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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 26, 2004
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
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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 07083
Union, New Jersey (Zip Code)
(Address of principal executive offices)
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 X No
--- ---
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 4, 2005, the total number of outstanding shares of
registrant's one class of common stock was 6,700,560.
INDEX
Page No.
--------
PART I. Financial Information
Item 1. Financial Statements........................................ 3
Statements of Consolidated Operations Three and
Nine Month Periods Ended December 26, 2004
and December 28, 2003....................................... 4
Consolidated Balance Sheets
December 26, 2004 and March 31, 2004........................ 5
Statements of Consolidated Cash Flows
Nine Month Periods Ended December 26, 2004 and
December 28, 2003........................................... 6
Notes to Consolidated Financial Statements.................. 7-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 12-21
Item 3. Quantitative and Qualitative Disclosures about Market Risk.. 21
Item 4. Controls and Procedures..................................... 21
PART II. Other Information
Item 1. Legal Proceedings........................................... 21
Item 6. Exhibits.................................................... 22
SIGNATURES.............................................................. 23
EXHIBIT 10.29........................................................... 24-31
EXHIBIT 31.1............................................................ 32
EXHIBIT 31.2............................................................ 33
EXHIBIT 32.............................................................. 34
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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 Statement of Consolidated Operations for the period ended
December 26, 2004, 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, 2004.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
3
TRANSTECHNOLOGY CORPORATION
STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
(In Thousands of Dollars, Except Share Data)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------- -------------------------------------
DECEMBER 26, 2004 DECEMBER 28, 2003 DECEMBER 26, 2004 DECEMBER 28, 2003
----------------- ----------------- ----------------- -----------------
Net sales $ 17,267 $ 16,679 $ 47,064 $ 49,131
Cost of sales 10,049 9,682 27,810 28,029
----------- ----------- ----------- -----------
Gross profit 7,218 6,997 19,254 21,102
General, administrative
and selling expenses 4,411 4,397 12,635 11,699
Interest expense 2,462 2,640 8,143 7,711
Interest income and other expense (income)-net 85 (1,112) 16 (1,318)
Loss on extinguishment of debt 2,185 -- 2,185 --
----------- ----------- ----------- -----------
(Loss) income before income taxes (1,925) 1,072 (3,725) 3,010
(Benefit) provision for income taxes (657) 408 (1,341) 1,144
----------- ----------- ----------- -----------
Net (loss) income $ (1,268) $ 664 $ (2,384) $ 1,866
=========== =========== =========== ===========
Basic (loss) earnings per share:
Net (loss) income $ (0.19) $ 0.10 $ (0.36) $ 0.28
=========== =========== =========== ===========
Diluted (loss) earnings per share:
Net (loss) income $ (0.19) $ 0.10 $ (0.36) $ 0.28
=========== =========== =========== ===========
Number of shares used in computation
of per share information: (Note 1)
Basic 6,701,000 6,669,000 6,684,000 6,655,000
Diluted 6,701,000 6,691,000 6,684,000 6,672,000
See accompanying notes to unaudited consolidated financial statements.
4
TRANSTECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share Data)
(UNAUDITED)
DECEMBER 26, 2004 MARCH 31, 2004
----------------- --------------
Assets
Current assets:
Cash and cash equivalents $ 153 $ 960
Accounts receivable (net of allowance for doubtful accounts
of $20 at December 26, 2004 and $10 at March 31, 2004) 10,852 8,720
Inventories-net 15,748 20,449
Prepaid expenses and other current assets 689 842
Income tax receivable 376 395
Deferred income taxes 3,334 3,334
Real estate held for sale - 1,432
-------- --------
Total current assets 31,152 36,132
-------- --------
Property, plant and equipment 14,857 13,222
Less accumulated depreciation (11,139) (10,794)
-------- --------
Property, plant and equipment - net 3,718 2,428
-------- --------
Other assets:
Deferred income taxes 28,227 27,035
Other 11,978 11,614
-------- --------
Total other assets 40,205 38,649
-------- --------
Total $ 75,075 $ 77,209
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt and short term borrowings $ 3,301 $ 79
Accounts payable-trade 3,956 5,224
Accrued compensation 1,629 2,890
Accrued income taxes 1,077 1,566
Accrued interest 624 1,813
Other current liabilities 1,657 2,387
-------- --------
Total current liabilities 12,244 13,959
-------- --------
Long-term debt payable to banks and others 58,450 56,472
-------- --------
Other long-term liabilities 10,385 10,565
-------- --------
Stockholders' deficit:
Preferred stock - authorized, 300,000 shares; none issued - -
Common stock - authorized, 14,700,000 shares of $.01 par value;
issued 7,090,695 and 7,059,107 at December 26, 2004 and March 31, 2004, respectively 71 71
Additional paid-in capital 75,659 76,728
Accumulated deficit (73,633) (71,249)
Unearned compensation (181) (97)
-------- --------
1,916 5,453
Less treasury stock, at cost - 390,135 shares at December 26, 2004
and 560,964 at March 31, 2004 (7,920) (9,240)
-------- --------
Total stockholders' deficit (6,004) (3,787)
-------- --------
Total $ 75,075 $ 77,209
======== ========
See accompanying notes to unaudited consolidated financial statements.
