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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, 1997
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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
incorporation or organization) Identification No.)
10 Vantage Point Drive, Rochester, NY 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 5,707,384 July 30, 1997
TOTAL PAGES - 16
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Part I
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FINANCIAL INFORMATION
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Item 1. Financial Statements
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TRANSMATION, INC.
CONSOLIDATED BALANCE SHEET
June 30, March 31,
1997 1997
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ASSETS:
Current Assets:
Cash $ 275,665 $ 758,215
Accounts Receivable, less allowance
for doubtful accounts of $369,100 at
June 30, 1997, and $436,000 at
March 31, 1997 14,025,425 6,773,669
Inventories 11,385,183 7,790,166
Prepaid Expenses and Deferred Charges 1,139,188 956,235
Deferred Tax Assets 394,402 394,402
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Current Assets 27,219,863 16,672,687
Properties, at cost, less accumulated
depreciation 8,153,934 2,355,757
Deferred Charges 140,832 118,214
Deferred Income Taxes 226,352 226,352
Other Assets 238,846 537,790
Goodwill, less accum. amortization of $534,003
at 6/30/97 and $313,600 at 3/31/97 17,088,181 5,947,558
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$ 53,068,008 $ 25,858,358
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities
Notes Payable $ 2,550,784
Current Portion of Long Term Debt 750,000 $ 600,000
Accounts Payable 6,458,794 3,596,365
Accrued Payrolls, Commissions & Other 2,242,202 2,008,698
Income Taxes Payable 161,972 689,461
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Current Liabilities 12,163,752 6,894,524
Long-Term Debt 27,487,493 6,000,000
Deferred Compensation 574,883 594,026
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40,226,128 13,488,550
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Commitments and Contingent Liabilities
Stockholders' Equity:
Common Stock, par value $.50 per share -
Authorized - 15,000,000 shares - issued
and outstanding - 2,853,692 at June 30,
1997, and 2,826,412 at March 31, 1997 1,426,846 1,413,206
Capital in Excess of Par Value 3,335,261 3,121,746
Accumulated Translation Adjustment (127,237) (130,532)
Retained Earnings 8,207,010 7,965,388
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12,841,880 12,369,808
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$ 53,068,008 $ 25,858,358
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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TRANSMATION, INC.
CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
April 1, 1997 - April 1, 1996 -
June 30, 1997 June 30, 1996
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Net Sales $19,113,082 $11,047,617
Cost and Expenses:
Cost of Product Sold 13,075,821 6,733,456
Selling & Administrative Expenses 4,665,734 3,221,128
Research & Development Costs 399,407 395,398
Interest Expense 588,298 152,461
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18,729,260 10,502,443
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Income Before Taxes 383,822 545,174
Provision for Income Taxes
State and Federal 142,200 241,300
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Net Income 241,622 303,874
Retained Earnings at
Beginning of Period 7,965,388 5,905,652
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Retained Earnings at
End of Period $ 8,207,010 $ 6,209,526
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Net Income Per Share $ .08 $ .11
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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TRANSMATION, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
Three Months Ended
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June 30, 1997 June 30, 1996
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Cash Flows from Operating Activities
Net Income $ 241,622 $ 303,874
Items Not Requiring (Providing) Cash
Included in Income
Depreciation and Amortization 675,805 236,286
Provision for Losses on Accounts Receivable (66,900) 49,000
Other Assets 298,944 109
(Increase) in Accounts Receivable (339,556) (320,737)
Decrease(Increase) in Inventories (1,002,535) 217,499
Decrease(Increase) in Prepaid Expenses &
Deferred Charges (45,522) 260,203
(Decrease) in Accounts Payable (923,778) (704,531)
Increase(Decrease) in Accrued Payrolls, Commissions
and Other Liabilities 10,662 (313,499)
(Decrease) in Income Taxes Payable (527,489) (81,769)
