1
FORM 10-Q
-------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-7872
-----------
TRANSTECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-4062211
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
150 Allen Road 07938
Liberty Corner, New Jersey (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (908) 903-1600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
As of November 6, 1996, the total number of
outstanding shares of registrant's one class
of common stock was 5,315,470.
2
TRANSTECHNOLOGY CORPORATION
INDEX
PART I. Financial Information Page No.
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Consolidated Operations--
Three and Six Month Periods Ended September 29, 1996
and October 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets--
September 29, 1996 and March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Consolidated Cash Flow--
Six Months Ended September 29, 1996 and
October 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Consolidated Stockholders' Equity--
Six Months Ended September 29, 1996 . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 7-10
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition . . . . . . . . . . . . . . . . . . . . . . . 11-17
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
EXHIBIT 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
EXHIBIT 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited Statements of Consolidated Operations, Consolidated
Balance Sheets and Statements of Consolidated Cash Flow are of TransTechnology
Corporation and its consolidated subsidiaries. These reports reflect all
adjustments of a normal recurring nature, which are, in the opinion of
management, necessary to a fair presentation of the results of operations for
the interim periods reflected therein. The results reflected in the unaudited
Statements of Consolidated Operations for the period ended September 29, 1996
are not necessarily indicative of the results to be expected for the entire
year. The following unaudited Consolidated Financial Statements should be read
in conjunction with the notes thereto, and Management's Discussion and Analysis
set forth in Item 2 of Part I of this report, as well as the audited financial
statements and related notes thereto contained in the Form 10-K filed for the
fiscal year ended March 31, 1996.
[THIS SPACE INTENTIONALLY LEFT BLANK]
2
4
STATEMENTS OF CONSOLIDATED OPERATIONS
UNAUDITED
(In Thousands of Dollars Except Share Data)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------- ---------------------------
9/29/96 10/01/95 9/29/96 10/01/95
---------- ---------- ----------- -----------
Total revenue $ 44,067 $ 44,434 $ 88,993 $ 70,844
Cost of sales 31,084 31,972 62,023 49,911
---------- ---------- ----------- -----------
Gross profit 12,983 12,462 26,970 20,933
---------- ---------- ----------- -----------
General, administrative
and selling expenses 8,106 8,509 16,667 13,206
Interest expense 1,814 1,879 3,624 2,765
---------- ---------- ----------- -----------
Total general, administrative,
selling and interest expenses 9,920 10,388 20,291 15,971
---------- ---------- ----------- -----------
Income from continuing operations
before income taxes 3,063 2,074 6,679 4,962
Income taxes 1,336 731 2,855 1,886
---------- ---------- ----------- -----------
Income from continuing operations 1,727 1,343 3,824 3,076
Discontinued operations:
Loss from operations (net of applicable
tax benefits of $4 and $2 for
the three and six months ended 9/29/96,
respectively, and $122 and $294
for the three and six months ended
10/01/95, respectively) (6) (221) (2) (480)
Gain (loss) from disposal (net of applicable
tax benefits of $153 and $342 for
the three and six months ended
9/29/96, respectively, and net of
applicable tax provision of $40 and
$98 for the three and six months
ended 10/01/95, respectively) (200) 72 (473) 159
---------- ---------- ----------- -----------
Net income $ 1,521 $ 1,194 $ 3,349 $ 2,755
========== ========== =========== ===========
Earnings per Share: (Note 1)
Income from continuing operations $ 0.34 $ 0.26 $ 0.75 $ 0.60
Loss from discontinued operations (0.04) (0.03) (0.09) (0.06)
---------- ---------- ----------- -----------
Net income $ 0.30 $ 0.23 $ 0.66 $ 0.54
========== ========== =========== ===========
Number of shares used in computation
of per share information 5,100,000 5,095,000 5,102,000 5,089,000
See accompanying notes to unaudited consolidated financial statements.
