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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, 1999 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, 1999 was 3,139,737.
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TRANS-INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
FORM 10-Q - FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
PART I. Financial Information
Item 1. FINANCIAL STATEMENTS
A. Consolidated Statements of Earnings ---
Three months ended March 31, 1999 and 1998.
B. Consolidated Statements of Comprehensive Income---
Three months ended March 31, 1999 and 1998.
C. Consolidated Balance Sheets ---
March 31, 1999 and December 31, 1998.
D. Consolidated Statements of Cash Flows ---
Three months ended March 31, 1999 and 1998.
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 EARNINGS (Unaudited)
For 3 Months Ended:
-------------------
3/31/99 3/31/98
------- -------
1. Gross sales less discounts, returns and allowances $ 8,910,832 $ 9,202,796
2. Cost of goods sold 6,247,649 5,989,735
------------ ------------
3. Gross Profit 2,663,183 3,213,061
4. Selling, general and administrative exp. 2,450,365 2,083,175
------------ -------------
5. Operating income 212,818 1,129,886
6. Other (income)/ expense
Interest expense 184,214 141,219
Other income (51,095) (22,390)
------------ ------------
Total other (income)/expense 133,119 118,829
------------ ------------
7. Earnings before income taxes 79,699 1,011,057
8. Income tax expense 58,000 278,000
------------ ------------
9. Net profit $ 21,699 $ 733,057
10. Earnings per share (Note 6):
Basic $ .01 $ .23
Diluted $ .01 $ .23
============ ============
11. Dividends per share $ -- $ --
============ ============
See Notes to Financial Statements
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
B.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
QUARTER ENDED MARCH 31, 1999 AND 1998
1999 1998
------------ ------------
Net earnings $ 21,699 $ 733,057
Other comprehensive income (loss)
Equity adjustment from foreign
currency translation (30,581) 3130
-------------- ------------
Comprehensive income ($ 8,882) $ 736,187
============== ============
See Notes to Financial Statements
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
Current Assets 3/31/99 12/31/98
(Unaudited) (Audited)
----------- ---------
Cash $ 65,386 $ 193,579
Accounts receivable 8,801,491 8,658,444
Inventories (Note 2) 11,831,454 10,896,529
Prepaid expenses 732,763 584,419
Deferred income taxes 469,000 461,000
----------- ----------
Total current assets 21,900,094 20,793,971
Property, Plant & Equipment, at Cost
Land 306,881 306,881
Land Improvements 126,660 126,660
Buildings 5,465,952 5,457,543
Machinery & equipment 10,070,081 9,236,662
----------- ----------
15,969,574 15,127,746
Less: accumulated
depreciation (9,953,662) (9,396,048)
----------- ----------
Net plant and equipment 6,015,912 5,731,698
----------- ----------
Other Assets
Investments in affiliates 10,000 10,000
Patents, licenses & trademarks,
net of accumulated amortization 176,718 195,694
Excess of cost of investment in
stock of subsidiary over equity in
underlying net assets of acquisition 1,663,294 351,721
Sundry 8,800 3,375
----------- ----------
Total assets $29,774,818 $ 27,086,459
=========== ============
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
3/31/99 12/31/98
(Unaudited) (Audited)
----------- ---------
Notes Payable (Note 5) $ 8,031,758 $ 4,645,144
Current installments
- Long term debt (Note 5) 275,126 222,726
Accounts payable - trade 2,649,470 2,792,705
Accrued liabilities 1,512,350 1,621,198
Income taxes 58,277 614,000
------------ -----------
Total current liabilities 12,526,981 9,895,773
Deferred income taxes - Non-current 325,000 325,000
Long term debt
Current portion shown above (Note 5) 3,237,750 3,175,917
Other non-current liabilities 344,340 340,140
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;
3,139,737 shares issued and 3,139,737
outstanding at 3/31/99 313,974 313,974
Additional paid-in capital 4,072,081 4,072,081
Retained earnings 9,053,805 9,032,106
Foreign currency translation (99,113) (68,532)
------------ -----------
13,340,747 13,349,629
------------ -----------
Total liabilities and stockholders'
equity $ 29,774,818 $27,086,459
============ ===========
See Notes to Financial Statements.
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TRANS-INDUSTRIES, INC.