(Decrease) in Deferred Compensation (19,143) (22,922)
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Net Cash Provided(used) by Operating Activities (1,697,890) (376,487)
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Cash Flows from Investing Activities:
Purchase of EIL Instruments, Inc. (22,000,000)
Purchase of Altek Industries Corp (6,728,293)
Purchases of Properties (1,203,387) (60,427)
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Net Cash (used in) Investing Activities (23,203,387) (6,788,720)
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Cash Flows from Financing Activities:
Increase in Notes Payable & Current Portion of LTD 2,700,784 1,700,000
Exercise of Stock Options & Warrants 227,155 108,404
Stock Issued - Altek Purchase 612,500
Increase in Long-Term Debt 21,487,493 3,548,808
Stock Payable - Former Altek Owners 1,225,000
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Net Cash Provided by Financing Activities 24,415,432 7,194,712
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Effect of Exchange Rate Changes on Cash 3,295 (16,609)
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Net Increase(Decrease) in Cash (482,550) 12,896
Cash at Beginning of Period 758,215 204,046
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Cash at End of Period $ 275,665 $ 216,942
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Cash Paid for Interest and Income Taxes is as follows:
Interest Paid $ 143,979 $ 167,343
Taxes Paid $ 682,715 $ 305,190
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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TRANSMATION, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Number of
Shares of $.50
Par Value Common Stock Capital Accumulated
Common Stock Issued and in Excess of Retained Translation
Outstanding Outstanding Par Value Earnings Adjustment
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Balance, March 31, 1995 2,380,640 $1,190,320 $849,829 $4,670,929 ($109,513)
Issuance of Stock 71,306 35,653 274,754
Currency Translation Activity 15,694
Net Income 1,234,723
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Balance, March 31, 1996 2,451,946 1,225,973 1,124,583 5,905,652 (93,819)
Issuance of Stock 374,466 187,233 1,997,163
Currency Translation Activity (36,713)
Net Income 2,059,736
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Balance, March 31, 1997 2,826,412 1,413,206 3,121,746 7,965,388 ($130,532)
Issuance of Stock 27,280 13,640 213,515
Currency Translation Activity 3,295
Net Income 241,622
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Balance, June 30, 1997 2,853,692 1,426,842 3,335,261 $8,207,010 ($127,237)
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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Note 1 - Borrowings
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Notes payable consists of amounts payable to the former owners of Altek
Industries Corp. resulting from the purchase of Altek by the Company in April
1996. Interest on this note is payable at the rate of 8%.
The Company has a $32,000,000 Revolving Credit and Term Loan agreement with
banks. At June 30, 1997, $15,000,000 is borrowed under a term loan. The term
loan, dated April 4, 1997, extending through January 1, 2003, amortizes over 21
consecutive quarterly installments commencing January 1, 1998. 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, 1997 interest to be paid under the Term Loan was at
2.50% above LIBOR or 1.00% above the bank's prime lending rate. At June 30, 1997
$13,237,493 was borrowed under the Revolving Credit portion of the Company's
credit facility. The term of the Revolving Credit facility, dated April 4, 1997,
extends through January 4, 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 their basis of company performance as determined by
its leverage ratio. On June 30, 1997 interest to be paid under the Revolving
Credit Agreement was at 2.25% above LIBOR or .75% above the bank's prime lending
rate.
The Revolving Credit and Term Loan agreement contains, among other provision,
restrictions on capital expenditures, cash catalog expenditures, prohibitions
against dividend payments and fiscal quarterly losses, and a requirement to
maintain adjusted leverage ratios as defined.
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 the lenders a
fee in the amount equal to 1/4% of the unused portion of the total revolving
credit available. The fee is payable quarterly. The Company also agreed to pay a
closing fee in the amount of $80,000 and an agency fee in the amount of $45,000
in conjunction with the Revolving Credit and Term Loan facility.
The Company is in compliance with provisions of its loan agreement or has
received a waiver at June 30, 1997.
