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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 2002 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 No.)
2637 S. Adams Road, Rochester Hills, MI 48309
(Address) (Zip Code)
Registrant's Telephone Number, including Area Code (248) 852-1990
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 and 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
--- ---
The number of shares outstanding of registrant's Common stock, par value $.10
per share, at June 30, 2002 was 3,139,737.
TRANS-INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
FORM 10-Q - FOR THE QUARTER ENDED JUNE 30, 2002
INDEX
PART I. Financial Information
Item 1. FINANCIAL STATEMENTS
A. Consolidated Statements of Operations ---
Three months ended June 30, 2002 and 2001.
Six months ended June 30, 2002 and 2001.
B. Consolidated Statements of Comprehensive Income/(Loss)
Six months ended June 30, 2002 and 2001.
C. Consolidated Balance Sheets ---
June 30, 2002 and December 31, 2001.
D. Consolidated Statements of Cash Flows ---
Six months ended June 30, 2002 and 2001.
E. Notes to Consolidated Financial Statements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PART II. Other Information
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
2
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
A.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For 3 Months Ended: For 6 Months Ended:
------------------- -------------------
6/30/02 6/30/01 6/30/02 6/30/01
------------ ------------ ------------ ------------
1. Gross sales less discounts, returns and allowances $ 8,256,438 $ 8,306,103 $ 17,055,119 $ 19,053,764
2. Cost of goods sold 6,050,842 6,690,331 11,860,388 14,579,857
------------ ------------ ------------ ------------
3. Gross Profit 2,205,596 1,615,772 5,194,731 4,473,907
4. Selling, general and administrative exp 2,498,760 2,510,870 4,788,983 5,094,005
5. Restructuring costs (note 8) -0- 700,457 -0- 700,457
------------ ------------ ------------ ------------
6. Operating income/(loss) (293,164) (1,595,555) 405,748 (1,320,555)
7. Other (income)/ expense
Interest expense 218,928 309,070 432,510 649,794
Other income (14,045) (48,390) (13,130) (52,558)
------------ ------------ ------------ ------------
Total other (income)/expense 204,883 260,680 419,380 597,236
------------ ------------ ------------ ------------
8. Earnings/(loss) before income taxes (498,047) (1,856,235) (13,632) (1,917,791)
9. Income tax expense/(benefit) (541,000) (344,000) (366,000) (347,000)
------------ ------------ ------------ ------------
10. Net earnings/(loss) $ 42,953 $ (1,512,235) $ 352,368 $ (1,570,791)
============ ============ ============ ============
11. Earnings/(loss) per share: (note 6)
Basic $ .01 $ (.48) $ .11 $ (.50)
Diluted $ .01 $ (.48) $ .11 $ (.50)
============ ============ ============ ============
12. Dividends per share $ .00 $ .00 $ .00 $ .00
============ ============ ============ ============
See Notes to Financial Statements
3
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
B.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
SIX MONTHS ENDED JUNE 30, 2002 AND 2001
2002 2001
----------- -----------
Net earnings/(loss) $ 352,368 $(1,570,791)
Other comprehensive loss:
Equity adjustment from foreign
currency translation (32,066) (53,309)
----------- -----------
Comprehensive earnings/(loss) $ 320,302 $(1,624,100)
=========== ===========
See Notes to Financial Statements
4
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
C.