5
TRANSTECHNOLOGY CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(In Thousands of Dollars)
NINE MONTHS ENDED
--------------------------------------
December 26, 2004 December 28, 2003
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (2,384) $ 1,866
Adjustments to reconcile net (loss) income to net cash used in
operating activities:
Loss on extinguishment of debt 2,185 --
Depreciation and amortization 1,162 1,696
Noncash interest expense 2,510 2,367
Increase in provision for bad debt 12 10
Changes in assets and liabilities:
Increase in accounts receivable and other receivables (2,125) (922)
Decrease in inventories 4,701 716
(Increase) decrease in deferred taxes net (1,192) 1,024
(Increase) decrease in other assets (174) 214
Decrease in accounts payable (1,268) (1,193)
Decrease in accrued compensation (1,261) (868)
Decrease in income taxes payable (489) (1,979)
Decrease in other liabilities (2,238) (8,869)
-------- --------
Net cash used in operating activities (561) (5,938)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (1,636) (350)
Proceeds from sale of real estate 1,331 --
Decrease in notes receivable 25 1,000
-------- --------
Net cash (used in) provided by investing activities (280) 650
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt and other short term borrowings (66,216) --
Proceeds from debt and other short term borrowings 69,046 --
Payment of debt issue costs (2,070) --
Payment of debt prepayment penalties (747) --
Exercise of stock options 21 39
-------- --------
Net cash provided by financing activities 34 39
-------- --------
Decrease in cash and cash equivalents (807) (5,249)
Cash and cash equivalents at beginning of period 960 7,104
-------- --------
Cash and cash equivalents at end of period $ 153 $ 1,855
========= ========
Supplemental information:
Interest payments 6,109 5,271
Income tax payments 341 2,099
Increase in senior subordinated note and term loans for paid-in-kind
interest expense 2,370 2,230
Increase in additional paid-in-capital from warrant put expiration -- 2,184
See accompanying notes to unaudited consolidated financial statements.
6
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
NOTE 1. Earnings (Loss) Per Share
Basic earnings (loss) per share is 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 26, December 28, December 26, December 28,
2004 2003 2004 2003
------------- ------------- ------------- -------------
Basic Earnings (Loss) per
Common Share:
Weighted-average
common stock out-
standing for basic earnings
(loss) per share calculation 6,701 6,669 6,684 6,655
============= ============= ============= =============
Diluted Earnings (Loss) per
Common Share:
Weighted-average
common shares
outstanding 6,701 6,669 6,684 6,655
Stock options and
warrants* - 22 - 17
------------- ------------- ------------- -------------
Weighted-average common
stock outstanding for diluted
earnings (loss) per share
calculation 6,701 6,691 6,684 6,672
============= ============= ============= =============
* Not including anti-dilutive stock options totaling 144 and 148 for the
three and nine month periods ended December 26, 2004 respectively, and 158
and 255 for the three and nine month periods ended December 28, 2003,
respectively.
7
NOTE 2. Stock-Based Compensation
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation", 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.
Three Months Ended Nine Months Ended
--------------------------------- -------------------------------
December 26, December 28, December 26, December 28,
2004 2004 2004 2003
------------ ------------ ------------ -------------
Net (loss) income as reported $ (1,268) $ 664 $ (2,384) $ 1,866
Deduct: Total stock-based compensation expense
determined under fair value based method for all
awards, net of related tax effects (43) (47) (106) (132)
----------- --------- --------- --------
Proforma net (loss) income $ (1,311) $ 617 $ (2,490) $ 1,734
========== ======== ========= ========
Basic earnings (loss) per share:
As reported $ (0.19) $ 0.10 $ (0.36) $ 0.28
Proforma $ (0.20) $ 0.09 $ (0.37) $ 0.26
Diluted earnings (loss) per share:
As reported $ (0.19) $ 0.10 $ (0.36) $ 0.28
Proforma $ (0.20) $ 0.09 $ (0.37) $ 0.26
8
NOTE 3. Inventories
Inventories, net of valuation allowances, are summarized as follows:
December 26, 2004 March 31, 2004
----------------- --------------
Finished goods $ -- $ 1
Work in process 4,275 7,037
Purchased and
manufactured parts 11,473 13,411
----------------- --------------
Total $15,748 $20,449
================= ==============
NOTE 4. Long-term Debt Payable to Banks and Others
Long-term debt payable to banks and others consisted of the following:
December 26, 2004 March 31, 2004
----------------- --------------
Revolving Credit Facility 6.75% $ 222 $ -
Term Loans 8.25-21.25% 61,371 -
Senior Subordinated Notes 19% - 56,393
Other 158 158
----------- -----------
61,751 56,551
Less current maturities 3,301 79
----------- -----------
Total long-term debt $ 58,450 $ 56,472
=========== ===========
Senior Credit Facility - On November 10, 2004, the Company refinanced and repaid
in full the Former Senior Credit Facility (see below) and the Notes (see below)
with a $71.5 million, forty-two month, senior credit facility (the "Senior
Credit Facility"). The Senior Credit Facility consists of a $10.0 million
asset-based Revolving Credit Facility, and three tranches of Term Loans totaling
$61.5 million. At December 26, 2004, the Senior Credit Facility has an effective
weighted interest rate of approximately 13.7% which is tied to the prime rate.
