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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 March 31, 1998 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 March 31, 1998 was 3,074,400.
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TRANS-INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
FORM 10-Q - FOR THE QUARTER ENDED MARCH 31, 1998
INDEX
PART I. Financial Information
Item 1. FINANCIAL STATEMENTS
A. Consolidated Statements of Earnings ---
Three months ended March 31, 1998 and 1997.
B. Consolidated Balance Sheets ---
March 31, 1998 and December 31, 1997.
C. Consolidated Statements of Cash Flows ---
Three months ended March 31, 1998 and 1997.
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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A. TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
For 3 Months Ended:
------------------
3/31/98 3/31/97
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1. Gross sales less discounts, returns and allowances $9,202,796 $7,989,776
2. Cost of goods sold 5,989,735 5,038,495
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3. Gross Profit 3,213,061 2,951,281
4. Selling, general and administrative exp. 2,083,175 1,986,580
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5. Operating income/(loss) 1,129,886 964,701
6. Other (income)/ expense
Interest expense 141,219 175,723
Other income (22,390) (169,090)
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Total other (income)/expense 118,829 6,633
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7. Earnings/(loss) before income taxes 1,011,057 958,068
8. Income tax expense/(benefit) 278,000 337,000
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9. Net profit/(loss) $ 733,057 $621,068
========= ==========
10. Earnings per share:
Basic $ .24 $ .20
========= ==========
Diluted $ .23 $ .20
========= ==========
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 3/31/98 12/31/97
(Unaudited) (Audited)
---------- --------
Cash $ 168,668 $ 132,297
Accounts receivable 8,218,941 8,433,468
Inventories (Note 2) 7,175,208 6,824,438
Prepaid expenses 676,295 247,123
Deferred income taxes 444,000 444,000
----------- ----------
Total current assets 16,683,112 16,081,326
Property, Plant & Equipment, at Cost
Land 314,503 314,503
Land Improvements 126,660 126,660
Buildings 4,992,828 4,992,360
Machinery & equipment 8,091,618 7,848,472
----------- ----------
13,525,609 13,281,995
Less: accumulated
depreciation (8,474,960) (8,269,084)
----------- ----------
Net plant and equipment 5,050,649 5,012,911
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Other Assets
Investments in affiliates 10,000 10,000
Patents, licenses & trademarks,
net of accumulated amortization 234,345 231,937
Excess of cost of investment in
stock of subsidiary over equity in
underlying net assets of acquisition 167,140 178,283
Sundry 104,471 104,471
----------- ----------
Total assets $22,249,717 $21,618,928
=========== ===========
See Notes to Financial Statements.
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities 3/31/98 12/31/97
(Unaudited) (Audited)
---------- -----------
Notes Payable (Note 5) $ 3,028,764 $ 3,503,262
Current installments
- Long term debt (Note 5) 191,136 193,389
Accounts payable - trade 3,052,421 2,419,154
Accrued liabilities 1,324,589 1,703,684
Income taxes 256,000 88,000
------------ ---------
Total current liabilities 7,852,910 7,907,489
Deferred income taxes - Non-current 197,000 197,000
Long term debt
Current portion shown above (Note 5) 3,499,469 3,561,838
Other non-current liabilities 315,652 312,355
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;
3,074,400 shares issued and 3,074,400
outstanding at 3/31/98 307,440 307,320
Additional paid-in capital 4,070,246 4,062,116
Retained earnings 6,006,304 5,273,244
Foreign currency translation 696 (2,434)
------------ ------------
10,384,686 9,640,246
------------ ------------
Total liabilities and stockholders' equity $ 22,249,717 $ 21,618,928
============ ============
See Notes to Financial Statements.
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TRANS-INDUSTRIES, INC.
Consolidated Statements of Cash Flows
C. For the Three Months Ended March 31, 1998 and 1997
Three Months Ended March 31
--------------------------------
1998 1997
---- ----
( Unaudited) ( Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 733,060 $ 621,068
Adjustments to reconcile net income (loss)
to net cash provided by operations:
Depreciation/Amortization 215,407 199,573
Decrease (increase) in accts. receiv. 214,527 ( 670,632)
Decrease (increase) in inventory ( 350,770) ( 316,735)
Decrease (increase) in prepaid exp. ( 429,172) ( 43,237)
Increase (decrease) in accts. payable 633,267 ( 265,330)
Increase (decrease) in accr. liab. ( 379,095) ( 70,327)
Increase (decrease) in income taxes 168,000 137,000
(Gain) loss on sale of fixed assets -0- ( 148,689)
---------------- -------------
Net Cash Provided (Used) by Operations 805,224 ( 557,309)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets ( 244,410) ( 164,304)
Proceeds from sale of property and equipment -0- 205,000
---------------- -------------
Net Cash Provided (Used) by Investing ( 244,410) 40,696
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (repayment) of long-term
borrowings ( 61,325) ( 146,323)
Net proceeds (payment) of credit line ( 474,498) 511,817
Common stock issued through ESOP 8,250 -0-
---------------- -------------
Net Cash Provided (Used) by Financing ( 527,573) 365,494
Foreign currency translation 3,130 ( 37,911)
---------------- -------------
Net Increase in Cash 36,371 ( 189,030)
Cash at beginning of year 132,297 358,764
---------------- -------------
Cash at end of quarter $ 168,668 $ 169,734
================ =============
Supplemental Disclosures:
Interest paid $ 140,087 $ 165,312
Income taxes (refunded) paid, net $ 110,000 $ 200,000
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, 1997.
