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FORM 10-Q
--------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 28, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-7872
-------------------------
TRANSTECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-4062211
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
700 Liberty Avenue
Union, New Jersey 07083
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 688-2440
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 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 [ ] No [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of February 6, 2004, the total number of outstanding shares of
registrant's one class of common stock was 6,498,143.
TRANSTECHNOLOGY CORPORATION
INDEX
PART I. Financial Information Page No.
Item 1. Financial Statements........................................ 2
Statements of Consolidated Operations--
Three and Nine Month Periods Ended December 28, 2003
and December 29, 2002....................................... 3
Consolidated Balance Sheets--
December 28, 2003 and March 31, 2003........................ 4
Statements of Consolidated Cash Flows--
Nine Month Periods Ended December 28, 2003 and
December 29, 2002........................................... 5
Notes to Consolidated Financial Statements.................. 6-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 11-20
Item 3. Quantitative and Qualitative Disclosures about Market Risk.. 20
Item 4. Controls and Procedures..................................... 20
PART II. Other Information
Item 1. Legal Proceedings........................................... 20
Item 6. Exhibits and Reports on Form 8-K............................ 20-21
SIGNATURES.............................................................. 21
EXHIBIT 31.1............................................................ 22
EXHIBIT 31.2............................................................ 23
EXHIBIT 32.............................................................. 24
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Company's independent public accountants have not completed their review of
the condensed consolidated financial statements included herein prior to the
deadline for filing this Form 10-Q as required by Rule 10-01(d) of Regulation
S-X promulgated under the Securities and Exchange Act of 1934, as amended.
The following unaudited Statements of Consolidated Operations, Consolidated
Balance Sheets, and Statements of Consolidated Cash Flows are of TransTechnology
Corporation and its consolidated subsidiaries (collectively, the "Company").
These reports reflect all adjustments of a normal recurring nature, which are,
in the opinion of management, necessary for a fair presentation of the results
of operations for the interim periods reflected therein. The results reflected
in the unaudited Statements of Consolidated Operations for the period ended
December 28, 2003, are not necessarily indicative of the results to be expected
for the entire year. The following unaudited Consolidated Financial Statements
should be read in conjunction with the notes thereto, and Management's
Discussion and Analysis of Financial Condition and Results of Operations set
forth in Item 2 of Part I of this report, as well as the audited financial
statements and related notes thereto contained in the Company's Annual Report on
Form 10-K filed for the fiscal year ended March 31, 2003.
Information provided herein for the nine month period ended December 29, 2002,
has been reclassified to give effect to the reporting of the Company's former
wholly owned subsidiary, Norco, Inc., as discontinued operations as discussed in
Note 5 to the Financial Statements.
[THIS PAGE INTENTIONALLY LEFT BLANK]
2
TRANSTECHNOLOGY CORPORATION
STATEMENTS OF CONSOLIDATED OPERATIONS
UNAUDITED
(In Thousands of Dollar, Except Share Data)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------- -------------------------------------
DECEMBER 28, 2003 DECEMBER 29, 2002 DECEMBER 28, 2003 DECEMBER 29, 2002
----------------- ----------------- ----------------- -----------------
Net sales $ 16,679 $ 15,562 $ 49,131 $ 41,303
Cost of sales 9,682 8,076 28,029 22,132
----------------- ----------------- ----------------- -----------------
Gross profit 6,997 7,486 21,102 19,171
General, administrative
and selling expenses 4,397 4,012 11,699 11,885
Interest expense 2,640 2,418 7,711 6,538
Interest and other (income) expense - net (1,112) 151 (1,318) 118
Unrealized gain on warrants - (1,228) - (9)
Forbearance fees - - - 764
Corporate office restructuring charge - 515 - 515
----------------- ----------------- ----------------- -----------------
Income (loss) from continuing operations
before income taxes 1,072 1,618 3,010 (640)
Provision for income taxes (benefit) 408 181 1,144 (225)
----------------- ----------------- ----------------- -----------------
Income (loss) from continuing operations 664 1,437 1,866 (415)
Discontinued operations:
Loss on disposal of discontinued businesses
(less applicable income tax benefit of
$1,930 and $3,908 for the three and
nine month periods ended
December 29, 2002, respectively) - (3,126) - (7,256)
----------------- ----------------- ----------------- -----------------
Net income (loss) $ 664 $ (1,689) $ 1,866 $ (7,671)
================= ================= ================= =================
Basic earnings (loss) per share:
Income (loss) from continuing operations $ 0.10 $ 0.23 $ 0.28 $ (0.07)
Loss from discontinued operations - (0.51) - (1.17)
----------------- ----------------- ----------------- -----------------
Net income (loss) $ 0.10 $ (0.28) $ 0.28 $ (1.24)
================= ================= ================= =================
Diluted earnings (loss) per share:
Income (loss) from continuing operations $ 0.10 $ 0.23 $ 0.28 $ (0.07)
Loss from discontinued operations - (0.50) - (1.17)
----------------- ----------------- ----------------- -----------------
Net income (loss) $ 0.10 $ (0.27) $ 0.28 $ (1.24)
================= ================= ================= =================
Number of shares used in computation
of per share information: (Note 1)
Basic 6,669,000 6,199,000 6,655,000 6,196,000
Diluted 6,691,000 6,295,000 6,672,000 6,196,000
See accompanying notes to unaudited consolidated financial statements.