CONSOLIDATED BALANCE SHEETS
ASSETS
------
Current Assets 6/30/02 12/31/01
- -------------- (Unaudited) (Audited)
------------ ------------
Cash $ 90,107 $ 161,782
Accounts receivable 7,934,415 8,856,017
Inventories (Note 2) 11,044,905 11,306,388
Prepaid expenses 285,136 392,703
Deferred income taxes 997,000 997,000
Refundable income taxes -- 764,606
------------ ------------
Total current assets 20,351,563 22,478,496
Property, Plant & Equipment, at Cost
Land 306,881 306,881
Land Improvements 126,660 126,660
Buildings 6,024,859 6,019,461
Machinery & equipment 10,553,576 10,441,646
------------ ------------
17,011,976 16,894,648
Less: accumulated
depreciation (12,548,803) (12,156,127)
------------ ------------
Net plant and equipment 4,463,173 4,738,521
Other Assets
Investments in affiliates 68,484 68,484
Patents, licenses & trademarks,
net of accumulated amortization 18,865 21,468
Excess of cost of investment in
stock of subsidiary over equity in
underlying net assets of acquisition 150,369 150,369
Deferred Income Taxes -- 824,000
------------ ------------
Total assets $ 25,052,454 $ 28,281,338
============ ============
LIABILITIES AND STOCKHOLDERS EQUITY
-----------------------------------
Current Liabilities 6/30/02 12/31/01
- ------------------- (Unaudited) (Audited)
------------ ------------
Notes Payable (Note 5) $ 4,556,865 $ 7,669,746
Current installments
- Long term debt (Note 5) 986,667 1,077,112
Accounts payable - trade 3,653,592 3,526,513
Accrued liabilities 1,302,103 1,529,727
Income taxes 30,000 --
------------ ------------
Total current liabilities 10,529,227 13,803,098
Deferred income taxes -Non-current 193,000 --
Long term debt, less
Current portion shown above (Note 5) 3,570,269 4,044,584
Other non-current liabilities 255,248 249,248
Stockholders' Equity
Preferred stock of $1.00 par value
per share - authorized 500,000
shares; 19,000 issued 19,000 19,000
Common stock of $.10 par value per
share - authorized 10,000,000 shares;
3,139,737 shares issued 313,974 313,974
Additional paid-in capital 5,953,081 5,953,081
Retained earnings 4,227,481 3,875,113
Foreign currency translation (8,826) 23,240
------------ ------------
10,504,710 10,184,408
------------ ------------
Total liabilities and stockholders' equity $ 25,052,454 $ 28,281,338
============ ============
See Notes to Financial Statements.
5
TRANS-INDUSTRIES, INC.
Consolidated Statements of Cash Flows
D. For the Six Months Ended June 30, 2002 and 2001
-----------------------------------------------
2002 2001
---- ----
(Unaudited) (Unaudited)
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings/(loss) $ 352,368 $(1,570,791)
Adjustments to reconcile net earnings/(loss)
to net cash provided by operations:
Depreciation/Amortization 463,316 678,789
Decrease (increase) in accts. receiv. 921,602 1,424,967
Decrease (increase) in refundable
income taxes 764,606 -0-
Deferred income taxes (benefit) 1,017,000 -0-
Decrease (increase) in inventory 261,483 453,817
Decrease (increase) in prepaid exp 107,567 26,553
Increase (decrease) in accts. payable 127,079 (2,860,164)
Increase (decrease) in accr. liab. (227,624) (480,639)
Increase (decrease) in income taxes 30,000 (333,664)
(Gain) Loss on sale of Property and Equipment (9,529) 649,244
Other 692 (33,861)
----------- -----------
Net Cash Provided (Used) by Operations 3,808,560 (2,045,749)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (187,979) (272,561)
Proceeds from sale of Property & Equip 11,451 1,010,611
----------- -----------
Net Cash Provided (Used) by Investing (176,528) 738,050
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from preferred stock -0- 1,900,000
Net increase (repayment) of long-term
borrowings (558,760) (264,181)
Net proceeds (payment) of credit line (3,112,881) (528,960)
----------- -----------
Net Cash Provided (Used) by Financing (3,671,641) 1,106,859
Foreign currency translation (32,066) (53,309)
----------- -----------
Net decrease in cash (71,675) (254,149)
Cash at beginning of year 161,782 317,754
----------- -----------
Cash at end of quarter $ 90,107 $ 63,605
Supplemental Disclosures:
Interest paid $ 383,801 $ 646,857
Income taxes paid $ -0- $ -0-
See Notes to Financial Statements
6
E. TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The financial information presented as of any date other than December 31
has been prepared from the Company's books and records without audit.
Financial information as of December 31 has been derived from the audited
financial statements of the Company. In the opinion of management, all
adjustments consisting of normal recurring adjustments, necessary for a
fair presentation of the financial information for the periods indicated,
have been included. For further information regarding the Company's
accounting policies, refer to the consolidated financial statements and
related notes included in the Company's annual report on form 10-K for the
year ended December 31, 2001.
2. Inventories
The major components of inventories are:
6/30/02 12/31/01
------- --------
Raw Materials $ 4,877,618 $ 5,283,603
Work in Process 4,503,197 4,444,531
Finished Goods 1,664,090 1,578,254
----------- -----------
$11,044,905 $11,306,388
=========== ===========
3. Principles of Consolidation
There have been no significant changes in the principles of consolidation
since our most recent audited financial statements.
4. Significant Accounting Policies
Except for the adoption of SFAS 142, there have been no significant changes
in accounting policies since our most recent audited financial statements
(See note 9).