Consolidated Statements of Cash Flows
D. For the Three Months Ended March 31, 1999 and 1998
Three Months Ended March 31
1999 1998
(Unaudited) (Unaudited)
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 21,699 $ 733,057
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation/Amortization 267,074 215,410
Decrease (increase) in accts. receiv ( 63,047) 214,527
Decrease (increase) in inventory ( 726,725) ( 350,770)
Decrease (increase) in prepaid exp ( 146,044) ( 429,172)
Increase (decrease) in accts. payable ( 203,735) 633,267
Increase (decrease) in accr. liab ( 173,689) ( 379,095)
Increase (decrease) in income taxes ( 555,723) 168,000
Other ( 54,880) -0-
---------- ----------
Net Cash Provided (Used) by Operations (1,635,070) 805,224
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets ( 357,453) ( 244,410)
Acquisition of Business (1,362,854) -0-
---------- ----------
Net Cash Provided (Used) by Investing (1,720,307) ( 244,410)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (repayment) of long-term
borrowings ( 128,849) ( 61,325)
Net proceeds (payment) of credit line 3,386,614 ( 474,498)
Common stock issued through ESOP -0- 8,250
---------- ----------
Net Cash Provided (Used) by Financing 3,257,765 ( 527,573)
Foreign currency translation ( 30,581) 3,130
---------- -----------
Net Increase in Cash ( 128,193) 36,371
Cash at beginning of year 193,579 132,297
---------- -----------
Cash at end of quarter $ 65,386 $ 168,668
Supplemental Disclosures:
Interest paid $ 160,537 $ 140,087
Income taxes paid $ 610,000 $ 110,000
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, 1998.
2. Inventories
The major components of inventories are:
3/31/99 12/31/98
------- --------
Raw Materials $ 4,843,951 $ 4,078,689
Work in Process 4,392,022 4,346,320
Finished Goods 2,595,481 2,471,520
----------- -----------
$11,831,454 $10,896,529
=========== ===========
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 March 31, 1999 consisted of the following:
Trans-Industries, Inc., $3,840,000 term note, payable in $3,234,377
monthly installments of $39,036 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 $896 109,509
including interest at a rate of 6%. The note is
due January 21, 2002.
Other 168,990
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3,512,876
Less current installments ( 275,126)
----------
Long-term debt $3,237,750
==========
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 March 31, 1999 the
Company was not in compliance and received a waiver from the bank.
The Company also has an unsecured $10,000,000 line of credit of which
$8,031,758 was utilized at March 31, 1999. Interest is charged at the
bank's prime lending rate, less 1/4 point. This line of credit expires on
July 1, 2000.
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TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 1999
Basic earnings per share:
Earnings available to common
stockholders $21,699 3,138,339 $ .01
Effect of dilutive securities
Stock options -- 8,090 .00
------- --------- ---------
Diluted earnings per share:
Earnings available to stockholders
plus assumed conversions $21,699 3,146,429 $ .01
======= ========= =========
EARNINGS SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------
Qtr. ended March 31, 1998
Basic earnings per share:
Earnings available to common
stockholders $733,057 3,135,848 $ .23
Effect of dilutive securities
Stock Options -- 58,427 .00
-------- --------- ---------
Diluted earnings per share:
Earnings available to stockholders
plus assumed conversions $733,057 3,194,275 $ .23
======== ========= =========
During 1998, the Company's stock transfer agent (agent) notified the
Company that the agent's records did not reflect the issuance of 62,948
shares of the Company's common stock which shares were presented for the
payment of dividends. The certificates underlying the shares were issued
prior to 1995. The Company's Board of Directors authorized the issuance of
the 62,948 shares to validate the underlying certificates. Prior year
earnings per share computations were based on information furnished by the
transfer agent and have been revised to give effect to these shares as if
they had been outstanding for all periods presented. Earnings per share as
presented in the accompanying financial statements have been restated and
are less than those previously reported for 1998.
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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.
In June of 1998, the Company received a request from an employee to
exercise his stock option for 1189 shares of common stock at a price of
$6.875 per share. Accordingly, the Company issued a certificate for 1189
shares.
In July 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.
8. Segment Information
During 1998, the Company adopted SFAS No. 131, "Disclosure About Segments
of an Enterprise and Related Information," which establishes standards for
the way that public business enterprises report information about operating
segments. This statement also establishes standards for related disclosures
about products and services, geographic areas and major customers. The
Company operates in one market segment, the transportation industry.