The Term Loans require monthly principal payments of $250,000 over the term of
the loan with the balance due at the end of the term. Accordingly, the balance
sheet reflects $3.0 million of current maturities due under the Senior Credit
Facility. The Senior Credit Facility also contains certain mandatory prepayment
provisions which are linked to cash flow and customary financial covenants and
events of default. The Senior Credit Facility is secured by all of the Company's
assets. The Company recorded a pre-tax charge of $2.2 million relating to the
write-off of unamortized debt issue costs and the payment of pre-payment
premiums in the quarter ended December 26, 2004. Costs associated with
establishing the Senior Credit Facility were $2.2 million and will be amortized
over the forty-two month term of the new facility.
9
Former Senior Credit Facility - At the time of the refinancing on November 10,
2004, 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
"Former Senior Credit Facility") to refinance all remaining obligations
outstanding under the prior senior credit facility. The Former Senior Credit
Facility was amended on August 5, 2003 and was subsequently amended on January
30, 2004 and July 30, 2004, and was repaid in full on November 10, 2004 (see
"Senior Credit Facility" above). The maturity date of this facility, as amended,
was January 31, 2005, and had an interest rate of 5.75%. The Former Senior
Credit Facility was secured by all of the Company's assets.
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, were due on August 29, 2005 and bore 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 increased 0.25% each quarter,
commencing December 31, 2002 until the Notes were repaid. Effective October 7,
2004, the Purchasers executed a waiver with respect to our technical compliance
with certain financial covenants. At the time of the refinancing on November 10,
2004 described above, the principal balance outstanding on the Notes amounted to
$58.7 million, which included the original principal amount plus the PIK notes.
As of November 5, 2004, all of the Warrants had been exercised by the
Purchasers.
NOTE 5. New Accounting Standards
In December 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 46R, a revision to Interpretation No. 46, "Consolidation of
Variable Interest Entities", which addresses how a business enterprise should
evaluate whether it has a controlling financial interest in an entity through
means other than voting rights and accordingly should consolidate the entity.
Interpretation No. 46R clarifies some of the provisions of Interpretation No. 46
and exempts certain entities from its requirements. Interpretation No. 46R was
effective for the Company at the end of the first quarter ended June 27, 2004.
The adoption of this statement did not have a material impact on the Company's
financial position or results of operations.
In November 2004, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 151, Inventory Costs. This statement amends the guidance in
Accounting Research Bulletin ("ARB") No. 43, Restatement and Revision of
Accounting Research Bulletins, Chapter 4 "Inventory Pricing", to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling
costs and wasted material (spoilage). SFAS No. 151 requires that these items be
recognized as current-period charges regardless of whether they meet the
definition of "so abnormal" in ARB No. 43. In addition, SFAS No. 151 requires
that allocation of fixed overheads to the costs of conversion be based on the
normal capacity of production facilities. SFAS No. 151 is effective for the
Company for its fiscal year ending March 31, 2006. Management does not believe
that the adoption of this statement will have a material impact on the results
of its operations.
In December 2004, the FASB issued SFAS No. 123 (Revised 2004) "Share-Based
Payment" ("SFAS No. 123R") that addresses the accounting for share-based payment
transactions in which a company
10
receives employee services in exchange for (a) equity instruments of the company
or (b) liabilities that are based on the fair value of the company's equity
instruments or that may be settled by the issuance of such equity instruments.
SFAS No. 123R addresses all forms of share-based payment awards, including
shares issued under employee stock purchase plans, stock options, restricted
stock and stock appreciation rights. SFAS No. 123R eliminates the ability to
account for share-based compensation transactions using APB Opinion No. 25,
"Accounting for Stock Issued to Employees", that was provided in Statement 123
as originally issued. Under SFAS No. 123R companies are required to record
compensation expense for all share based payment award transactions measured at
fair value. This statement is effective for quarters ending after June 15, 2005.
Management has not yet determined the transition approach in adopting this
statement.
NOTE 6. 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 Breeze-Eastern'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 review 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 review
with the United States Attorney's office. The investigation has had no direct
impact, and the Company does not expect a direct impact, on the Company's
ability to manufacture and ship products and meet customer delivery schedules.
However, the Company has implemented changes in its operating procedures and
added new personnel to its overhaul and repair operation which has had the
effect of producing higher labor and material costs and lower gross profit and
has impeded throughput in that operation. The Company has held initial
discussions with the United States Attorney's office relative to the resolution
of the issues associated with the investigation. As of this date, the United
States Attorney's investigation is continuing and the Company has not been made
aware of any specific statutory or regulatory violations resulting from that
investigation.
