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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001 Commission File Number 0-4539
TRANS-INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2598139
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2637 S. Adams Road, Rochester Hills, MI 48309
(Address of principal executive offices) (Zip Code)
(248) 852-1990
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.10 Per Share
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 and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
As of February 28, 2002, 3,139,737 shares of Common Stock were
outstanding and the aggregate market value of the Common Stock held by
non-affiliates of the registrant (based upon the last sale price on the NASDAQ
National Market) was approximately $1,400,397.
DOCUMENTS INCORPORATED BY REFERENCE
Information called for by Part III (Items 10, 11, 12, and 13) is
incorporated by reference from the Registrant's definitive proxy statement in
connection with its Annual Meeting of Shareholders to be held on May 15, 2002,
which Proxy Statement will be filed pursuant to Regulation 14A.
PART I
Item 1 Business.
Introduction
Trans-Industries, Inc. (the "Company") was incorporated in
Delaware in 1967 to acquire the business of Transign, Inc., a company founded in
1952 to manufacture mechanical bus signs. Initially, the Company produced
mechanical signage for the mass transit market, but its current efforts are
concentrated on electronic systems for the display of information, bus lighting
products, and source extraction systems for the environmental market. These
products are sold to virtually all aspects of the transportation industry and to
a broad range of commercial and industrial markets. The Company has two major
customers - Gillig Corporation and New Flyer Industries - which each accounted
for over 10 percent of consolidated annual sales. Although Gillig Corp. and New
Flyer Industries are highly valued customers, the Company does not consider
itself dependent upon them for continued ongoing sales. Sales volume is
significantly affected by state and municipal government spending for mass
transit, highway systems, and airports. As of February 28, 2002, the Company's
backlog was $14,094,628 compared with $16,780,628 and approximately $18,983,400
for the same dates in 2001 and 2000, respectively. Of the current backlog, it is
anticipated that 90 percent will be completed within one year.
Operations
A. Industry Segment.
By nature, all products supplied by Trans-Industries and its
subsidiary Companies are designed to provide comfort, convenience and safety to
passengers and properties in the mass transit market. The signage is used as a
means of communication with vehicle passengers. The signs provide a system to
send messages to vehicle operators and passengers alike, whether the message is
of alternate routes in heavy traffic or to warn of an impending hazard. The
interior bus lighting systems not only provide comfort but illuminates the
vehicles interior which in effect improves passenger safety. The "source
extraction system" is provided to transportation groups who use the system to
clean their
2
vehicles. This system provides a convenient method of maintaining a cleaner,
healthier, and more comfortable atmosphere for the passengers. The production
process for all but a small percentage of production is assembly work. The
"source extraction system" is strictly an assembly operation.
The customer base for most of Trans-Industries products include:
1. State department of transportation groups;
2. Bus builders; and
3. City and local government.
B. Foreign and Domestic Operations and Export Sales.
Through a subsidiary, the Company operates a manufacturing,
assembly, sales, and service facility in the United Kingdom. This operation
sells products purchased from the affiliated domestic companies, as well as
products manufactured in the United Kingdom, to customers in Europe, Australia,
and Asia. Additional foreign sales are made on an export basis from domestic
offices as well as through certain agents abroad. Summarized financial
information about foreign operations and exports is in Note N to the
Consolidated Financial Statements.
C. Research and Quality Control.
The Company's principal research activities are conducted at its
product development center in Rochester Hills, Michigan, where line maintenance
and new product programs are carried out according to perceived market
opportunities. Quality control, rather than being centralized, is a function
performed at each manufacturing plant.
Approximately $816,000, $966,000 and $1,140,000 was spent on
research and development during the years-ended December 31, 2001, 2000 and
1999, respectively.
D. Competition.
In each of the market niches where the Company competes, there are
one or more competitors. Sizes of these concerns range from small to large
integrated enterprises, both domestically and internationally, with no single
company dominating the various markets. The Company owns and
3
has licensed United States and foreign patents relating to the manufacture of
most of its products, but these are not deemed sufficient to substantially
minimize competition from other parties. It is felt that success in the
marketplace is due to the ability to compete on the basis of price, service, and
product performance.
E. Raw Materials.
The principal raw materials used by the Company include steel,
aluminum, plastics, electronic components, and synthetic materials, all of which
are presently available in adequate supply on the open market.
F. Employee Relations.
The Company employs approximately 236 people, supplemented by
temporary workers, with a minimum of these employees covered by a union contract
that expires August 10, 2002. The Company considers its overall labor relations
with employees to be good.
The Company maintains profit sharing and 401-K plans for all of
its full-time employees who are not part of a bargaining unit.
In 1996, the Company adopted a stock option plan for officers,
directors, and key employees of the Company and its subsidiaries. (See Note I to
the financial statements)
G. Environmental Considerations.
The Company believes it is in compliance with all state and
federal regulations for environmental control and safety, and the related
expenditures are generally not significant.
H. Directors and Officers of the Registrant.
See Part III, Item 10 for certain information regarding officers
and directors.
Item 2. Properties.
Domestic operations are conducted at seven principal facilities.
Four are owned, of which two are located in Waterford, Michigan, one in
Rochester Hills, Michigan and one in Bad Axe,
4
Michigan. Four locations are leased. One of the leased facilities is located in
Rochester Hills, Michigan under a month to month lease agreement. Two leased
facilities are in Wilmington, North Carolina. One facility is leased through
January 2006 and the other is leased through June 2003.
International operations are conducted in England at a leased
facility located in Leeds. The lease agreement expires in December 2009.
The plants, all of which are well maintained and in good operating
condition, contain an aggregate of approximately 280,000 square feet of floor
space. Generally, the plants have been operating on a five day a week basis with
occasional overtime.
Item 3. Legal Proceedings.
The Company was the plaintiff in a patent infringement lawsuit
filed in the Federal District Court for the Eastern District of Michigan,
Southern Division. On April 9, 1998, the District Court awarded the Company
$3,023,773 in damages and $1,119,588 in interest. On May 1, 1998, the defendant
paid the damages awarded to the Company and appealed the interest award. On
April 29, 1999, the Court Of Appeals, consisting of a three judge panel, ruled
in favor of the defendant, thus allowing the interest calculation to be computed
using an interest rate of approximately 1/2 the original calculation. Because
the decision was not unanimous, the Company appealed this decision. In June of
1999, the court again ruled in favor of the defendant. In August of 1999, a
final interest award of $719,153 ($599,294 net of legal fees) was paid to the
Company, thereby bringing a conclusion to this suit.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted during the fourth quarter of the fiscal
year covered by this report to a vote of security holders through solicitations
of proxies or otherwise.