3
TRANSTECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share Data)
(UNAUDITED)
DECEMBER 28, 2003 MARCH 31, 2003
----------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,855 $ 7,104
Accounts receivable (net of allowance for doubtful accounts
of $75 at December 28, 2003 and $65 at March 31, 2003) 7,714 6,701
Inventories 18,967 19,683
Prepaid expenses and other current assets 1,143 1,364
Income tax receivable 226 363
Deferred income taxes 1,288 1,289
----------------- --------------
Total current assets 31,193 36,504
----------------- --------------
Property, plant and equipment 13,060 12,721
Less accumulated depreciation 10,697 10,372
----------------- --------------
Property, plant and equipment - net 2,363 2,349
----------------- --------------
Other assets:
Deferred income taxes 29,689 30,712
Other 13,309 15,558
----------------- --------------
Total other assets 42,998 46,270
----------------- --------------
Total $ 76,554 $ 85,123
================= ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt $ 79 $ 79
Accounts payable - trade 3,761 4,954
Accrued compensation 1,979 2,847
Accrued income taxes 216 2,460
Other current liabilities 6,397 15,003
----------------- --------------
Total current liabilities 12,432 25,343
----------------- --------------
Long-term debt payable to banks and others 55,717 53,487
----------------- --------------
Deferred income taxes 1,597 1,332
----------------- --------------
Other long-term liabilities 10,574 11,601
----------------- --------------
Redeemable common stock - 1,283
----------------- --------------
Stockholders' deficit:
Preferred stock - authorized, 300,000 shares; none issued - -
Common stock - authorized, 14,700,000 shares of $.01 par value;
issued 7,059,107 at December 28, 2003, and 7,018,299 at March 31, 2003 71 70
Additional paid-in capital 76,728 74,283
Accumulated deficit (71,127) (72,993)
Unearned compensation (198) (43)
----------------- --------------
5,474 1,317
Less treasury stock, at cost - (560,964 shares at December 28,2003
and March 31, 2003) (9,240) (9,240)
----------------- --------------
Total stockholders' deficit (3,766) (7,923)
----------------- --------------
Total $ 76,554 $ 85,123
================= ==============
See accompanying notes to unaudited consolidated financial statements.
4
TRANSTECHNOLOGY CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(In Thousands of Dollars)
NINE MONTHS ENDED
----------------------------------------
DECEMBER 28, 2003 DECEMBER 29, 2002
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,866 $ (7,671)
Adjustments to reconcile net income (loss) to net cash (used in) provided by
operating activities:
Loss from discontinued operations - 7,256
Depreciation and amortization 1,696 1,671
Net change in assets of discontinued companies - 3,807
Warrant mark to market adjustment - 9
Noncash interest expense 2,367 2,265
Increase (decrease) in provision for bad debt 10 (195)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable and other receivables (922) 7,395
Decrease (increase) in inventories 716 (1,099)
Decrease (increase) in deferred taxes net 1,024 (4,063)
Decrease (increase) in other assets 214 (3,188)
Decrease in accounts payable (1,193) (1,141)
(Decrease) increase in accrued compensation (868) 131
Decrease in income taxes payable (1,979) (449)
Decrease in other liabilities (8,869) (769)
----------------- -----------------
Net cash (used in) provided by operating activities (5,938) 3,959
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (350) (501)
Proceeds from sales of businesses - 6,425
Decrease (increase) in notes and other receivables 1,000 (208)
----------------- -----------------
Net cash provided by investing activities 650 5,716
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on debt - (7,567)
Exercise of stock options and other 39 (2)
----------------- -----------------
Net cash provided by (used in) financing activities 39 (7,569)
----------------- -----------------
(Decrease) increase in cash and cash equivalents (5,249) 2,106
Cash and cash equivalents at beginning of period 7,104 97
----------------- -----------------
Cash and cash equivalents at end of period $ 1,855 $ 2,203
================= =================
Supplemental information:
Interest payments $ 5,271 $ 13,409
Income tax payments 2,099 215
Increase in senior subordinated note for paid-in-kind
interest expense 2,230 2,118
Increase in additional paid in capital from warrant put expiration 2,184 -
Noncash charge to equity from classification of warrants as financial derivatives - 4,550
See accompanying notes to unaudited consolidated financial statements.
5
TRANSTECHNOLOGY CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
NOTE 1. Earnings (Loss) Per Share
Basic earnings (loss) per share are computed by dividing net income (loss)
by the weighted-average number of shares outstanding. Diluted earnings
(loss) per share is computed by dividing net income (loss) by the sum of
the weighted-average number of shares outstanding plus the dilutive effect
of shares issuable through the exercise of stock options and warrants.
The components of the denominator for basic earnings (loss) per common
share and diluted earnings (loss) per common share are reconciled as
follows:
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
December 28, December 29, December 28, December 29,
2003 2002 2003 2002
------------ ------------ ------------ ------------
Basic Earnings
(Loss) per Common
Share:
Weighted-average
common stock out-
standing for basic
earnings (loss)
per share
calculation 6,669 6,199 6,655 6,196
============ ============ ============ ============
Diluted Earnings
(Loss) per Common
Share:
Weighted-average
common shares
outstanding 6,669 6,199 6,655 6,196
Stock options and
warrants* 22 96 17 --
------------ ------------ ------------ ------------
Weighted-average
common stock
outstanding for
diluted earnings
(loss) per share
calculation 6,691 6,295 6,672 6,196
============ ============ ============ ============
* Not including anti-dilutive stock options totaling 158 and 764 for
the three and nine month periods ended December 28, 2003, respectively and
265 for the three and nine month periods ended December 29, 2002. Also
excluding anti-dilutive warrants totaling 428 for the nine month period
ended December 29, 2002.
6
NOTE 2. Comprehensive Income (Loss)
Comprehensive income (loss) for the three and nine month periods ended
December 28, 2003 and December 29, 2002 is summarized below.
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
December 28, December 29, December 28, December 29,
2003 2002 2003 2002
------------ ------------ ------------ ------------
Net income (loss) $ 664 $ (1,689) $ 1,866 $ (7,671)
Other comprehensive
income (loss), net of tax:
Foreign currency
translation
adjustment arising
during period -- -- -- (86)
Reclassification
adjustment for sale
of investment in
foreign entity -- -- -- 2,974
------------ ------------ ------------ ------------
Total comprehensive
income (loss) $ 664 $ (1,689) $ 1,866 $ (4,783)
============ ============ ============ ============
NOTE 3. Stock Based Compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"), encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. Accordingly, the Company records expense
in an amount equal to the excess, if any, of the quoted market price on the
grant date over the option price.
The following table includes as reported and proforma information required by
Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure." Proforma information is based on the
fair value method under SFAS No. 123.