The Company sold the assets of its Breeze Industrial Products (BIP) division in
July 2001. As part of that transaction, the Company sold the land and building
occupied by the BIP operation to the Indiana County (PA) Development Corporation
(ICDC) for $2,000,000. The ICDC, in turn, entered into a lease of the facility
in September 2001 with BIP as lessee for an initial term of five years and up to
four additional five-year terms. The lease contains an option for BIP to
purchase the property from ICDC at the end of the first term for $1,500,000 (the
appraised value of the property in July 2001). In the event that BIP does not
exercise the purchase option or the renewal option at the end of the initial
term, ICDC, upon proper notification, can require the Company to repurchase the
property for $1,000,000, of which $500,000 is contractually required to be
maintained on deposit with banks located in Indiana County, Pennsylvania. The
Company considers a decision by BIP to vacate the location in Saltsburg,
Pennsylvania to be unlikely as this is a manufacturing facility with
sophisticated machinery, an established well-trained work force, dependable
suppliers, and excellent distribution access. In the event that the facility is
presented for repurchase, management is confident that the repurchase would not
have a material effect on the Company's financial position or cash flows and the
facility can be resold for at least the repurchase price.
11
The Company is also engaged in various other legal proceedings incidental to its
business. Management is of the opinion that, after taking into consideration
information furnished by our counsel, the above matters will have no material
effect on the consolidated financial position or the results of our operations
in future periods.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
This Quarterly Report on Form 10-Q may contain forward-looking statements. See
"Forward Looking Statements" on page 19 hereof for further information of the
risks and uncertainties associated with forward-looking statements.
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.
All references to fiscal 2005 and beyond in this Management's Discussion and
Analysis of Financial Condition and Results of Operations refer to the fiscal
year ending March 31, 2005 and beyond, and all references to all other fiscal
years refer to the fiscal years ended March 31.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 26, 2004 COMPARED WITH THREE MONTHS ENDED DECEMBER
28, 2003.
Net sales. Our sales increased to $17.3 million for the third quarter of fiscal
2005, from sales of $16.7 million for the third quarter of fiscal 2004. This 4%
increase in sales for the third quarter of fiscal 2005 was primarily due to
higher spare parts and overhaul and repair sales. Sales of cargo hook and weapon
handling spares were up $2.4 million from the prior year's third quarter
primarily due to shipments on the MLRS and HIMARS programs. Sales in the
overhaul and repair portion of our business increased 29% from the same period
last year (See discussion of Gross profit below). Sales of new equipment were
down $ 2.0 million from the prior year's third quarter primarily due to the
completion of shipments of the HLU-196 Bomb Hoist program.
Gross profit. Gross profit increased 3% to $7.2 million for the third quarter of
fiscal 2005 from $7.0 million for the third quarter of fiscal 2004. Generally,
repair and overhaul services and spare parts sales have higher gross margins
than sales of new equipment or engineering services. We have implemented changes
in our operating procedures and added new personnel to our overhaul and repair
operation, all of which has had an impact on the results for the quarter. These
changes were made as a result of the process and procedures review of that
operation over the past twelve months. We have instituted additional levels of
verification and have increased personnel training. This situation produced
higher labor and material costs than we had planned. As a result, our overhaul
and repair throughput was impeded resulting in reduced gross margins in the
third quarter.
12
Notwithstanding an increase in overhaul and repair sales, the inefficiencies
experienced as we implement improvements in our overhaul and repair operation
caused the gross profit to decrease by approximately $0.1 million. Gross profit
from new products experienced a decrease of approximately $0.7 million. These
decreases were offset by approximately $0.8 million related to higher sales of
spares, and approximately $0.2 million related to better profitability of
engineering sales.
General, administrative and selling expenses. Fiscal year third quarter selling,
general and administrative expenses were approximately equal to the comparable
period last year, however, we had anticipated a reduction of almost $0.3
million. The higher costs were largely attributed to the Company's appeal of the
New York Stock Exchange's delisting decision, additional costs associated with
the United States Attorney's investigation, and legal and accounting costs
associated with business units that had been sold in prior fiscal years.
Interest expense. Interest expense decreased $0.2 million to $2.5 million in the
third quarter of fiscal 2005 as compared to $2.6 million in the third quarter of
fiscal 2004 primarily from the decreased aggregate interest rate resulting from
our refinancing in November 2004.
Other income. Interest income and other expense [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 incurred a net loss of $1.3 million in the third quarter of
fiscal 2005, versus net income of $0.7 million in the third quarter of fiscal
2004, which primarily resulted from the reasons discussed above.
New orders. New orders received in the third quarter of fiscal 2005 totaled
$12.6 million, which represents a 10% decrease from new orders of $14.0 million
in the third quarter of fiscal 2004. The rescue hoist and cargo winch product
line was particularly strong in the third quarter of fiscal 2004 and accounted
for virtually all of the decrease in the third quarter of fiscal 2005. Increases
in orders for tiedowns and weapons handling were offset by a decrease in cargo
hook orders. Generally, new equipment sales are the subject of high-value,
long-term contracts, while repair, overhaul and spare parts sales have much
shorter lead times and a less predictable order pattern.