5
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The Common Stock is traded on the Over-the-Counter Market and is
included in the National Association of Securities Dealers Automated Quotation
System under the symbol TRNI. The following table sets forth the range of trade
prices as reported by the National Securities Dealers Association, Inc. for the
preceding two years:
Trade Prices
High Low
---- ---
2001
First Quarter 3.44 1.13
Second Quarter 4.00 2.00
Third Quarter 3.05 1.26
Fourth Quarter 1.60 .87
2000
First Quarter 7.88 5.00
Second Quarter 5.88 4.25
Third Quarter 5.00 2.88
Fourth Quarter 3.16 1.25
These quotations reflect actual transactions without retail markup, markdown, or
commission.
As of December 31, 2001, there were 225 registered holders of the
Common Stock of the Registrant.
6
Item 6. Selected Financial Data.
The following selected consolidated financial data relating to the
Company and its subsidiaries has been taken from the consolidated financial
statements. Such selected consolidated financial data should be read in
conjunction with the consolidated financial statements of the Company.
OPERATIONS 2001 2000 1999 1998 1997
Net Sales $ 36,135,578 $ 44,687,028 $ 39,544,177 $ 35,795,386 $ 35,382,461
Cost of Sales 28,013,444 35,219,941 28,167,787 22,296,059 22,824,939
Interest Expense 1,191,470 1,444,864 955,953 565,889 637,401
Income Tax Exp. (benefit) (1,944,000) (305,000) 392,000 2,287,000 1,498,000
Net Earnings (loss) (3,079,378) (2,303,258) 225,643 4,071,729 2,711,560
FINANCIAL CONDITION
Current Assets 22,478,496 25,834,537 24,664,953 20,793,971 16,081,326
Current Liabilities 13,803,098 17,652,186 15,669,461 9,895,773 7,795,272
Working Capital 8,675,398 8,182,351 8,995,492 10,898,198 8,286,054
Current Ratio 1.63 1.46 1.57 2.10 2.06
Net Property, Plant
and Equipment 4,738,521 7,292,013 7,318,657 5,731,698 5,012,911
Long Term Debt 4,044,584 5,263,236 3,923,634 3,175,917 3,561,838
Stockholders' Equity 10,184,408 11,307,577 13,630,120 13,349,629 9,640,246
Total Assets 28,281,338 34,763,470 33,833,827 27,086,459 21,618,928
Tangible Net Worth
and Subordinated Debt 9,120,087 9,670,657 11,779,903 12,788,839 9,220,026
COMMON SHARE DATA
Net Earnings (loss) (a)
Basic $ (.98) $ (.73) $ .07 $ 1.30 $ .86
Diluted $ (.98) $ (.73) $ .07 $ 1.28 $ .85
Book Value (b) $ 3.24 $ 3.60 $ 4.34 $ 4.25 $ 3.07
Average Shares Outstanding
Basic 3,140,000 3,140,000 3,140,000 3,138,000 3,135,000
Diluted 3,140,000 3,140,000 3,140,000 3,185,000 3,214,000
(a) Based on weighted average number of common shares and equivalents
outstanding.
(b) Based on shares outstanding at year end.
7
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Forward-Looking Statements
This discussion highlights significant factors influencing the
financial condition and results of operations of Trans-Industries, Inc. It
should be read in conjunction with the financial statements and related notes.
This discussion includes certain forward-looking statements based on
management's estimate of trends and economic factors in the markets in which the
corporation is active, as well as the corporation's business plans. In light of
recent securities law developments, including the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995, the corporation notes that
such forward-looking statements are subject to risks and uncertainties.
Accordingly, the corporation's actual results may differ from those set forth in
such statements. Significant changes in economic conditions, regulatory or
legislative changes affecting Trans-Industries, Inc., its competitors, or the
markets in which it is active, or changes in other factors may cause future
results to vary from those expected by the corporation.
OPERATIONS
2001 compared with 2000
Sales for 2001 were $36.1 million compared to $44.7 million for the
previous year. This sales decrease of $8.6 million, or 19.1 percent, from 2000
sales levels, was attributable to the closing of two subsidiaries, Transmatic
Europe and Transmatic Window Systems, and to a decline in sales of the Company's
electronic information signs. Transmatic Europe produced transit lighting
products for sale abroad as well as the vacuum forming of bus interior parts
sold in the United States. Transmatic Window Systems fabricated bus window
systems for use in transit buses and was located in California. During 2001, it
became evident that neither company would achieve its profit targets. This,
coupled with recent fiscal year losses at each company, prompted the decision to
close both operations for the good of the company as a whole. The negative
impact on sales for 2001 compared with 2000 was approximately $2.7 million.
Inflationary impact on sales for 2001 and 2000 was minimal.
For the first quarter of 2002, it is anticipated that sales will be down
approximately 15 percent from the level achieved for the same period last year.
However, the Company does expect to post modest profits on this reduced volume
due, in large measure to the closing of unprofitable operations.
8
The Company's pretax loss for 2001 amounted to $5,023,378 compared to a
pretax loss of $2,608,258 for the 2000 fiscal year. Included in the pretax loss
for 2001 is $2,116,000 of restructuring costs associated with the closing of two
subsidiaries. These restructuring costs and lower sales volumes for 2001 are
primarily responsible for the increased loss.
Cost of sales for 2001 was $28,013,444 compared to $35,219,941 for the
previous year. As a percentage of sales, this amounted to 77.5 percent in 2001
compared to 78.8 percent in 2000. This slight decrease of 1.3 percent was
primarily attributable to product mix.
Selling, general, and administrative expenses showed a decrease in 2001
to $9,915,491 from $10,775,130 in 2000. This decrease of $859,639 or 8.0 percent
was primarily due to the closing of two subsidiaries and attendant employee
reductions.
Interest expense in 2001 decreased to $1,191,470 from $1,444,864 in
2000. The decrease of $253,394 reflects lower borrowings and lower interest
rates for the 2001 year.
