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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, 1997 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 September 30, 1997 was 3,073,200.
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TRANS-INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
FORM 10-Q - FOR THE QUARTER ENDED SEPTEMBER 30, 1997
INDEX
PART I. Financial Information
Item 1. FINANCIAL STATEMENTS
A. Consolidated Statements of Operations ---
Three months ended September 30, 1997 and 1996.
Nine months ended September 30, 1997 and 1996.
B. Consolidated Balance Sheets ---
September 30, 1997 and December 31, 1996.
C. Consolidated Statements of Cash Flows ---
Nine months ended September 30, 1997 and 1996.
D. 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 5. OTHER INFORMATION
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:
---------------------- ---------------------
9/30/97 9/30/96 9/30/97 9/30/96
------- ------- ------- -------
1. Gross sales less discounts, returns and allowances $9,357,536 $7,217,902 $26,637,033 $21,734,670
2. Cost of goods sold 6,357,269 4,681,411 17,416,234 13,988,564
---------- ---------- ----------- -----------
3. Gross Profit 3,000,267 2,536,491 9,220,799 7,746,106
4. Selling, general and administrative exp. 1,923,691 1,873,857 6,037,411 5,557,173
---------- ---------- ----------- -----------
5. Operating income/(loss) 1,076,576 662,634 3,183,388 2,188,933
6. Other (income)/ expense
Interest expense 150,461 193,909 483,635 615,661
Other income (15,295) (20,045) (198,347) (81,428)
---------- ---------- ----------- -----------
Total other (income)/expense 135,166 173,864 285,288 534,233
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7. Earnings/(loss) before income taxes 941,410 488,770 2,898,100 1,654,700
8. Income tax expense/(benefit) 322,000 173,000 994,000 566,000
---------- ---------- ----------- -----------
9. Net profit/(loss) $ 619,410 $ 315,770 $ 1,904,100 $ 1,088,700
========== ========= =========== ===========
10. Earnings per share $ .20 $ .10 $ .62 $ .36
========== ========= =========== ===========
11. Dividends per share -- -- -- --
========== ========= =========== ===========
See Notes to Financial Statements
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
B.
CONSOLIDATED BALANCE SHEETS
ASSETS
Current Assets 9/30/97 12/31/96
(Unaudited) (Audited)
----------- -----------
Cash $ 220,212 $ 358,764
Accounts receivable 7,196,629 6,195,865
Inventories (Note 2) 6,432,795 6,162,592
Prepaid expenses 482,321 279,385
Deferred income taxes 373,000 373,000
----------- -----------
Total current assets 14,704,957 13,369,606
Property, Plant & Equipment, at Cost
Land 314,503 370,814
Land Improvements 126,660 126,660
Buildings 5,268,550 5,234,892
Machinery & equipment 7,191,786 6,582,016
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12,901,499 12,314,382
Less:accumulated depreciation (8,091,121) (7,793,413)
----------- -----------
Net plant and equipment 4,810,378 4,520,969
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Other Assets
Investments in affiliates 10,000 10,000
Patents, licenses & trademarks,
net of accumulated amortization 249,428 287,267
Excess of cost of investment in
stock of subsidiary over equity in
underlying net assets of acquisition 189,426 222,854
Sundry 104,471 104,471
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Total assets $20,068,660 $18,515,167
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LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities 9/30/97 12/31/96
(Unaudited) (Audited)
----------- -----------
Notes Payable (Note 5) $ 2,949,171 $ 2,539,142
Current installments
- Long term debt (Note 5) 160,570 250,243
Accounts payable - trade 2,640,453 2,779,171
Accrued liabilities 1,511,758 1,400,727
Income taxes (96,000) 195,000
----------- -----------
Total current liabilities 7,165,952 7,164,283
Deferred income taxes - Non-current 126,000 126,000
Long term debt
Current portion shown above (Note 5) 3,640,118 3,992,566
Other non-current liabilities 320,447 310,547
Stockholders' Equity
Preferred stock of $1.00 par value
per share - authorized 500,000
shared; none issued -- --
Common stock of $.10 par value per
share - authorized 10,000,000 shares;
3,073,200 shares issued and 3,073,200
outstanding at 9/30/97 307,320 307,200
Additional paid-in capital 4,062,116 4,053,985
Retained earnings 4,465,784 2,561,684
Foreign currency translation (19,077) (1,098)
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8,816,143 6,921,771
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Total liabilities and stockholders' equity $20,068,660 $18,515,167
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See Notes to Financial Statements.
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TRANS-INDUSTRIES, INC.
Consolidated Statements of Cash Flows
C. For the Nine Months Ended September 30, 1997 and 1996
Nine Months Ended September 30
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1997 1996
---- ----
(Unaudited) (Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $1,904,100 $1,088,700
Adjustments to reconcile net income (loss)
to net cash provided by operations:
Depreciation/Amortization 588,419 508,555
Decrease (increase) in accts. receiv. (1,000,764) 372,329
Decrease (increase) in inventory (270,203) 186,773
Decrease (increase) in prepaid exp. (202,936) 170,428
Increase (decrease) in accts. payable (138,718) (1,215,796)
Increase (decrease) in accr. liab. 111,031 308,051
Increase (decrease) in income taxes (291,000) (415,000)
(Gain) loss on sale of fixed assets (136,689) (21,402)
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Net Cash Provided (Used) by Operations 563,240 982,638
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (905,872) (712,810)
Proceeds from sale of property and equipment 236,000 47,000
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Net Cash Provided (Used) by Investing (669,872) (665,810)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (repayment) of long-term
borrowings (432,221) (622,571)
Net proceeds (payment) of credit line 410,029 358,009
Common stock issued through ESOP 8,251 -0-
Purchase of Treasury Stock -0- (28,060)
---------- ----------
Net Cash Provided (Used) by Financing (13,941) (292,622)
Foreign currency translation (17,979) 20,706
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Net Increase in Cash (138,552) 44,912
Cash at beginning of year 358,764 109,123
---------- ----------
Cash at end of quarter $ 220,212 $ 154,035
========== ==========
Supplemental Disclosures:
Interest paid $ 468,229 $ 564,619
Income taxes (refunded) paid, net $1,285,000 $ 981,000
See notes to financial statements.