Backlog. Backlog at December 26, 2004 was $32.9 million, down $8.1 million from
$41.0 million at March 31, 2004. The reduction in the backlog is due to the
order pattern in the first nine months of fiscal 2005 as well as completion of
the HLU-196 Bomb Hoist program. 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 2005 was
..73, compared to .84 for the third quarter of fiscal 2004. The decrease in the
book to bill ratio was directly related to the increased shipments in the third
quarter of fiscal 2005 and lower order intake during the third quarter of fiscal
2005. 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 26, 2004 COMPARED WITH NINE MONTHS ENDED DECEMBER 28,
2003.
Net sales. Our sales decreased to $47.1 million for the first nine months of
fiscal 2005, a 4% decrease from sales of $49.1 million for the first nine months
of fiscal 2004. This decrease in sales is the
13
result of lower shipments of our weapons handling equipment primarily due to the
completion of the HLU-196 Bomb Hoist program.
Gross profit. Gross profit decreased 9% to $19.3 million for the first nine
months of fiscal 2005 from $21.1 million for the first nine months of fiscal
2004. Generally, repair and overhaul services and spare parts sales have higher
gross margins than sales of new equipment or engineering services. We have
implemented changes in our operating procedures and added new personnel to our
overhaul and repair operation, all of which has had an impact on the results for
the first nine months of fiscal 2005. These changes were made as a result of the
process and procedures review of that operation over the past twelve months. We
have instituted additional levels of verification and have increased personnel
training. This situation produced higher labor and material costs than we had
planned. As a result, our overhaul and repair throughput was impeded resulting
in reduced gross margins in the first nine months of fiscal 2005. The
inefficiencies experienced as we implement improvements in our overhaul and
repair operation accounted for approximately $1.3 million of the decrease in
gross profit with the remaining $0.5 million being related to a lower volume of
new equipment products than in the same period last year. These inefficiencies
are expected to continue through the remainder of fiscal 2005.
General, administrative and selling expenses. General, administrative and
selling expenses increased 8% to $12.6 million in the first nine months of
fiscal 2005 from $11.7 million in the first nine months of fiscal 2004. The
increase was due to approximately $0.5 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 operation. There was also
an increase in business insurance expense of $0.4 million, product support,
engineering and marketing costs of approximately $0.4 million and an increase of
$0.3 million in information technology costs associated with the installation of
the new enterprise resource planning system. This increase was offset by a
reduction in our corporate office expense of $0.7 million which was principally
the result of the recognition of a settlement charge of $0.4 million in the
first quarter of fiscal 2004 and approximately $0.3 million of cost reductions
primarily due to lower amortization of fees related to issuance of debt.
Interest expense. Interest expense increased $0.4 million to $8.1 million in the
first nine months of fiscal 2005 from $7.7 million in the first nine months of
fiscal 2004 primarily as the result of the increased interest rate on our former
subordinated debt and the increased debt level due to payment-in-kind
interest.
Other income. Interest income and other expense [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 incurred a net loss of $2.4 million in the first nine months of
fiscal 2005, versus net income of $1.9 million in the first nine months of
fiscal 2004, which primarily resulted from the reasons discussed above.
New orders. New orders received in the first nine months of fiscal 2005 totaled
$39.0 million, which represents an 11% decrease from new orders received of
$44.1 million in the first nine months of fiscal 2004. An order for the HLU-196
Bomb Hoist program was received in the first nine months of fiscal 2004, with no
new orders being received in the first nine months of fiscal 2005.
Backlog. Backlog at December 26, 2004 was $32.9 million, down $8.1 million from
$41.0 million at March 31, 2004. The reduction in the backlog is due to the
order pattern mentioned above as well as
14
completion of the HLU-196 Bomb Hoist program. 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 2005 was .83, compared to .98 for the first nine months of
fiscal 2004. An order for the HLU-196 bomb hoist program in fiscal 2004 that was
not repeated in fiscal 2005 resulted in the lower book to bill ratio in fiscal
2005. 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
As previously reported, the New York Stock Exchange (NYSE) notified us on or
about April 7, 2003, that we 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 an 18-month plan to comply with the listing
standards, which was accepted by the NYSE on July 7, 2003. The conclusion of the
plan implementation period was October 7, 2004. We received a letter from the
NYSE dated October 8, 2004, informing us of the determination of the NYSE to
delist our common stock from the NYSE. We filed a notice of appeal with the NYSE
and on January 5, 2005 had a hearing before the NYSE Board's Regulation,
Enforcement and Listing Standards Committee with respect to the review of the
delisting. On January 14, 2005 we announced that we had been informed by the
NYSE that it had reaffirmed the determination to delist our stock as set forth
in the October 8, 2004 letter. At the close of trading on January 20, 2005, the
NYSE suspended trading in our stock. On January 21, 2005 our stock began trading
in the Over-the-Counter market, but not on the Over-the-Counter Bulletin Board.