3
5
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars Except Share Data)
UNAUDITED
9/29/96 3/31/96
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 2,695 $ 2,362
Accounts receivable (net of allowance
for doubtful accounts of $775 at
9/29/96 and $735 at 3/31/96) 25,903 28,368
Notes receivable 1,129 1,258
Inventories 50,469 50,551
Prepaid expenses and other current assets 1,467 1,726
Deferred income taxes 1,030 1,037
Net assets held for sale 7,070 9,980
----------- -----------
Total current assets 89,763 95,282
----------- -----------
Property, Plant & Equipment 81,634 78,326
Less accumulated depreciation and amortization 20,685 17,749
----------- -----------
Property, Plant & Equipment - net 60,949 60,577
----------- -----------
Other assets:
Notes receivable 12,495 12,824
Costs in excess of net assets of acquired businesses
(net of accumulated amortization:
9/29/96, $3,747; 3/31/96, $3,308) 19,166 16,411
Other 15,903 14,273
----------- -----------
Total other assets 47,564 43,508
----------- -----------
Total $ 198,276 $ 199,367
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 6,256 $ 6,026
Accounts payable-trade 10,714 14,719
Accrued compensation 5,180 6,473
Accrued income taxes 2,043 1,415
Other current liabilities 10,395 9,301
----------- -----------
Total current liabilities 34,588 37,934
----------- -----------
Long-term debt payable to banks and others 72,256 72,565
----------- -----------
Other long-term liabilities 18,487 16,398
----------- -----------
Stockholders' equity:
Preferred stock-authorized, 300,000 shares; none issued -- --
Common stock-authorized, 14,700,000 shares of $.01 par value;
issued 5,299,415 at 9/29/96, and 5,276,463 at 3/31/96 53 53
Additional paid-in capital 46,493 46,188
Retained earnings 32,151 29,467
Other stockholders' equity (1,972) (1,083)
----------- -----------
76,725 74,625
Less treasury stock, at cost - (277,500 shares at 9/29/96 and
177,500 at 3/31/96) (3,780) (2,155)
----------- -----------
Total stockholders' equity 72,945 72,470
----------- -----------
Total $ 198,276 $ 199,367
=========== ===========
- -----------------------------
See accompanying notes to unaudited consolidated financial statements.
4
6
STATEMENTS OF CONSOLIDATED CASH FLOW
UNAUDITED
(In Thousands of Dollars)
SIX MONTHS ENDED
----------------------
9/29/96 10/01/95
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,349 $ 2,755
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 3,834 2,215
Provision for losses on accounts receivable 53 67
(Gain) on sale or disposal of fixed assets and discontinued businesses (8) (181)
Change in assets and liabilities net of acquisitions and dispositions:
Decrease in accounts receivable 2,412 6,618
Decrease (increase) in inventories 1,107 (1,209)
Decrease (increase) in net assets of discontinued businesses 926 (409)
Increase in other assets (4,530) (717)
Decrease in accounts payable (4,005) (4,133)
Decrease in accrued compensation (1,293) (1,801)
Increase in other liabilities 3,154 2,424
Increase (decrease) in income tax payable 628 (737)
-------- --------
Net cash provided by (used in) operating activities 5,627 4,892
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions (3,219) (46,185)
Capital expenditures (2,545) (1,946)
Proceeds from sale of fixed assets and discontinued business 2,118 14,338
Decrease (increase) in notes receivable 458 (9,494)
-------- --------
Net cash used in investing activities (3,188) (43,287)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 20,336 81,637
Payments on long-term debt (20,414) (41,184)
Proceeds from issuance of stock under stock option plan 311 163
Stock repurchases (1,625) (53)
Dividends paid (665) (662)
-------- --------
Net cash provided by financing activities (2,057) 39,901
-------- --------
Effect of exchange rate changes on cash (49) (74)
-------- --------
Net increase in cash and cash equivalents 333 1,432
Cash and cash equivalents at beginning of year 2,362 1,544
-------- --------
Cash and cash equivalents at end of year $ 2,695 $ 2,976
======== ========
Supplemental Information:
Interest payments $ 2,498 $ 1,740
Income tax payments $ 1,682 $ 1,694
- ---------------------
See accompanying notes to unaudited consolidated financial statements.