7
E. TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Long-Term Debt
Long-term debt at June 30, 2002 consisted of the following:
Term note, payable in monthly installments of $35,607, $2,439,980
including interest at the bank's prime rate plus 1.75% (effective rate of
6.5% at June 30, 2002) with a balloon payment of $2,226,508 on January 1,
2004. The note is secured by substantially all the assets of the Company.
Term note, payable in monthly installments of $50,965 plus interest at the
bank's prime interest rate plus 1.75% (effective rate of 6.5% at June 30,
2002) with a balloon payment of $917,374 on January 1, 2004. The note is
secured by substantially all the assets of the Company. 2,038,607
Other 78,349
----------
Total 4,556,936
Less current installments (986,667)
----------
Long-term debt $3,570,269
==========
The Company also has a secured $13,000,000 line of credit, in the form of a
demand note, of which $4,556,865 was utilized at June 30, 2002. Interest is
charged at the bank's prime lending rate, plus 1.75% and is payable
monthly.
The line of credit agreement requires the Company to earn $1.00 pre-tax per
month. The agreement also restricts the payment of dividends, repurchase of
common stock, and acquisition of property and equipment. At June 30, 2002,
the Company was not in compliance with the earnings covenant for one month
of the second quarter and obtained a waiver for such non compliance from
its lender.
8
E. TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Earnings (Loss) Per Share
For the three and six months ended June 30, 2001, and the six months ended
June 30, 2002 all options outstanding have been excluded from the
computation of diluted earnings (loss) per share as the effect would be
anti-dilutive. The following is a reconciliation of the numerator and
denominator of the basic and diluted earnings per share computation for the
three months ended June 30, 2002.
THREE MONTHS ENDED 6/30/02
--------------------------
PER SHARE
EARNINGS SHARES AMOUNT
-------- ------ ------
Basic earnings per share:
Earnings available to common stockholders: $42,953 3,139,737 $.01
Effect of dilutive securities:
Stock Options -- 3,669 --
Diluted earnings per share:
Earnings available to common stock
holders plus assumed conversion: $42,953 3,143,406 $.01
7. Segment Information
The Company operates in one market segment, the transportation industry,
with products directed towards customers in the mass transit, highway,
airline and rental car segments. Financial information summarized by
geographic area is as follows:
6/30/02 6/30/01
------------------------- -------------------------
LONG- LONG-
LIVED LIVED
REVENUES ASSETS REVENUES ASSETS
-------- ------ -------- ------
United States $13,117,138 $ 4,496,755 $15,430,123 $ 6,498,219
United Kingdom 969,472 204,136 788,531 322,030
Canada 2,854,012 -0- 2,547,806 -0-
Other 114,497 -0- 287,304 -0-
----------- ----------- ----------- -----------
Total $17,055,119 $ 4,700,891 $19,053,764 $ 6,820,249
=========== =========== =========== ===========
9
E. TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Restructuring Costs
The Company, in June 2001, reported restructuring charges relating to the
consolidation of manufacturing facilities in England of approximately
$700,000. A major portion of this charge, $648,000, relates to the disposal
of redundant fixed assets. Also included in the restructuring charges is
$21,000 for severance pay and approximately $31,000 for the cancellation of
leases and miscellaneous fees.
9. Note - Goodwill
Effective January 1, 2002, the Company adopted the provisions of Statement No.
142, Goodwill and Other Intangible Assets, issued by the Financial Accounting
Standards Board in July 2001 ("SFAS 142"). SFAS 142 addresses how intangible
assets that are acquired individually or with a group of assets should be
accounted for in financial statements upon their acquisition. SFAS 142 specifies
that goodwill is not subject to amortization, but is subject to certain
impairment tests annually.
The Company recorded goodwill in connection with the acquisition of the Lobb
Company, the net amount of goodwill, $150,369 as of January 1, 2002, will not be
amortized.
A reconciliation of net earnings (loss) and earnings (loss) per share reported
in the consolidated statements of operations to the net earnings (loss) and
earnings (loss) per share adjusted for the effect of goodwill amortization for
the six month periods is as follows:
Six Months Ended June 30,
------------------------------------------
2002 2001
---- ----
Net earnings (loss):
Net earnings (loss) as reported $352,368 $ (1,570,791)
Goodwill amortization -- 80,903
------------------------------------------
Adjusted net earnings (loss) $352,368 $ (1,489,888)
==========================================
10
E. TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Note-Goodwill (continued)
- -------------------------------------------
Six Months Ended June 30,
--------------------------------------------
2002 2001
---- ----
Basic and diluted earnings (loss) per share:
Net earnings (loss) as reported $ 0.11 $ (0.50)
Goodwill amortization -- 0.03
--------------------------------------------
Adjusted net earnings (loss) per share $ 0.11 $ ( 0.47)
============================================
11
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For Six Months Ended June 30, 2002
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.