On January 26, 2005, we reported that the NASD OTC Compliance Unit has requested
supplemental information relative to the previously disclosed investigation by
the Newark, New Jersey office of the United States Attorney with respect to the
overhaul and repair operations of the our Breeze-Eastern Division, that we are
in the process of responding to the market maker to whom the request for the
supplemental information was made and that until the market maker resolves the
issue with the NASD, our stock will not be traded on the Over-the-Counter
Bulletin Board.
WORKING CAPITAL
Our working capital at December 26, 2004, was $18.9 million, compared to $22.2
million at March 31, 2004. The ratio of current assets to current liabilities
was 2.5 to 1.0 and 2.6 to 1.0 at December 26, 2004, and March 31, 2004
respectively.
Changes in working capital during the first nine months of fiscal 2005 resulted
from a decrease in cash of $0.8 million, an increase in accounts receivable of
$2.1 million, a decrease in inventories of $4.7 million, a decrease in prepaid
and other current assets of $0.2 million, a decrease in real estate held for
sale of $1.4 million, a decrease in accounts payable of $ 1.3 million, a
decrease in accrued compensation of $1.2 million, a decrease in accrued interest
and other current liabilities of $1.2 million and $0.7 million respectively and
a decrease in income tax payable of $0.5 million. In addition, the current
portion of long-term debt and short-term borrowings increased by $3.2 million
due to the refinancing as described in Note 4. The increase in accounts
receivable was due to strong sales at the end of the third quarter fiscal 2005
and the decrease in accrued compensation was due to the payment of bonuses
earned in fiscal 2004. The decrease in inventory was largely due to increased
sales, and the decrease in prepaid and other current assets was mainly due to
fees
15
associated with the lower prepayment of insurance premiums. The decrease in real
estate held for sale was due to the sale of land and building retained from a
previous divestiture. The decrease in accounts payable was mainly due to the
payments coming due for purchases made in the fourth quarter of fiscal 2004.
Interest payments on our senior credit facility are due on a monthly basis,
instead of quarterly, thus accounting for the decrease in accrued interest. The
decrease in other current liabilities is the result of the final shipments on
the HLU-196 Bomb Hoist program and payment of liabilities which were accrued in
fiscal year 2004. The decrease in income tax payable is the result of a tax
installment related to a previous divestiture and a lower effective tax benefit.
The number of days that sales were in accounts receivable increased to 40.6 days
at December 26, 2004 from 35.2 days at March 31, 2004. The increase in days was
attributable to December sales representing 34% of fiscal 2005 third quarter
sales due to specific scheduling requirements. Inventory turnover increased to
2.6 turns for the third quarter of fiscal 2005 versus 1.79 turns for fiscal
2004. The increase in inventory turns is reflective of normal inventory and
production patterns.
CAPITAL EXPENDITURES
Our additions to property, plant and equipment were $1.6 million for the nine
months of fiscal 2005, compared to $350 thousand for the first nine months of
fiscal 2004. Projects budgeted in fiscal 2005, are expected to be in a range of
$2.6-$3.3 million and include the installation of a new enterprise resource
planning (ERP) system.
SENIOR CREDIT FACILITY
On November 10, 2004, we refinanced and repaid in full the Former Senior Credit
Facility and the Notes with a $71.5 million, forty-two month, senior credit
facility (the "Senior Credit Facility"). The Senior Credit Facility consists of
a $10.0 million asset-based Revolving Credit Facility, and three tranches of
Term Loans totaling $61.5 million. At December 26, 2004, the Senior Credit
Facility has an effective weighted interest rate of approximately 13.7% which is
tied to the prime rate. The Term Loans require monthly principal payments of
$250,000 over the term of the loan with the balance due at the end of the term.
Accordingly, the balance sheet reflects $3.0 million of current maturities due
under the Senior Credit Facility. The Senior Credit Facility also contains
certain mandatory prepayment provisions which are linked to cash flow and
customary financial covenants and events of default. The Senior Credit Facility
is secured by all of the Company's assets. The Company recorded a pre-tax
charge of $2.2 million relating to the write-off of unamortized fees from prior
financings and the payment of pre-payment premiums in the quarter ended
December 26, 2004. Costs associated with establishing the Senior Credit Facility
were $2.2 million and will be amortized over the forty-two month term of the new
facility. As mentioned above, we have lowered our current effective interest
rate to 13.7% from the 19.5% in effect at the time of the refinancing. Measured
against the annual effective interest rate at the time of the refinancing, the
Senior Credit Facility is expected to result in an annual interest expense
savings of approximately $3.4 million, subject to future changes in the Prime
Rate. The Senior Credit Facility also contains provisions that would allow the
rate to decline further if we achieve certain operating targets.