7
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
December 28, December 29, December 28, December 29,
2003 2002 2003 2002
------------ ------------ ------------ ------------
Net income (loss) as
reported $ 664 $ (1,689) $ 1,866 $ (7,671)
Deduct: Total stock-based
compensation expense
determined under fair
value based method, net of
taxes (47) (56) (132) (168)
------------ ------------ ------------ ------------
Proforma net income (loss) $ 617 $ (1,745) $ 1,734 $ (7,839)
============ ============ ============ ============
Basic earnings (loss) per
share:
As reported $ 0.10 $ (0.28) $ 0.28 $ (1.24)
Proforma $ 0.09 $ (0.28) $ 0.26 $ (1.27)
Diluted earnings (loss)
per share:
As reported $ 0.10 $ (0.27) $ 0.28 $ (1.24)
Proforma $ 0.09 $ (0.28) $ 0.26 $ (1.27)
NOTE 4. Inventories
Inventories are summarized as follows:
December 28, 2003 March 31, 2003
----------------- --------------
Finished goods $ 1 $ 2
Work in process 6,538 6,105
Purchased and
manufactured parts 12,428 13,576
----------------- --------------
Total $ 18,967 $ 19,683
================= ==============
8
NOTE 5. Discontinued Operations
During fiscal 2001, the Company implemented a restructuring plan to focus its
resources and capital on the aerospace and defense products business and exit
the specialty fastener segment. As a result, discontinued operations include all
of the remaining operations related to its specialty fastener segment and Norco,
Inc., the net assets of which were sold on February 24, 2003. There were no
operating results from discontinued operations in fiscal 2004.
Net sales and losses from the discontinued operations for the comparable periods
in fiscal 2003 were as follows:
Three Months Ended Nine Months Ended
December 29, 2002 December 29, 2002
------------------ -----------------
Net sales $ 9,370 $ 40,852
================= =================
Loss from discontinued
operations before income taxes $ (5,056) $ (11,164)
Income tax benefits 1,930 3,908
----------------- -----------------
Loss from discontinued
operations $ (3,126) $ (7,256)
================= =================
The $7.3 million loss from discontinued operations for the nine months ended
December 29, 2002 included actual operating income of $6.3 million from
discontinued operations, allocated interest expense of $5.3 million, a $7.4
million charge to reflect the amounts ultimately realized from sales of
discontinued business units, a noncash charge of $4.6 million associated with
the recognition of accumulated currency translation losses from the sale of our
Brazilian operation, a cash charge of $0.2 million from the final settlement of
our interest rate swap contracts, and a tax benefit of $3.9 million.
NOTE 6. Long-Term Debt Payable to Banks and Others
Long-term debt payable to banks and others, including current maturities,
consisted of the following:
December 28, March 31,
2003 2003
------------ ---------
Senior Subordinated Notes 18.75% $ 55,559 $ 53,329
Other 237 237
------------ ---------
55,796 53,566
Less current maturities 79 79
------------ ---------
Total long-term debt $ 55,717 $ 53,487
============ =========
9
SENIOR CREDIT FACILITY
At December 28, 2003, the Company had a senior credit facility consisting of an
$8.0 million asset based revolving credit facility which was established in
August 2002 (the "New Senior Credit Facility") to refinance all remaining
obligations outstanding under our prior senior credit facility. The New Senior
Credit Facility was amended on August 5, 2003 and was subsequently amended on
January 30, 2004. The maturity date of this facility, as amended, is July 31,
2004. The current interest rate is approximately 5.0%. The New Senior Credit
Facility is secured by all of the Company's assets. The Company is in compliance
with the provisions of the facility. There were no borrowings outstanding under
the facility at December 28, 2003.
SENIOR SUBORDINATED NOTES
On August 30, 2000, the Company completed a private placement of $75 million of
senior subordinated notes (the "Notes") and warrants to purchase shares of the
Company's common stock (the "Warrants") to a group of institutional investors
(collectively, the "Purchasers"). The Company used the proceeds of the private
placement to retire, in full, a $75 million bridge loan held by a group of
lenders led by Fleet National Bank. The Notes, as amended in August 2002, are
due on August 29, 2005 and bear interest at a rate of 18% per annum consisting
of 13% cash interest on principal, payable quarterly, and 5% interest on
principal, payable quarterly in "payment-in-kind" ("PIK") promissory notes. The
PIK portion of the interest rate increases 0.25% each quarter until the notes
are retired. The Company may prepay the Notes after August 29, 2001, at a
premium initially of 9%, declining to 5%, 3%, and 1% on each of the next
succeeding anniversaries of that date. The Notes contain customary financial
covenants and events of default, including a cross-default provision to our
senior debt obligations. The Company is in compliance with the provisions of the
Notes. At December 28, 2003, the principal balance outstanding on the notes
amounted to $55.6 million, which included the original principal amount plus the
PIK notes. At March 31, 2003, the Company reported redeemable common stock in
the amount of $1.3 million representing the per share put right (257,000 shares
at $5.00 per share) held by certain Purchasers who had exercised their Warrants.
The put right on approximately 211,000 shares expired on June 24, 2003 and,
accordingly, the Company reclassified $1.1 million from redeemable common stock
to additional paid-in capital with the remainder of the redeemable common stock
being reclassified to long-term debt to reflect the exercise of the put by a
Purchaser. Subsequent to the end of the first quarter of fiscal 2004, the
Purchaser in question revoked its put exercise and that portion was reclassified
to additional paid in capital in the second quarter. In addition, the put right
on 171,041 Warrants expired and, accordingly, $0.9 million representing the cash
value of the put right on these Warrants was reclassified from a liability
account to additional paid-in capital in the first quarter of fiscal 2004. At
December 28, 2003, there were 171,041 Warrants outstanding which are each
convertible into common stock at the price of $.01 per warrant. All of the
Warrants were considered to be common stock equivalents for the purpose of
calculating earnings per share at December 28, 2003.
The Company has long-term debt maturities of $0.1 million, $0.1 million and
$55.6 million in fiscal 2004, 2005 and 2006, respectively.
