $104.5 million, an increase of $17.1 million or
20% from 1994. New orders are discussed below by industry segment. At March 31,
1996, total backlog of unfilled orders was $62.3 million, compared to $34.4
million and $30.9 million at March 31, 1995 and 1994, respectively.
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS No.
121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of," which the Company is required to adopt during fiscal 1997.
The adoption of SFAS No. 121 is not expected to have a material impact on the
Company's consolidated financial statements. Also in 1995, the FASB issued SFAS
No. 123, "Accounting for Stock-Based Compensation," which requires companies to
measure employee stock compensation plans based on the fair value method of
accounting or to continue to apply APB No. 25, "Accounting for Stock Issued to
Employees," and provide pro forma footnote disclosures under the fair
26
29
value method in SFAS No. 123. The Company will continue to apply the principles
of APB No. 25 and provide pro forma fair value disclosures starting in the 1997
Annual Report.
In March 1994, the Company adopted Statement of Financial Accounting Standard
No. 115, related to accounting for certain investments in debt and equity
securities. Adoption of this statement resulted in a gross unrealized holding
loss of $1.6 million, reported as a direct reduction to stockholders' equity in
the March 31, 1994 balance sheet. At March 31, 1996, this gross unrealized
holding loss, which had increased to $2.6 million, was reclassified as a
realized holding loss, and a pre-tax charge of $2.6 million was recorded in the
fourth quarter Statement of Operations.
ACQUISITIONS
- --------------------------------------------------------------------------------
On June 30, 1995, the Company acquired the Seeger Group of companies from a unit
of AB SKF of Goteborg, Sweden for approximately $43 million in cash plus direct
acquisition costs and the assumption of trade debts and accrued expenses. The
Seeger Group, headquartered in Konigstein, Germany, is the global leader in
manufacturing circlips, snap rings and retaining rings. The Seeger Group
operates under the trade names of "Seeger", "Anderton", and "Waldes" with over
900 employees at its five manufacturing facilities located in Germany, the UK,
Brazil and the U.S.A.
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 $15.3 million in cash and the assumption of liabilities.
Industrial Retaining Ring Company manufactures retaining rings and clips used
primarily in the heavy equipment and industrial machinery industries.
On August 2, 1993, the Company acquired substantially all of the assets of the
Palnut fastener operation ("Palnut") of TRW Inc. for a total purchase price of
$20.5 million in cash and the assumption of certain liabilities consisting
primarily of trade payables and accrued expenses aggregating approximately $1.4
million. The Palnut operation manufactures single and multi-thread metal
fasteners, for the automotive and industrial products industries.
DISCONTINUED OPERATIONS
- --------------------------------------------------------------------------------
In June 1995 and January 1996, the Company sold the domestic and European
portions of its computer graphics service operations, respectively, in two
separate transactions to two different buyers. These businesses operated under
the name TransTechnology Systems & Services and were classified as discontinued
operations in March 1995. The sale of the domestic portion for $0.7 million in
cash and $0.6 million in notes receivable was for book value, and the sale of
the European portion for $0.1 million in cash and $0.2 million in notes
receivable resulted in an after-tax gain on disposal of $0.1 million.
In August 1995, the company sold its Electronics division for $4.4 million in
cash and $9.6 million in notes receivable. The sale of this operation resulted
in an after-tax gain on disposal of $0.2 million.
In March 1995, the Company sold substantially all of the assets and business of
its chaff products operation for $6.7 million in cash. The sale of this
operation resulted in an after-tax loss on disposal of $0.4 million. Additional
after-tax disposal costs of $0.2 million were recorded in 1996 in connection
with the sale. The Company retained the chaff avionics product line and
negotiated its sale separately in May 1995 for $0.3 million in cash and $0.7
million in notes receivable, resulting in an after-tax gain on disposal of $0.4
million. In the fourth quarter of 1996, the Company recorded an after-tax charge
of $0.4 million to record the anticipated loss on the sale of the facility that
was formerly used by this operation.
In March 1994, the Company sold its tear-gas division which operates under the
name Federal Laboratories, for $1.0 million in cash, $1.2 million in notes
receivable and 465,000 shares of Mace Security International, Inc. common stock.