OPERATIONS
2000 Compared with 1999
Sales for 2000 were $44.7 million compared to $39.6 million for the
previous year. This sales increase of $5.1 million, or 13.2 percent, from 1999
sales levels, was attributable to increased sales of the Company's electronic
signs systems, transit bus lighting equipment, and its transit bus window
systems. Inflationary impact on sales for 2000 and 1999 was minimal.
For the first quarter of 2001, the Company's sales were slightly below
the levels achieved for the same period last year. This decrease of 6.8 percent
reflects lower sales of the Company's electronic sign and bus window systems.
The Company's pretax loss for 2000 amounted to $2,608,258 compared to a
pretax income of $617,643 for the 1999 fiscal year. Pretax income for 1999
includes a gain, net of legal fees, of $599,294 from an interest judgement
relating to the proceeds of a patent infringement lawsuit award received by the
Company in 1998. The decline in the Company's 2000 pretax income from operations
as compared to 1999 was primarily attributable to high fixed and variable
manufacturing costs associated with the
9
production of the Company's bus window systems and insufficient revenues to
recover these costs. The same was true at our U.K. facility where moldings of
complete bus interiors are produced. The Company is actively addressing
corrective measures for both facilities.
Cost of sales for 2000 was $35,219,941 compared to $28,167,787 for the
prior year. As a percentage of sales, this amounted to 78.8 percent in 2000
compared to 71.2 percent in 1999. This increase of 7.6 percent was primarily
attributable to increased manufacturing costs associated with the Company's
window systems and molding operations.
Selling, general, and administrative expenses showed a small increase in
2000 to $10,775,130 from $10,636,155 in 1999. This increase of $138,975, or 1.3
percent, was primarily due to increased sales efforts.
Interest expense increased in 2000 to $1,444,864 from $955,953 in 1999.
This increase of $488,911 reflects higher borrowings and higher interest rates
in 2000.
LIQUIDITY AND CAPITAL RESOURCES
As of year-end 2001, the Company had $8.7 million of working capital
compared with $8.2 million at year-end 2000 and $9.0 million at year-end 1999.
The increase in working capital of $.5 million in 2001 from 2000 was primarily
due to the increase in refundable income taxes. The Company showed a net
utilization of cash from operating activities of $1,065,000 for the year ended
December 31, 2001. Net cash used by operations was primarily the result of
operating losses for the year and a significant reduction in the Company's trade
payables. The Company generated cash from investing activities of $678,000 which
is the net of sales and purchases of property and equipment. $1,900,000 was
generated from the issuance of preferred stock and the proceeds of which were
primarily used to reduce bank debt resulting in a net generation of cash from
financing activities for the current year of $175,000. The decrease of working
capital in 2000 of $.8 million was primarily due to operating losses incurred in
2000.
Anticipated increases in required working capital are expected to be met
from the cash flow from operations and credit line borrowings. At December 31,
2001, there were no material commitments for capital expenditures for the
ensuing year.
10
DIVIDENDS
Typically, the Company does not pay cash dividends on its common
stock. See Note F regarding dividends on preferred stock.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company's exposure to interest rate risk is limited to
fluctuations in the banks prime lending rate which may increase or decrease the
effective interest rate on the Company's revolving credit facility. The Company
is exposed to the impact of foreign currency fluctuations. International
revenues from the foreign subsidiaries were approximately 8% of total revenues
for the twelve months ended December 31, 2001. The Company's primary foreign
currency exposure is the British Pound. The Company manages its exposure to
foreign currency denominated assets with liabilities in the same currency and,
as such, certain exposures are naturally offset. The Company's foreign currency
loss is immaterial and as such the exposure has been omitted. The bulk of the
items purchased by the Company are electronic components not considered
commodities, as such there is no real commodity price risk. The Company does not
hold any derivative instruments or engage in any hedging activities. Therefore
SFAS 133 is not applicable.
Item 8. Financial Statements.
The following pages contain the Consolidated Balance Sheets as of
December 31, 2001 and 2000 and the related Consolidated Statements of
Operations, Stockholders' Equity and Cash Flows for each of the years in the
three year period ended December 31, 2001, including the report of the Company's
independent certified public accountants.
11
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
12
CONTENTS
PAGE
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.................................................. 14
FINANCIAL STATEMENTS
Consolidated Balance Sheets..................................................................... 15
Consolidated Statements of Operations........................................................... 17
Consolidated Statements of Comprehensive (Loss) Income.......................................... 18
Consolidated Statement of Stockholders' Equity.................................................. 19
Consolidated Statements of Cash Flows........................................................... 20
Notes to Consolidated Financial Statements...................................................... 21
SUPPLEMENTAL INFORMATION
Schedule II - Valuation and Qualifying Accounts ................................................ 32
13
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Trans-Industries, Inc.
We have audited the accompanying consolidated balance sheets of
Trans-Industries, Inc. (a Delaware corporation) and Subsidiaries as of December
31, 2001 and 2000 and the related consolidated statements of operations,
comprehensive (loss) income, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Trans-Industries, Inc. and Subsidiaries as of December 31, 2001 and 2000, and
the consolidated results of their operations and their consolidated cash flows
for each of the three years in the period ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States of America.