NOTE 7. New Accounting Standards
In December 2002, the Financial Accounting Standards Board issued SFAS No. 148,
"Accounting for Stock-Based Compensation -- Transition and Disclosure" which
amends SFAS No. 123. This statement provides alternative methods of transition
for a voluntary change to the fair value-based method of accounting for
stock-based employee compensation and amends the disclosure requirements of SFAS
No. 123. The transition guidance and disclosure requirements are effective
10
for fiscal years ending after December 15, 2002. The Company has adopted the
disclosure requirements and expects that the adoption of this statement will not
have a material effect on the Company's financial position or results of
operations.
NOTE 8. Contingencies
As previously reported, the Company is subject to an investigation being
conducted by the Newark, New Jersey office of the United States Attorney with
respect to the Company's overhaul and repair operations. The Company has to date
cooperated fully and will continue to cooperate fully with the government's
investigation. In addition, the Board of Directors retained a fact finding and
forensic accounting firm, The Bradlau Group of Morristown, New Jersey, to
perform an independent process review and evaluation of the overhaul and repair
operations of the Company's Breeze-Eastern business. The Board of Directors has
shared the preliminary and follow-on reports of the findings of this independent
process review and evaluation with the United States Attorney's office. The
final part to the follow-on report issued by The Bradlau Group in January 2004
is in process as of the date of this filing. The investigation has had no
impact, and the Company does not expect an impact, on its ability to manufacture
and ship products and meet customer delivery schedules. As of this date, the
United States Attorney's investigation is continuing and the Company has not
been made aware of any specific violations resulting from that investigation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
We design, develop, and manufacture sophisticated lifting equipment for
specialty aerospace and defense applications. With over 50% of the global
market, we have long been recognized as the world's largest designer and leading
supplier of performance-critical rescue hoists and cargo-hook systems. We also
manufacture weapons-handling systems, cargo winches, tie-down equipment, and
tow-hook assemblies. Marketed under the trade name "Breeze-Eastern", our
products are designed to be efficient and reliable in extreme operating
conditions. Our equipment is used to complete rescue operations and military
insertion/extraction operations, move and transport cargo, and load weapons onto
aircraft and ground-based launching systems.
Beginning in fiscal 2001, we implemented a restructuring plan to focus our
resources and capital on our specialty aerospace and defense products business
and exit the specialty fastener segment. On February 24, 2003, we completed the
sale of the business and substantially all of the assets of our subsidiary,
Norco, Inc., to Marathon Power Technologies Company, a division of TransDigm
Inc., for cash consideration of $51.0 million, subject to post-closing
adjustments. This transaction completed our divestiture program. As a result,
our discontinued operations for the three and nine month periods ended December
29, 2002 includes Norco and all of the operations related to our Specialty
Fastener segment, including the TransTechnology Engineered Rings retaining rings
businesses, Aerospace Rivet Manufacturers Corp. and TCR Corporation. Of the
operations included in discontinued operations prior to fiscal 2003, only the
operations of TransTechnology Engineered Rings USA, Inc., TransTechnology (GB)
Limited, TransTechnology Brasil Ltda., Aerospace Rivet Manufacturers
Corporation, TCR Corporation and Norco, Inc. were carried into fiscal 2003.
All discussions related to our ongoing operations, or to TransTechnology
Corporation, which include our results of operations, refer only to continuing
operations, which consists of our Breeze-Eastern
11
business. We discuss our discontinued operations separately under the heading
"--Divestitures and Discontinued Operations."
All references to fiscal 2004 in this Management's Discussion and Analysis of
Financial Condition and Results of Operations refer to the fiscal year ending
March 31, 2004, and all references to fiscal 2003, 2002, and 2001 refer to the
fiscal years ended March 31.
As previously reported, we are subject to an investigation being conducted by
the Newark, New Jersey office of the United States Attorney with respect to
Breeze-Eastern's overhaul and repair operations. We have to date cooperated
fully and will continue to cooperate fully with the government's investigation.
In addition, the Board of Directors retained a fact finding and forensic
accounting firm, The Bradlau Group of Morristown, New Jersey, to perform an
independent review of the overhaul and repair operations of our Breeze-Eastern
business. The Board of Directors has shared the preliminary and follow-on
reports of the findings of this independent review with the United States
Attorney's office. The final part to the follow-on report issued by The
Bradlau Group in January 2004 is in process as of the date of this filing. Once
our independent accountants have had a chance to review and evaluate materials
compiled or reviewed by The Bradlau Group in the preparation of their reports
as well as other information in connection with the investigation, we expect
that they will be able to complete their review of this Form 10-Q as well as
their review of the Form 10-Q for the period ended September 28, 2003. The
investigation has had no impact, and we do not expect an impact, on our ability
to manufacture and ship products and meet customer delivery schedules. As of
this date, the United States Attorney's investigation is continuing and we have
not been made aware of any specific violations resulting from that
investigation.
DIVESTITURES AND DISCONTINUED OPERATIONS
During fiscal 2001, we implemented a restructuring plan to focus our resources
and capital on our aerospace and defense products business and exit the
specialty fastener segment. As a result, our discontinued operations include all
of the operations related to our specialty fastener segment. Our discontinued
operations also include Norco, Inc., which we previously included in our
aerospace and defense products segment.
On April 16, 2002, we sold Aerospace Rivet Manufacturers Corporation to Allfast
Fastening Systems, Inc. for $3.2 million in cash. We used the net proceeds of
the sale to repay borrowings outstanding under our prior senior credit
agreement.
On May 30, 2002, we completed the sale of substantially all of the net assets of
TransTechnology Engineered Rings USA, Inc., to a newly formed affiliate of
SeaView Capital LLC for $2.9 million in cash, a promissory note of $0.8 million
and warrants for 5% of the equity of the purchaser. We used the net proceeds of
the sale to repay borrowings outstanding under our prior senior credit
agreement.
On July 16, 2002, we completed the recapitalization of our TransTechnology (GB)
Limited subsidiary, now known as Cirteq Limited, by selling 81% of its shares to
a new entity controlled by local management for $121 (one hundred twenty-one
dollars). We also converted $2.0 million of unsecured intercompany debt into a
$2.0 million loan secured by a first lien on Cirteq's real property in Glusburn,
England.