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Note 2 - Inventories
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The major classifications of inventory are as follows:
June 30, June 30,
1997 1996
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Raw Materials and Purchased Parts $ 1,964,281 $2,088,533
Work in Process 725,153 519,280
Finished Products 9,578,800 5,710,854
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12,268,234 8,318,667
Less Inventory Reserves (883,051) (528,501)
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$11,385,183 $7,790,166
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Note 3 - Net Income Per Share
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The net income per share amounts in 1997 and 1996 were computed by dividing the
net income by the average number of shares actually outstanding plus common
equivalent shares resulting from the assumed conversion of dilutive stock
options and warrants. Common and common equivalent shares averaged 3,189,583 in
1997 and 2,857,957 in 1996.
The Company will adopt provisions of Financial Accounting Standards ("FAS") 128,
"Earnings Per Share" effective for financial statements issued for periods
ending after December 15, 1997; earlier application is not permitted. FAS 128
requires dual presentation of basic and diluted EPS on the face of the income
statement and requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted EPS
calculation. Basic EPS excludes the effect of common stock equivalents and is
computed by dividing income available to common shareholders by the weighted
average common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could result if securities or other instruments to issue
common stock were exercised or converted into common stock.
Proforma earnings per share computed in accordance with FAS 128 is presented
below:
For 3 months ended
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6/30/97 6/30/96
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Basic EPS $.09 $.11
Diluted EPS $.08 $.11
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The directors of the Corporation voted a 2 for 1 stock split in the form of a
stock dividend to be paid on July 22, 1997 to shareholders of record July 1,
1997. The above per earnings per share amounts do not reflect the effect of such
split.
Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of
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Operations
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On April 4, 1997, Transmation, Inc. acquired certain assets and business of the
former E.I.L. Instruments, Inc. for $22,000,000 cash and the value of certain
defined assumed liabilities. The cash required for the transaction was obtained
from funds available under a $32,000,000 Revolving Credit and Term Loan
Agreement with banks.
Sales increases during the first quarter resulted primarily from the acquisition
of E.I.L. Instruments, Inc. Sales in the Company's Instrument Division and Altek
subsidiary were on plan for the quarter.
Financial Condition
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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.
The Company's accounts receivable balance increased by $339,600 and its total of
inventory on hand increased by $1,002,500 in the quarter. Additionally, the
Company reduced its balance of accounts payable to vendors by $923,800 and its
amount of taxes payable by $527,500 in the quarter. The primary source of funds,
in addition to the non-cash expenses of depreciation and amortization, was
additional bank borrowings. The Company will strive to improve its cash flows
and reduce bank borrowings from current levels during the balance of the current
fiscal year through increased profitability and relative reductions in both
accounts receivable and inventory balances.
Results of Operations
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Comparison of April 1, 1997 - June 30, 1997
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to
April 1, 1996 - June 30, 1996
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Sales increased to $19,113,082 from $11,047,617, an increase of 73% in the
quarter ended June 30, 1997 compared to June 30, 1996. This increase resulted
from the inclusion of E.I.L. Instruments' sales into the Company's operations in
1997.
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Cost of Product Sold in the quarter ended June 30, 1997 totaled 68.4% of sales
compared to 61% in the same quarter last year. The increased percentage in 1997
is the result of proportionately more sales of lower margin distribution and
service business in 1997 than in 1996 and resulted from Transmation's purchase
of E.I.L. Instruments on April 4, 1997.
Interest expense totaled $588,298 in the quarter ended June 30, 1997 compared to
$152,461 in the quarter ended June 30, 1996. The increase is the result of
additional borrowings in 1997 necessary to have purchased E.I.L. Instruments.
Selling and administrative expenses increased by 31% in 1997 compared to 1996.
This increase is the result of increased sales personnel in 1997 compared to
1996 as the result of the E.I.L. Instruments' acquisition.
PART II
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OTHER INFORMATION
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Item 2. Changes in Securities
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None
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 12, 1997 /s/ Robert G. Klimasewski
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Robert G. Klimasewski
President
Date August 12, 1997 /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.
