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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 2000 Commission File Number 0-4539
TRANS-INDUSTRIES, INC.
----------------------
(Exact name of registrant as specified in its charter)
Delaware 13-2598139
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2637 S. Adams Road, Rochester Hills, MI 48309
---------------------------------------------
(Address) (Zip Code)
Registrant's Telephone Number, including Area Code (248) 852-1990
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 and Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
----- -----
The number of shares outstanding of registrant's Common stock, par value $.10
per share, at September 30, 2000 was 3,139,737.
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TRANS-INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
FORM 10-Q - FOR THE QUARTER ENDED SEPTEMBER 30, 2000
INDEX
PART I. Financial Information
Item 1. FINANCIAL STATEMENTS
A. Consolidated Statements of Operations ---
Three months ended September 30, 2000 and 1999.
Nine months ended September 30, 2000 and 1999.
B. Consolidated Statements of Comprehensive Income / (Loss)
Nine months ended September 30, 2000 and 1999.
C. Consolidated Balance Sheets ---
September 30, 2000 and December 31, 1999.
D. Consolidated Statements of Cash Flows ---
Nine months ended September 30, 2000 and 1999.
E. Notes to Consolidated Financial Statements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PART II. Other Information
Item 1. LEGAL PROCEEDINGS
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
A.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For 3 Months Ended: For 9 Months Ended:
------------------- -------------------
9/30/00 9/30/99 9/30/00 9/30/99
------- ------- ------- -------
1. Gross sales less discounts, returns and allowances $10,296,543 $9,698,966 $34,573,951 $28,127,015
2. Cost of goods sold 8,590,131 7,063,248 26,404,634 20,043,610
------------ ----------- ------------ ------------
3. Gross Profit 1,706,412 2,635,718 8,169,317 8,083,405
4. Selling, general and administrative exp. 2,432,929 2,836,624 8,071,861 7,807,043
------------ ----------- ------------ ------------
5. Operating income/(loss) (726,517) (200,906) 97,456 276,362
6. Other (income)/ expense
Interest expense 419,072 266,374 1,078,749 682,022
Other income (9,786) (726,131) (26,015) (791,277)
------------ ----------- ------------ ------------
Total other (income)/expense 409,286 (459,757) 1,052,734 (109,255)
------------ ----------- ------------ ------------
7. Earnings/(loss) before income taxes (1,135,803) 258,851 (955,278) 385,617
8. Income tax expense/(loss) (318,000) 121,000 (178,000) 214,000
------------ ----------- ----------- ------------
9. Net earnings $ (817,803) $ 137,851 $ (777,278) $ 171,617
============ =========== =========== ============
10. Earnings/(loss) per share: (note 6)
Basic ($ .26) $ .04 ($ .25) $ .05
Diluted ($ .26) $ .04 ($ .25) $ .05
============ =========== =========== ============
11. Dividends per share $ .00 $ .00 $ .00 $ .00
============ =========== =========== ============
See Notes to Financial Statements
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
B.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE NET EARNINGS / (LOSS)
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
---------------- ---------------
Net earnings $ (777,278) $ 171,617
Other comprehensive income/ (loss)
Equity adjustment from foreign
currency translation (126,780) 93,173
-------------- ------------
Comprehensive income / (Loss) $ (904,058) $ 264,790
============== ============
See Notes to Financial Statements
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
C.
CONSOLIDATED BALANCE SHEETS
ASSETS LIABILITIES AND STOCKHOLDERS EQUITY
------ -----------------------------------
Current Assets 9/30/00 12/31/99 Current Liabilities 9/30/00 12/31/99
- -------------- (Unaudited) (Audited) ------------------- (Unaudited) (Audited)
----------- ----------- ------------ ---------
Cash $ 25,095 $ 163,953 Notes Payable (Note 5) $10,943,000 $ 8,504,120
Accounts receivable 12,138,738 10,489,187 Current installments
Inventories (Note 2) 13,076,660 12,799,521 - Long term debt (Note 5) 1,574,946 561,940
Prepaid expenses 560,892 382,292 Accounts payable - trade 5,410,275 4,367,123
Deferred income taxes 837,978 830,000 Accrued liabilities 1,167,877 2,028,962
----------- ----------- Income taxes (171,672) 207,316
------------ -------------
Total current assets 26,639,363 24,664,953
Total current liabilities 18,924,426 15,669,461
Property, Plant & Equipment,
at Cost
- ----------------------------
Deferred income taxes -
Non-current 269,000 269,000
Land 306,881 306,881
Land Improvements 126,660 126,660 Long term debt
--------------
Buildings 5,957,071 5,905,639
Machinery & equipment 12,726,436 11,754,635 Current portion shown above 3,588,614 3,923,634
----------- ---------- (Note 5)
19,117,048 18,093,815 Other non-current liabilities 295,168 341,612
Less: accumulated
depreciation (11,660,187) (10,775,158) Stockholders' Equity
----------- ----------- --------------------
Net plant and equipment 7,456,861 7,318,657
----------- -----------
Preferred stock of $1.00 par
Other Assets value per share - authorized
- ------------ 500,000 shared; none issued -- --
Investments in affiliates 51,196 51,196
Common stock of $.10 par
Patents, licenses & value per share - authorized
trademarks, net of 10,000,000 shares; 3,139,737
accumulated amortization 89,917 132,568 shares issued and 3,139,737
outstanding at 9/30/00 313,974 313,974
Excess of cost of
investment in stock of
subsidiary over equity in Additional paid-in capital 4,072,081 4,072,081
underlying net assets of Retained earnings 8,480,471 9,257,749
acquisition 1,533,021 1,654,374
Sundry 32,912 12,079 Foreign currency translation (140,464) (13,684)
----------- ----------- ------------ ------------
12,726,062 13,630,120
------------ ------------
Total assets $35,803,270 $33,833,827 Total liabilities and $35,803,270 $33,833,827
=========== =========== stockholders' equity =========== ============
See Notes to Financial Statements.
