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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 June 30, 2001 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
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(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 June 30, 2001 was 3,139,737.
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TRANS-INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
FORM 10-Q - FOR THE QUARTER ENDED JUNE 30, 2001
INDEX
PART I. Financial Information
Item 1. FINANCIAL STATEMENTS
A. Consolidated Statements of Operations ---
Three months ended June 30, 2001 and 2000.
Six months ended June 30, 2001 and 2000.
B. Consolidated Statements of Comprehensive Loss ---
Six months ended June 30, 2001 and 2000.
C. Consolidated Balance Sheets ---
June 30, 2001 and December 31, 2000.
D. Consolidated Statements of Cash Flows ---
Six months ended June 30, 2001 and 2000.
E. Notes to Consolidated Financial Statements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
A. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For 3 Months Ended: For 6 Months Ended:
------------------- -------------------
6/30/01 6/30/00 6/30/01 6/30/00
------- ------- ------- -------
1. Gross sales less discounts, returns and allowances $ 8,306,103 $ 12,748,067 $ 19,053,764 $ 24,277,408
2. Cost of goods sold 6,690,331 9,310,468 14,579,857 17,814,503
------------ ------------- ------------- -------------
3. Gross Profit 1,615,772 3,437,599 4,473,907 6,462,905
4. Selling, general and administrative exp. 2,510,870 2,795,982 5,094,005 5,638,932
5. Restructuring costs (note 8) 700,457 0 700,457 0
------------ ------------- ------------- -------------
6. Operating income/(loss) (1,595,555) 641,617 (1,320,555) 823,973
7. Other (income)/ expense
Interest expense 309,070 349,675 649,794 659,677
Other income (48,390) (8,145) (52,558) (16,229)
------------ ------------- ------------- -------------
Total other (income)/expense 260,680 341,530 597,236 643,448
------------ ------------- ------------- -------------
8. Earnings/(loss) before income taxes (1,856,235) 300,087 (1,917,791) 180,525
9. Income tax expense/(benefit) (344,000) 144,000 (347,000) 140,000
------------ ------------- ------------- -------------
10. Net earnings/(loss) $ (1,512,235) $ 156,087 $ (1,570,791) $ 40,525
============ ============= ============= =============
11. Earnings/(loss) per share: (note 6)
Basic $ (.48) $ .05 $ (.50) $ .01
Diluted $ (.48) $ .05 $ (.50) $ .01
============ ============= ============= =============
12. 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 LOSS (Unaudited)
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
2001 2000
----------- ------------
Net earnings/(loss) $(1,570,791) $ 40,525
Other comprehensive loss:
Equity adjustment from foreign
currency translation (53,309) (95,237)
----------- -----------
Comprehensive loss $(1,624,100) $ (54,712)
=========== ===========
See Notes to Financial Statements
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
C. CONSOLIDATED BALANCE SHEETS
ASSETS
Current Assets 6/30/01 12/31/00
- -------------- (Unaudited) (Audited)
----------- -----------
Cash $ 63,605 $ 317,754
Accounts receivable 9,500,568 10,925,535
Inventories (Note 2) 12,602,284 13,056,101
Prepaid expenses 400,630 427,183
Deferred income taxes 863,978 856,000
----------- -----------
Total current assets 23,431,065 25,582,573
Property, Plant & Equipment, at Cost
Land 306,881 306,881
Land Improvements 126,660 126,660
Buildings 5,361,551 5,958,794
Machinery & equipment 11,803,114 12,895,829
----------- -----------
17,598,206 19,288,164
Less: accumulated
depreciation (12,260,807) (11,996,151)
----------- -----------
Net plant and equipment 5,337,399 7,292,013
Other Assets
Investments in affiliates 68,484 68,484
Patents, licenses & trademarks,
net of accumulated amortization 48,938 76,438
Excess of cost of investment in
stock of subsidiary over equity in
underlying net assets of acquisition 1,407,082 1,487,985
Sundry 26,830 4,013
----------- -----------
Total assets $30,319,798 $34,511,506
=========== ===========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities 6/30/01 12/31/00
- ------------------- (Unaudited) (Audited)
----------- -----------
Notes Payable (Note 5) $ 7,910,790 $ 8,439,750
Current installments
- Long term debt (Note 5) 795,231 813,025
Accounts payable - trade 4,075,033 6,935,197
Accrued liabilities 983,575 1,464,214
Income taxes (585,628) (251,964)
----------- -----------
Total current liabilities 13,179,001 17,400,222
Deferred income taxes - Non-current 240,000 240,000
Long term debt
Current portion shown above (Note 5) 5,010,249 5,263,236
Other non-current liabilities 307,071 300,471
Stockholders' Equity
Preferred stock of $1.00 par value
per share - authorized 500,000
shares; 19,000 shares issued and
outstanding at 6/30/01 19,000 --
Common stock of $.10 par value per
share - authorized 10,000,000 shares;
3,139,737 shares issued and 3,139,737
outstanding at 6/30/01 313,974 313,974
Additional paid-in capital 5,953,081 4,072,081
Retained earnings 5,383,700 6,954,491
Foreign currency translation (86,278) (32,969)
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11,583,477 11,307,577
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Total liabilities and stockholders' equity $30,319,798 $34,511,506
=========== ===========
See Notes to Financial Statements.