Certificate of Amendment thereto is incorporated herein by reference
to Exhibit I to the Registrant's Form 10-Q for the quarter ended
September 30, 1996.
(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
(a) Revolving Credit Agreement between the Registrant and Manufacturers
and Traders Trust Company is incorporated herein by reference to
Exhibit 1 to the Registrant's Form 10-Q for the fiscal quarter ended
September 30, 1994. Agreement and Amendment No. 1 thereto is
incorporated herein by reference to Exhibit 4(c) to the Registrant's
Form 10-Q for the fiscal quarter ended September 30, 1995. Agreement
and Amendment No. 2 thereto is incorporated herein by reference to
Exhibit 4(d) to the Registrant's Form 10Q-A for the fiscal quarter
ended December 31, 1995. Agreement and Amendment No. 2 thereto is
incorporated herein by reference to Exhibit 4(e) to the Registrant's
Form 10-Q for the fiscal quarter ended December 31, 1996.
(b) Revolving Credit Agreement dated April 4, 1997 among Transmation, Inc.
and Manufacturer's and Traders Trust Company and State Street Bank and
Trust Company is incorporated herein by reference to Exhibit 4(c) to
the Registrant's Form 8-K dated April 18, 1997.
(10) Material Contracts
The documents listed under (4) are incorporated herein by reference.
(a) Amendment No. 2 to Transmation, Inc. Amended and Restated Directors'
Warrant Plan is incorporated herein by reference to Exhibit II to the
Registrant's Form 10-Q for the quarter ended September 30, 1996.
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(b) Amendments No. 1 and No. 2 to the Transmation, Inc. Amended and
Restated 1993 Stock Option Plan is incorporated herein by reference to
Exhibits III and IV to the Registrant's Form 10-Q for the quarter
ended September 30, 1996.
(c) Amendment No. 2 to the Transmation, Inc. Employees' Stock Purchase
Plan is incorporated herein by reference to Exhibit V to the
Registrant's Form 10-Q for the quarter ended September 30, 1996.
(d) Stock Purchase Agreement dated March 28, 1996 among the Registrant, E.
Lee Garelick and James N. Wurtz is incorporated herein by reference to
Exhibit 2(a) to the Registrant's Form 8-K dated April 3, 1996.
(e) Asset Purchase Agreement dated April 4, 1997 between Transmation, Inc.
and E.I.L. Instruments, Inc. is incorporated herein by reference to
Exhibit 2(a) to the Registrant's Form 8-K dated April 18, 1997.
(f) Amendment No. 3 to the Transmation, Inc. Directors' Stock Plan is
incorporated herein by reference to Exhibit 10(a) to the Registrant's
Form 10-K for the year ended March 31, 1997.
(g) Amendment No. 1 to Stock Purchase Agreement dated February 5, 1997
among the Registrant, E. Lee Garelick and James N. Wurtz is
incorporated herein by reference to Exhibit 10(b) to the Registrant's
Form 10-K for the year ended March 31, 1997.
*(h) Amendment No. 4 to the Transmation, Inc. Directors' Stock Plan is
included herein as Exhibit 10(h) at page 13 of this Report.
*(i) Amendment No. 2 to the Transmation, Inc. Amended and Restated
Directors' Warrant Plan is included herein as Exhibit 10(i) at page 14
of this Report.
(11) Statement re Computation of Per Share Earnings
Computation can be clearly determined from Note 9 to the Financial
Statements included herein at Item 8.
(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.
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(23) Consents of experts and counsel
Consent of Price Waterhouse LLP is included herein as Exhibit 23.
(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.
(b) The Registrant filed a report on Form 8-K dated April 4,1997, reporting
the Acquisition or Disposition of Assets under Item 2 and Financial
Statements under Item 7 thereof, and a report on Form 8-K dated June 6,
1997 reporting the issuance of a press release under Item 5 thereof.
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* Exhibit filed with this Report
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