On August 6, 2002, we completed the sale of all of the shares of TransTechnology
Brasil, Ltda. for $742,000, of which $325,000 was paid in cash and the balance
in installment payments. We used the net proceeds of the sale to repay
borrowings outstanding under our prior senior credit agreement.
12
On January 3, 2003, we completed the sale of the business and substantially all
of the assets of our wholly owned subsidiary, TCR Corporation, to a newly formed
affiliate of MidMark Capital LLC for $10.0 million in cash. We used the net
proceeds of the sale to repay borrowings outstanding under our New Senior Credit
Facility.
On February 24, 2003, the Company sold Norco Inc. for $51.0 million cash and a
$1.0 million reimbursement for certain income taxes payable as a result of the
transaction to a wholly owned subsidiary of TransDigm Inc. The net cash proceeds
were used to retire senior debt under the New Senior Credit Facility and
partially repay subordinated debt under the Notes.
On November 21, 2003, we sold our remaining 19% interest in Cirteq Limited back
to Cirteq Limited for $100,000 and collected $1.6 million of the $2.0 million
outstanding principal of the loan to Cirteq Limited. We collected the balance of
the principal owed under the loan from Cirteq Limited on December 22, 2003.
For the first nine months of fiscal 2003 the $7.3 million loss from discontinued
operations included actual operating income of $6.3 million from discontinued
operations, allocated interest expense of $5.3 million, a $7.4 million charge to
reflect the amounts ultimately realized from sales of discontinued business
units, a noncash charge of $4.6 million associated with the recognition of
accumulated currency translation losses from the sale of our Brazilian
operation, a cash charge of $0.2 million from the final settlement of our
interest rate swap contracts, and a tax benefit of $3.9 million.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 28, 2003 COMPARED WITH THREE MONTHS ENDED DECEMBER
29, 2002
Net sales. Our net sales increased to $16.7 million for the third quarter of
fiscal 2004, a 7% increase over sales of $15.6 million for the third quarter of
fiscal 2003. This increase in sales is the result of higher shipments of hoists
and winches.
Gross profit. Gross profit decreased 7% to $7.0 million for the third quarter of
fiscal 2004 from $7.5 million for the third quarter of fiscal 2003. Generally,
repair and overhaul services and spare parts sales have higher gross margins
than sales of new equipment or engineering services. As a result of a sales mix
that was more heavily weighted in favor of new equipment sales due to the timing
of shipments to meet customer demands, we recorded gross margins for the third
quarter of fiscal 2004 which are more in line with our long-term targeted gross
margin. Generally, we cannot predict changes in our product mix between
aftermarket sales and new equipment sales for any given period because the
changes result primarily from the timing of our customers' orders, over which we
have little control.
General, administrative and selling expenses. General, administrative and
selling expenses increased 10% to $4.4 million in the third quarter of fiscal
2004 from $4.0 million in the third quarter of fiscal 2003. This increase was
primarily due to approximately $0.7 million of legal and other costs associated
with the ongoing investigation by the Newark, New Jersey office of the United
States Attorney of our overhaul and repair operations which offset a $0.2
million reduction in corporate office expenses during fiscal 2004 which were
mostly due to the restructuring of the corporate office that began in the fourth
quarter of fiscal 2001.
13
Operating income. Operating income (gross profit less general, administrative
and selling expenses) decreased 25% to $2.6 million in the third quarter of
fiscal 2004 from $3.5 million in the third quarter of fiscal 2003. This decrease
was mainly due to the change in the mix of products sold as well as additional
general, administrative and selling expenses as mentioned above.
Interest expense. Interest expense increased $0.2 million to $2.6 million in the
third quarter of fiscal 2004 from $2.4 million in the third quarter of fiscal
2003, as a result of the allocation formula we are required to use under
Generally Accepted Accounting Principles (GAAP) to apportion interest expense
between continuing and discontinued operations. We base this allocation formula
upon the net asset balances attributable to continuing and discontinued
operations. Total interest expense for the third quarter of fiscal 2004
decreased $1.7 million to $2.6 million from $4.3 million for the third quarter
of fiscal 2003 due to the retirement of debt with the proceeds from divestitures
and other internally generated sources of cash.
Other income. Interest and other income for the third quarter of fiscal 2004
includes a gain of $0.9 million relating to the sale of our remaining 19%
interest in Cirteq Limited and the collection of an intercompany note from
Cirteq Limited.
Net income. We earned net income of $0.7 million in the third quarter of fiscal
2004, versus a loss of $1.7 million in the third quarter of fiscal 2003, which
primarily resulted from the reasons discussed above.
New orders. New orders received in the third quarter of fiscal 2004 totaled
$14.0 million, which represents a 31% decrease from new orders of $20.4 million
in the third quarter of fiscal 2003.
Backlog. Backlog at December 28, 2003 was $41.1 million, down $5.1 million from
$46.2 million at March 31, 2003. We measure backlog by the amount of products or
services that our customers have committed by contract to purchase from us as of
a given date. Our book-to-bill ratio for the third quarter of fiscal 2004 was
0.84, compared to 1.31 for the third quarter of fiscal 2003. Cancellations of
purchase orders or reductions of product quantities in existing contracts,
although seldom occurring, could substantially and materially reduce our
backlog. Therefore, our backlog may not represent the actual amount of shipments
or sales for any future period.
NINE MONTHS ENDED DECEMBER 28, 2003 COMPARED WITH NINE MONTHS ENDED DECEMBER 29,
2002
Net sales. Our net sales increased to $49.1 million for the first nine months of
fiscal 2004, a 19% increase over sales of $41.3 million for the first nine
months of fiscal 2003. This increase in sales is the result of higher shipments
of hoists and weapons handling equipment for military agencies.
Gross profit. Gross profit increased 10% to $21.1 million for the first nine
months of fiscal 2004 from $19.2 million for the first nine months of fiscal
2003. The increase in gross profit is due to the increase in sales. The gross
margin for the first nine months of fiscal 2004 at 43% was down from the prior
period's margin of 46% due mainly to a significant amount of HLU-196 bomb
hoists, which carry a lower gross margin than other new equipment, being shipped
in fiscal 2004, the effect of which was compounded by a higher amount of spare
parts in fiscal 2003 which generally carry higher gross margins than new
equipment. Generally, we cannot predict changes in our product mix between
aftermarket sales and new equipment sales for any given period because the
changes result primarily from the timing of our customers' orders, over which we
have little control.