TAX BENEFITS FROM NET OPERATING LOSSES
At December 26, 2004, we had federal and state net operating loss carryforwards
("NOLs"), of approximately $59.7 million and $79.6 million, respectively, which
are due to expire in fiscal 2006 through fiscal 2024. These NOLs may be used to
offset future taxable income through their
16
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 believe that we have not 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)
2005 2006 2007 2008 2009 TOTAL
------------------------------------------------------
Long-term debt $ 1,051 $ 3,079 $ 3,000 $ 3,000 $51,621 $ 61,751
Operating leases 72 277 174 65 -- 588
------------------------------------------------------
Total $ 1,123 $ 3,356 $ 3,174 $ 3,065 $51,621 $ 62,339
======================================================
Obligations for long-term debt do not reflect any change that may occur due to
any future change in the Prime Rate of interest.
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
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, 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.
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ENVIRONMENTAL MATTERS
We evaluate our exposure to environmental liabilities using a financial risk
assessment methodology, including a system of internal environmental audits and
tests and outside consultants. This risk assessment includes the identification
of risk events/issues, including potential environmental contamination at
Company and off-site facilities; characterizes risk issues in terms of
likelihood, consequences and costs, including the year(s) when these costs could
be incurred; analyses risks using statistical techniques; and, constructs risk
cost profiles for each site. Remediation cost estimates are prepared from this
analysis and are taken into consideration in developing project budgets from
third party contractors. Although we take great care in the development of these
risk assessments and future cost estimates, the actual amount of the remediation
costs may be different from those estimated as a result of a number of factors
including, changes to government regulations or laws; changes in local
construction costs and the availability of personnel and materials; unforeseen
remediation requirements that are not apparent until the work actually
commences; and other similar uncertainties. We do not include any unasserted
claims we might have against others in determining our liability for such costs,
and, except as noted with regard to specific cost sharing arrangements, have no
such arrangements, nor have we taken into consideration any future claims
against insurance carriers we might have in determining our environmental
liabilities. In those situations where we are considered a de minimus
participant in a remediation claim, the failure of the larger participants to
meet their obligations could result in an increase in our liability with regard
to such a site.
We continue to participate in environmental assessments and remediation work at
eleven locations, including our former facilities. Due to the nature of
environmental remediation and monitoring work, such activities can extend for up
to thirty years, depending upon the nature of the work, the substances involved,
and the regulatory requirements associated with each site. In calculating the
net present value (where appropriate) of those costs expected to be incurred in
the future, we use a discount rate of 7.5%. Based on the above, we estimate the
current range of undiscounted cost for remediation and monitoring to be between
$7.1 million and $9.7 million with an undiscounted amount of $8.0 million to be
most probable. Current estimates for expenditures for each of the five
succeeding fiscal years are $1.1 million, $0.8 million, $0.3 million, $0.3
million, and $0.3 million respectively, with $5.2 million payable thereafter. Of
the total undiscounted costs, we estimate that approximately 30% will relate to
remediation activities and that 70% will be associated with monitoring
activities.
We estimate that our potential cost for implementing corrective action at nine
of these sites will not exceed $0.5 million in the aggregate, payable over the
next several years, and have provided for the estimated costs, without
discounting for present value, in our accrual for environmental liabilities. In
the first quarter of fiscal 2003, we entered into a consent order for a former
facility in New York, which is currently subject to a contract for sale,
pursuant to which we are developing a remediation plan for review and approval
by the New York Department of Environmental Conservation. Based upon the
characterization work performed to date, we have accrued estimated costs of
approximately $2.4 million. The amounts and timing of such payments are subject
to an approved remediation plan.
The environmental cleanup plan we presented during the fourth quarter of fiscal
2000 for a portion of a site in Pennsylvania which continues to be owned
although the related business has been sold was approved during the third
quarter of fiscal 2004. This plan was submitted
18
pursuant to the Consent Order and Agreement with the Pennsylvania Department of
Environmental Protection ("PaDEP") concluded in fiscal 1999. 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. An environmental cleanup plan for the portion of the site covered by the
2003 Consent Order was presented during the second quarter of fiscal 2004. We
are also administering an agreed settlement with the Federal government under
which the government pays 50% of the direct and indirect 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 direct and indirect environmental response costs associated with another
portion of the site. At December 26, 2004, our cleanup reserve was $1.9 million
based on the net present value of future expected cleanup and monitoring costs.
We expect that remediation at this site, which is subject to the oversight of
the Pennsylvania authorities, will not be completed for several years, and that
monitoring costs could extend for up to thirty years.
In addition, we have been named as a potentially responsible party in five
environmental proceedings pending in several 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 one site, 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 our 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 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.
FORWARD LOOKING STATEMENTS
Certain statements in this Quarterly Report constitute "forward-looking
statements" within the meaning of the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended (the "Acts"). Any statements
contained herein that are not statements of historical fact are deemed to be
forward-looking statements.
The forward-looking statements in this Quarterly Report are based on current
beliefs, estimates and assumptions concerning the operations, future results,
and prospects of the Company. As actual operations and results may materially
differ from those assumed in forward-looking statements, there is no assurance
that forward-looking statements will prove to be accurate. Forward-looking
statements are subject to the safe harbors created in the Acts.