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TRANS-INDUSTRIES, INC.
Consolidated Statements of Cash Flows
D. For the Six Months Ended June 30, 2001 and 2000
2001 2000
---- ----
(Unaudited) (Unaudited)
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings/(loss) $(1,570,791) $ 40,525
Adjustments to reconcile net earnings/(loss)
to net cash provided by operations:
Depreciation/Amortization 678,789 704,729
Decrease (increase) in accts. receiv. 1,424,967 (2,619,370)
Decrease (increase) in inventory 453,817 (1,150,984)
Decrease (increase) in prepaid exp. 26,553 (315,515)
Increase (decrease) in accts. payable (2,860,164) 1,532,551
Increase (decrease) in accr. liab. (480,639) (156,275)
Increase (decrease) in income taxes (333,664) (152,924)
Loss on sale of Property and Equipment 649,244 -0-
Other (33,861) -0-
----------- -----------
Net Cash Used by Operations (2,045,749) (2,117,263)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (272,561) (879,960)
Proceeds from sale of Property & Equip. 1,010,611 -0-
----------- -----------
Net Cash Provided (Used) by Investing 738,050 (879,960)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from preferred stock 1,900,000 -0-
Net increase (repayment) of long-term
borrowings (264,181) 801,997
Net proceeds (payment) of credit line (528,960) 2,128,023
----------- -----------
Net Cash Provided (Used) by Financing 1,106,859 2,930,020
Foreign currency translation (53,309) (95,237)
----------- -----------
Net decrease in cash (254,149) (162,440)
Cash at beginning of year 317,754 163,953
----------- -----------
Cash at end of quarter $ 63,605 $ 1,513
=========== ===========
Supplemental Disclosures:
Interest paid $ 646,857 $ 613,064
Income taxes paid $ -0- $ 300,000
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, 2000.
2. Inventories
The major components of inventories are:
6/30/01 12/31/00
------- --------
Raw Materials $ 6,640,944 $ 6,984,323
Work in Process 3,718,528 3,262,522
Finished Goods 2,242,812 2,809,256
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$12,602,284 $13,056,101
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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 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 June 30, 2001 consisted of the following:
Trans-Industries, Inc., $3,840,000 term note, payable in $2,760,476
monthly installments of $40,725 which includes interest
at bank's prime lending rate, and a balloon payment of
$1,927,007 in October 2004. The note is secured by
substantially all the assets of the Company.
Term note, payable in monthly installments of $896 99,476
including interest at a rate of 6%. The note is due
January 21, 2002.
Term note, payable in monthly installments of $50,965.
Interest is payable monthly at the bank's prime lending
rate plus .5%. The note is due November 2005 and is
secured by substantially all the assets of the Company. 2,650,189
Other 295,339
-----------
5,805,480
Less current installments 795,231
-----------
Long-term debt $5,010,249
===========
The Company also has a secured $13,000,000 line of credit, in the form of a
demand note, of which $7,910,790 was utilized at June 30, 2001. Interest is
charged at the bank's prime lending rate, plus 1%.
The line of credit agreement requires the company to maintain certain
financial ratios. The agreement also restricts the payment of dividends,
repurchase of common stock, and acquisition of property and equipment. At
June 30, 2001, the Company was not in compliance with the financial ratio
covenants and obtained a waiver for such non compliance from its lender.
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E. TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Loss Per Share
For the three and six months ended June 30, 2000, and 2001 all options
outstanding have been excluded from the computation of diluted loss per
share as the effect would be anti-dilutive.
7. Segment Information
The Company operates in one market segment, the transportation industry,
with products directed towards customers in the mass transit, highway,
airline and rental car segments. Financial information summarized by
geographic area is as follows:
6/30/01 6/30/00
--------------------------------------- ----------------------------------------
LONG- LONG-
LIVED LIVED
REVENUES ASSETS REVENUES ASSETS
-------- ------ -------- ------
United States $15,430,123 $6,498,219 $19,852,279 $ 7,423,225
United Kingdom 788,531 322,030 988,374 1,933,934
Canada 2,547,806 -0- 2,733,316 -0-
Other 287,304 -0- 703,439 -0-
----------- ---------- ----------- -----------
Total $19,053,764 $6,820,249 $24,277,408 $ 9,357,159
=========== ========== =========== ===========
8. Restructuring Costs
The Company, in June 2001, reported restructuring charges relating to the
consolidation of manufacturing facilities in England of approximately
$700,000. A major portion of this charge, $648,000, relates to the disposal
of redundant fixed assets. Also included in the restructuring charges is
$21,000 for severance pay and approximately $31,000 for the cancellation of
leases and miscellaneous fees.