/s/ GRANT THORNTON, LLP
Detroit, Michigan
February 15, 2002
14
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
- -------------------------------------------------------------------------------
ASSETS 2001 2000
----------- -----------
CURRENT ASSETS
Cash $ 161,782 $ 317,754
Accounts receivable, less allowance for doubtful
accounts of $481,000 in 2001 and $656,000
in 2000 8,856,017 10,925,535
Inventories 11,306,388 13,056,101
Refundable income taxes 764,606 251,964
Deferred income taxes 997,000 856,000
Prepaid expenses and other current assets 392,703 427,183
----------- -----------
Total Current Assets 22,478,496 25,834,537
PROPERTY, PLANT AND EQUIPMENT - AT COST
Land 306,881 306,881
Land improvements 126,660 126,660
Buildings 6,019,461 6,165,056
Machinery and equipment 10,441,646 12,689,567
----------- -----------
16,894,648 19,288,164
Less accumulated depreciation and amortization 12,156,127 11,996,151
----------- -----------
Net property, plant and equipment 4,738,521 7,292,013
Goodwill, less accumulated amortization of
$74,999 in 2001 and $1,521,917 in 2000 150,369 1,487,985
Deferred income taxes 824,000 --
Other assets 89,952 148,935
----------- -----------
$28,281,338 $34,763,470
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
15
LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2000
------------ ------------
CURRENT LIABILITIES
Note payable to bank $ 7,669,746 $ 8,439,749
Current maturities of long-term debt 1,077,112 813,025
Accounts payable 3,526,513 6,935,197
Accrued liabilities 1,529,727 1,464,215
------------ ------------
Total Current Liabilities 13,803,098 17,652,186
LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES 4,044,584 5,263,236
DEFERRED INCOME TAXES -- 240,000
OTHER LIABILITIES 249,248 300,471
COMMITMENTS AND CONTINGENCIES (NOTE G) -- --
STOCKHOLDERS' EQUITY
Preferred stock of $1 par value per share, authorized
500,000 shares; 19,000 issued and outstanding in 2001 19,000 --
Common stock of $0.10 par value per share, authorized
10,000,000 shares; 3,139,737 issued and outstanding 313,974 313,974
Additional paid-in capital 5,953,081 4,072,081
Retained earnings 3,875,113 6,954,491
Accumulated other comprehensive (income) loss 23,240 (32,969)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 10,184,408 11,307,577
------------ ------------
$ 28,281,338 $ 34,763,470
============ ============
16
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
2001 2000 1999
------------ ------------ ------------
Net sales $ 36,135,578 $ 44,687,028 $ 39,544,177
Cost of goods sold 28,013,444 35,219,941 28,167,787
------------ ------------ ------------
Gross profit 8,122,134 9,467,087 11,376,390
Selling, general and administrative expenses 9,915,491 10,775,130 10,636,155
Restructuring costs 2,116,153 -- --
------------ ------------ ------------
Operating (loss) earnings (3,909,510) (1,308,043) 740,235
Other expense (income), net
Interest expense 1,191,470 1,444,864 955,953
Patent litigation award -- -- (599,294)
Other (77,602) (144,649) (234,067)
------------ ------------ ------------
1,113,868 1,300,215 122,592
------------ ------------ ------------
(Loss) earnings before income taxes (5,023,378) (2,608,258) 617,643
Income tax (benefit) expense (1,944,000) (305,000) 392,000
------------ ------------ ------------
Net (loss) earnings $ (3,079,378) $ (2,303,258) $ 225,643
============ ============ ============
(Loss) earnings per share:
Basic $ (.98) $ (.73) $ .07
============ ============ ============
Diluted $ (.98) $ (.73) $ .07
============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
17
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
YEARS ENDED DECEMBER 31,
2001 2000 1999
----------- ----------- -----------
Net (loss) earnings $(3,079,378) $(2,303,258) $ 225,643
Other comprehensive income (loss)
Equity adjustment from foreign
currency translation 56,209 (19,285) 54,848
----------- ----------- -----------
Comprehensive (loss) income $(3,023,169) $(2,322,543) $ 280,491
=========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
18
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
- -------------------------------------------------------------------------------
ACCUMULATED
ADDITIONAL OTHER
PREFERRED COMMON PAID-IN RETAINED COMPREHENSIVE
STOCK STOCK CAPITAL EARNINGS INCOME (LOSS) TOTAL
------- -------- ---------- ----------- -------- ------------
Balance at January 1, 1999 $ -- $313,974 $4,072,081 $ 9,032,106 $(68,532) $ 13,349,629
Net earnings -- -- -- 225,643 -- 225,643
Other comprehensive income -- -- -- -- 54,848 54,848
------- -------- ---------- ----------- -------- ------------
Balance at December 31, 1999 -- 313,974 4,072,081 9,257,749 (13,684) 13,630,120
Net loss -- -- -- (2,303,258) -- (2,303,258)
Other comprehensive loss -- -- -- -- (19,285) (19,285)
------- -------- ---------- ----------- -------- ------------
Balance at December 31, 2000 -- 313,974 4,072,081 6,954,491 (32,969) 11,307,577
Issuance of 19,000 shares of
preferred stock 19,000 -- 1,881,000 -- -- 1,900,000
Net loss -- -- -- (3,079,378) -- (3,079,378)
Other comprehensive income -- -- -- -- 56,209 56,209
------- -------- ---------- ----------- -------- ------------
Balance at December 31, 2001 $19,000 $313,974 $5,953,081 $ 3,875,113 $ 23,240 $ 10,184,408
======= ======== ========== =========== ======== ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
19
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
- -------------------------------------------------------------------------------
2001 2000 1999
----------- ----------- -----------
OPERATING ACTIVITIES
Net (loss) earnings $(3,079,378) $(2,303,258) $ 225,643
Adjustments to reconcile net (loss) earnings to net
cash (used in) operations:
Depreciation of property, plant and equipment 1,055,681 1,247,147 1,155,076
Bad debt expense 397,598 375,220 204,557
Amortization and write-off of goodwill 1,337,616 166,389 144,652
Loss on sale of property and equipment 820,238 -- 2,519
Deferred income tax benefit (1,205,000) (55,000) (425,000)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 1,671,920 (811,568) (1,954,868)
Decrease (increase) in inventories 1,749,713 (256,580) (1,744,832)
(Decrease) increase in accounts payable (3,408,684) 2,568,074 1,513,933
(Decrease) increase in other (404,890) (1,063,151) 224,458
----------- ----------- -----------
Net cash used in operating activities (1,065,186) (132,727) (653,862)
INVESTING ACTIVITIES
Purchases of property, plant and equipment (444,785) (1,220,503) (2,552,686)
Proceeds from sale of property and equipment 1,122,358 -- 1,500
Acquisition of businesses, net of cash acquired -- -- (1,604,704)
----------- ----------- -----------
Net cash provided by (used in) investing activities 677,573 (1,220,503) (4,155,890)
FINANCING ACTIVITIES
Borrowings from long-term debt -- 2,765,318 1,185,424
Repayments of long-term debt (954,565) (1,078,735) (415,018)
Net (repayments) borrowings from note payable to bank (770,003) (160,267) 3,954,872
Proceeds from issuance of preferred stock 1,900,000 -- --
----------- ----------- -----------
Net cash provided by financing activities 175,432 1,526,316 4,725,278
Effect of foreign currency exchange rate changes 56,209 (19,285) 54,848
----------- ----------- -----------
Net (decrease) increase in cash (155,972) 153,801 (29,626)
Cash at beginning of year 317,754 163,953 193,579
----------- ----------- -----------
Cash at end of year $ 161,782 $ 317,754 $ 163,953
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES
Interest paid $ 1,160,956 $ 1,413,202 $ 913,358
=========== =========== ===========
Income taxes paid $ -- $ -- $ 350,000
=========== =========== ===========
Fair value of assets acquired, including goodwill $ 1,895,283
Liabilities assumed (290,579)
-----------
Net cash paid $ 1,604,704
===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
20
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001, 2000 AND 1999
- -------------------------------------------------------------------------------
NOTE A - NATURE OF OPERATIONS
The Company is a multinational manufacturer of lighting and information display
systems. The principal markets for its products are the United States, the
United Kingdom and Canada. Sales volume is significantly affected by state and
municipal government spending for mass transit, highway systems and airports.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the parent company
and its wholly owned subsidiaries (the Company). All significant intercompany
balances and transactions have been eliminated in consolidation.