5
7
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
UNAUDITED
(In Thousands of Dollars Except Share Data)
COMMON STOCK TREASURY STOCK ADDITIONAL OTHER
FOR THE SIX MONTHS ---------------- ------------------- PAID-IN RETAINED STOCKHOLDERS'
ENDED SEPTEMBER 29, 1996 SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY TOTAL
- ------------------------ --------- ------ -------- ------- ---------- -------- ------------- -------
Balance, March 31, 1996 5,276,463 $53 (177,500) $(2,155) $46,188 $29,467 $(1,083) $72,470
Net Income -- -- -- -- -- 3,349 -- 3,349
Cash dividends
($.13 per share) -- -- -- -- -- (665) -- (665)
Purchase of Treasury Stock -- -- (100,000) (1,625) -- -- -- (1,625)
Unrealized investment
holding losses -- -- -- -- -- -- (216) (216)
Issuance of stock under
stock option plan 24,562 -- -- -- 266 -- -- 266
Effects of stock under
incentive bonus plan - net (1,610) -- -- -- 39 -- 6 45
Foreign translation
adjustments -- -- -- -- -- -- (679) (679)
--------- --- -------- ------- ------- ------- ------- -------
Balance, September 29, 1996 5,299,415 $53 (277,500) $(3,780) $46,493 $32,151 $(1,972) $72,945
========= === ======== ======= ======= ======= ======= =======
See accompanying notes to unaudited consolidated financial statements.
6
8
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars)
NOTE 1. Earnings Per Share:
Earnings per share are based on the weighted average number of common
shares and common stock equivalents (stock options) outstanding during
each period. In computing earnings per share, common stock
equivalents were either anti-dilutive because of the market value of
the stock or not material, and, therefore, have been excluded from the
calculation.
NOTE 2. Inventories:
Inventories are summarized as follows:
9/29/96 3/31/96
------- --------
Finished goods $21,273 $22,645
Work-in-process 8,858 9,326
Purchased and
manufactured parts 20,338 18,580
------- -------
Total inventories $50,469 $50,551
======= =======
NOTE 3. Discontinued Operations
At September 29, 1996, the Company's only remaining discontinued and
unsold business is its Australian computer graphics service operation,
using the name TransTechnology Australasia.
Through September 1996, the Company recorded an additional $0.5
million of after-tax disposal costs related to other previously
discontinued businesses. These losses consisted primarily of disposal
costs different from previous estimates associated primarily with
environmental and legal matters.
7
9
Operating results of the discontinued business were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
9/29/96 10/01/95 9/29/96 10/01/95
------- -------- ------- --------
Total revenues $ 92 $2,276 $219 $7,580
Loss before income taxes
$(10) $ (343) $ (4) $ (774)
Income tax benefit 4 122 2 294
---- ------ ----- ------
Loss from operations $ (6) $ (221) $ (2) $ (480)
==== ====== ==== ======
The loss from operations includes interest expense of $88 and $214 for the
three months and six months ended October 1, 1995, respectively.
Net assets held for sale at September 29, 1996 and March 31, 1996 were as
follows:
9/29/96 3/31/96
------- -------
Accounts receivable $ 116 $ 143
Inventory 559 529
Property 6,578 8,667
Other assets 359 1,269
Liabilities (542) (628)
------ ------
Net assets held for sale $7,070 $9,980
====== ======
8
10
NOTE 4. 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 750
employees at its five manufacturing facilities located in Germany, the
UK, Brazil and the U.S.A.
On June 18, 1996 the Company acquired the Pebra hose clamp business
from Pebra GmbH Paul Braun i.K. for approximately $3 million in cash
plus direct acquisition costs. Pebra, which employs approximately 40
people, is located in Frittlingen, Germany, and manufactures heavy
duty hose clamps primarily for use in the manufacture of heavy trucks
in Europe.
NOTE 5. Employee Benefit Plans
The Company maintains a postretirement benefits plan available to
union employees at one of the Company's divisions. In September 1996,
the Company signed a new contract with the union employees at the
above mentioned division which resulted in the removal of active
employees from the plan. This amendment to the plan resulted in the
accumulated postretirement benefit obligation being reduced by
approximately $1.3 million. This reduction was used to offset the
remaining unrecognized transition obligation of approximately $1.7
million. The remaining $0.4 million obligation was recognized as an
expense in the September 29, 1996, Statement of Consolidated
Operations.