The sale of this division resulted in a after-tax gain on disposal of $0.5
million. Additional after-tax disposal costs of $0.1 million and $0.5 million
were recorded in 1996 and 1995, respectively, in connection with the sale.
Additional after-tax costs of $0.6 million and $1.4 million were recorded in
1996 and 1995, respectively, in connection with other previously discontinued
and sold operations, and an after-tax gain on disposal of $0.3 million was
recorded in 1994. These additional costs represent adjustments to previous
estimates related primarily to environmental and legal matters.
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30
SPECIALTY FASTENER PRODUCTS SEGMENT
1996 COMPARED WITH 1995
- --------------------------------------------------------------------------------
Sales for the Specialty Fastener Products segment were $127.5 million in 1996,
an increase of $56.4 million or 79% from 1995. The increase in sales was
primarily due to the inclusion of nine months of Seeger Group operations in
1996, and to a lesser extent, the inclusion of twelve months of Industrial
Retaining Ring Company operations in 1996 versus eight months in 1995, and
increased industrial and truck fastener demand for gear-driven fasteners in
fiscal 1996.
Operating profit for the Specialty Fastener Products segment was $23.7 million
in 1996, an increase of $7.2 million or 44% from 1995. The primary factors
contributing to the segments increased operating profit in 1996 were the
inclusion of nine months of Seeger Group operations, the inclusion of twelve
months of Industrial Retaining Ring Company operations in 1996 versus eight
months in 1995, and increased shipments of gear-driven fasteners.
In 1996, new orders in the Specialty Fastener Products segment increased $48.8
million or 66% from 1995. The primary reasons for the increase were the
inclusion of nine months of Seeger Group operations in 1996, the inclusion of
twelve months of Industrial Retaining Ring Company operations versus eight
months in 1995, and the increased demand for gear-driven fasteners. Backlog of
unfilled orders was $31.4 million at March 31, 1996, compared to $12.7 million
at March 31, 1995.
1995 COMPARED WITH 1994
- --------------------------------------------------------------------------------
Sales for the Specialty Fastener Products segment were $71.1 million in 1995, an
increase of $18.8 million or 36% from 1994. The increase in sales was primarily
due to the inclusion of twelve months of Palnut fastener operations in 1995
versus eight months in 1994, the inclusion of eight months of Industrial
Retaining Ring Company operations in 1995, and increased industrial and truck
fastener demand for gear-driven fasteners in fiscal 1995.
Operating profit for the Specialty Fastener Products segment was $16.5 million
in 1995, an increase of $6.5 million or 65% from 1994. The primary factors
contributing to the segments increased operating profit in 1995 were the
inclusion of eight months of Industrial Retaining Ring Company operations, the
inclusion of twelve months of Palnut fastener operations in 1995 versus eight
months in 1994 and increased shipments of gear-driven fasteners.
In 1995, new orders in the Specialty Fastener Products segment increased $14.4
million or 24% from 1994. The primary reasons for the increase were the
inclusion of twelve months of Palnut fastener operations in 1995 versus eight
months in 1994, the inclusion of eight months of Industrial Retaining Ring
Company operations and the increased demand for gear-driven fasteners. Backlog
of unfilled orders was $12.7 million at March 31, 1995, compared to $9.5 million
at March 31, 1994.
RESCUE HOIST AND CARGO HOOK PRODUCTS SEGMENT 1996 COMPARED WITH 1995
- --------------------------------------------------------------------------------
Sales for the Rescue Hoist and Cargo Hook Products segment were $30.5 million in
1996, an increase of $0.5 million or 2% from 1995. All three product lines in
this segment, rescue hoists and related spare parts, cargo hooks, and tie-downs
had little change in sales from 1995 levels.
Following the second full year under a new management team, the Rescue Hoist and
Cargo Hook Products segment reported an operating profit of $4.9 million in
1996, compared to $0.2 million in 1995. The increase was primarily due to plant
operating efficiencies, price adjustments and better inventory utilization.
In 1996 new orders in the Rescue Hoist and Cargo Hook Products segment increased
by $9.3 million or 31% from 1995. This increase, led by the Rescue Hoist product
line, was primarily due to increased marketing effort and customer timing of
order placement. At March 31, 1996, the backlog of unfilled orders was $30.9
million, compared to $21.8 million at March 31, 1995.