Sales and Earnings
Sales for the second quarter of 2002 were $8.3 million compared with $8.3
million for the same period a year ago. Included in last year's quarterly
results were $665,000 of sales from two closed operations. For the six month
period ending June 30, 2002, sales were $17.1 million compared with $19.1
million a year ago with $1.6 million of this $2.0 million decrease attributable
to the two operations closed in 2001.
During the second quarter of 2002, the Company recorded a net income of $42,953
or $0.01 per share on sales of $8,256,438. Incurred in the second quarter of
2002, were several unusual expenses, which hampered earnings. Expenses for the
Company's medical program, which is self-insured, were extremely high due to
several high dollar claim amounts being paid. Accordingly, $500,000 of this
expense was recorded in June, 2002. Additionally, the Company recorded several
non-recurring expenses relating to the closure of Transmatic Window Systems in
2001. In June of 2002, the Company received a federal income tax refund, which
due to the change in the law of carry back provisions, was $396,000 higher than
the estimated reserve established at December 31, 2001, and accordingly, it was
credited in the second quarter of 2002.
For the same period last year, sales were $8,306,103 with a net loss of
$1,512,235 or $0.48 per share. Included in this $1.5 million loss is a
restructuring change in the amount of $700,000 before income taxes.
12
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For Six Months Ended June 30, 2002
Inventories
Inventory valuation is based upon the lower of cost or market. At June 30, 2002,
consolidated inventories were $11,044,905 compared to $12,602,284 a year ago.
This decrease of $1,557,379 is a result of the Company's effort to bring its
inventory levels more in line with its sales volumes.
Interest
Interest expense amounted to approximately $219,000 and $309,000 for the second
quarter of 2002 and 2001, respectively. This decrease of $90,000 was the result
of slightly lower debt levels in 2002.
Financial Condition
Current financial resources coupled with anticipated funds from operations and
the federal income tax refund the Company received in June, 2002 are expected to
meet funding requirements for the remainder of the year, based upon present
needs.
13
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On May 15, 2002, the Company held its annual meeting of shareholders. There were
two matters voted upon, which was the election of six directors and to ratify
the appointment of Grant Thornton LLP as independent auditor for the Company for
the fiscal year ending December 31, 2002.
The following table sets forth the results of the voting on the election of
directors.
Nominee Votes For Votes Withheld Total Votes
Dale S. Coenen 2,788,595 64,454 2,853,049
Duncan Miller 2,792,595 64,454 2,857,049
Harry E. Figgie, Jr. 2,792,595 64,454 2,857,049
O.K. "Bud" Dealey, Jr. 2,774,203 64,454 2,853,049
Jessie D. Swinea, Jr. 2,774,203 64,454 2,838,657
Robert J. Ruben 2,792,595 64,454 2,857,049
On the proposal to ratify Grant Thornton LLP as independent auditor for the
company there was 2,803,245 votes for the proposal and 53,804 votes withheld.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANS-INDUSTRIES, INC.
Date: August 7, 2002 /s/ Kai Kosanke
------------------------ -----------------------------
Kai Kosanke, Treasurer
and Chief Financial Officer
Date: August 7, 2002 /s/ Keith LaCombe
----------------------- -----------------------------
Keith LaCombe
Assistant Treasurer
15
CERTIFICATION
The following constitutes the Certification accompanying the Quarterly
Report on Form 10-Q of Trans-Industries Inc. (the Company) for the quarterly
period ended June 30, 2002, as filed with the Securities and Exchange
Commission.
The undersigned are the Chief Executive Officer and the Chief Financial
Officer of the Company. This Certification is made pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
We each hereby certify that such Quarterly Report on Form 10-Q fully
complies with the requirements of section 13(a) or 15(d), of the Securities
Exchange Act of 1934; and that the information contained in such 10-Q Report
fairly presents, in all material respects, the financial condition and results
of operations of the Company.
/s/ Dale S. Coenen /s/ Kai Kosanke
- -------------------- --------------------
Dale S. Coenen Kai Kosanke
Chief Executive Officer Chief Financial Officer
Dated: August 7, 2002 Dated: August 7, 2002
- --------------------------- ----------------------