NOTE 6. Contingencies
ENVIRONMENTAL MATTERS. The Company has commenced environmental site
assessments and cleanup feasibility studies to determine the presence,
extent and sources of 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 site, a feasibility study has been
prepared and submitted to the state. At September 29, 1996, the
balance of this cleanup reserve was $2.3 million payable over the next
several years. In addition, the Company is pursuing recovery of a
portion of cleanup 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.
The Company also continues to participate in environmental assessments
and remediation work at eight other locations, which include operating
facilities, facilities for sale, and previously owned facilities. The
Company estimates that its potential cost for implementing corrective
action at these sites will not exceed $1.5 million payable over the
9
11
next several years, and has provided for the estimated costs in its
accrual for environmental liabilities.
In addition, the Company has been named as a potentially responsible
party in five environmental remediation recovery proceedings pending
in several states in which it is alleged that the Company was a
generator of wasted that was sent to landfills and other treatment
facilities. 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 the work
defined and a method of remediation selected and approved by the
relevant state authorities.
LITIGATION. The Company is also engaged in various other legal
proceedings incidental to its business.
It is the opinion of management that, after taking into consideration
information furnished by its counsel, the above matters will have no
material effect on the Company's consolidated financial position or
the results of the Company's operations in future periods.
10
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
All references to three and six month periods in this Management's Discussion
refer to the three and six month periods ended September 29, 1996 for fiscal
year 1997 and the three and six month periods ended October 1, 1995 for fiscal
year 1996. 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 for the six month period in 1997 was $89
million, an increase of $18.1 million or 26% from the comparable period in
1996. For the three month period in 1997 total revenue was $44.1 million, a
$0.4 million or 1% decrease from the comparable period in 1996. As further
discussed below, the increased revenue performance for the six month period in
1997 resulted primarily from the Seeger Group acquisition on June 30, 1995.
The slight decrease for the three month period was due to softness in the
European fastener markets offset by the inclusion of operations from the Pebra
acquisition on June 18, 1996.
Gross profit for the six month period in 1997 increased $6.0 million or 29%
from the comparable period in 1996. For the three month period in 1997, gross
profit increased $0.5 million or 4%. Operating profit from continuing
operations for the six month period in 1997 was $14.1 million, an increase of
$3.6 million or 34% from the comparable period in 1996. For the three month
period in 1997 operating profit from continuing operations was $6.5 million, an
increase of $1.1 million or 20% from the comparable period in 1996. Changes in
sales, operating profit and new orders from continuing operations are discussed
below by segment.
Net income, including discontinued operations, for the six month period in 1997
was $3.3 million or $0.66 per share, compared to $2.8 million or $0.54 per
share, for the comparable period of 1996. The three month period in 1997
experienced net income of $1.5 million or $0.30 per share compared to $1.2
million or $0.23 per share for the year earlier period. As further discussed
below, the increased earnings performance in 1997 resulted primarily from the
inclusion of the Seeger Group acquisition in the six month period, increased
domestic fastener volume, and to a lesser extent, the Pebra acquisition in the
three month period. Additionally, increased shipments of hoist and winch and
tie-down products, which are due to large multi-year contracts received in the
prior fiscal year, contributed to the overall earnings increase in the current
fiscal year.
Interest expense increased $0.9 million for the six month period in 1997, and
decreased $0.1 million for the three month period. The six month increase was
a result of increased bank borrowings used for the acquisition of the Seeger
Group, and the three month decrease was primarily due to lower rates in effect
during the current year period.
11
13
New orders received during the six month period in 1997 totaled $93 million, an
increase of $15.6 million or 20% from 1996's comparable period. For the three
month period, new orders totaled $48.4 million, a decrease of $0.7 million or
2% from last year's comparable period. At September 29, 1996, total backlog of
unfilled orders was $65.9 million compared to $67.7 million at October 1, 1995.
EMPLOYEE BENEFIT PLANS
The Company maintains a postretirement benefits plan available to union
employees at one of the Company's divisions. In September 1996, the Company
signed a new contract with the union employees at the above mentioned division
which resulted in the removal of active employees from the plan. This amendment
to the plan resulted in the accumulated postretirement benefit obligation being
reduced by approximately $1.3 million. This reduction was used to offset the
remaining unrecognized transition obligation of approximately $1.7 million.
The remaining $0.4 million obligation was recognized as an expense in the
September 29, 1996, Statements of Consolidated Operations.