REVENUE RECOGNITION
Revenue from product sales is recorded when delivery has occurred or title has
passed and collectibility is reasonably assured.
Under arrangements containing multiple elements, revenue is allocated to each
element based upon its relative fair value. Revenue from each element is
recognized when delivery occurs or title has passed and collectibility is
reasonably assured.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market (net
realizable value).
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is provided using
straight line and accelerated methods over the estimated useful lives of the
assets which range from 10-40 years for buildings and 3-10 years for machinery
and equipment.
GOODWILL
Goodwill is the excess of the cost over the fair value of net assets acquired
and is amortized over a 10 to 30 year period using the straight-line method. On
an ongoing basis, management reviews the valuation and amortization of goodwill.
As part of the review, the Company estimates the value of and the estimated
undiscounted future net income expected to be generated by the related
subsidiary to determine that no impairment has occurred.
STOCK BASED COMPENSATION
The Company adheres to the guidance of Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), which
permits entities to recognize as compensation expense over the vesting period
the fair value of all stock-based awards on the date of grant. Alternately, SFAS
No. 123 also allows entities to continue to apply the provisions of APB Opinion
No. 25 and provide for pro forma net income (loss) and pro forma earnings (loss)
per share disclosures for employee stock option grants as if the fair
value-based method defined in SFAS No. 123 had been applied. The Company has
elected to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
21
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
- -------------------------------------------------------------------------------
NOTE B - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign subsidiaries are translated principally at
year-end exchange rates. Income and expense accounts are converted using the
average exchange rate prevailing throughout the period. The gains and losses
resulting from the translation of these accounts are reported as a separate
component of stockholders' equity.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. Research and
development costs approximated $816,000, $966,000 and $1,140,000 for the years
ended December 31, 2001, 2000 and 1999, respectively.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, and the effects of operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of the line of credit facility and
long-term debt. The carrying value approximates the estimated fair value based
upon rates and terms available for loans and notes with similar characteristics.
SELF INSURANCE
The Company maintains a Voluntary Employee Benefit Trust (the Trust), to cover
all or a portion of certain medical and dental expenses to eligible
participants. Participants are required to contribute a portion of their
compensation to the Trust. The Trust has insurance to cover catastrophic claims.
The Trust accrues for known claims plus an estimate of claims incurred but not
reported. The Company contributes to the Trust amounts sufficient to fund any
shortfall in Trust assets. Contributions are recorded as a component of selling,
general and administrative expenses.
NOTE C - EARNINGS (LOSS) PER SHARE
For all years presented, all options outstanding have been excluded from the
computation of diluted earnings per share as the effect would be antidilutive.
The weighted average common shares outstanding for 1999, 2000 and 2001 were
3,139,737.
22
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
- -------------------------------------------------------------------------------
NOTE D - INVENTORIES
The major components of inventories at December 31 are:
2001 2000
----------- -----------
Raw materials and purchased parts $ 5,283,603 $ 6,984,323
Work in process 4,444,531 3,262,522
Finished goods 1,578,254 2,809,256
----------- -----------
$11,306,388 $13,056,101
=========== ===========
NOTE E - NOTE PAYABLE AND LONG-TERM DEBT
The Company has a secured line of credit facility with a bank. The facility
allows the Company to borrow up to $13,000,000. The facility bears interest at
the bank's prime lending rate plus 1.75% (effective rate of 6.5% at December 31,
2001). Interest is payable monthly.
The line of credit agreement requires the Company to meet two covenants: A fixed
charge ratio, and a Tangible Net Worth test. At December 31, 2001 the Company
was required to exhibit a Fixed Charge Ratio of 1.00 and a Tangible Net Worth of
$8,800,000. At December 31, 2001 the Company met both covenants. The agreement
also restricts the payment of dividends, repurchase of common stock, and
acquisition of property and equipment.
Long-term debt at December 31 consisted of the following:
2001 2000
---------- ----------
Term note, payable in monthly installments of $40,725, including interest at the
bank's prime lending rate plus 1.75% (effective rate of 6.5% at December 31,
2001) with a balloon payment of $2,186,508 on May 1, 2003. The note is secured
by substantially all the assets of
the Company $2,601,519 $2,884,198
Term note payable in monthly installments $50,965 plus interest at the bank's
prime lending rate plus 1.75% (effective rate of 6.5% at December 31, 2001) with
a balloon payment of $917,374 on May 1, 2003. The note is secured by
substantially all the assets of the
Company 2,344,398 2,752,120
Other notes payable 175,779 439,943
---------- ----------
5,121,696 6,076,261
Less current maturities 1,077,112 813,025
---------- ----------
$4,044,584 $5,263,236
========== ==========
The aggregate maturities of long-term debt by year are as follows:
2002 $1,077,112
2003 3,993,716
2004 11,720
2005 12,443
2006 13,211
2007 13,494
----------
$5,121,696
==========
23
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
- -------------------------------------------------------------------------------
NOTE F - PREFERRED STOCK
During June 2001, the Company issued 19,000 shares of 8.25% cumulative preferred
stock with a par value of $1 to the Trans-Industries, Inc. Employees 401(k) and
Profit Sharing Plan for $1,900,000. Dividends in arrears at December 31, 2001
are $78,375.