2. Inventories
The major components of inventories are:
3/31/98 12/31/97
------- --------
Raw Materials $3,385,694 $3,471,708
Work in Process 1,216,319 1,178,684
Finished Goods 2,573,195 2,174,046
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$7,175,208 $6,824,438
========== ==========
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.
On January 1, 1998, the Corporation adopted Financial Accounting Standards
Board (the "FASB") issued Statement No. 130, "Reporting of Comprehensive
Income" ("SFAS130"), which establishes standards for reporting and display
of comprehensive income and its
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D. TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
components (revenues, expenses, gains and losses) in a full set of
financial statements. This statement also requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. Consolidated
statements of comprehensive income for each of the three month periods
ended March 31, 1998 and 1997 have been omitted, as comprehensive income
for each of the periods does not materially differ from reported earnings.
5. Long-Term Debt
Long-term debt at March 31, 1998 consisted of the following:
Trans-Industries, Inc., $3,840,000 term note, payable in $3,421,378
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 155,675
installments of $3,476 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 $896 113,552
including interest at a rate of 6%. The note is due January 21, 2002.
---------
3,690,605
Less current installments ( 191,136)
---------
Long-term debt $3,499,469
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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 March 31, 1998 the Company was in compliance with all
provisions.
The Company also has a secured $6,500,000 line of credit of which
$3,028,764 was utilized at March 31, 1998. 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.
6. Earnings Per Share
The following is a reconciliation of the numerator and denominator of the
basic and diluted earnings per share computations.
EARNINGS SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------- ------------- ---------
Qtr. ended March 31, 1998
Basic earnings per share:
Earnings available to common
stockholders $733,057 3,072,900 .24
Effect of dilutive securities
Stock options -- 58,427 (.01)
Diluted earnings per share: -------- --------- ------
Earnings available to stockholders
plus assumed conversions $733,057 3,131,327 .23
======== ========= ======
EARNINGS SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------- ------------- ---------
Qtr. ended March 31, 1997
Basic earnings per share:
Earnings available to common
stockholders $621,068 3,073,250 .20
Effect of dilutive securities
Convertible debt 3,535 107,124 .00
Diluted earnings per share: -------- --------- ------
Earnings available to stockholders
plus assumed conversions $624,603 3,180,374 .20
======== ========= ======
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Stock Changes
In February of 1998, the Company received a request from an employee to
exercise his 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 Three Months Ended March 31, 1998
Sales and Earnings
Sales for the quarter ended March 31, 1998 were $9,202,796 compared to
$7,989,776 for the same period a year ago. This increase of $1,213,020 is
primarily attributable to an increase in sales of the Company's lighting
products utilized on mass transit vehicles.
During the first quarter of 1998, the Company realized a net profit of
$733,057 on sales of $9,202,796. For the same period of the prior year, the
Company reported net profit of $621,068 on sales of $7,989,776. This increase in
net profit of $111,989 can, in part, be attributed to the increased sales volume
achieved. The Company was also able to utilize a portion of the foreign tax
credits generated from prior year losses. This foreign credit permitted the
Company to reduce its overall income tax rate to 27.5 percent for the quarter.
Net profit per share for the first quarter was $.24 and $.20 for 1998 and 1997,
respectively. Net profit per share was computed on the adjusted weighted average
number of shares outstanding during the quarter for 1998 and 1997, which were
3,072,900 and 3,073,250, respectively.
Inventories
Inventory valuation is based upon the lower of cost or market. At March 31,
1998, consolidated inventories were $7,175,208 compared to $6,479,327 a year
ago. This increase of $695,881 is to accommodate the growth in sales volume.
Interest
Interest expense amounted to approximately $141,000 and $176,000 for the
first quarter of 1998 and 1997, respectively. This decrease of $35,000 was the
result of average debt levels being less during the first quarter of 1998
compared to 1997.
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.
As noted in Item 1, "Legal Proceedings", the Company was paid $3,023,773.00
on May 1, 1998. This amount represents damages awarded by the Court in a patent
infringement case. After paying related fees, the Company expects to net
approximately $2.4 million before paying related income taxes.
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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. On April 9,
1998, the District Court awarded the Company $3,023,773.00 in damages and
$1,119,588.00 in interest. On May 1, 1998, the defendant paid the damages
awarded to the Company and indicated they intended to appeal the interest award.
At the time of this writing, the defendant has not filed an appeal with the
court. A final outcome is expected in 9 - 12 months.
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 May 4, 1998; receipt of damage award and Declaration of
Special Dividend.
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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: May 12, 1998 /s/ Kai Kosanke
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Kai Kosanke, Treasurer
and Chief Financial Officer
Date: May 12, 1998 /s/ Paul Clemo
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Paul Clemo
Assistant Treasurer
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EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule