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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended June 30, 2000
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OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from to
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Commission file number 0-3905
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Transmation, Inc.
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(Exact name of registrant as specified in its charter)
Ohio 16-0874418
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10 Vantage Point Drive, Rochester, New York 14624
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 716-352-7777
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- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark (X) whether the registrant, (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Number of Shares Outstanding Date
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Common 6,002,303 July 24, 2000
Total Pages - 31
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Transmation, Inc.
Consolidated Balance Sheet
June 30, 2000 March 31, 2000
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ASSETS:
Current Assets:
Cash $ 314,241 $ 508,453
Accounts Receivable, less allowance for doubtful accounts of
$331,500 at June 30, and $363,500 at March 31, 2000 10,436,589 11,635,069
Inventories 8,595,608 8,834,612
Income Taxes Receivable 814,856 963,343
Prepaid Expenses and Deferred Charges 1,345,028 1,577,413
Deferred Tax Assets 582,427 582,427
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Current Assets 22,088,749 24,101,317
Properties, at cost, less accumulated depreciation 6,192,296 6,542,814
Goodwill, less accumulated amortization of $4,066,530 at 6/30
and $3,726,805 at 3/31 20,930,794 21,245,824
Deferred Charges 158,069 185,379
Other Assets 283,394 283,394
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$ 49,653,302 $ 52,358,728
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Current Portion of Long-Term Debt $ 3,033,333 $ 2,700,000
Accounts Payable 6,496,044 7,103,734
Accrued Payrolls, Commissions and Other 1,983,584 2,418,299
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Current Liabilities 11,512,961 12,222,033
Long-Term Debt 24,692,267 26,693,400
Deferred Compensation 344,912 360,108
Deferred Tax Liabilities 269,480 269,480
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36,819,620 39,545,021
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Stockholders' Equity
Common Stock, par value $.50 per share - Authorized - 30,000,000 shares 3,060,930 3,050,159
Capital in Excess of Par Value 2,865,783 2,826,208
Accumulated Other Comprehensive Income (191,690) (131,695)
Retained Earnings 7,551,974 7,522,350
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13,286,997 13,267,022
Treasury Stock, at cost, 119,358 shares in 2000 and 1999 (453,315) (453,315)
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12,833,682 12,813,707
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$ 49,653,302 $ 52,358,728
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See Notes to Consolidated Financial Statements
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Transmation, Inc.
Consolidated Statement of Income
Unaudited
April 1, 2000 April 1, 1999
to to
June 30, 2000 June 30, 1999
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Net Sales: $18,800,009 $20,388,597
Costs and Expenses:
Cost of Product Sold 13,091,957 13,977,358
Selling and Administrative Expenses 4,639,903 4,882,604
Research and Development Costs 366,442 383,360
Interest Expense 665,983 662,291
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18,764,285 19,905,613
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Income Before Taxes 35,724 482,984
Provision for Income Taxes
State and Federal 6,100 192,800
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Net Income 29,624 290,184
Retained Earnings at Beginning of Period 7,522,350 10,012,460
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Retained Earnings at End of Period $ 7,551,974 $10,302,644
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Earnings Per Share - Basic $.01 $.05
Earnings Per Share - Diluted $.01 $.05
See Notes to Consolidated Financial Statements
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Transmation, Inc.
Consolidated Statement of Cash Flows
Unaudited
Three Months Ended
June 30, 2000 June 30, 1999
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Cash Flow from Operating Activities:
Net Income $ 29,624 $ 290,184
Items Not Requiring (Providing) Cash Included in Income
Depreciation and Amortization 1,188,257 1,157,840
Provision for Losses on Accounts Receivable (32,000) (74,000)
Decrease (Increase) in Accounts Receivable 1,230,480 (175,212)
Decrease (Increase) in Inventories 239,004 (1,245,516)
Increase in Prepaid Expenses and Deferred Charges (80,030) (72,268)
Decrease in Accounts Payable (607,690) (2,400,208)
(Decrease) Increase in Accrued Payrolls, Commissions and Other Liabilities (434,715) 85,979
Income Taxes Payable/Receivable 148,487 125,118
Decrease in Deferred Compensation (15,196) (16,850)
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Net Cash Provided (Used) by Operating Activities 1,666,221 (2,324,933)
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Cash Flows from Investing Activities:
Purchase of Metermaster, Inc. (188,494)
Purchase of Properties (182,984) (1,116,999)
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Net Cash Used in Investing Activities (182,984) (1,305,493)
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Cash Flows from Financing Activities:
Increase in Notes Payable and Current Portion of LTD 333,333 125,000
Issuance of Stock 50,346 71,451
(Decrease) Increase in Long-Term Debt (2,001,133) 3,646,500
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Net Cash (Used) Provided by Financing Activities (1,617,454) 3,842,951
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Effect of Exchange Rate Changes on Cash (59,995) 37,061
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Net (Decrease) Increase in Cash (194,212) 249,586
Cash at Beginning of Period 508,453 282,625
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Cash at End of Period $ 314,241 $ 532,211
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Cash Paid for Interest and Income Taxes is as follows:
Interest Paid $ 665,984 $ 613,849
Taxes (Refund Received) Paid ($ 150,000) $ 67,297
See Notes to Consolidated Financial Statements
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TRANSMATION, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Number of
of Shares
of $.50 Accumulated
Par Value Other
Common Common Stock Capital in Comprehensive
Stock Out- Issued and Excess of Retained (Loss) Treasury
standing Outstanding Par Value Earnings Income Stock Total
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Balance March 31, 1997 2,826,412 $1,413,206 $3,121,746 $7,965,388 ($130,532) $12,369,808
Components of Compre-
hensive Income:
Net Income 997,971 997,971
Currency Translation 9,744 9,744
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Total Comprehensive Income 1,007,715
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Issuance of Stock 150,838 75,419 532,217 607,636
Two for One Stock Split
On July 22, 1997 2,853,692 1,426,846 (1,426,846)
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Balance March 31, 1998 5,830,942 2,915,471 2,227,117 8,963,359 (120,788) 13,985,159
Components of Compre-
hensive Income:
Net Income 1,049,101 1,049,101
Currency Translation (79,780) (79,780)
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Total Comprehensive Income 969,321
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Issuance of Stock 101,800 50,900 353,938 404,838
Share Re-purchase ($453,315) (453,315)
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Balance March 31, 1999 5,932,742 2,966,371 2,581,055 10,012,460 (200,568) (453,315) 14,906,003
Components of Compre-
hensive Income:
Net Loss (2,490,110) (2,490,110)
Currency Translation 68,873 68,873
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Total Comprehensive Loss (2,421,237)
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Issuance of Stock 167,576 83,788 245,153 328,941
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Balance March 31, 2000 6,100,318 3,050,159 2,826,208 7,522,350 (131,695) (453,315) 12,813,707
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Components of Compre-
hensive Income:
Net Income 29,624 28,224
Currency Translation (59,995) (59,995)
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Total Comprehensive Loss (31,771)
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Issuance of Stock 21,542 10,771 39,575 50,346
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Balance June 30, 2000 6,121,860 $3,060,930 $2,865,783 $7,551,974 ($191,690) ($453,315) $12,833,682
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See Notes to Consolidated Financial Statements
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Note 1 - Borrowings
At June 30, 2000, the Company has a $33,125,000 Revolving Credit and Term Loan
Agreement with banks dated August 8, 1998 and amended February 9, 1999 and June
23, 2000 and extending through June 1, 2007. At June 30, 2000, $18,125,000 was
borrowed under term loans. The term loans require annual repayments of amounts
outstanding, paid on a quarterly basis, as follows:
July 1, 2000 - June 30, 2001 $3,033,333
July 1, 2001 - June 30, 2002 $4,033,333
July 1, 2002 - June 30, 2003 $4,033,333
July 1, 2003 - June 30, 2004 $4,033,333
July 1, 2004 - June 30, 2005 $1,333,333
Interest is payable on a formula basis, at the Company's option, at rates above
prime or above LIBOR determined on the basis of Company performance as
determined by its leverage ratio. On June 30, 2000, interest to be paid under
Term Loans was 2.40% to 3.25% above LIBOR or .50% to 1.00% above the bank's
prime lending rate. At June 30, 2000, $9,600,600 was borrowed under the
Revolving Credit portion of the Company's credit facility. The term of the
Revolving Credit Facility dated August 8, 1998 matures on July 1, 2001. Interest
is payable under the Revolving Credit Facility on a formula basis, at the
Company's option, at rates above prime or above LIBOR determined on the basis of
the Company's performance as determined by its leverage ratio. On June 30, 2000,
interest to be paid under the Revolving Credit Agreement was 2.50% above LIBOR
or .50% above the bank's prime lending rate. At June 30, 2000, interest was
payable on the above loans at rates ranging from 9.16% to 10.00%. The Company
has entered into interest rate swaps resulting in a substantial portion of
floating interest rate debt being swapped into fixed interest rate debt.
The revolving credit and term loan agreement contains, among other provisions,
requirements to maintain minimum levels of net worth, to meet minimum fixed
charge coverage ratios and leverage ratios throughout the term of the loans.
Additionally, the Company has pledged its personal property and fixtures,
including inventory and equipment, and its accounts receivable as collateral
security for the loan. Further, the Company has agreed to pay to its lenders an
annual commitment fee from .125% to .25%, depending on performance of the
Company, of the unused portion of the Lenders' Revolving Credit committed
amount. The fee is payable quarterly and total commitment fees paid under any
unused lines of credit under Revolving Credit Agreements were immaterial in both
1999 and 2000. The Company agreed to pay a closing fee in the amount of $130,000
in conjunction with the Revolving Credit and Term Loan Facility and the
amendment thereto; fees are being amortized over the term of the loans.
The Company is in compliance with provisions of its loan agreement as of June
30, 2000.
Note 2 - Inventories
The major classifications of inventory are as follows:
June 30, 2000 March 31, 2000
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Raw Materials and Purchased Parts $ 3,747,286 $ 3,900,063
Work in Process 620,526 612,554
Finished Products 6,408,585 6,493,767
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10,776,397 11,006,384
Less Inventory Reserves (2,180,789) (2,171,772)
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$ 8,595,608 $ 8,834,612
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Note 3 - Net Income Per Share
Basic earnings per share is computed based on the weighted average number of
common shares outstanding during the period. Diluted earnings per share reflects
the assumed conversion of dilutive stock options and warrants. In computing the
per share effect of assumed conversion, funds which would have been received
from the exercise of options and warrants are considered to have been used to
purchase common shares at average market prices for the period, and the
resulting net additional common shares are included in the calculation of
average common shares outstanding.
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The table below summarizes the amounts used to calculate basic and diluted
earnings per share:
Three Months Ended June 30, 2000 Three Months Ended June 30, 1999
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Average Average
Net Outstanding Per Net Outstanding Per
Earnings Shares Share Earnings Shares Share
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Basic Earnings Per Share $28,224 5,923,638 $.01 $290,184 5,844,549 $.05
Effect of Dilutive Options and Warrants 170,539
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Diluted Earnings Per Share $28,224 5,923,638 $.01 $290,184 6,015,088 $.05
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Certain anti-dilutive outstanding stock options and warrants were excluded from
the calculation of average shares outstanding since their exercise prices
exceeded the average market price of common shares during the period. The
anti-dilutive stock options and warrants so excluded at the end of each of the
last two interim periods and their associated exercise prices are summarized
below. The options expire at various times between 2000 and 2005.
Number of Options and Warrants Exercise Price
2000 1,550,732 $2.41 - $9.25
1999 1,211,091 $3.75 - $9.25
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
The Company's primary sources of liquidity and capital are funds provided
through its borrowing agreement with banks, its profitability and management of
its Balance Sheet.
During the quarter ended June 30, 2000, Accounts Receivable balances owing to
the Company by its customers decreased by $1,198,000 and inventories were
reduced by $230,000. Trade payables were reduced by approximately $608,000 in
the quarter ended June 30, 2000 and bank debt was reduced by $1,668,000. It is
the Company's intention to continue to aggressively manage its Balance Sheet so
that it can continue to reduce bank debt.