General, administrative and selling expenses. General, administrative and
selling expenses decreased 2% to $11.7 million in the first nine months of
fiscal 2004 from $11.9 million in the first
14
nine months of fiscal 2003. This decrease was mainly due to lower corporate
office expenses during fiscal 2004 which were primarily due to the restructuring
of the corporate office that began in the fourth quarter of fiscal 2001 offset
by approximately $0.7 million of legal and other costs associated with the
above-noted investigation by the Newark, New Jersey office of the United States
Attorney of our overhaul and repair operations.
Operating income. Operating income (gross profit less general, administrative
and selling expenses) increased 29% to $9.4 million in the first nine months of
fiscal 2004 from $7.3 million in the first nine months of fiscal 2003. This
increase mainly was due to a higher sales volume, the benefit of spreading fixed
costs over a larger sales volume, and the reduction in corporate office
expenses.
Interest expense. Interest expense increased $1.2 million to $7.7 million in the
first nine months of fiscal 2004 from $6.5 million in the first nine months of
fiscal 2003, as a result of the allocation formula we are required to use under
GAAP to apportion interest expense between continuing and discontinued
operations. We base this allocation formula upon the net asset balances
attributable to continuing and discontinued operations. Total interest expense
for the first nine months of fiscal 2004 decreased $4.1 million to $7.7 million
from $11.8 million for the first nine months of fiscal 2003 due to the
retirement of debt with the proceeds from divestitures and other internally
generated sources of cash.
Other income. Interest and other income for the nine months of fiscal 2004
includes a gain of $0.9 million relating to the sales of our remaining 19%
interest in Cirteq Limited and the collection of an intercompany note from
Cirteq Limited.
Net income. We earned net income of $1.9 million in the first nine months of
fiscal 2004, versus a loss of $7.7 million in the first nine months of fiscal
2003, which primarily resulted from the reasons discussed above.
New orders. New orders received in the first nine months of fiscal 2004 totaled
$44.1 million, as compared to the new orders of $50.2 million in the first nine
months of fiscal 2003.
Backlog. Backlog at December 28, 2003 was $41.1 million, down $5.1 million from
$46.2 million at March 31, 2003. We measure backlog by the amount of products or
services that our customers have committed by contract to purchase from us as of
a given date. Our book-to-bill ratio for the first nine months of fiscal 2004
was 0.90, compared to 1.22 for the first nine months of fiscal 2003.
Cancellations of purchase orders or reductions of product quantities in existing
contracts, although seldom occurring, could substantially and materially reduce
our backlog. Therefore, our backlog may not represent the actual amount of
shipments or sales for any future period.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity requirements depend on a number of factors, many of which are
beyond our control, including the timing of production under our long-term
contracts with the U.S. Government. Although we have infrequently received
payments on these government contracts based on performance milestones, as is
the case with our contract with the U.S. Navy for the HLU-196 Bomb Hoist, our
working capital needs fluctuate between periods as a result of changes in
program status and the timing of payments by program. Additionally, as our sales
are generally made on the basis of individual purchase orders, our liquidity
requirements vary based on the timing and volume of these orders.
15
Our restructuring and divestiture program has had a substantial impact upon our
financial condition through December 28, 2003, as we reduced debt with the
proceeds of the divestitures and lowered costs as a result of the corporate
office restructuring. At December 28, 2003, there was no indebtedness
outstanding under our New Senior Credit Facility.
As previously reported, the New York Stock Exchange (NYSE) notified us that the
company had fallen below the NYSE continued listing standards requiring total
market capitalization of not less than $50 million over a 30-day trading period
and total stockholders' equity of not less than $50 million. We submitted to the
NYSE a plan to return to compliance with the listing standards, and announced on
July 7, 2003 that the NYSE has accepted the company's proposed plan. The Company
periodically updates the NYSE on developments with respect to the plan.
WORKING CAPITAL
Our working capital at December 28, 2003, was $18.8 million, compared to $11.2
million at March 31, 2003. The ratio of current assets to current liabilities
was 2.5 to 1.0 at December 28, 2003, compared to 1.4 to 1.0 at March 31, 2003.
Working capital changes during the first nine months of fiscal 2004, resulted
from a decrease in cash of $5.2 million, an increase in accounts receivable of
$1.0 million, a decrease in inventories of $0.7 million, a decrease in prepaid
expenses and other current assets of $0.2 million, a decrease in accrued income
taxes of $2.2 million and a decrease in other current liabilities of $10.7
million. The increase in accounts receivable was due to strong sales at the end
of the third quarter fiscal 2004. The decrease in inventory was largely due to
increased sales and the decrease in prepaid expenses and other current assets
was due primarily to receipt of a cash payment related to a divestiture. The
decrease in accrued income taxes was due to the payment of state income taxes
related to the sale of Norco and the decrease in other current liabilities was
due mainly to the shipment of the HLU-196 bomb hoists against customer advances
and payment of obligations related to divestitures. The number of days that
sales were outstanding in accounts receivable decreased to 30.6 days at December
28, 2003, from 31.8 days at March 31, 2003. Inventory turnover increased to 2.0
turns from 1.55 turns for fiscal 2003.
CAPITAL EXPENDITURES
Our capital expenditures were $350 thousand for the first nine months of fiscal
2004, compared to $501 thousand for the first nine months of fiscal 2003.
Projects budgeted in fiscal 2004 include refurbishment of the offices and the
initial phase of installing a new ERP system.
In fiscal 2004, capital expenditures are expected to be in a range of $0.6-0.9
million.
SENIOR CREDIT FACILITY
At December 28, 2003, our New Senior Credit Facility consisted of an $8.0
million asset based revolving credit facility which was established in August
2002 to refinance all remaining obligations outstanding under our prior senior
credit facility. The New Senior Credit Facility was amended on August 5, 2003
and January 30, 2004. The maturity date of this facility, as amended, is July
31, 2004. The current interest rate is approximately 5.0%. The New Senior Credit
Facility is secured by all of our assets. We are in compliance with the
provisions of the facility. There were no borrowings outstanding under the
facility at December 28, 2003.