Financial information summarized by geographic is as follows:
3/31/99 3/31/98
--------------------------------- ----------------------------------
LONG- LONG-
LIVED LIVED
REVENUES ASSETS REVENUES ASSETS
-------- ------ -------- ------
United States $6,524,400 $6,931,685 $6,738,172 $4,940,718
United Kingdom 775,230 943,039 880,630 625,887
Canada 1,021,093 - 1,054,549 -
Other 590,109 - 529,445 -
Total $8,910,832 $7,874,724 $9,202,796 $5,566,605
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9. Business Acquisition
In February, 1999, Trans-Industries, Inc. acquired 100% of the outstanding
common stock of Plastech Transparencies, Inc., a California based company
specializing in the design and manufacture of glass and window system
technology. In a transaction accounted for as a purchase. Plastech
Transparencies, Inc. has served the replacement and conversion market in
the West Coast transit industry since 1991. Plastech will become part of
Trans-Industries' Transmatic Group of Companies, operating as a wholly
owned subsidiary of Transmatic, Inc. and will change its name to
TransGlass, Inc.
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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, 1999
Sales and Earnings
Sales for the quarter ended March 31, 1999 were $8,910,832 compared to
$9,202,796 for the same period a year ago. This decrease of $291,964 was
primarily attributable to a decline in sales volumes at the Company's
electronics display and lighting operations in England.
During the first quarter of 1999, the Company realized a net profit of $21,699
on sales of $8,910,832. For the same period of the prior year, the Company
reported net profit of $733,057 on sales of $9,202,796. This decrease in net
profit was due solely to the Company's electronic operations, both domestically
and internationally. Hardware and software design delays coupled with late
factory "buy-offs" on the part of the customer resulted in excess labor and
factory overhead costs. Moreover, administration expense levels were increased
in research and development and marketing in anticipation of higher volume
levels being realized.
Inventories
Inventory valuation is based upon the lower of cost or market. At March 31,
1999, consolidated inventories were $11,831,454 compared to $7,175,208 a year
ago. This increase of $4,656,246 is to accommodate anticipated growth in sales
volume.
Interest
Interest expense amounted to approximately $184,000 and $141,000 for the first
quarter of 1999 and 1998, respectively. This increase of $43,000 was the result
of higher debt levels in 1999.
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.
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Year 2000 Compliance
The Company has recognized that, without some modifications and enhancements,
some of its computer software and hardware may not operate properly after
December 31, 1999. The problem stems from the fact that some computers and
software programs, particularly those which are several years old, only
recognize the last two digits of the year when reading the date. Hence, in the
year 2000 it may read the date as 1900, and cause significant malfunctions.
To correct this potential problem, the Company has completed an internal review
of its computer systems and identified all the areas where modifications and/or
upgrades may be required. This process was completed in the first half of 1998.
Fortunately, the Company, as a whole, is not faced with any serious consequences
relating to the year 2000 issue. Both U.K. operations are utilizing relatively
new data processing systems and are already "Year 2000 Compliant". Likewise, the
Company's lighting and dust control operations have installed a new system over
the last year and a half. Testing of the system was completed in October of 1998
and went live in November 1998, thus eliminating potential year 2000 compliance
issues. The balance of the Company's operations utilize the same software, which
consist of eight modules. Three of the eight modules have been modified to
accommodate a four-digit year. Testing has been completed, and they are already
in daily use. One module (payroll) is going to be replaced with new, more
current software during the third quarter of 1999. The balance of the modules
are in the modification stage and are expected to be completed during the third
quarter of 1999.
Additionally, the Company has talked to some of its larger vendors and received
assurances that there will not be any undue disruptions of services or products
due to year 2000 issues.
The Company has estimated the magnitude of costs to accommodate the year 2000
data change to be less than $30,000.00. Because the Company sees little risk
associated with the year 2000 date change, and modifications and enhancements
have progressed so favorably, the Company has not developed a contingency plan
and nor does it intend to.
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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. Because the
decision was not unanimous, the Company is going to appeal this decision. A
final outcome on the interest award is expected in 6 - 9 months.
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, 1999 /s/ Kai Kosanke
----------------------- -----------------------------
Kai Kosanke, Treasurer
and Chief Financial Officer
Date: May 12, 1999 /s/ Paul Clemo
----------------------- -----------------------------
Paul Clemo
Assistant Treasurer
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
EX-27 Financial Data Schedule