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TRANS-INDUSTRIES, INC.
Consolidated Statements of Cash Flows
D. For the Nine Months Ended September 30, 2000 and 1999
Nine Months Ended September 30
------------------------------
2000 1999
---- ----
(Unaudited) (Unaudited)
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net earnings/(loss) $ (777,278) $ 171,617
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation/Amortization 1,080,473 956,995
Decrease (increase) in accts. receiv. (1,649,551) (1,095,328)
Decrease (increase) in inventory (277,139) (1,220,397)
Decrease (increase) in prepaid exp. (178,600) (269,805)
Increase (decrease) in accts. payable 1,043,152 468,841
Increase (decrease) in accr. liab. (869,063) (336,790)
Increase (decrease) in income taxes (378,988) (779,855)
Other -0- (242,562)
-------------- --------------
Net Cash Provided (Used) by Operations (2,006,994) (2,347,284)
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Purchase of fixed assets (1,075,506) (1,699,888)
Acquisition of Business -0- (1,357,816)
-------------- --------------
Net Cash Provided (Used) by Investing (1,075,506) (3,057,704)
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Net increase (repayment) of long-term
borrowings 631,542 962,527
Net proceeds (payment) of credit line 2,438,880 4,180,506
-------------- --------------
Net Cash Provided (Used) by Financing 3,070,422 5,143,033
Foreign currency translation (126,780) 93,173
-------------- --------------
Net Increase (decrease) in Cash (138,858) (168,782)
Cash at beginning of year 163,953 193,579
-------------- ---------------
Cash at end of quarter $ 25,095 $ 24,797
============== ===============
Supplemental Disclosures:
Interest paid $ 986,911 $ 624,579
Income taxes paid $ 300,000 $ 900,528
See Notes to Financial Statements
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E. TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The financial information presented as of any date other than December 31
has been prepared from the Company's books and records without audit.
Financial information as of December 31 has been derived from the audited
financial statements of the Company. In the opinion of management, all
adjustments consisting of normal recurring adjustments, necessary for a
fair presentation of the financial information for the periods indicated,
have been included. For further information regarding the Company's
accounting policies, refer to the consolidated financial statements and
related notes included in the Company's annual report on form 10-K for the
year ended December 31, 1999.
2. Inventories
The major components of inventories are:
9/30/00 12/31/99
------- --------
Raw Materials $ 5,548,665 $ 4,993,075
Work in Process 4,599,829 4,592,891
Finished Goods 2,928,166 3,213,555
----------- -----------
$13,076,660 $12,799,521
=========== ===========
3. Principles of Consolidation
There have been no significant changes in the principles of consolidation
since our most recent audited financial statements.
4. Significant Accounting Policies
There have been no significant changes in the accounting policies since our
most recent audited financial statements.
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E. TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Long-Term Debt
Long-term debt at September 30, 2000 consisted of the following:
Trans-Industries, Inc., $3,840,000 term note, payable in $2,936,276
monthly installments of $40,725 which includes interest at
bank's prime lending rate, and a balloon payment of $1,723,141
in October 2004. The note is secured by substantially all the
assets of Trans-Industries, Inc. and subsidiaries.
Term note, payable in monthly installments of $896 102,972
including interest at a rate of 6%. The note is due January 21,
2002.
Term note, payable in monthly installments of $16,667 766,667
plus interest at bank's prime lending rate less 1/4 point.
The note is due July 1, 2004.
Term note, due on demand, interest at banks prime 1,000,000
lending rate less 1/4 point.
Other 357,645
5,163,560
Less current installments ( 1,574,946)
-----------
Long-term debt $3,588,614
===========
The Trans-Industries, Inc. term loan agreement contains restrictive
provisions relating principally to the maintenance of working capital,
tangible net worth, and ratio of debt to earnings. At September 30, 2000
the Company was in compliance.
The Company also had an unsecured $12,000,000 line of credit of which
$10,943,000 was utilized at September 30, 2000. Through September 30
Interest was charged at the bank's prime lending rate, less 1/4 point. In
October of 2000 the bank agreement was renegotiated. The new agreement
transfers $2,000,000 from the credit line to term debt and increases the
banks interest rate to 1/2 over prime.