16
SENIOR SUBORDINATED NOTES
On August 30, 2000, we completed a private placement of $75 million of senior
subordinated notes (the "Notes") and warrants to purchase shares of our common
stock (the "Warrants") to a group of institutional investors (collectively, the
"Purchasers"). We used the proceeds of the private placement to retire, in full,
a $75 million bridge loan held by a group of lenders led by Fleet National Bank.
The Notes, as amended in August 2002, are due on August 29, 2005 and bear
interest at a rate of 18% per annum consisting of 13% cash interest on
principal, payable quarterly, and 5% interest on principal, payable quarterly in
"payment-in-kind" ("PIK") promissory notes. The PIK portion of the interest rate
increases 0.25% each quarter until we retire the notes. We may prepay the Notes
after August 29, 2001, at a premium initially of 9%, declining to 5%, 3%, and 1%
on each of the next succeeding anniversaries of that date. The Notes contain
customary financial covenants and events of default, including a cross-default
provision to our senior debt obligations. We are in compliance with the
provisions of the Notes. At December 28, 2003, the principal balance outstanding
on the notes amounted to $55.6 million, which included the original principal
amount plus the PIK notes.
At March 31, 2003, we reported redeemable common stock in the amount of $1.3
million representing the per share put right (257,000 shares at $5.00 per share)
held by certain Purchasers who had exercised their Warrants. The put right on
approximately 211,000 shares expired on June 24, 2003 and, accordingly, we
reclassified $1.1 million from redeemable common stock to additional paid-in
capital with the remainder of the redeemable common stock being reclassified to
long-term debt to reflect the exercise of the put by a Purchaser. Subsequent to
the end of the first quarter of fiscal 2004, the Purchaser in question revoked
its put exercise and that portion was reclassified to additional paid in capital
in the second quarter. In addition, the put right on 171,041 Warrants expired
and, accordingly, $0.9 million representing the cash value of the put right on
these Warrants was reclassified from a liability account to additional paid-in
capital in the first quarter of fiscal 2004. At December 28, 2003, there were
171,041 Warrants outstanding which are each convertible into common stock at the
price of $.01 per warrant. All of the Warrants were considered to be common
stock equivalents for the purpose of calculating earnings per share at December
28, 2003.
We have long-term debt maturities of $0.1 million, $0.1 million and $55.6
million in fiscal 2004, 2005 and 2006, respectively.
Our operations require significant amounts of cash, and we may be required to
seek additional capital, whether from selling equity or borrowing money, for the
future growth and development of our business or to fund our operations and
inventory, particularly in the event of a market downturn. Although currently we
have the ability to borrow additional sums under our New Senior Credit Facility,
this facility contains a borrowing base provision and financial covenants which
may limit the amount we can borrow under our senior credit facility or from
other sources. Also, we may not be able to replace or renew the New Senior
Credit Facility upon its expiration on terms that are favorable to us. In
addition, a number of factors could affect our ability to access debt or equity
financing, including our financial strength and credit rating, results of audits
and inquires into our business practices, the financial market's confidence in
our management team and financial reporting, general economic conditions, the
conditions in the defense and aerospace industries and overall capital market
conditions.
The Company was in the process of securing a refinancing of its debt through
various financial institutions. As previously reported, representatives of the
financial institutions participating in such refinancing have been made aware of
the investigation by the United States Attorney, as well as the independent
review and audit by the forensic accounting firm. Those financial institutions
have
17
advised the Company that the refinancing process would not be completed until
after a report of the forensic accounting firm is issued. There can be no
assurance as to when the refinancing process will begin again or that such
refinancing can be successfully completed on terms and conditions acceptable to
the Company.
Even if available, additional financing could be costly or have adverse
consequences. If we raise additional funds by issuing stock, dilution to
stockholders may result. If we raise additional funds by incurring debt, we will
incur increased debt servicing costs and may become subject to additional
restrictive financial and other covenants. We can give no assurance as to the
terms or availability of additional capital. If we were not successful in
obtaining sufficient capital, it could reduce our sales and earnings and
adversely impact our financial position and we may not be able to expand or
operate our business as planned.
TAX BENEFITS FROM NET OPERATING LOSSES
At December 28, 2003, we had federal and state net operating loss carryforwards,
or NOLs, of approximately $49.3 million and $73.9 million, respectively, which
are due to expire in fiscal 2004 through fiscal 2023. These NOLs may be used to
offset future taxable income through their respective expiration dates and
thereby reduce or eliminate our federal and state income taxes otherwise
payable. The Internal Revenue Code of 1986, as amended (the "Code") imposes
significant limitations on the utilization of NOLs in the event of an "ownership
change" as defined under Section 382 of the Code (the "Section 382 Limitation").
The Section 382 Limitation is an annual limitation on the amount of
pre-ownership NOLs that a corporation may use to offset its post-ownership
change income. The Section 382 Limitation is calculated by multiplying the value
of a corporation's stock immediately before an ownership change by the long-term
tax-exempt rate (as published by the Internal Revenue Service). Generally, an
ownership change occurs with respect to a corporation if the aggregate increase
in the percentage of stock ownership by value of that corporation by one or more
5% shareholders (including specified groups of shareholders who in the aggregate
own at least 5% of that corporation's stock) exceeds 50 percentage points over a
three-year testing period. We do not believe that we have gone through an
ownership change that would cause our NOLs to be subject to the Section 382
Limitation.