1995 COMPARED WITH 1994
- --------------------------------------------------------------------------------
Sales for the Rescue Hoist and Cargo Hook Products segment were flat in 1995 at
$30.0 million. All three product lines in this segment, rescue hoists and
related spare parts, cargo hooks, and tie-downs, experienced virtually identical
sales as in 1994.
Operating profit for the Rescue Hoist and Cargo Hook Products segment was $0.2
million in 1995, a decrease of $3.6 million or 96% from 1994. The decrease was
primarily due to reduced margins for all product lines through the first three
quarters from shipments on low profit contracts.
28
31
In 1995 new orders in the Rescue Hoist and Cargo Hook Products segment increased
by $2.7 million or 10% from 1994. New orders for rescue hoists and related spare
parts were up $5.2 million or 27%, new orders for cargo hooks were down $2.8
million or 35%, and new orders for tie-downs were up $0.3 million or 55%, in
1995 over 1994. These changes were primarily due to customer timing of order
placement. At March 31, 1995, the backlog of unfilled orders was $21.8 million,
compared to $21.4 million at March 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
The Company's debt-to-capitalization ratio was 52%, 38% and 34% as of March 31,
1996, 1995 and 1994, respectively. The current ratio at March 31, 1996, stood at
2.51, compared to 3.25 and 3.49 at March 31, 1995 and 1994, respectively.
Working capital was $57.3 million at March 31, 1996, up $4.2 million from March
31, 1995 and up $3.4 million from March 31, 1994.
At March 31, 1996, the Company's debt consisted of $17.2 million of borrowings
under a revolving credit line, $4.2 million of borrowings under international
lines of credit, a $31.3 million term loan, a $25 million term loan and $0.9
million of other borrowings. The revolving bank credit line commitment of $33.4
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, which are included in the borrowing
base formula, are limited to $5 million. Letters of credit under the line at
March 31, 1996 were $0.8 million. The total commitment from the international
lines of credit are $6.6 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 international lines of credit are tied to the
primary bank's prime rate, or at the Company's option, the London Interbank
Offered Rate (LIBOR), plus a margin that varies depending upon the Company's
achievement of certain operating and financial goals.
The $31.3 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 $31.3 million term loan has an additional $15 million available through
March 1997 for future acquisitions. Quarterly principal payments on the $31.3
million term loan of $1.4 million, with escalations to $1.8 million and $2.8
million in June 1999 and June 2000, respectively, began on December 31, 1995,
and are due and payable on the last day of each quarter through December 31,
2000. Interest on the $31.3 million term loan is tied to the lending bank's
prime rate, or LIBOR, plus a margin that varies depending on 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 March 31, 1996, the Company had $53.8 million of 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
ended March 31, 1996, and $7 million annually thereafter for the life of the
agreement, as well as containing other customary financial covenants.
On May 13, 1994, the Company obtained authorization to repurchase up to 200,000
shares of the Company's common stock at an aggregate price not to exceed $2.5
million. Through March 31, 1996, the Company had repurchased 177,500 shares at
an aggregate cost of $2.2 million.
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 1996 were $6.5 million as compared with $5 million in
1995. The Company's two industry segments have similar cash flow requirements.
The Company is subject to various contingencies related to land and groundwater
contamination at several facilities. These matters are described in Note 11 of
the Notes to Financial Statements. Management believes that, after taking into
consideration information provided by counsel, the resolution of these matters
will not have a material adverse effect on the Company's liquidity.
29
32
- --------------------------------------------------------------------------------
On May 15, 1996 the Company sold real property in Florida formerly occupied by
its chaff division, and terminated the lease of the property, for total
consideration of $1,984,000, paid in cash.
On May 25, 1996, the Company entered into a definitive agreement to acquire the
assets and business of the hose clamp product line of Pebra GmbH Paul Braun i.K.
This business, located in Frittlingen, Germany, manufactures heavy-duty hose
clamps used primarily by heavy truck OEM's in Germany. Revenues for the year
ended December 31, 1995, were approximately $6.5 million. The transaction is
expected to be completed in June 1996 with a purchase price of $3 million
provided by the Company's existing revolving credit line.