NOTE G - LEASES
The Company leases facilities and equipment under operating leases with terms
ranging from a month to month basis to five years. Rent expense for all
operating leases approximated $803,000, $801,000, and $561,000 for 2001, 2000
and 1999, respectively. Future minimum rentals required under noncancelable
lease agreements are immaterial.
NOTE H - INCOME TAXES
The components of (loss) earnings before income taxes were as follows:
2001 2000 1999
----------- ----------- -----------
Domestic $(3,811,605) $(1,037,394) $ 1,435,405
Foreign (1,211,773) (1,570,864) (817,762)
----------- ----------- -----------
$(5,023,378) $(2,608,258) $ 617,643
=========== =========== ===========
Income taxes have been charged to operations as follows:
2001 2000 1999
----------- --------- ---------
Current $ (738,583) $(250,000) $ 817,000
Deferred (1,205,000) (55,000) (425,000)
----------- --------- ---------
Total income tax (benefit) expense $(1,943,583) $(305,000) $ 392,000
=========== ========= =========
A reconciliation of actual income tax expense to the expected amounts computed
by applying the effective U.S. federal income tax rate of 34 percent to earnings
or losses before income taxes is as follows:
2001 2000 1999
----------- --------- ---------
Expected income tax (benefit) expense $(1,708,000) $(887,000) $ 210,000
Amortization and write-off of goodwill
not deductible for income tax purposes 455,000 57,000 49,000
Losses of foreign subsidiaries without tax effect 412,000 534,000 145,000
Loss on disposal of subsidiaries (1,334,000) -- --
Increase in valuation allowance 386,000 -- --
Income tax credits (238,000) -- --
Other items, net 83,000 (9,000) (12,000)
----------- --------- ---------
Actual income tax (benefit) expense $(1,944,000) $(305,000) $ 392,000
=========== ========= =========
24
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
- -------------------------------------------------------------------------------
NOTE H - INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant deferred
tax assets and liabilities at December 31, 2001 and 2000 are as follows:
DEFERRED DEFERRED
TAX TAX
YEAR ENDED DECEMBER 31, 2001 ASSETS LIABILITIES
- ------------------------------------- ----------- -----------
Property, plant and equipment, principally depreciation $ -- $336,000
Inventory valuation 692,000 --
Accrued expenses, deductible when paid 392,000 --
US net operating loss carryforwards 1,309,000 --
Foreign tax loss carryforwards 1,176,000 --
US tax credit carryforwards 150,000
----------- --------
3,719,000 336,000
Less valuation allowance on deferred tax assets (1,562,000) --
----------- --------
$ 2,157,000 $336,000
=========== ========
DEFERRED DEFERRED
TAX TAX
YEAR ENDED DECEMBER 31, 2000 ASSETS LIABILITIES
- ------------------------------------- ----------- -----------
Property, plant and equipment, principally depreciation $ -- $ 342,000
Inventory valuation 521,000 --
Accrued expenses, deductible when paid 437,000 --
Foreign tax loss carryforwards 1,176,000 --
----------- -----------
2,134,000 342,000
Less valuation allowance on deferred tax assets (1,176,000) --
----------- -----------
$ 958,000 $ 342,000
=========== ===========
The Company has US and foreign tax net operating loss carryforwards of
approximately $7,271,000 at December 31, 2001. The net operating loss
carryforwards expire at various dates through 2021. A valuation allowance of
$1,562,000 has been recognized to reduce the deferred tax assets principally due
to the uncertainty of realizing the benefit of the tax loss carryforward. The
valuation allowance increased by $386,000 in 2001.
NOTE I - EMPLOYEE BENEFIT PLANS
The Company has a Voluntary Employee Benefit Trust (the Trust) designed to
provide for the payment or reimbursement of all or a portion of certain medical
and dental expenses to eligible participants. Eligible participants include
active full-time employees of the Company and their dependents. Eligible
terminated and retired employees may continue to participate in the Trust, on a
contributory basis, for up to 18 months subsequent to the date of termination or
retirement. The provision for Company contributions to the Trust approximated
$657,000, $545,000 and $467,000 for the years ended December 31, 2001, 2000 and
1999, respectively.
The Company has a deferred compensation plan for all employees who are not part
of a bargaining unit. Company contributions are voluntary and are established as
a percentage of each participant's base salary. Company contributions to the
deferred compensation plan were approximately $45,000, $45,000 and $290,000 for
2001, 2000 and 1999, respectively.
In 1996, shareholders approved the adoption of the 1996 Stock Option Plan (the
Plan) for the officers, directors, and key employees of the Company.
25
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
- -------------------------------------------------------------------------------
NOTE I - EMPLOYEE BENEFIT PLANS (CONTINUED)
The Plan is administered by an Option Committee (Committee) appointed by the
Board of Directors. The Committee has the authority, subject to Board of
Directors resolutions and the provisions of the Plan, to determine the persons
to whom awards will be granted, the number, type and terms of the awards,
including vesting and to interpret the Plan.
The Plan permits the granting of incentive stock options, non-qualified stock
options and stock appreciation rights (SAR). The total number of shares of
common stock with respect to which awards may be granted under the Plan is
200,000 shares. The option price of each option and the base for calculation of
appreciation of each SAR will be no less than the fair market value at the date
of grant. The term of each option will be fixed and may not exceed ten years
from the date of grant. The Committee may make options exercisable in
installments and may accelerate exercisability.
The Company accounts for the Plan under APB Opinion No. 25, "Accounting for
Stock Issued to Employees." No compensation costs have been recognized for the
Plan. Had compensation costs for the Plan been determined based on the fair
value of the options at the grant dates consistent with the method of SFAS No.
123, the Company's net earnings and earnings per share would have been reduced
to the pro forma amounts indicated below:
2001 2000 1999
------------- ------------- -------------
Net (loss) earnings
As reported $ (3,079,378) $ (2,303,258) $ 225,643
Pro forma $ (3,154,998) $ (2,421,002) $ 82,018
Basic (loss) earnings per share
As reported $ (.98) $ (.73) $ .07
Pro forma $ (1.00) $ (.77) $ .03
Diluted (loss) earnings per share
As reported $ (.98) $ (.73) $ .07
Pro forma $ (1.00) $ (.77) $ .03
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes options-pricing model with the following weighted average
assumptions for the options and SAR's granted in 2001, 2000 and 1999,
respectively: risk-free interest rates of 5.4%, 6.7% and 5.7%; expected
volatility of 71.42%, 61.41% and 46.71%; expected lives of 10 years for options
and four years for SAR's for all years; and no dividend yield for all years.