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D. 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, 1996.
2. Inventories
The major components of inventories are:
9/30/97 12/31/96
---------- ----------
Raw Materials $3,538,179 $3,213,861
Work in Process 1,091,509 976,993
Finished Goods 1,803,107 1,971,738
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$6,432,795 $6,162,592
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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 the accounting policies since
our most recent audited financial statements.
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D. TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Long-Term Debt
Long-term debt at September 30, 1997 consisted of the following:
Trans-Industries, Inc., $3,840,000 term note, payable in $3,504,667
monthly installments of $39,333 which includes interest at
1/4% over the bank's prime lending rate, and a balloon payment
of $3,137,124 in October 1999. The note is secured by
substantially all the assets of Trans-Industries, Inc. and
subsidiaries.
Transmatic Europe Ltd., mortgage note, payable in monthly 173,795
installments of $890 plus interest at 9.99%. The mortgage is
secured by certain property and is due August 9, 2003.
Term note, payable in monthly installments of $896 115,485
including interest at a rate of 6%. The note is due
January 21, 2002.
Other 6,741
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3,800,688
Less current installments (160,570)
----------
Long-term debt $3,640,118
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Long-Term Debt (continued)
The Trans-Industries, Inc. term loan agreement contains restrictive
provisions relating principally to the maintenance of working capital,
net worth, ratio of debt to net worth, payment of dividends, and
acquisition of fixed assets. At September 30, 1997 the Company was in
compliance with all provisions.
The Company also has a secured $6,500,000 line of credit of which
$2,949,171 was utilized at September 30, 1997. Interest is charged at
the bank's prime lending rate. This line of credit expires on July 1,
1999. The line is secured by substantially all of the assets of
Trans-Industries, Inc. and its domestic subsidiaries.
In August, 1997 the remaining debenture was repurchased and retired,
thus eliminating the possibility of conversion by the holder. Prior to
the date of repurchase the debenture was convertible, at $2.00/share,
into 107,142 shares.
6. Stock Changes
In December of 1996, 28,000 shares that were held as Treasury Stock were
retired.
In September of 1997, the Company received a request from an employee to
exercise her stock option for 1200 shares of common stock at a price of
$6.875 per share. Accordingly, the Company issued a certificate for 1200
shares.
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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, 1997
Sales and Earnings
Sales for the quarter ended September 30, 1997 were $9,357,536 compared to
$7,212,902 for the same period a year ago. This increase of $2,144,634 is
primarily attributable to an increase in sales of the Company's electronic
variable message signs as well as higher volumes achieved in the sale of its'
lighting products.
During the third quarter of 1997, the Company realized a net profit of
$619,410 on sales of $9,357,536. For the same period of the prior year, the
Company reported net profit of $315,770 on sales of $7,217,902. This increase
in net profit of $303,640 can be attributed to the increased sales volume
achieved. Net profit per share for the third quarter was $.20 and $.10 for
1997 and 1996, respectively. Net profit per share was computed on the adjusted
weighted average number of shares outstanding during the quarter for 1997 and
1996, which were 3,072,100 and 3,064,500, respectively.
Inventories
Inventory valuation is based upon the lower of cost or market. At
September 30, 1997, consolidated inventories were $6,432,795 compared to
$5,787,644 a year ago. This increase of $645,151 is to accommodate the growth
in sales volume.
Interest
Interest expense amounted to approximately $150,000 and $194,000 for the
third quarter of 1997 and 1996, respectively. This decrease of $44,000 was the
result of average debt levels being less during the third quarter of 1997
compared to 1996.
Financial Conditions
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.
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PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDING
The Company is the plaintiff in a patent infringement lawsuit. During
November of 1993, an advisory jury recommended a decision in favor of the
Company. In April of 1994, the judge concurred with the advisory jury and
ordered that the defendant be enjoined from any further manufacture, use, or
sale of the accused patented device. It was also ordered that the defendant
pay approximately $3 million in damages. During 1994, the defendant appealed
the case based on the lower courts interpretation of the law. On May 2, 1995,
the Company was notified that the U.S. Circuit Court of Appeals changed the
District Courts ruling that the defendant literally infringed the patent
instead of infringement by equivalents. Further the court of appeals remanded
the case back to the Federal District Court for further determination of
damages. A final outcome is expected to be reached in 1997. Because this
decision can be further appealed by the defendant, the ultimate award to the
Company will be recorded in the financial statements when realized.
Additionally, any award received by the Company will be net of certain
contingent legal fees related to the lawsuit.
Item 5. OTHER INFORMATION
On August 6, 1997 the Company repurchased all remaining convertible
subordinated debentures outstanding. This purchase eliminates the possibility
of any dilution of common stock which would have resulted from the conversion
of these debentures.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Form 8K dated April 19, 1995, and Form 8K/A dated May 23, 1995; change
in registrants certifying accountant.
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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 10, 1997 /s/ Kai Kosanke
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Kai Kosanke, Treasurer
and Chief Financial Officer
Date: November 10, 1997 /s/ Paul Clemo
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Paul Clemo
Assistant Treasurer
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Exhibit Index
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Exhibit No. Description
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Ex 27 Financial Data Schedule