30
33
DIRECTORS
- --------------------------------------------------------------------------------
- -- Gideon Argov
Chairman of the Board, President
and Chief Executive Officer
Kollmorgen Corporation
(High-performance motion control systems)
- - --Walter Belleville
Chairman and Chief Executive Officer
ATI Machinery, Inc.
(Heavy machinery)
+ Michael J. Berthelot
Chairman of the Board and
Chief Executive Officer
TransTechnology Corporation
Patrick K. Bolger
President and Chief Operating Officer
TransTechnology Corporation
+ --Thomas V. Chema
Partner
Arter & Hadden
(Telecommunications consulting)
Michel Glouchevitch
Managing Director
Triumph Capital Group
- - + James A. Lawrence
President and Chief Executive Officer
Asia/Middle East/Africa
Pepsi-Cola Company
- - Audit Committee
+ Nominating Committee
- -- Incentives & Compensation Committee
CORPORATE OFFICE
- --------------------------------------------------------------------------------
150 Allen Road
Liberty Corner, NJ 07938
908/903-1600
Fax 908/903-1616
COUNSEL
- --------------------------------------------------------------------------------
Hahn, Loeser & Parks
Cleveland, Ohio
AUDITORS
- --------------------------------------------------------------------------------
Deloitte & Touche LLP
Parsippany, New Jersey
CORPORATE OFFICERS
- --------------------------------------------------------------------------------
Michael J. Berthelot
Chairman of the Board and
Chief Executive Officer
Patrick K. Bolger
President and Chief Operating Officer
Chandler J. Moisen
Senior Vice President, Chief Financial
Officer and Treasurer
Winston Lau
Vice President of Operations
Gerald C. Harvey
Vice President, Secretary and
General Counsel
Monica Aguirre
Assistant Secretary
ANNUAL MEETING
- --------------------------------------------------------------------------------
The Annual Shareholders' Meeting will be held on Wednesday, July 24, 1996 at the
Marriott Financial Center Hotel, 85 West Street,
New York, NY 10006.
FORM 10-K AND ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
The Company, upon request to the Investor Relations department, will provide to
any shareholder a copy of the Form 10-K required to be filed with the Securities
and Exchange Commission and any other available information.
TRANSFER AGENT AND REGISTRAR
- --------------------------------------------------------------------------------
Wachovia Bank & Trust Co., N.A.
Winston-Salem, North Carolina
INVESTOR RELATIONS CONTACT
Michael J. Berthelot
Chairman of the Board and
Chief Executive Officer
TransTechnology Corporation
150 Allen Road
Liberty Corner, NJ 07938
908/903-1600
OPERATIONAL GROUPS
- --------------------------------------------------------------------------------
Specialty Fasteners
BREEZE INDUSTRIAL PRODUCTS
Gear-driven band fasteners
100 Aero-Seal Drive
Saltsburg, PA 15681-9594
412/639-3571
Fax 412/639-3020
Robert Tunno - Division President
THE PALNUT COMPANY
Single and multi-thread fasteners
152 Glen Road
Mountainside, NJ 07092-2997
908/233-3300
Fax 908/233-6566
Winston Lau - Division President
INDUSTRIAL RETAINING RING (IRR)
Multi-sized retaining rings
57 Cordier Street
Irvington, NJ 07111-4035
201/926-5000
Fax 201/926-4699
SEEGER INC.
Retaining rings and assembly tools
500 Memorial Drive
Somerset, NJ 08875
908/469-7999
Fax 908/469-2413
THE SEEGER GROUP
Retaining rings and circlips
Wiesbadener Strasse 243
D-61462 Konigstein, Germany
49/6174 2050
Fax 49/6174 205 100
Ulf Jemsby - Managing Director
SEEGER-ORBIS GmbH
Konigstein, Germany
Ulf Jemsby - Managing Director
ANDERTON INTERNATIONAL LTD.
Bingley, West Yorkshire, England
Robert Wieremiej - Managing Director
SEEGER-RENO
INDUSTRIA E COMERCIO LTD.
Sao Paulo, Brazil
Joao Scivoletto - Managing Director
RESCUE HOISTS AND CARGO HOOKS
BREEZE-EASTERN
Lifting and restraint products
700 Liberty Avenue
Union, NJ 07083-4115
908/686-4000
Fax 908/686-9292
Robert White - Division President
34
150 Allen Road
Liberty Corner, New Jersey 07938
908/903-1600