19
Any number of factors could affect future operations and results, including,
without limitation, the results of audits and inquiries into the Company's
business practices; the Company's ability to provide a trading venue for its
shares; determination by the Company to dispose of or acquire additional assets;
general industry and economic conditions; events impacting the U.S. and world
financial markets and economies; interest rate trends; capital requirements;
competition from other companies; changes in applicable laws, rules and
regulations affecting the Company in the locations in which it conducts its
business; the availability of equity and/or debt financing in the amounts and on
the terms necessary to support the Company's future business; and those specific
risks that are discussed in this Quarterly Report.
Additional information concerning factors that could cause actual results to
differ materially from those expressed or implied in forward-looking statements
is available in the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 2004, and subsequent filings with the United States Securities
and Exchange Commission (SEC). Copies of these filings are available at no cost
on the SEC's website at www.sec.gov or on the Company's website at
www.transtechnology.com. Management may elect to update forward-looking
statements at some future point; however, it specifically disclaims any
obligation to do so.
RECENTLY ISSUED ACCOUNTING STANDARDS
In December 2003, the FASB issued Interpretation No. 46R, a revision to
Interpretation No. 46, "Consolidation of Variable Interest Entities", which
addresses how a business enterprise should evaluate whether it has a controlling
financial interest in an entity through means other than voting rights and
accordingly should consolidate the entity. Interpretation No. 46R clarifies some
of the provisions of Interpretation No. 46 and exempts certain entities from its
requirements. Interpretation No. 46R was effective at the end of the first
quarter ended June 27, 2004. The adoption of this statement did not have a
material impact on our financial position or results of operations.
In November 2004, the Financial Accounting Standards Board issues Statement of
Financial Accounting Standards ("SFAS") No. 151, Inventory Costs. This statement
amends the guidance in Accounting Research Bulletin ("ARB") No. 43, Restatement
and Revision of Accounting Research Bulletins, Chapter 4 "Inventory Pricing", to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs and wasted material (spoilage). SFAS No. 151 requires that these
items be recognized as current-period charges regardless of whether they meet
the definition of "so abnormal" in ARB No. 43. In addition, SFAS No. 151
requires that allocation of fixed overheads to the costs of conversion be based
on the normal capacity of production facilities. SFAS No. 151 is effective for
our fiscal year ending March 31, 2006. Management has not yet determined that
the adoption of this statement will have on the results of our operations.
In December 2004, the FASB issued SFAS No. 123 (Revised 2004) "Share-Based
Payment" ("SFAS No. 123R") that addresses the accounting for share-based payment
transactions in which a company receives employee services in exchange for (a)
equity instruments of the company or (b) liabilities that are based on the fair
value of our equity instruments or that may be settled by the issuance of such
equity instruments. SFAS No. 123R addresses all forms of share-based payment
awards, including shares issued under employee stock purchase plans, stock
options, restricted stock and stock appreciation rights. SFAS No. 123R
eliminates the ability to account for share-based compensation transactions
using APB Opinion No. 25, "Accounting for Stock Issued to Employees", that was
provided in Statement 123 as originally issued. Under SFAS No. 123R companies
are required to record compensation expense for all share based payment award
transactions measured at
20
fair value. This statement is effective for quarters ending after June 15, 2005.
We have not yet determined the transition approach in adopting this statement.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have been and are exposed to various market risks, primarily changes in
interest rates associated with the Senior Credit Facility under which there were
borrowings of $61.6 million at December 26, 2004. Based on current debt levels,
each quarter point increase in the Prime Rate will increase our annual interest
expense by approximately $0.2 million.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to the Company's management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. In designing and evaluating the disclosure
controls and procedures, management recognizes that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, and management necessarily is
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.
Within 90 days prior to the date of this report, the Company carried out an
evaluation under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Company's
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the forgoing, the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date the Company completed its evaluation.
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.
21
ITEM 6. EXHIBITS
(a) Exhibits
10.29 Waiver dated October 1, 2004 of certain financial covenants of
the Securities Purchase Agreement between the Company and the
Purchasers named therein, dated as of August 29, 2000, as
amended.
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.
32 Certification Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(b) Form 8-K
On October 12, 2004 the Registrant filed an 8-K which furnished the
October 8, 2004 press releases TT Receives Commitment for New
Financing and TransTechnology to appeal NYSE Delisting Determination
On October 14, 2004 the Registrant filed an 8-K which furnished the
October 13, 2004 press release TransTechnology Reports Fiscal 2005
Second Quarter Results
On November 9, 2004 the Registrant filed an 8-K which furnished the
November 8, 2004 press release TransTechnology Reports Revised
EBITDA Target and Refinancing Terms
On November 15, 2004 the Registrant filed an 8-K which furnished the
November 10, 2004 Credit Agreement and press release TransTechnology
Announces Completion of Refinancing
22
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 7, 2005 By: /s/ Joseph F. Spanier
---------------------------------------
Joseph F. Spanier, Vice President,
Chief Financial Officer and Treasurer *
*On behalf of the Registrant and as Principal Financial and Accounting
Officer.
23