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E. TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Recent Accounting Pronouncements
On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business Combinations,
and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all
business combinations completed after June 30, 2001. SFAS 142 is effective for
fiscal years beginning after December 15, 2001; however, certain provisions of
this Statement apply to goodwill and other intangible assets acquired between
July 1, 2001 and the effective date of SFAS 142. Major provisions of these
Statements and their effective dates for the Company are as follows:
- - all business combinations initiated after June 30, 2001 must use the
purchase method of accounting. The pooling of interest method of accounting
is prohibited except for transactions initiated before July 1, 2001.
- - intangible assets acquired in a business combination must be recorded
separately from goodwill if they arise from contractual or other legal
rights or are separable from the acquired entity and can be sold,
transferred, licensed, rented or exchanged, either individually or as part
of a related contract, asset or liability
- - goodwill, as well as intangible assets with identifiable lives, acquired
after June 30, 2001, will not be amortized. Effective January 1, 2002, all
previously recognized goodwill and intangible assets with indefinite lives
will no longer be subject to amortization.
- - effective January 1, 2002, goodwill and intangible assets with indefinite
lives will be tested for impairment annually and whenever there is an
impairment indicator
- - all acquired goodwill must be assigned to reporting units for purposes of
impairment testing and segment reporting.
The Company will continue to amortize goodwill recognized prior to July 1, 2001,
under its current method until January 1, 2002, at which time annual and
quarterly goodwill amortization of $160,280 and $40,070 will no longer be
recognized. By December 31, 2002 the Company will have completed a transitional
fair value based impairment test of goodwill as of January 1, 2002. Impairment
losses, if any, resulting from the transitional testing will be recognized in
the quarter ended March 31, 2002, as a cumulative effect of a change in
accounting principle.
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For Six Months Ended June 30, 2001
Forward-Looking Statements
This discussion highlights significant factors influencing the financial
condition and results of operations of Trans-Industries, Inc. It should be read
in conjunction with the financial statements and related notes. This discussion
includes certain forward-looking statements based on management's estimate of
trends and economic factors in the markets in which the corporation is active,
as well as the corporation's business plans. In light of recent securities law
developments, including the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the corporation notes that such forward-looking
statements are subject to risks and uncertainties. Accordingly, the
corporation's actual results may differ from those set forth in such statements.
Significant changes in economic conditions, regulatory or legislative changes
affecting Trans-Industries, Inc., its competitors, or the markets in which it is
active, or changes in other factors may cause future results to vary from those
expected by the corporation.
Sales and Earnings
Sales for the quarter ended June 30, 2001 were $8,306,103 compared to
$12,748,067 for the same period a year ago. This decrease of $4,441,964 is
attributed to declines in all product sectors as bus builders pushed delivery
schedules back into later periods while a highway customer delayed a major
contract beyond scheduled second quarter shipment dates.
During the second quarter of 2001, the Company recorded a net loss of $1,512,235
or $.48 per share on sales of $8,306,103. Restructuring charges incurred for
consolidating the manufacturing facilities in England and the disposing of
redundant fixed assets accounted for approximately $700,000 of this loss and
approximately $812,000 of loss related to normal operations. For the same period
last year, sales were $12,748,067 with a net profit of $156,087. The decline in
operating profits in the second quarter of 2001 compared to the second quarter
of 2000 is attributable to reduced sales volumes.
Inventories
Inventory valuation is based upon the lower of cost or market. At June 30, 2001,
consolidated inventories were $12,602,284 compared to $13,950,505 a year ago.
This decrease of $1,348,221 is a result of the Company's effort to bring its
inventory levels more in line with its sales volumes.
Interest
Interest expense amounted to approximately $309,000 and $350,000 for the second
quarter of 2001 and 2000, respectively. This decrease of $41,000 was the result
of slightly lower interest rates in 2001.
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For Six Months Ended June 30, 2001
Financial Condition
Current financial resources coupled with anticipated funds from operations and
those freed up through the consolidation of the Companies operations in England,
are expected to meet funding requirements for the remainder of the year, based
upon present needs.
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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: August 9, 2001 /s/ Kai Kosanke
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Kai Kosanke, Treasurer
and Chief Financial Officer
Date: August 9, 2001 /s/ Paul Clemo
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Paul Clemo
Assistant Treasurer
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