DISCONTINUED OPERATIONS
At September 29, 1996, the Company's only remaining discontinued and unsold
business is its Australian computer graphics service operation, using the name
TransTechnology Australasia.
Through September, 1996, the Company recorded an additional $0.5 million of
after-tax disposal costs related to other previously discontinued businesses.
These losses consisted primarily of disposal costs different from previous
estimates associated primarily with environmental and legal matters.
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
750 employees at its five manufacturing facilities located in Germany, the UK,
Brazil and the U.S.A.
On June 18, 1996, the Company acquired the Pebra hose clamp business from Pebra
GmbH Paul Braun i.K. for approximately $3.0 million in cash plus direct
acquisition costs. Pebra, which employs approximately 40 people, is located in
Frittlingen, Germany, and manufactures heavy duty hose clamps primarily for use
in the manufacture of heavy trucks in Europe.
12
14
FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
SIX MONTHS ENDED NET CHANGE
------------------------ -------------------
9/29/96 10/01/95 $ %
--------- -------- ------- -----
Sales:
Speciality fastener products $71,106 $56,366 $14,740 26.2
Rescue hoist and cargo hook products $17,114 13,702 3,412 24.9
------- ------- -------
Total $88,220 $70,068 $18,152 25.9
======= ======= =======
Operating profit:
Speciality fastener products $10,772 $ 8,973 $ 1,799 20.0
Rescue hoist and cargo hook products 3,305 1,514 1,791 118.3
------- ------- -------
Total $14,077 $10,487 $ 3,590 34.2
Corporate expense (3,774) (2,760)(a) (1,014) (36.7)
Interest expense (3,624) (2,765)(b) (859) (31.1)
------- ------- -------
Income from continuing
operations before
income taxes $ 6,679 $ 4,962 $ 1,717 34.6
======= ======= =======
a) The corporate expense for the six months ended October 1, 1995
has been reduced by $341 to reflect an allocation made to
discontinued operations.
b) The interest expense for the six months ended October 1, 1995 has
been reduced by $214 to reflect an allocation made to
discontinued operations.
13
15
FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
THREE MONTHS ENDED NET CHANGE
------------------------ -------------------
9/29/96 10/01/95 $ %
--------- -------- ------- -----
Sales:
Speciality fastener products $35,607 $37,171 $(1,564) (4.2)
Rescue hoist and cargo hook products 7,973 6,690 1,283 19.2
------- ------- --------
Total $43,580 $43,861 $ (281) (0.6)
======= ======= ========
Operating profit:
Speciality fastener products $ 5,070 $ 4,476 $ 594 13.3
Rescue hoist and cargo hook products 1,382 886 496 56.0
------- ------- --------
Total $ 6,452 $ 5,362 $ 1,090 20.3
Corporate expense (1,575) (1,409)(a) (166) (11.8)
Interest expense (1,814) (1,879)(b) 65 3.5
------- ------- --------
Income from continuing
operations before
income taxes $ 3,063 $ 2,074 $ 989 47.7
======= ======= ========
a) The corporate expense for the three months ended October 1, 1995
has been reduced by $130 to reflect an allocation made to
discontinued operations.
b) The interest expense for the three months ended October 1, 1995
has been reduced by $88 to reflect an allocation made to
discontinued operations.
14
16
SPECIALTY FASTENER PRODUCTS SEGMENT
Sales for the specialty fastener products segment were $71.1 million for the
six month period in 1997, an increase of $14.7 million or 26% from the
comparable period in 1996. Sales for the three month period in 1997 were down
$1.6 million or 4% from the same period in 1996. The six month increase was
primarily due to the inclusion of Seeger Group operations and to a lesser
extent the inclusion of Pebra operations. Additionally, domestic new product
market penetration and increased automotive fastener demand offset by a slight
decrease in truck fastener demand during the first quarter of fiscal 1997,
further increased 1997 six month sales performance. The slight decrease for
the three month 1997 period was primarily due to softness in the European
markets slightly offset by the inclusion of Pebra operations.
Operating profit for the segment was $10.8 million for the six month period in
1997, an increase of $1.8 million or 20% from the comparable period in 1996.
The three month period in 1997 showed an operating profit of $5.1 million, an
increase of $0.6 million or 13% from the comparable period in 1996. The
increase in operating profit for the six month period was primarily due to the
inclusion of Seeger Group operations and to a lesser extent the inclusion of
Pebra operations. The increase in operating profit for the three month period
was primarily due to the increased domestic fastener volume and the inclusion
of Pebra operations offset by the lower European fastener volume, as mentioned
above.
New orders increased by $20 million or 37% for the six month period in 1997,
primarily due to the acquisitions mentioned above. New orders for the three
month period in 1997 increased $3.4 million or 10% from the comparable period
in 1996, primarily due to the inclusion of Pebra operations, and increased
domestic and Brazilian automotive and truck fastener demand offset by the soft
European markets mentioned above. Backlog of unfilled orders at September 29,
1996 was $33.3 million compared to $36.3 million at October 1, 1995.
RESCUE HOIST AND CARGO HOOK PRODUCTS SEGMENT
Sales for the rescue hoist and cargo hook products segment were $17.1 million
for the six month period in 1997, an increase of $3.4 million or 25% from the
comparable period in 1996. Sales for the three month period in 1997 were $8.0
million, up $1.3 million or 19% from the comparable period in 1996. The
increases were primarily due to shipments being made in this fiscal year on
large multi-year contracts which were placed last year, for hoist and winch,
and tie-down products.
Operating profit for the six month period in 1997 was $3.3 million, an increase
of $1.8 million or 118% from the comparable period in 1996. The three month
period had an operating profit of $1.4 million, an increase of $0.5 million or
56% from the comparable period in 1996. The increased sales volume product
sales mix and operating efficiencies were the primary factors contributing to
the improvement in operating profit in both the six and three month periods.
15
17
New orders for the six month period in 1997 were down $4.4 million or 19% from
the comparable period in 1996. New orders for the three month period in 1997
were of $4.1 million or 29% from the comparable period in 1996. The decreases
in both 1997 periods were primarily due to a large multi-year order for hoist
and winch products being placed in the prior year second quarter. Backlog of
unfilled orders at September 29, 1996 was $32.7 million compared to $31.4
million at October 1, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's debt-to-capitalization ratio was 52% as of September 29, 1996,
unchanged from March 31, 1996. The current ratio at September 29, 1996, stood
at 2.60 compared to 2.51 at March 31, 1996. Working Capital was $55.2 million
at September 29, 1996, down $2.1 million from March 31, 1996.
At September 29, 1996, the Company's debt consisted of $19.6 million of
borrowings under a revolving credit line, $4.6 million of borrowings under
international lines of credit, a $28.9 million term loan, a $24.5 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
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 September 29,1996 were $0.2 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 the
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 $28.9 million and $24.5 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 $28.9 million term loan has an additional $15 million
available through March 1997 for future acquisitions. Quarterly principal
payments on the $28.9 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 $28.9 million term loan is tied to
the primary bank's prime rate, or LIBOR, plus a margin that varies depending
upon the Company's achievement of certain operating and financial goals.
Annual principal payments on the $24.5 million term loan of $0.5 million, began
on June 30, 1996 and continue 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 $24.5 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-
16
18
quarter percentage points. At September 29, 1996, the Company had $55.7
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 $7.0 million, as well as
containing other customary financial covenants.
On September 13, 1996, the Company obtained authorization and repurchased
100,000 shares of the Company's common stock from a private estate at an
aggregate price of $1.6 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 the six month period in 1997 were $2.5 million as
compared with $1.9 million in the comparable period in 1996.
The Company is subject to various contingencies related to land and groundwater
contamination at several facilities. Expenditures made pursuant to the
remediation and restoration of these sites in the six month period in 1997
approximated $0.4 million as compared with $0.6 million in the comparable
period in 1996. These expenditures are primarily of a non-recurring nature and
are not capitalized. 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.
Additionally, management believes that the Company's cash flow from operations,
combined with the bank credit described above, will be sufficient to cover
future expenditures.
17
19
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended Sepember 29,
1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSTECHNOLOGY CORPORATION
(Registrant)
Dated: November 11, 1996 By: /s/ Chandler J. Moisen
-----------------------------------------
CHANDLER J. MOISEN, Senior Vice President
and Chief Financial Officer*
* On behalf of the Registrant and as Principal Financial Officer.
18