Results of Operations
Comparison of April 1, 2000 - June 30, 2000
to
April 1, 1999 - June 30, 1999
Sales totaled $18,800,009 in the quarter ended June 30, 2000, a decrease of
7.8%, compared to sales of $20,388,597 recorded in the same quarter one year
ago. Seventy-six percent of the decrease resulted from lower sales in the
Company's meter modification operation. In 1999, significant shipments of such
products which had built up in Metermaster's backlog prior to its acquisition by
Transmation in February, 1999, were accomplished. Additionally, shipments of
products to export markets through Transcat declined 24% in the quarter ended
June 30, 2000 compared to shipments in the same quarter last year. Transmation
has hired new production management to reduce the delivery time to customers in
its meter modification business to enable it to better compete in the meter
modification marketplace. Transmation has also transferred experienced sales
management to this division to more aggressively seek out business
opportunities. Additionally, Transmation is currently revamping its sales
distribution network, particularly in Asian markets, to enable it to better
compete for business in that important market.
Cost of product sold totaled 69.6% of sales in 2000 compared to 68.6% of sales
in 1999. Lower shipments in the meter modification division led to higher per
unit overheads in 2000 compared to 1999.
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Selling and administrative expenses were reduced by 5 percent in 2000 compared
to 1999, this despite selling and administrative spending of $276,000 in the
Company's MetersandInstruments.com subsidiary in 2000. MetersandInstruments.com
did not exist in the quarter ended June 30, 1999. The Company continuously
reviews selling and administrative spending to attempt to minimize such costs in
their relationship to sales.
Despite higher interest rates during the period, lower average borrowing levels
enabled the Company to hold interest costs to approximately the same level as in
1999.
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PART II
OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
a. See Index to Exhibits.
b. Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSMATION, INC.
Date August 10, 2000 /s/ Robert G. Klimasewski
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Robert G. Klimasewski, President and CEO
Date August 10, 2000 /s/ John A. Misiaszek
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John A. Misiaszek, Vice President - Finance
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INDEX TO EXHIBITS
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession.
Not Applicable.
(3) Articles of Incorporation and By-Laws.
(i) The Articles of Incorporation, as amended, are
incorporated herein by reference to Exhibit 4(a) to the
Registrant's Registration Statement on Form S-8 (Registration
No. 33-61665) filed on August 8, 1995, and to Exhibit 3(i) to
the Registrant's Form 10-Q for the quarter ended September 30,
1999.
(ii) By-Laws, as amended through August 18, 1987, are
incorporated herein by reference to Exhibit (3) to the
Registrant's Form 10-K for the year ended March 31, 1988.
(4) Instruments defining the rights of security holders, including
indentures.
Credit and Loan Agreement dated August 7, 1998 between Transmation,
Inc. and KeyBank National Association is incorporated herein by
reference to Exhibit 4(a) to the Registrant's Form 10-Q for the quarter
ended September 30, 1998.
(a) Third Amendment to Credit and Loan Agreement dated as of June
23, 2000 by and among Transmation, Inc., certain Lenders, and
KeyBank National Association is included herein as
Exhibit 4(a).
(10) Material Contracts.
The documents listed under (4) are incorporated herein by reference.
(a) Employment Agreement by and between Transmation, Inc. and
Robert G. Klimasewski dated as of April 1, 2000 is included
herein as Exhibit 10(a).
(11) Statement re Computation of Per Share Earnings.
Computation can be clearly determined from Note 3 to the Financial
Statements included herein as Item 1.
(15) Letter re unaudited interim financial information.
Not Applicable.
(18) Letter re change in Accounting Principles.
Not Applicable.
(19) Report furnished to security holders.
Not Applicable.
(22) Published report regarding matters submitted to vote of security
holders.
Not Applicable.
(23) Consents of Experts and Counsel.
Not Applicable.
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(24) Power of Attorney.
Not Applicable.
(27) Financial Data Schedule.
The Financial Data Schedule is included herein as Exhibit 27.
(99) Additional Exhibits.
Not Applicable.
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