26
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
- -------------------------------------------------------------------------------
NOTE I - EMPLOYEE BENEFIT PLANS (CONTINUED)
A summary of the status of the Plan as of December 31, 2001, 2000 and 1999 and
changes during the years then ended is as follows:
2001 2000 1999
----------------------------- ---------------------------- -----------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
STOCK EXERCISE STOCK EXERCISE STOCK EXERCISE
OPTIONS SAR'S PRICE OPTIONS SAR'S PRICE OPTIONS SAR'S PRICE
------- ------- -------- -------- ------- -------- -------- ------- --------
Outstanding at
beginning of year 149,200 15,000 $ 7.08 134,200 78,000 $ 7.18 124,200 75,000 $7.141
Granted 15,000 9,000 2.66 20,000 12,000 6.03 10,000 3,000 7.840
Forfeited (12,200) -- 6.88 (5,000) (75,000) 6.94 -- -- --
-------- ------ ------ -------- ------- ------ ------- ------ ------
Outstanding at
end of year 152,000 24,000 $ 6.49 149,200 15,000 $ 7.08 134,200 78,000 $ 7.18
======== ====== ====== ======== ======= ====== ======= ====== ======
2001 2000 1999
-------------------- ------------------- --------------------
STOCK STOCK STOCK
OPTIONS SAR'S OPTIONS SAR'S OPTIONS SAR'S
-------- ------ ------- ------ ------- -------
Exercisable at year end 116,000 6,960 99,360 2,000 72,520 73,000
Weighted average fair value of
grants during the year $ 2.17 $ 1.47 $ 4.77 $ 2.94 $ 5.27 $ 3.22
The options have a ten year life with twenty percent vesting in each of the
first five years. The SAR's are for a four year duration with one-third vesting
in each of the first three years. Holders of SAR's will upon exercise, receive
in cash or other property at the sole discretion of the option committee, the
difference between the base price and the market price of the Company's stock on
the date of exercise. Since the SAR's were issued in tandem with stock options,
upon exercise of an SAR the holder must surrender an equivalent number of stock
options.
NOTE J - BUSINESS ACQUISITIONS
On February 8, 1999, the Company acquired all the outstanding common stock of
Plastech Transparencies, Inc. (Plastech), in exchange for $1,604,741. Plastech
changed its name to Transmatic Windows Systems, Inc. (TWS) and was an early
stage manufacturer of custom designed windows for the transportation industry.
Goodwill of $1,447,000 was recorded in connection with this acquisition, which
has been accounted for under the purchase method of accounting and accordingly
the accompanying consolidated financial statements include Plastech's results
from the date of acquisition. Plastech's operating results prior to the
acquisition were not significant, accordingly, no pro forma information is
presented. During 2001, the Company decided to cease operations at TWS (See Note
K).
27
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
- -------------------------------------------------------------------------------
NOTE K - RESTRUCTURING CHARGES
During the year ended December 31, 2001, the Company commenced and completed a
restructuring plan which resulted in the consolidation of its operations in
England and the ceasing of the operations of Transmatic Window Systems, Inc.
(TWS), its bus window manufacturer. In connection with the restructuring, the
Company recorded restructuring costs as follows:
Write-off of TWS Goodwill $1,198,129
Loss on disposal of property and equipment 810,956
Severance and other costs 107,068
----------
$2,116,153
==========
NOTE L - SIGNIFICANT CUSTOMERS
During 2001, the Company had two major customers which accounted for ten percent
or more of consolidated net sales. Sales to these customers were $5,414,000 and
$4,871,000,respectively.
During 2000 and 1999 the Company had one major customer which accounted for ten
percent or more of consolidated net sales in 2000 and 1999. Sales to this
customer amounted to $4,891,000 and $4,362,000 in 2000 and 1999, respectively.
NOTE M - PATENT LITIGATION
The Company was the plaintiff in a patent infringement lawsuit filed in the
Federal District Court for the Eastern District of Michigan, the Southern
Division. On April 9, 1998, the District Court awarded the Company $3,023,773 in
damages and $1,119,588 in interest. On May 1, 1998 the defendant paid the
damages awarded to the Company and appealed the interest award. On January 3,
1999, the defendant's appeal was denied, and interest was paid to close the
matter.
NOTE N - SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one market segment, the transportation industry.
Financial information summarized by geographic location is as follows:
2001 2000 1999
------------------------- -------------------------- --------------------------
LONG- LONG- LONG-
LIVED LIVED LIVED
REVENUES ASSETS REVENUES ASSETS REVENUES ASSETS
----------- ---------- ----------- ---------- ----------- ----------
United States $25,518,733 $5,584,995 $36,188,459 $6,965,812 $32,336,319 $7,382,489
United Kingdom 2,634,450 217,847 1,849,351 1,963,121 1,609,910 1,786,385
Canada 7,701,805 -- 5,975,397 -- 4,452,153 --
Other 280,590 -- 673,821 -- 1,145,795 --
----------- ---------- ----------- ---------- ----------- ----------
Total $36,135,578 $5,802,842 $44,687,028 $8,928,933 $39,544,177 $9,168,874
=========== ========== =========== ========== =========== ==========
28
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
- -------------------------------------------------------------------------------
NOTE O - UNAUDITED QUARTERLY RESULTS OF OPERATIONS
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
QUARTER ENDED 2001 2001 2001 2001
- ----------------------- ------------ ------------ ----------- ------------
Net sales $ 8,764,699 $ 8,317,115 $ 8,306,103 $ 10,747,661
Cost of sales 7,139,228 6,293,859 6,690,831 7,889,526
----------- ----------- ----------- ------------
Gross profit $ 1,625,471 $ 2,023,256 $ 1,615,272 $ 2,858,135
=========== =========== =========== ============
Loss applicable to common stock $ (964,109) $ (538,478) $(1,512,235) $ (64,556)
=========== =========== =========== ============
Basic and diluted loss per common share $ (.31) $ (.17) $ (.48) $ (.02)
=========== =========== =========== ============
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
QUARTER ENDED 2000 2000 2000 2000
- ----------------------- ------------ ------------ ----------- ------------
Net sales $ 10,113,077 $ 10,296,543 $12,748,067 $ 11,529,341
Cost of sales 8,815,307 8,590,131 9,310,468 8,504,035
------------ ------------ ----------- ------------
Gross profit $ 1,297,770 $ 1,706,412 $ 3,437,599 $ 3,025,306
============ ============ =========== ============
Earnings (loss) applicable to
common stock $ (1,525,980) $ (817,803) $ 156,087 $ (115,562)
============ ============ =========== ============
Basic and diluted earnings
(loss) per common share $ (0.49) $ (0.26) $ 0.05 $ (0.03)
============ ============ =========== ============
29
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
- -------------------------------------------------------------------------------
NOTE P - RECENT ACCOUNTING PRONOUNCEMENTS
On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business Combinations,
and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all
business combinations completed after June 30, 2001. SFAS 142 is effective for
fiscal years beginning after December 15, 2001; however, certain provisions of
this Statement apply to goodwill and other intangible assets acquired between
July 1, 2001 and the effective date of SFAS 142. Major provisions of these
Statements and their effective dates for the Company are as follows:
- - all business combinations initiated after June 30, 2001 must use the
purchase method of accounting. The pooling of interest method of accounting
is prohibited except for transactions initiated before July 1, 2001.
- - intangible assets acquired in a business combination must be recorded
separately from goodwill if they arise from contractual or other legal
rights or are separable from the acquired entity and can be sold,
transferred, licensed, rented or exchanged, either individually or as part
of a related contract, asset or liability.
- - goodwill, as well as intangible assets with identifiable lives, acquired
after June 30, 2001, will not be amortized. Effective January 1, 2002, all
previously recognized goodwill and intangible assets with indefinite lives
will no longer be subject to amortization.
- - effective January 1, 2002, goodwill and intangible assets with indefinite
lives will be tested for impairment annually and whenever there is an
impairment indicator.
- - all acquired goodwill must be assigned to reporting units for purposes of
impairment testing and segment reporting.
The Company's management does not believe that these Statements will have a
material impact on the Company's financial position or results of operations.
30
SUPPLEMENTAL INFORMATION
31
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 2001, 2000, AND 1999
- -------------------------------------------------------------------------------
ALLOWANCE
FOR DOUBTFUL ALLOWANCE
ACCOUNTS BAD WRITE-OFF OF FOR DOUBTFUL
BEGINNING DEBT UNCOLLECTIBLE ACCOUNTS
OF PERIOD EXPENSE ACCOUNTS END OF PERIOD
------------- --------- ------------- -------------
Year ended December 31, 1999 $225,000 $205,000 $ 67,000 $363,000
Year ended December 31, 2000 $363,000 $375,000 $ 82,000 $656,000
Year ended December 31, 2001 $656,000 $398,000 $573,000 $481,000
32
PART III
Item 10. Directors and Executive Officers of the Registrant.
Name of Director (a)
or Officer (b) Age Office Held and/or Principal Occupation Term Expires
------------------------- --- --------------------------------------- ------------
Dale S. Coenen (a) 73 Chairman of the Board and President May 2002
and (b) since 1972.
Duncan Miller (a) 77 Director since 1967, Investment May 2002
Counselor.
Harry E. Figgie, Jr. (a) 78 Director since 2000. May 2002
Robert J. Ruben (a) 78 Secretary since 1967, Director since 2001. May 2002
Kai R. Kosanke (b) 51 Vice-President, Controller & Treasurer May 2002
since January, 1987
Paul Clemo (b) 41 Assistant Secretary since May 1991. May 2002
Assistant Treasurer since May 1991.
Joan Booth (b) 45 Secretary since 2001. May 2002
O.K. Dealey, Jr. (a) 61 President - Transmatic, Inc. May 2002
and (b) Director since 1998.
Jessie D. Swinea, Jr. (a) 66 President - Vultron, Inc. May 2002
and (b) Director since 1998.
The Company's directors and executive committee's fees for 2001
were as follows: Dale S. Coenen $25,000.00; Duncan Miller, $25,000.00; Harry E.
Figgie, Jr., $25,000.00; O.K. Dealey, Jr., $25,000.00; Robert J. Ruben,
$9,375.00; and Jessie D. Swinea, Jr., $25,000.00.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
33
Item 13. Certain Relationships and Related Transactions
The information called for by Part III (Items 11, 12, and 13, and
additional information regarding Item 10), is incorporated by reference from the
Registrant's definitive proxy statement in connection with its Annual Meeting of
Shareholders to be held on May 15, 2002, which Proxy Statement will be filed
pursuant to Regulation 14A.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1, 2. Consolidated Financial Statements for Trans-Industries,
Inc. and Subsidiaries for years ended December 31, 2001, 2000,
and 1999 are filed under Part II, Item 8.
4. Exhibits:
Exhibit 3 (a) Restated Certificate of Incorporation
incorporated herein by reference to Form 8
filed May 17, 1982.
Exhibit 3 (b) Bylaws incorporated herein by reference to
Registration Statement No. 2-30317.
Exhibit 13 (b) Form 10-Q for quarter ended September 30,
2001, filed with the Securities and Exchange
Commission on November 14, 2001 incorporated
herein by reference.
Exhibit 21 List of Subsidiaries (see page 36).
(b) No reports on Form 8-K for the three months ended December 31,
2001 were required to be filed.
34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this Annual
Report to be signed on its behalf by the undersigned, thereunto duly authorized.
TRANS-INDUSTRIES, INC.
Date: 3/25/02 /s/ Dale S. Coenen
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Dale S. Coenen
Chairman of the Board of Directors
and Chief Executive Office
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons, which include
the President, the Chief Financial Officer, the Assistant Treasurer, and a
majority of the Board of Directors on behalf of the Registrant and in the
capacities and on the dates indicated:
/s/ Dale S. Coenen President 3/25/02
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(Dale S. Coenen)
/s/ Kai Kosanke Vice-President 3/25/02
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(Kai Kosanke) and Chief Financial Officer
/s/ Paul Clemo Assistant Treasurer 3/25/02
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(Paul Clemo)
/s/ Jessie D. Swinea, Jr. Director 3/25/02
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(Jessie D. Swinea, Jr.)
/s/ O.K. Dealey, Jr. Director 3/25/02
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(O.K. Dealey, Jr.)
/s/ Robert J. Ruben Director 3/25/02
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(Robert J. Ruben)
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