SUMMARY DISCLOSURE ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following table reflects a summary of our contractual cash obligations for
the next several fiscal years:
(DOLLARS IN THOUSANDS) 2008 AND
2004 2005 2006 2007 THEREAFTER TOTAL
---- ---- ------- ---- ---------- -------
Long-Term Debt $ 79 $ 79 $55,638 $ - $ - $55,796
Operating Leases 71 116 114 61 22 384
---- ---- ------- ---- ---- -------
Total $150 $195 $55,752 $ 61 $ 22 $56,180
==== ==== ======= ==== ==== =======
In addition, we have divested ten businesses since March 31, 2001. Under the
terms of the agreements associated with the sales of those businesses, we have
agreed to indemnify the purchasers for certain damages that might arise in the
event that a representation we made with respect to the divested business is
found to have contained a material misstatement, subject in each case to a
customary cap on the indemnification amount and customary limitations on the
18
survivability of the representations made. As of the date of this report, we
have no unresolved claims for indemnification with respect to these divested
businesses. Additionally, the terms of these divestiture agreements generally
require the calculation of purchase price adjustments based upon the amount of
working capital or net assets transferred at the closing date. In the case of
each divestiture completed as of the filing date, all purchase price adjustments
have been agreed and paid.
INFLATION
While neither inflation nor deflation has had, and we do not expect it to have,
a material impact upon operating results, we cannot assure you that our business
will not be affected by inflation or deflation in the future.
ENVIRONMENTAL MATTERS - During the fourth quarter of fiscal 2000, we presented
an environmental cleanup plan for a portion of a site in Pennsylvania which the
Company continues to own although the related business has been sold. This plan
was submitted pursuant to the Consent Order and Agreement with the Pennsylvania
Department of Environmental Protection ("PaDEP") concluded in fiscal 1999 and
was conditionally approved by PaDEP in November 2003. Pursuant to the Consent
Order, upon its execution we paid $0.2 million for past costs, future oversight
expenses and in full settlement of claims made by PaDEP related to the
environmental remediation of the site with an additional $0.2 million paid in
fiscal 2001. A second Consent Order was concluded with PaDEP in the third
quarter of fiscal 2001 for another portion of the site, and a third Consent
Order for the remainder of the site was concluded in the third quarter of fiscal
2003. We are also administering an agreed settlement with the Federal government
under which the government pays 50% of the environmental response costs
associated with a portion of the site. We have also reached an agreement in
principle with the Federal government and are in the process of finalizing the
necessary documentation under which the Federal government will pay 45% of the
environmental response costs associated with another portion of the site. At
December 28, 2003, our cleanup reserve was $2.0 million based on the net present
value of future expected cleanup costs. We expect that remediation at the
Pennsylvania site will not be completed for several years.
We also continue to participate in environmental assessments and remediation
work at nine other locations, including former facilities of the company. We
estimate that the potential cost for implementing corrective action at these
sites will not exceed $0.5 million payable over the next several years, and have
provided for the estimated costs in our accrual for environmental liabilities.
In addition, in the first quarter of fiscal 2003, we entered into a consent
order for a former facility in New York pursuant to which we are developing a
remediation plan for review and approval by the New York Department of
Environmental Conservation. We have established a reserve of $2.5 million for
this site which we believe is adequate.
In addition, we have been named as a potentially responsible party in eight
environmental proceedings pending in several other states in which it is alleged
that we were a generator of waste that was sent to landfills and other treatment
facilities and, as to several sites, it is alleged that we were an owner or
operator. Such properties generally relate to businesses which have been sold or
discontinued. We estimate that the expected future costs, and our estimated
proportional share of remedial work to be performed, associated with these
proceedings will not exceed $0.2 million and we have provided for these
estimated costs in our accrual for environmental liabilities.
LITIGATION - We are also engaged in various other legal proceedings incidental
to our business. It is our opinion that, after taking into consideration
information furnished by our counsel, the above matters will have no material
effect on our consolidated financial position or the results of our operations
in future periods.
19
RECENTLY ISSUED ACCOUNTING STANDARDS
In December 2002, the Financial Accounting Standards Board issued SFAS No. 148,
"Accounting for Stock-Based Compensation -- Transition and Disclosure" which
amends SFAS No. 123. This statement provides alternative methods of transition
for a voluntary change to the fair value-based method of accounting for
stock-based employee compensation and amends the disclosure requirements of SFAS
No. 123. The transition guidance and disclosure requirements are effective for
fiscal years ending after December 15, 2002. Our company has adopted the
disclosure requirements and expects that the adoption of this statement will not
have a material effect on our Company's financial position or results of
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various market risks that primarily consist of changes in
interest rates associated with the New Senior Credit Facility. There are no
borrowings under the New Senior Credit Facility at December 28, 2003.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures. Our management, with the participation of
our Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of our disclosure controls and procedures (as such term is defined
in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) as of the end of the period covered by this
quarterly report. Based on such evaluation, our Chief Executive Office and Chief
Financial Officer have concluded that, as of the end of such period, our
disclosure controls and procedures are effective in recording, processing,
summarizing and reporting, on a timely basis, information required to be
disclosed by us in the reports that we file or submit under the Exchange Act.
Internal Control Over Financial Reporting. There have not been any changes in
our internal control over financial reporting (as such term is defined in Rules
13a-15(f) and 15(d)-15(f) under the Exchange Act) during the fiscal quarter to
which this report relates that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are engaged in various legal proceedings incidental to our business. It is
the opinion of management that, after taking into consideration information
furnished by our counsel, these matters will not have a material effect on our
consolidated financial position or the results of our operations in future
periods.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
20
32 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(b) Form 8-K
On October 9, 2003 the Registrant filed an 8-K which furnished the October
3, 2003 press release announcing the engagement of the Bradlau Group of
Morristown, NJ relative to the investigation of the Registrant's overhaul
and repairs operations by the Newark, NJ office of the United States
Attorney.
On October 16, 2003 the Registrant filed an 8-K which furnished the
October 15, 2003 press release announcing its financial results for the
second quarter of fiscal year ending March 31, 2004.
On November 20, 2003 the Registrant filed an 8-K which furnished the
November 19, 2003 press release announcing the preliminary results of
internal review of overhaul and repair operations by The Bradlau Group of
Morristown, NJ, relative to an investigation of these operations.
SIGNATURES
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.
TRANSTECHNOLOGY CORPORATION
(Registrant)
Dated: February 10, 2004 By: /s/ Joseph F. Spanier
-------------------------------------
Joseph F. Spanier, Vice President
Treasurer and Chief Financial Officer*
*On behalf of the Registrant and as Principal Financial and Accounting Officer.
21