This line of credit expires on July 1, 2001.
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
E. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Earnings/(loss) Per Share
For the quarter ended September 30, 2000, all options outstanding have been
excluded from the computation of diluted earnings/(loss) per share as the
effect would be anti-dilutive.
The following is a reconciliation of the numerator and denominator of the
basic and diluted earnings per share computations, for the quarter ended
1999.
EARNINGS SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------
Qtr. ended September 30, 1999
-----------------------------
Basic earnings per share:
Earnings available to common
stockholders $137,851 3,139,737 $ .04
Effect of dilutive securities
Stock options -- 1,128 .00
------------- ------------- ---------
Diluted earnings per share:
Earnings available to stockholders
plus assumed conversions $137,851 3,140,865 $ .04
============= ============= =========
7. Segment Information
The Company operates in one market segment, the transportation industry.
Financial information summarized by geographic is as follows:
9/30/00 9/30/99
----------------------------------------- -----------------------------------------
LONG- LONG-
-----
LIVED LIVED
-----
REVENUES ASSETS REVENUES ASSETS
-------- ------ -------- ------
United States $28,272,035 $7,173,162 $20,594,250 $7,103,966
United Kingdom 1,407,563 1,990,745 2,447,011 1,605,556
Canada 3,892,571 - 3,223,076 -
Other 1,001,782 - 1,862,678 -
Total $34,573,951 $9,163,907 $28,127,015 $8,709,522
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For Nine Months Ended September 30, 2000
Sales and Earnings
Sales for the quarter ended September 30, 2000, were $10,296,543 compared to
$9,698,966, for the same period a year ago. This increase of $597,577 reflects
improved shipments of the Company's lighting products and bus window systems.
During the third quarter of 2000, the Company had a net loss of approximately
$818,000. For the same period of the prior year, the Company had a net profit of
$138,000. This result was aided by inclusion of $600,000 of net interest income
from a favorable patent ruling. This decrease in profits of $956,000 can be
attributed to three areas of the business. First, our U.K. operations showed
heavy losses, particularly at our molding operations, where high scrap rates and
outgoing freight charges were incurred in meeting customer requirements.
Extensive review of this operation is in progress and improved processes are
expected to be implemented in the fourth quarter of 2000. Second, our bus window
operation on the west coast did not hit their sales targets, in part, due to the
transit strike in Los Angeles. However, significant progress has been made in
becoming a supplier to OEM bus builders and these efforts are expected to become
apparent during the first quarter of 2001. The last area of opportunity that has
been costly for the Company relates to our product, technical, and market
development costs associated with our "smart bus" technology designed to improve
on-time performance of transit busses. Although the costs for this project have
been substantial to date, the Company believes this investment is key to the
Company's future growth. Evidence of this is anticipated with an expected major
order for this product either late in the fourth quarter or shortly thereafter.
Inventories
Inventory valuation is based upon the lower of cost or market. At September 30,
2000, consolidated inventories were $13,076,660 compared to $12,325,086 a year
ago. This increase of $751,574 is to accommodate increased sales compared to a
year ago, and is concentrated in raw materials.
Interest
Interest expense amounted to approximately $419,000 and $266,000 for the third
quarter of 2000 and 1999, respectively. This increase of $153,000 was the result
of higher debt levels in 2000, plus increased interest costs.
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For Nine Months Ended September 30, 2000
Financial Condition
Current financial resources coupled with anticipated funds from operations are
expected to meet funding requirements for the remainder of the year, based upon
present needs. In anticipation of future funding requirements associated with
forecasted production contracts of vehicle information products and software,
exploratory bank conversations have been held regarding additional credit
availability. Additionally the bank agreement was renegotiated in October of
2000. Key changes to the new banking agreement include the moving of $2,000,000
from the Company's working capital credit line to five year term debt, the
availability of a $1,000,000 capital expenditure line, and an increase in the
banks interest rate from 1/4 under prime to 1/2 over prime. This move will
provide additional availability under the Company's credit line.
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDING
The Company was the plaintiff in a patent infringement lawsuit filed in the
Federal District Court for the Eastern District of Michigan, the Southern
Division. On April 9, 1998, the District Court awarded the Company $3,023,773 in
damages and $1,119,588 in interest. On May 1, 1998, the defendant paid the
damages awarded to the Company and appealed the interest award. On April 29,
1999, the Court of Appeals, consisting of a three judge panel, ruled in favor of
the defendant, thus allowing the interest calculation to be computed using an
interest rate of approximately 1/2 the original calculation. In June of 1999,
the court again ruled in favor of the defendant. In August, 1999 a final
interest award of $719,153 was paid to the Company thereby concluding the suit.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANS-INDUSTRIES, INC.
Date: November 9, 2000 /s/ Kai Kosanke
---------------- --------------------------------
Kai Kosanke, Treasurer
and Chief Financial Officer
Date: November 9, 2000 /s/ Paul Clemo
---------------- --------------------------------
Paul Clemo
Assistant Treasurer
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Exhibit Index
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Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule