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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)
For the fiscal year ended March 31, 1998
----------------------
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transition period from________________ to _______________________
Commission file number 0-3905
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TRANSMATION, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 16-0874418
- ---------------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Vantage Point Drive, Rochester, NY 14624
- ------------------------------------------------ ------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 716-352-7777
------------------------------
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- --------------------------------- -----------------------------------------
None None
- --------------------------------- -----------------------------------------
- --------------------------------- -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
- --------------------------------------------------------------------------------
(Title of Class)
Common Stock $0.50 Par Value
- --------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark (X) whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
TOTAL PAGES - 68
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Indicate by check mark (X) if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
The aggregate market value of the voting stock held by non-affiliates of the
registrant is $34,956,479 as of the close of business June 16, 1998. Market
value is determined by reference to the final NASDAQ quotation of the price paid
for Transmation stock as of that date.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the close of business on June 5, 1998.
Class Number of Shares Outstanding
Common 5,832,945
------ ----------------------------
Documents incorporated by reference and the part of Form 10-K into which they
are incorporated are listed hereunder.
Part of Form 10-K Document Incorporated
----------------- ---------------------
Part III Registrant's definitive Proxy Statement
for Annual Meeting of Shareholders to be
held on August 18, 1998
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Part I
------
Item 1. Business
- -----------------
Transmation, Inc., the "Company", an Ohio corporation organized in 1964, is
primarily engaged in the sale and distribution, development, manufacture and
service of electronic instrumentation which is used principally for measurement,
indication and transmission of information. The principal products sold and
serviced by Transmation fall within two main categories:
* Test, measurement and calibration equipment - Instruments used
for calibrating, measuring and testing many physical
parameters in industry and science. These products are
manufactured by Transmation or by other manufacturers and are
distributed and serviced by Transmation.
* Process monitoring instrumentation - A line of instrumentation
which measures low level signals, proportional to some
parameter such as temperature, and then amplifies the
measurement to permit transmission to a receiving device which
may be used to alter the process or trigger an alarm. Certain
of these products may be used to monitor one or more points of
a process by multiplexing information into one or more digital
devices. These products are manufactured, distributed and
serviced by Transmation.
Products and services sold range in price from $100 for a single calibration
service to more than $200,000 for a large multiplexing system.
The principal market for Transmation's products and services is within the
process industry and is primarily directed to the petroleum refining and
chemical manufacturing industries, and secondarily to the pulp and paper, gas
pipeline and primary metals industries. Transmation's sales are accomplished
through a catalog distribution division, the Transcat Division ("Transcat"), a
manufacturing division, the Instrument Division, a manufacturing subsidiary,
Altek Industries Corp. ("Altek"), and four foreign sales subsidiaries.
Sales of test, measurement and calibration equipment and services are
principally made through Transcat, which sells through a catalog distributed to
existing and prospective customers, and through salespeople in selected
locations in the United States and Canada. Transcat sells
Transmation-manufactured products and re-sells the products of approximately 200
other manufacturers through an annual catalog, which is currently approximately
550 pages. To date, more than one million catalogs have been distributed through
this part of Transmation's sales and marketing effort. In addition to the annual
catalog, Transcat makes periodic mailings to existing and prospective customers
to spur additional sales as well as to generate names for future catalog or
product mailings.
In addition to catalog sales, Transmation engages in direct sales of test,
measurement and calibration equipment and services as well as process monitoring
instrumentation. The Company employs over 30 direct sales people in Transcat and
four sales managers in the Instrument Division and Altek. Two sales people are
employed in Australia to manage Far Eastern sales representative or distributor
organizations and to direct sell in Australia. The Company also maintains one
regional sales manager in Singapore. In addition, the Company has arrangements
with over 60 sales representative and distributor organizations, each employing
one or more sales engineers, located in other areas of concentrated demand for
Transmation's products in the United States, Canada, the Far East, Central and
South America, Australia, the Middle East and Eastern and Western Europe. These
sales representatives and distributors either promote Transmation's products on
a commission basis or purchase them from Transmation at a discount and resell to
end users at a gross price.
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The Company's Transcat CalXpress operations, which are ISO 9002 registered,
provide periodic calibration and repair services for customers owning
instrumentation manufactured by others and by Transmation. At March 31, 1998,
there were Transcat CalXpress facilities in 14 locations in the United States
and Canada.
The Company's two manufacturing operations, both located in Rochester, New York,
primarily develop, manufacture and sell electronic and pneumatic instrumentation
used to calibrate and test instrumentation used primarily in the process
industries. The Instrument Division's facility has ISO 9001 registration.
The Company's value added operations, which customize, modify and repair analog
gauges, are located in Dayton, Ohio and Baltimore, Maryland.
Since the beginning of fiscal 1997, Transmation has expanded its business
through two acquisitions:
Altek Acquisition. In April 1996, the Company acquired all of the stock
of Altek, a manufacturer of electronic calibration equipment, for cash and notes
aggregating $4.8 million, and 300,000 shares of Common Stock. As a result of
this acquisition, the Company's sales have increased by more than $5 million
annually.
EIL Acquisition. In April 1997, the Company acquired substantially all
of the assets of the Sales and Service Divisions of E.I.L. Instruments, Inc. a
distributor and servicer of electronic test, measurement and calibration
instrumentation, for $22 million in cash and the value of certain assumed
liabilities. As a result of this acquisition, the Company has added a
significant base of potential new customers, a value added meter modification
business and several new product lines, and has significantly increased its
overall capabilities to provide repair, calibration and certification services.
Transmation's future performance will depend substantially on its
ability to integrate and manage its acquired businesses and operations, to
respond to competitive developments, to further develop markets for its products
and services, and to anticipate future customer needs and to provide solutions
for customers in a timely, cost-effective manner.
The Company's principal executive offices are located at 10 Vantage
Point Drive, Rochester, New York 14624. Its telephone number is (716) 352-7777.
The following information is set forth as it is deemed material to an
understanding of the business of the registrant:
COMPETITION. The market to which the Company sells the products it
manufactures is highly competitive, and the Company expects that competition
will increase in the future. Failure to keep pace with rapid technological
advances, which characterize the industry, could adversely affect the Company's
competitive position with respect to the products it manufactures and the way it
distributes its products. In its manufacturing operations, the Company competes
on the basis of price, performance, inventory availability, quality, reliability
and customer service and support. To maintain its competitive position with
respect to manufactured product, the Company must continue to develop new
products, periodically enhance its existing products, reduce its cost of
manufacturing such products, maintain the quality of its products and compete
effectively in the areas described above. Although the Company believes that its
products are competitive in each of the above-described areas, there can be no
assurance that existing or future competitors, some of which have greater
financial resources than the Company, will not introduce comparable or superior
products incorporating more advanced technology at lower prices. The Company's
competitors are numerous, ranging from large corporations to many relatively
small and highly specialized firms. Although no single company competes in all
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of the Company's product markets, some of the major competitors which compete in
the Company's individual product markets include Fluke Corporation, Beta (a
division of Hathaway Corporation) and certain divisions of Ametek Corporation.
Some of these competitors have more extensive sales, distribution, engineering,
manufacturing and/or marketing capabilities and substantially greater financial,
technological and personnel resources than does the Company.
The markets to which the Company, through Transcat, sells products and
related services is also highly competitive. Competition for sales in
distribution and service is quite fragmented and ranges from large, well
financed national distributors to small local distribution organizations and
service providers, as well as the manufacturers of the products themselves.
Transcat competes on the basis of price, inventory availability, service quality
and customer service and support. To maintain its competitive position with
respect to such products and services, the Company must continually demonstrate
to customers its commitment to achieving the highest level of performance
possible for a distributor and compete effectively in the areas described above.
Significant Customers
---------------------
There were no sales to any customer or controlled group which amounted
to 10 percent or more of the Company's consolidated net sales during the years
1998-1996, nor is the Company dependent on a single customer or a few customers,
the loss of any one or more of which would have a material adverse effect on the
Company.
Backlog
-------
At the close of the fiscal year ended March 31, 1998, Transmation had a
firm order backlog of approximately $2,485,000 as compared to $1,460,000 in 1997
and $1,347,000 in 1996.
It is anticipated that 100 percent of Transmation's backlog existing on
March 31, 1998 will be filled by shipments in fiscal year 1999. Transmation's
cycle of sales to delivery at the present time is 1 day to 12 weeks on all
product categories except for process monitoring systems, where the cycle is
10-40 weeks. However, backlog has generally not been a significant factor in
Transmation's business.
Seasonality
-----------
Transmation does not believe that its line of business has any
significant seasonal factor.
Raw Materials
-------------
Finished products required for the Transcat division's catalog sales
are generally available from only one source per product (the manufacturer)
although on occasion substitutions of product are possible. Additionally, while
the raw materials and components essential to Transmation's manufacturing
business are available from a number of sources of supply, a portion of the
Company's manufacturing operations is dependent on the ability to deliver
completed products, sub-assemblies or components in time to meet critical
distribution and manufacturing schedules. In certain instances, important parts
and components are available through fewer suppliers than Transmation deems
suitable. If such suppliers should fail in deliveries, delays in Transmation's
production could result which in turn could have a material adverse effect on
the Company's business, prospects, results of operations and financial
condition. Periodically, Transmation has experienced delays in obtaining certain
parts and components or finished products. Such delays are primarily
attributable to demand for parts or products and long lead times. In order to
minimize such delays, Transmation has placed scheduled blanket purchase orders,
has sought out alternate sources of supply, has provided vendors with greater
lead time in filling such orders and has placed certain finished product in its
inventory.
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Transmation believes that such delays have not had a material adverse effect on
its business to date, although it cannot predict what effect such delays may
have in the future.
Patents
-------
The Company's success and ability to compete depends in part upon
protecting its proprietary rights in its products, its name and its trade names.
There can be no assurance that the measures taken by the Company will be
adequate to deter misappropriation of its products, its name and its trade names
or independent third-party development of its products, or that its intellectual
property rights can be successfully enforced or defended if challenged. Given
the continuing development of technology, there can be no assurance that certain
aspects of the Company's products do not or will not infringe upon the existing
or future proprietary rights of others or that, if licenses or rights are
required to avoid infringement, such licenses or rights could be obtained on
terms that would not have a material adverse effect on the Company, if at all.
It is the opinion of management that the obtaining of patent protection
is not essential to the conduct of Transmation's business. Transmation has,
however, sought patent protection for its manufactured products in certain
instances and presently holds several United States patents, the most recent of
which was granted in 1994; patents expire at various dates through 2012.
Transmation believes that the patents obtained provide a short-term marketing
benefit, particularly when marketing products against similar products produced
by competitors. However, Transmation does not believe that the patents have a
significant impact on its business.
Transmation has registered numerous trademarks in the United States
Patent and Trademark Office, including Transcat(R), Quick-Cal(R), CalXpress(R)
and Shop Access(R).
Research and Development
------------------------
During the fiscal year ended March 31, 1998, Transmation expended
approximately $1,660,110 in research and development as compared with an
approximate expenditure of $1,560,974 in 1997 and $1,099,508 in 1996. The
research and development costs in fiscal 1998 reflected the Company's efforts in
all of its product lines in its Instrument Division and Altek subsidiary.
Research and Development is Company sponsored. Approximately 26 of its
employees and several consultants are engaged in product development. All such
employees hold technical degrees.
Many of the instruments which the Company designs and manufactures are
used in the petroleum refining and chemical manufacturing industries. The
tolerance for error in the design, manufacture or use of these products may be
small or non-existent. If an instrument designed or manufactured by the Company
is found to be defective, whether due to design or manufacturing defects,
improper use of the product or other reasons, the instrument may need to be
recalled, possibly at the Company's expense. Furthermore, the adverse effect of
a product recall on the Company might not be limited to the cost of the recall
to the Company. Recalls, especially if accompanied by unfavorable publicity or
termination of customer contracts, could result in substantial costs, loss of
revenues and diminution of the Company's reputation, each of which could have a
material adverse effect on the Company's business, prospects, results of
operations and financial condition. In addition, the manufacture and sale of the
instruments manufactured by the Company also involves the risk of product
liability claims. The Company evaluates its insurance coverage from time to time
in view of developments in its business and products currently under
development. Product liability insurance is expensive and, in the future, may
not be available on acceptable terms, in sufficient amounts, or at all. A
successful claim brought against the Company in excess of its insurance coverage
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or any material claim for which insurance coverage is denied or limited could
have a material adverse effects on the Company's business, prospects, results of
operations and financial condition.
Employees
---------
Transmation employed 407 persons (including 3 part-time employees) as
of March 31, 1998 in all aspects of its business. At March 31, 1997, Transmation
employed 250 persons of which 2 were part-time. The EIL acquisition on April 4,
1997 increased Transmation's number of employees to 496. At March 31, 1996, the
Company employed 211 persons of which 3 were part-time. None of Transmation's
employees is subject to collective bargaining agreements.
Since April 1996, the Company has acquired one manufacturing business
and one business engaged in the distribution and service of products. This has
resulted in a 150% increase in the Company's work force, the addition of one
manufacturing facility, the addition of three value added operations and the
addition of ten service facilities. The Company is in the process of integrating
the acquired operations and efforts are underway to assimilate into Transmation
the products and services formerly sold independently by the acquired
businesses, their operations, corporate cultures, product lines, personnel,
management information systems, financial control systems, facilities
infrastructure and customer relationships. There can be no assurance that the
Company will be successful in these efforts. If the Company is unable to
integrate and manage all of the elements of these acquisitions effectively and
efficiently, it could have a material adverse effect on the Company's business,
prospects, results of operations and financial condition.
In addition, if the Company continues to experience rapid growth, a significant
strain may be placed on its financial, management and other resources. The
Company's ability to manage growth effectively will require it to continue to
improve its operational and financial control systems, infrastructure and
management information systems, and to attract, train, motivate, manage and
retain key employees. There can be no assurance that the Company will be
successful in doing so. Failure to manage its growth effectively could have a
material adverse effect on the Company's business, prospects, results of
operations and financial condition.
Environmental Matters
---------------------
Registrant does not believe that compliance with Federal, State or
local provisions relating to the protection of the environment have any material
effect on its capital expenditures, earnings or competitive position.
Information as to classes of similar products:
----------------------------------------------
Percent of Net Sales
--------------------
1998 1997 1996
---- ---- ----
Test, Measurement & Calibration Equipment
and Service 97.9 94.2 93.3
Process Monitoring Instrumentation
and Service 2.1 5.8 6.7
The change in sales mix from 1997 to 1998 and from 1996 to 1997 is
primarily the result of increased sales of resale product and service of test,
measurement and calibration equipment to the U.S. marketplace resulting from
increases in the number of company employed sales personnel in the Company's
Transcat division and from significant catalog mailings to customers and
prospective customers during fiscal 1998-1996 in the Company's Transcat
division. Additionally, all sales resulting from the Company's Altek Industries
Corp. subsidiary, acquired on April 3, 1996, were of calibration products and
sales which resulted from the Company's acquisition of the sales and service
division of EIL Instruments in April 1997 were of service and calibration
products.
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Information Regarding Export Sales
----------------------------------
Approximately 19.1 percent of Transmation's sales in 1998 resulted from
sales in foreign countries. This compares with 27.8 percent of sales in 1997 and
20.7 percent of sales in 1996. In 1998, the percentage of foreign sales
decreased as compared to 1997 as the result of the Company's acquisition of the
assets of EIL Instruments. The EIL business acquired was and is primarily
conducted in the U.S. The increase in 1997 compared to 1996 is primarily the
result of increased sales in the international marketplace of products
distributed through the Company's Transcat division. Sales in foreign countries
generate relatively the same profit margins as domestic sales. Management
believes that the relative lower value of the dollar compared to foreign
currencies that existed for several years through 1997 had a positive effect on
international sales. During fiscal 1998, many Asian currencies weakened
significantly compared to the U.S. dollar. The Company believes the stronger
U.S. dollar contributed to reduced sales in 1998; below levels which would
otherwise have been anticipated from Asian markets. Those markets are areas of
significant market potential for the Company. Management believes that continued
weakness in Asian currencies will continue to have a negative influence on our
future sales to Asia although it is impossible to predict the magnitude of such
impact. In addition, Transmation's revenues are subject to the customary risks
of operating in an international environment, including the potential imposition
of trade or foreign exchange restrictions, tariff and other tax increases,
fluctuations in exchange rates and unstable political situations, any one or
more of which could have a material adverse effect on the Company's business,
prospects, results of operations and financial condition.
The information contained in Notes 2 and 3 to the Financial Statements
of this report is incorporated herein by reference.
Item 2. Properties
- -------------------------
Transmation's manufacturing operation is housed in owned facilities located at
977 Mt. Read Boulevard, Rochester, New York comprising 26,800 square feet of
plant, storage and office space.
In addition, Transmation has leased an additional 19,000 square feet of space in
Rochester. This space is being used for certain executive, administrative,
sales, service and manufacturing purposes. The lease for this space will expire
in October, 2002.
Transmation also leases an additional 9,500 square feet which houses the
operations of its Altek subsidiary. This lease will expire in fiscal 2000.
Various sales office and CalXpress space is leased by the Company and its
subsidiary, Transmation (Canada), Inc., and is considered adequate to meet both
present and future needs in those locations. (See Note 7 to the Financial
Statements.)
Generally, Transmation's present facilities are being fully utilized and are
considered suitable for its current needs and there is no present requirement
for significant additional space. Any expansion or change in business facilities
as the result of a consolidation of manufacturing operations will be made in the
future if necessary.
Item 3. Legal Proceedings
- --------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------------
Not applicable.
Part II
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Item 5. Market for Registrant's Common Equity and Related Stockholder
- -----------------------------------------------------------------------------
Matters
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The Company's Common Stock is traded in the NASDAQ National Market System. A
record of actual transactions in Transmation's stock is reflected in the table
below:
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1997 High $5.31 $4.635 $5.375 $8.00
Low 2.75 3.310 3.750 4.56
1998 High $9.75 $9.875 $9.75 $9.00
Low 6.00 6.875 6.75 7.00
At June 5, 1998 there were approximately_969 shareholders. The Company has paid
no cash dividends since its inception, and under terms of a revolving credit
agreement with a bank may not pay such dividends without prior bank approval.
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Item 6.
- -------
TRANSMATION, INC.
SELECTED FINANCIAL DATA
Y E A R E N D E D M A R C H 31,
----------------------------------------------------------------------
1998 1997 1996
------------------- -------------------- -------------------
Net Sales $78,483,565 $47,311,224 $38,449,758
------------------- -------------------- -------------------
Operating Income $4,187,289 $3,435,961 $2,165,037
------------------- -------------------- -------------------
Net Income $997,971 $2,059,736 $1,234,723
------------------- -------------------- -------------------
Income Per Share
Basic $.17 $.37 $.26
----- ----- -----
Income Per Share
Diluted $.16 $.35 $.24
------------------- -------------------- -------------------
Total Assets $51,875,214 $25,858,358 $15,701,727
------------------- -------------------- -------------------
Long-Term Debt $21,752,922 $6,000,000 $2,050,800
------------------- -------------------- -------------------
1995 1994
------------------- --------------------
Net Sales $37,293,872 $33,984,430
------------------- --------------------
Operating Income (Loss) $915,481 ($523,129)
------------------- --------------------
Net Income (Loss) $381,785 ($586,234)
------------------- --------------------
Income(Loss) Per Share
Basic $.08 ($.12)
----- ------
Income (Loss) Per Share
Diluted $.08 ($.12)
------------------- --------------------
Total Assets $16,293,407 $17,525,838
------------------- --------------------
Long-Term Debt $4,064,426 $5,100,000
------------------- --------------------
The Company has paid no cash dividends since its inception.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Results of Operations
- ---------------------
Increases (Decreases) in Consolidated Operating Results Compared To Prior Year
$000
-------------------------------------------------
1998 1997
-------------------------------------------------
Change from Change from
Prior Year % Prior Year %
---------- -- ---------- --
Net Sales $ 31,172 66 $ 8,861 23
Costs and Expenses:
Cost of Product Sold 24,707 86 4,375 18
Selling & Admin. Expenses 5,614 41 2,754 25
Research & Develop. Costs 99 6 461 42
Interest Expense 1,914 301 300 90
-------------------------------------------------
Income from Operations (1,162) (41) 971 53
Other Income (479) 479 --
-------------------------------------------------
Income Before Income Taxes (1,641) (50) 1,450 79
Provision for Income Taxes (580) (47) 625 104
-------------------------------------------------
Net Income ($ 1,061) (52) $ 825 67
-------------------------------------------------
Earnings Per Share -Diluted ($ .19) (54) $ .11 46
-------------------------------------------------
Net Sales
- ---------
The 66% sales increase in 1998 was attributable to the Company's acquisition of
the assets of the Sales and Service divisions of E.I.L. Instruments Inc. in
April 1997.
The sales increase in 1997 of 23% is attributable to the Company's acquisition
of Altek Industries Corp. in April 1996 and to increased sales of products and
services by the Company's Transcat division in fiscal 1997. The effect of having
added salesmen in areas of significant market concentration in Transcat during
fiscal 1996, together with improved customer mail list techniques, resulted in
improved market penetration and increased sales in 1997 compared to 1996.
Cost of Product Sold
- --------------------
Cost of product sold increased by 86% in 1998 compared to 1997. This increase
resulted from proportionately greater sales through the Company's Transcat
division in 1998 compared to 1997. Gross margins on distribution and service
sales achieved through the Company's Transcat division are lower than in the
Company's manufacturing division.
Costs of product sold increased by 18% but as a percentage of sales decreased by
2.7% in 1997 compared to 1996. The improvement in 1997 is the result of the
addition of high margin Altek products to Transmation's sales and of
improvements in gross margins of both resale and service billings in the
Company's Transcat division.
Selling and Administrative Expenses
- -----------------------------------
Selling and administrative expenses in 1998 increased by 41% compared to 1997
but as a percentage of sales fell to 24.4% from 28.7%. The increased spending
was the result of increases in sales and marketing related costs which were
added as the result of the Company's April 1997 acquisition of the Sales and
Service divisions of E.I.L. Instruments Inc. Additionally, goodwill amortization
resulting from acquisitions totaled $1,007,000 in 1998 compared to
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$313,600 in 1997. Overall, economies of scale resulted in lower total sales and
administrative expenses as a percentage of sales in 1998 compared to 1997.
Selling and administrative expenses increased by 25% in 1997 compared to 1996;
however, as a percentage of sales, the increase is .6%. Increased spending
represents the full year effect of direct salespeople added in the Company's
Transcat division in areas of significant market potential. Additionally,
amortization of goodwill totaling $313,600 resulting from Transmation's April
1996 acquisition of Altek Industries Corp. is included in 1997 costs and there
were no similar costs in 1996.
Research and Development
- ------------------------
Research and development costs increased by 6% in 1998 compared to 1997.
Spending in this area is considered appropriate to enable the Company to
maintain its strong competitive position in the marketplace.
Research and development costs increased by 42% in 1997 compared to 1996. This
increase is the result of the acquisition of Altek Industries Corp. by the
Company in April 1996.
Interest Expense
- ----------------
Interest expense increased by 301% in 1998 compared to 1997. This increase is
the result of financing the Company's acquisition of the assets of the Sales and
Service divisions of E.I.L. Instruments in April 1997.
Interest expense increased by 90% in 1997 compared to 1996. This increase is the
result of financing the Company's acquisition of Altek Industries Corp. in April
1996.
Other Income
- ------------
Other income in 1997 is comprised primarily of the sale of land. The Company
sold a parcel of land it owned in a Rochester suburb which did not have a part
in the Company's future plans, resulting in a one-time net gain of $479,000.
Income Taxes
- ------------
The Company's effective tax rate was 39.2% of pretax profits in 1998 compared to
37.2% of profits in 1997. The higher tax rate in 1998 compared to 1997 is
primarily the result of the necessity to file returns in additional states as
the result of the Company's acquisition of the assets of the Sales and Service
divisions of E.I.L. Instruments in April 1997.
The Company's effective tax rate was 37.2% of pretax profits in 1997 compared to
32.6% of pretax profits in 1996. In 1997 and 1996 the Company used tax benefits
from foreign subsidiaries which will become available against future tax
liabilities in the determination of its income tax expense.
Impact of Inflation
- -------------------
The effects of inflation have not been significant to Transmation during
1998-1996 because inflation rates have been relatively low.
Year 2000 Issue
- ---------------
The Company has reviewed all of its current computer applications with respect
to the Year 2000 issue. The Company believes all of its relevant applications
are Year 2000 compliant and that no material costs with respect to Year 2000
compliance will be incurred by the Company. The Company is unable to determine
the effects of the Year 2000 compliance issue, if any, by its suppliers and
customers.
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LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
Cash Flows
- ----------
$000's
---------------------------------------
1998 1997 1996
---- ---- ----
Cash Provided (used) by:
Operating Activities $2,852 $1,561 $2,249
Investing Activities ($24,084) ($5,088) ($966)
Financing Activities $21,117 $4,118 ($1,703)
Operating Activities
- --------------------
Net cash from operations totaled $2,852,000 in 1998, an increase of $1,291,000
from 1997. Although net income decreased by $1,062,000 in 1998 compared to 1997,
depreciation and amortization increased by $1,701,000, trade accounts receivable
were reduced by $701,000 from amounts outstanding one year ago (after giving
consideration to receivables purchased in the EIL asset acquisition).
Inventories increased by $643,000 in 1998 and trade accounts payable increased
by $295,000 as an offset to the inventory increase. Other liabilities,
principally interest which resulted from additional borrowings in 1998 compared
to 1997 as the result of the EIL acquisition, increased by $793,000 in 1998 vs
1997. Income taxes payable were $454,000 lower in 1998 compared to 1997 due to
Transmation's lower profitability in 1998 vs 1997.
Net cash from operations totaled $1,561,000 in 1997 which was down by
approximately $688,000 from cash generated from operations in 1996. Net Income
in 1997 increased by $825,000 compared to 1996 and depreciation and amortization
increased by $521,000 in 1997 versus 1996. The effect of these cash generators
was offset in 1997 by an increase in accounts receivable of $776,000 and in
inventories of $457,000 which were the result of increased business through the
Company's Transcat division and of its purchase in April 1996 of the stock of
Altek Industries Corp.
Investing Activities
- --------------------
Cash used in investing activities totaled $24,084,000 in 1998 compared to
$5,088,000 in 1997. The Company invested $22,000,000 in its purchase of the
sales and service divisions of EIL Instruments in April 1997 and $6,637,500 in
its purchase of Altek Industries Corp in April 1996. Capital assets acquired
totaled $2,084,000 in 1998 compared to $815,000 in 1997.
Financing Activities
- --------------------
Financing activities generated $16,999,000 more cash in 1998 than in 1997.
$21,109,000 of additional bank debt was added in 1998 to finance the Company's
operations, acquire the assets of the former sales and service divisions of EIL
Instruments and to repay $600,000 of debt related to the Company's April 1996
acquisition of Altek Industries Corp. During 1998, employees and directors
exercised options and warrants which provided $261,000 more cash to the Company
as the result of such transactions in 1998 compared to 1997.
During 1997, financing activities generated $5,821,000 more cash than in 1996.
In addition, $1,838,000 worth of Company stock was issued as partial payment for
the stock of Altek Industries Corp., an additional $36,000 of stock was sold to
employees and directors under various stock option and warrant plans in 1997
versus 1996, and $5,184,000 of additional bank and other debt was added in 1997
compared to 1996 to finance the Company's operations and to acquire the stock of
Altek Industries Corp.
Forward-Looking Statements
- --------------------------
This Report may contain forward-looking statements based on current
expectations, estimates and projections about Transmation's industry,
13
14
management's beliefs and assumptions made by management. Words such as
"anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates,"
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and assumptions that
are difficult to forecast. Therefore, actual results may differ materially from
those expressed or forecast in any such forward-looking statements. Transmation
undertakes no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------------
Not applicable.
14
15
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------------
TRANSMATION, INC.
INDEX TO FINANCIAL STATEMENTS
Document Page
- -------- ----
Report of Independent Accountants 16
Consolidated Balance Sheet - March 31, 1998, 1997 17
Consolidated Statement of Income - March 31, 1998, 1997, 1996 18
Consolidated Statement of Cash Flows - March 31, 1998, 1997, 1996 19
Consolidated Statement of Stockholders' Equity -
March 31, 1998, 1997, 1996 20
Notes to Consolidated Financial Statements 21 - 32
Schedule VIII - Valuation and Qualifying Accounts -
March 31, 1998, 1997, 1996 33
All other schedules have been omitted because they are not applicable or the
required information is shown in the Financial Statements or notes thereto.
15
16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
Transmation, Inc.
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
Transmation, Inc. and its subsidiaries at March 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1998, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Rochester, New York
May 15, 1998
16
17
TRANSMATION, INC.
CONSOLIDATED BALANCE SHEET
March 31, March 31,
ASSETS: 1998 1997
------------ ------------
Current Assets:
Cash $652,664 $758,215
Accounts Receivable, less allowance
for doubtful accounts of $592,000 in 1998
and $404,000 in 1997 12,540,347 6,773,669
Inventories 10,675,829 7,790,166
Prepaid Expenses and Deferred Charges 1,344,799 956,235
Deferred Tax Assets 540,172 394,402
------------ ------------
Current Assets 25,753,811 16,672,687
Properties, at cost, less accumulated
Depreciation 6,405,053 2,355,757
Goodwill, less accum. Amortization of $1,320,500 in
1998 and $313,600 in 1997 19,199,947 5,947,558
Deferred Charges 204,308 118,214
Deferred Income Taxes 58,582 226,352
Other Assets 253,513 537,790
------------ ------------
$51,875,214 $25,858,358
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities
Notes Payable $2,500,000 $600,000
Current Portion, Long-Term Debt 2,856,000
Accounts Payable 7,861,779 3,596,365
Accrued Payrolls, Commissions & Other 2,174,389 2,008,698
Income Taxes Payable 234,984 689,461
------------ ------------
Current Liabilities 15,627,152 6,894,524
Long-Term Debt 21,752,922 6,000,000
Deferred Compensation 509,981 594,026
------------ ------------
37,890,055 13,488,550
------------ ------------
Commitments and Contingent Liabilities
Stockholders' Equity:
Common Stock, par value $.50 per share -
Authorized - 15,000,000 shares - issued and outstanding -
5,830,942 in 1998 (including 2,853,692 shares
issued on 7/22/97) and 2,826,412 in 1997 2,915,471 1,413,206
Capital in Excess of Par Value 2,227,117 3,121,746
Accumulated Translation Adjustment (120,788) (130,532)
Retained Earnings 8,963,359 7,965,388
------------ ------------
13,985,159 12,369,808
------------ ------------
$51,875,214 $25,858,358
============ ============
See notes to consolidated financial statements
17
18
TRANSMATION, INC.
CONSOLIDATED STATEMENT OF INCOME
Year Ending March 31,
1998 1997 1996
-------------- -------------- --------------
Net Sales $78,483,565 $47,311,224 $38,449,758
-------------- -------------- --------------
Costs and Expenses:
Cost of Product Sold 53,441,287 28,733,887 24,358,437
Selling & Administrative Expenses 19,194,879 13,580,402 10,826,776
Research & Development Costs 1,660,110 1,560,974 1,099,508
Interest Expense 2,547,218 633,638 333,414
-------------- -------------- --------------
76,843,494 44,508,901 36,618,135
-------------- -------------- --------------
1,640,071 2,802,323 1,831,623
Other Income 479,013
-------------- -------------- --------------
Income Before Income Taxes 1,640,071 3,281,336 1,831,623
Provision for Income Taxes 642,100 1,221,600 596,900
-------------- -------------- --------------
Net Income $997,971 $2,059,736 $1,234,723
============== ============== ==============
Earnings Per Share - Basic $0.17 $0.37 $0.26
============== ============== ==============
Earnings Per Share - Diluted $0.16 $0.35 $0.24
============== ============== ==============
See notes to consolidated financial statements
18
19
TRANSMATION, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
March 31, March 31, March 31,
1998 1997 1996
-------------- -------------- --------------
Cash Flows from Operating Activities
Net Income 997,971 $2,059,736 $1,234,723
Adjustments to reconcile net income to
net cash provided from operating
activities:
Depreciation and Amortization 2,711,779 1,010,656 489,462
(Increase) Decrease in CSV of
Life Insurance Policies (2,196) 21,728 (14,377)
Provision for Losses on Accounts Receivable 37,191 (32,000) (37,000)
Deferred Income Taxes 22,000 (205,094) (77,708)
Gain on Sale of Land, Net (479,013)
Changes in Assets and Liabilities
Accounts Receivable 700,688 (776,027) 240,248
Inventories (642,593) (457,470) 255,909
Prepaid Expenses & Deferred Charges (219,878) 23,475 297,072
Other Assets 284,277 (286,473)
Accounts Payable 295,054 122,865 (606,054)
Other Liabilities (793,304) 358,216 157,507
Income Taxes Payable (454,477) 288,895 407,956
Deferred Compensation (84,045) (88,567) (98,287)
-------------- -------------- --------------
Net Cash Provided by Operating Activities 2,852,467 1,560,927 2,249,451
-------------- -------------- --------------
Cash Flows from Investing Activities:
Purchase of EIL Instruments (22,000,000)
Proceeds from Sale of Land, Net 527,749
Purchase of Altek Industries Corp. (4,800,000)
Purchase of Properties (2,084,320) (815,349) (965,643)
-------------- -------------- --------------
Net Cash used in Investing Activities (24,084,320) (5,087,600) (965,643)
-------------- -------------- --------------
Cash Flows from Financing Activities:
Increase in Notes Payable 1,900,000 600,000
Current Portion of Long-Term Debt 2,856,000
Issuance of Common Stock 607,636 346,896 310,407
Borrowings (Repayments) of Long Term Debt 15,752,922 3,170,659 (2,013,626)
-------------- -------------- --------------
Net Cash Provided by(used by) Financing Activities 21,116,558 4,117,555 (1,703,219)
-------------- -------------- --------------
Effect of Exchange Rates on Cash 9,744 (36,713) 15,694
-------------- -------------- --------------
Net (Decrease)Increase in Cash (105,551) 554,169 (403,717)
Cash at Beginning of Period 758,215 204,046 607,763
-------------- -------------- --------------
Cash at End of Period $652,664 $758,215 $204,046
============== ============== ==============
Cash Paid for Interest and Income Taxes is as follows:
Interest Paid $2,517,840 $555,069 $367,739
Taxes Paid $1,052,268 $1,043,883 $124,750
See notes to consolidated financial statements
19
20
TRANSMATION, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Number of
Shares of $.50
Par Value Common Stock Capital Accumulated
Common Stock Issued and in Excess of Retained Translation
Outstanding Outstanding Par Value Earnings Adjustment
----------------- ----------------- ----------------- ----------------- ----------------
Balance, March 31, 1995 2,380,640 $1,190,320 $849,829 $4,670,929 ($109,513)
Issuance of Stock 71,306 35,653 274,754
Currency Translation Activity 15,694
Net Income 1,234,723
----------------- ----------------- ----------------- ----------------- ----------------
Balance, March 31, 1996 2,451,946 1,225,973 1,124,583 5,905,652 (93,819)
Issuance of Stock 374,466 187,233 1,997,163
Currency Translation Activity (36,713)
Net Income 2,059,736
----------------- ----------------- ----------------- ----------------- ----------------
Balance, March 31, 1997 2,826,412 1,413,206 3,121,746 7,965,388 (130,532)
Two for One Stock Split
on 7/22/97 2,853,692 1,426,846 (1,426,846)
Issuance of Stock 150,838 75,419 532,217
Currency Translation Activity 9,744
Net Income 997,971
----------------- ----------------- ----------------- ----------------- ----------------
Balance, March 31, 1998 5,830,942 $2,915,471 $2,227,117 $8,963,359 ($120,788)
================= ================= ================= ================= ================
See Notes to Consolidated Financial Statements
20
21
TRANSMATION, INC.
-----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - MARCH 31, 1998, 1997, AND 1996
---------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies
- ---------------------------------------------------
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
Principles of Consolidation
The financial statements include the accounts of wholly-owned subsidiaries. All
intercompany transactions have been eliminated.
Foreign Operations
The accounts of Transmation's foreign subsidiaries are maintained in the local
currency of the countries in which they operate and have been translated to U.S.
dollars in accordance with the Statement of Financial Accounting Standards No.
52. Accordingly, accounts representing assets and liabilities, except for
long-term intercompany and equity accounts, have been translated at the year-end
rates of exchange and related revenue and expense accounts have been translated
at average rates of exchange during the year. Gains and losses arising from
translation of subsidiaries' balance sheets into U.S. dollars are recorded
directly to the accumulated translation adjustment component of stockholders'
equity. Currency gains and losses on business transactions are included in net
income. In 1998, transaction losses totaled $59,303, in 1997 and 1996,
transaction gains totaled $1,336 and $20,652 respectively.
Inventories
Inventories are valued at the lower of standard cost or market. Standard costs
approximate the average cost method of inventory valuation.
Depreciation and Amortization
The cost of properties is depreciated over the estimated useful lives of the
assets. Depreciation is determined on a straight-line basis. For income tax
purposes, depreciation is determined by accelerated methods as permitted under
tax regulations. Additions and betterments are capitalized; maintenance and
repairs are charged to income. The cost and accumulated depreciation of assets
retired or otherwise disposed of are eliminated from the accounts and any
resulting gain or loss is credited or charged to income. Leasehold improvements
are amortized over the terms of the related leases.
Income Taxes
The Company accounts for certain income and expense items differently for
financial reporting purposes than for income tax reporting purposes. Deferred
income taxes are provided in recognition of these temporary differences.
21
22
Deferred Catalog Costs
Costs relating to mail order catalogs are amortized over a two-year period
beginning in the month of distribution. Such amortization periods approximate
the estimated productive life of a catalog. Prepaid expenses and deferred
charges at March 31, 1998, 1997, and 1996 consist principally of the unamortized
balance of costs associated with the catalogs. Catalog costs expensed in 1998,
1997, and 1996 were $1,059,418, $1,040,716, and $1,240,752 respectively.
Fiscal Year
The Company operates within a conventional 52 week accounting fiscal year ending
on March 31 of each year.
Revenue Recognition
The Company recognizes revenue from product sales at the time of shipment.
Goodwill
Goodwill represents the excess of acquisition cost over fair value of assets
acquired at the time subsidiaries were purchased. The excess acquisition cost is
being amortized over 20 years on a straight-line basis. The Company evaluates
the carrying value of the excess acquisition costs of its subsidiaries whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. The carrying value of excess acquisition costs is considered
impaired when the projected undiscounted future cash flows from the related
business unit is less than its carrying value. The Company measures impairment
based on the amount by which carrying value exceeds fair market value. Fair
market value is determined primarily using the projected future cash flows
discounted at a rate commensurate with the risk involved.
Stock Options
The Company follows the provisions of Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees," to account for its stock
option and warrant activity in the financial statements. The Company granted all
options currently outstanding at an exercise price equal to the market price at
the date of grant and, therefore, under APB 25, no compensation expense is
recorded. The Company follows the disclosure provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."
Commitments and Contingent Liabilities
Management is unaware of any litigation which is likely to result in any
material adverse impact on the Company.
22
23
Note 2 - Business Segments
- --------------------------
The Company and its subsidiaries sell in one basic industry, instrumentation
products for the process industry. Sales are made by the Company and its
subsidiaries to end users and engineering contractors in the United States and
other countries. The Company's domestic operations include manufacturing, sales
and service; the Company's foreign operations are limited to sales and service.
A summary of 1998, 1997, and 1996 operating data relating to the Company and its
subsidiaries is as follows:
ADJUSTMENTS
AND CONSOLI-
1998 UNITED STATES CANADA OTHER ELIMINATIONS DATED
- ------------------- --------------- --------------- --------------- --------------- ---------------
REVENUE FROM
UNAFFILIATED
CUSTOMERS $73,317,493 $5,166,072 $78,483,565
INTERCOMPANY
SALES AND
CREDITS 624,791 $1,489,598 ($2,114,389)
--------------- --------------- --------------- --------------- ---------------
TOTAL REVENUE $73,942,284 $5,166,072 $1,489,598 ($2,114,389) $78,483,565
=============== =============== =============== =============== ===============
NET INCOME $277,773 $222,172 $548,075 ($50,248) $997,971
=============== =============== =============== =============== ===============
IDENTIFIABLE
ASSETS $49,240,409 $1,451,495 $1,388,336 ($205,026) $51,875,214
=============== =============== =============== =============== ===============
ADJUSTMENTS
AND CONSOLI-
1997 UNITED STATES CANADA OTHER ELIMINATIONS DATED
- ------------------- --------------- --------------- --------------- --------------- ---------------
REVENUE FROM
UNAFFILIATED
CUSTOMERS $42,518,794 $4,792,430 $47,311,224
INTERCOMPANY
SALES AND
CREDITS 622,954 $1,445,577 ($2,068,531)
--------------- --------------- --------------- --------------- ---------------
TOTAL REVENUE $43,141,748 $4,792,430 $1,445,577 ($2,068,531) $47,311,224
=============== =============== =============== =============== ===============
NET INCOME $1,473,236 $265,790 $323,526 ($2,816) $2,059,736
=============== =============== =============== =============== ===============
IDENTIFIABLE
ASSETS $24,341,603 $1,338,863 $875,650 ($697,758) $25,858,358
=============== =============== =============== =============== ===============
ADJUSTMENTS
AND CONSOLI-
1996 UNITED STATES CANADA OTHER ELIMINATIONS DATED
- ------------------- --------------- --------------- --------------- --------------- ---------------
REVENUE FROM
UNAFFILIATED
CUSTOMERS $32,071,157 $3,839,411 $2,539,190 $38,449,758
INTERCOMPANY
SALES AND
CREDITS 1,208,369 544,321 ($1,752,690)
--------------- --------------- --------------- --------------- ---------------
TOTAL REVENUE $33,279,526 $3,839,411 $3,083,511 ($1,752,690) $38,449,758
=============== =============== =============== =============== ===============
NET INCOME $1,063,362 $318,813 ($168,104) $20,652 $1,234,723
=============== =============== =============== =============== ===============
IDENTIFIABLE
ASSETS $14,483,246 $939,003 $848,474 ($568,996) $15,701,727
=============== =============== =============== =============== ===============
23
24
Sales and transfers among the United States, Canada and Other are made on a
formula basis intended to reflect market value. Net income is revenue less costs
and operating expenses.
Total consolidated sales to additional separate foreign geographic areas except
Canada, as defined by the Company, did not aggregate more than 10 percent of
total consolidated sales during the years 1998-1996. Sales in foreign countries,
including Canada, represented 19.1 percent of sales in 1998, 27.8 percent of
sales in 1997, and 20.7 percent of sales in 1996.
Note 3 - Foreign Net Assets
- ---------------------------
The consolidated balance sheet includes net assets of Transmation's foreign
subsidiaries of $1,262,323 in 1998, and $983,401 in 1997.
Note 4 - Inventories
- --------------------
The major classifications of inventory are as follows:
March 31,
------------------------------
1998 1997
---- ----
Raw Materials and
Purchased Parts $4,221,730 $2,088,533
Work in Process 629,545 519,280
Finished Products 6,529,564 5,710,854
------------ ------------
11,380,839 8,318,667
Less Inventory Reserve (705,010) (528,501)
------------ ------------
$10,675,829 $7,790,166
============ ============
Note 5 - Properties
- -------------------
The major classifications of properties are as follows:
March 31,
------------------------------
1998 1997
---- ----
Land and Improvements $118,445 $118,445
Buildings 321,267 317,411
Machinery, Equipment &
Software 9,209,697 4,799,721
Tools, Dies and Molds 649,249 449,325
Furniture & Fixtures 1,532,980 828,241
Vehicles 81,951 135,174
Leasehold Improvements 153,553 110,193
----------- -----------
12,067,142 6,758,510
Less - Accumulated
Depreciation & Amort 5,662,089 4,402,753
----------- -----------
$6,405,053 $2,355,757
=========== ===========
Useful lives are estimated to be 15 to 30 years for buildings, 5 to 10 years for
machinery, equipment and software, 3 years for tools, dies and molds, 5 to 10
years for furniture and fixtures, and 3 years for vehicles. Leasehold
improvements are amortized over the terms of the related leases.
Note 6 - Borrowings
- -------------------
Notes payable consists of amounts payable to the former owners of Altek
Industries Corp. resulting from the purchase of Altek by the Company in April
1996. Interest on this note is payable at the rate of 8%.
At March 31, 1998, the Company has a $31,286,000 Revolving Credit and Term Loan
agreement with banks. At March 31, 1998, $14,286,000 is borrowed under the term
loan. The term loan, dated April 4, 1997, extends through January 1, 2003, and
24
25
requires 21 consecutive quarterly installment payments which commenced January
1, 1998. Interest is payable on a formula basis, at the Company's option, at
rates above prime or above LIBOR determined on the basis of Company performance
as determined by its leverage ratio. On March 31, 1998, interest to be paid
under the Term Loan was at 2.50% above LIBOR or 1.00% above the bank's prime
lending rate. At March 31, 1998, $10,322,922 was borrowed under the Revolving
Credit portion of the Company's credit facility. The term of the Revolving
Credit facility, dated April 4, 1997, extends through January 4, 2001. Interest
is payable under the revolving credit facility on a formula basis, at the
Company's option, at rates above prime or above LIBOR determined on the basis of
Company performance as determined by its leverage ratio. On March 31, 1998,
interest to be paid under the Revolving Credit Agreement was at 2.25% above
LIBOR or .75% above the bank's prime lending rate. At March 31, 1998, interest
was payable on the above loans at rates ranging from 7.94% to 9.25%.
Required payments under the term loan are as follows:
April 1, 1998 - March 31, 1999 $2,856,000
April 1, 1999 - March 31, 2000 $2,857,000
April 1, 2000 - March 31, 2001 $2,857,000
April 1, 2001 - March 31, 2002 $2,858,000
April 1, 2002 - March 31, 2003 $2,858,000
The revolving credit and term loan agreement contains, among other provisions,
restrictions on the annual amount of capital expenditures, payment of dividends,
the annual amount of expenditures made for the purpose of printing and
distributing catalogs.
Additionally, the Company has pledged its personal property and fixtures,
including inventory and equipment, and its accounts receivable as collateral
security for the loan. Further, the Company has agreed to pay to the lender an
amount equal to 1/4% of the unused portion of the total credit available. The
fee is payable quarterly and total commitment fees paid on any unused lines of
credit under revolving credit agreements were immaterial in all years 1996-1998.
The Company also agreed to pay a closing fee in the amount of $80,000 and an
agency fee in the amount of $45,000 in conjunction with the Revolving Credit and
Term Loan facility; both fees are being amortized over the term of the loans.
The Company is in compliance with provisions of its loan agreement as of March
31, 1998.
Note 7 - Leases
- ---------------
The Company has operating leases under renewable agreements covering sales
office and manufacturing space. At March 31, 1998, minimum future rental
payments due under such leases for space which had an initial non-cancelable
term in excess of one year were $2,593,829 due in monthly installments. Amounts
due under these leases are as follows:
1999 - $781,665
2000 - $722,539
2001 - $569,555
2002 - $328,337
2003 - $186,263
2004 - $5,470
Total rental expense under these leases was $840,955 in 1998, $350,076 in
1997,and $325,857 in 1996.
25
26
Note 8 - Stockholders' Equity
- -----------------------------
In August 1993, an incentive Stock Option plan was adopted. This plan was
amended and restated in August 1995, 1996 and 1997. Options are available to be
granted to employees under the 1993 Plan at prices not less than fair market
value at the date of grant and are exercisable in annual installments beginning
at the date of grant and expiring up to ten years later. A plan adopted in
August 1981 has now expired; however, certain options under that plan were
exercised during 1997.
The following table summarizes the transactions under the plans during 1998,
1997, and 1996:
1998 1997 1996
------------------------------- ------------------------------- -------------------------------
Weighted Weighted Weighted
Average Average Average
No. of Exercise No. of Exercise No. of Exercise
Shares Price Shares Price Shares Price
------------------------------- ------------------------------- -------------------------------
Beginning of Year 1,493,870 3.70 805,100 2.22 487,200 1.84
Add (Deduct)
Granted 539,520 7.10 878,520 4.65 388,900 2.56
Exercised (82,410) 2.66 (94,460) 1.24 (48,800) 1.13
Canceled (329,990) 5.22 (95,790) 2.29 (22,200) 2.32
-------------- -------------- --------------- -------------- -------------- ---------------
End of Year 1,620,990 4.58 1,493,370 3.70 805,100 2.22
-------------- -------------- --------------- -------------- -------------- ---------------
Exercisable, End of Year 648,435 3.65 253,434 3.28 97,800 1.23
============== ============== =============== ============== ============== ===============
Available, End of Year 187,940 176,630 - - - - -
============== =============== ==============
The following options were outstanding or exercisable as of March 31, 1998:
Options Outstanding Options Exercisable
------------------------------------------------ -------------------------------
Weighted
Average Weighted Weighted
Remain. Average Average
No. of Contractual Exercise No. of Exercise
Shares Life Price Shares Price
-------------- -------------- --------------- -------------- ---------------
Range of Exercise Prices:
$2.125 - $3.125 505,050 1.90 yrs $2.31 362,500 $2.30
$3.25 - $3.3125 75,300 3.04 yrs $3.26 36,650 $3.26
$4.1875 - $5.25 590,280 3.86 yrs $4.73 142,770 $4.70
$6.9375 - $9.25 450,360 4.13 yrs $7.13 106,515 $7.01
On August 21, 1984, shareholders approved the Directors' Warrant Plan. This Plan
was amended and restated in August 1995. The Plan provides that warrants may be
granted to non-employee directors of Transmation to purchase in the aggregate
not more than 200,000 shares of the Company's common stock. The purchase price
for shares issued under the Directors' Warrant Plan shall be equal to the fair
market value of the stock on the date of the grant of the warrant. A summary of
activity under the 1984 Directors' Warrant Plan is as follows:
26
27
Shares Warrant Price
------- -------------
Balance, 3/31/96 60,000 $1.50 - $3.25
Granted During 1997 24,000 4.19
Exercised During 1997 (8,400) 1.50 - 4.19
Canceled During 1997 (9,600) 3.25 - 4.19
------- -------------
Balance, 3/31/97 66,000 1.50 - 4.19
Granted During 1998 24,000 8.13
Exercised During 1998 (26,000) 1.50
------- -------------
64,000 $3.25 - $8.13
======= =============
On August 15, 1995, the Board of Directors granted the then President of the
Company's Transcat Division a non-qualified stock option to purchase 47,900
shares of the Company's common stock at $3.13 per share, the fair market value
at the date of the grant. These shares are exercisable in equal annual
installments beginning at the date of the grant and expiring five years later.
During 1997, the Company adopted the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 123 introduced a fair value
method of accounting for stock-based compensation. To calculate the fair value
of the options and warrants awarded, the Company elected to use the
Black-Scholes pricing model which produced a weighted average fair value of
options granted of $3.90, $4.65 and $2.35 in 1998, 1997 and 1996 respectively.
The following assumptions were used in the pricing model: a weighted average
expected option life of five years; an annualized volatility rate of 54.4% for
1998, 58.6% for 1997, and 63.6% for 1996; a weighted average risk-free rate of
return of 6.64% in 1998, 6.31% in 1997, and 6.37% for 1996; and no dividends in
any year. The Company elected to account for terminations when they occur rather
than include an attrition factor into its model.
If compensation cost had been measured based on the fair-value based accounting
method under SFAS 123, the following would have been disclosed for March 31:
1998 1997 1996
------------- ------------- -------------
Pro Forma
Net (Loss)Income ($458,150) $746,932 $1,071,103
Earnings Per Share
Basic ($.08) $.13 $.22
Diluted ($.08) $.13 $.21
The effect of applying SFAS 123 in the current year is not representative of the
effect on income for future years since each subsequent year will reflect
expense for additional year's vesting.
On June 23, 1997, the Company declared a two-for-one stock split effected in the
form of a 100% stock dividend to shareholders of record on July 22, 1997.
Accordingly, $1,426,846 was transferred from Capital in Excess of Par Value to
Common Stock, representing the par value of additional shares issued. All
references in the consolidated financial statements referring to shares, share
prices, per share amounts and stock plans have been adjusted retroactively for
the two-for-one stock split.
Note 9 - Net Earnings Per Share
- -------------------------------
In 1997, the Company adopted SFAS No. 128, "Earnings Per Share," which requires
disclosure of basic and diluted earnings per share. Basic earnings per share is
computed based on the weighted average number of common shares outstanding
during the period. Diluted earnings per share reflects the assumed conversion of
dilutive stock options and warrants. In computing the per share effect of
assumed conversion, funds which would have been received from the exercise of
options and warrants are considered to have been used to purchase common shares
at average market prices for the period, and the resulting net additional common
27
28
shares are included in the calculation of average common shares outstanding. All
previously reported earnings per share amounts were restated upon adoption of
SFAS No. 128.
The table below summarizes the amounts used to calculate basic and diluted
earnings per share:
1 9 9 8 1 9 9 7 1 9 9 6
--------------------------------- ----------------------------------- -----------------------------------
AVERAGE AVERAGE AVERAGE
NET OUTSTAND. PER NET OUTSTAND. PER NET OUTSTAND. PER
EARNINGS SHARES SHARE EARNINGS SHARES SHARE EARNINGS SHARES SHARE
----------- ----------- -------- ------------ ------------ --------- ------------- ----------- --------
Basic Earnings
Per Share $997,971 5,729,599 $0.17 $2,059,736 2,803,376 $0.73 $1,234,723 2,414,865 $0.51
Stock Split 7/22/97 2,803,376 ($0.36) 2,414,865 ($0.25)
Basic Earnings
After Stock Split 997,971 5,729,599 $0.17 2,059,736 5,606,752 $0.37 1,234,723 4,829,730 $0.26
Effect of Dilutive
Options & Warrants 545,039 335,658 240,876
Diluted Earnings
Per Share ----------- ----------- -------- ------------ ------------ --------- ------------- ----------- --------
$997,971 6,274,638 $0.16 $2,059,736 5,942,410 $0.35 $1,234,723 5,070,606 $0.24
=========== =========== ======== ============ ============ ========= ============= =========== ========
Certain anti-dilutive outstanding stock options and warrants were excluded from
the calculation of average shares outstanding since their exercise prices
exceeded the average market price of common shares during the period. The
anti-dilutive stock options and warrants so excluded at the end of each of the
last three years and their associated exercise prices are summarized below. The
options expire at various times between 1999 and 2002.
Number of Exercise
Options and Warrants Price
-------------------- -----
1998 70,520 $8.13 - $9.25
1997 None None
1996 88,000 $3.13 - $3.31
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Note 10 - Income Taxes
- ----------------------
The provisions for income tax determined in accordance with FAS 109 for the
years ended March 31, 1998, 1997, and 1996 are comprised of:
1998 Current Deferred Total
---- ------- -------- -----
Federal $ 312,800 $ 18,200 $ 331,000
State 77,500 3,800 81,300
Foreign 229,800 229,800
-------------- -------------- --------------
$ 620,100 $ 22,000 $ 642,100
============== ============== ==============
1997 Current Deferred Total
---- ------- -------- -----
Federal $ 1,085,400 ($ 201,400) $ 884,000
State 81,454 (3,694) 77,760
Foreign 259,840 259,840
-------------- -------------- --------------
$ 1,426,694 ($ 205,094) $ 1,221,600
============== ============== ==============
1996 Current Deferred Total
---- ------- -------- -----
Federal $ 405,100 $ 112,000 $ 517,100
State 24,000 (4,000) 20,000
Foreign 245,508 (185,708) 59,800
-------------- -------------- --------------
$ 674,608 ($ 77,708) $ 596,900
============== ============== ==============
The following is a reconciliation of the "expected" federal income tax provision
computed by applying the statutory U.S. federal income tax rate and the income
tax provision reflected in the statement of income:
1998 1997 1996
---- ---- ----
Computed "Expected"
Federal Income Tax $557,600 $1,115,650 $622,750
State Income Taxes 38,300 56,100 13,200
Foreign Sales Corp. (126,600) (69,400) (11,225)
Book Expense not
Deductible for taxes 150,300 106,600
Foreign Taxes 44,000 50,800 23,000
Valuation Allowance,
Foreign (17,900) (14,200) (45,100)
R&D Credit (12,300)
Other, Net (3,600) (23,950) 6,575
----------- ----------- -----------
$642,100 $1,221,600 $596,900
=========== =========== ===========
During 1998, 1997, and 1996, $17,900, $14,200 and $45,100 respectively of a
foreign valuation allowance was recognized due to the increase in the likelihood
that benefits will be recognized. Management believes net deferred tax assets
are more likely than not to be recognized.
29
30
The components of net deferred tax assets are as follows:
1998 1997 1996
---- ---- ----
Deferred Tax Assets:
Foreign Net Operating
Loss Carryforward $ 133,235 $ 154,857 $ 171,620
Deferred Compensation 209,069 226,749 265,938
Accrued Vacation Pay 216,211 150,474 132,805
Allowance for Doubtful
Accounts and Warranties 221,474 134,865 137,190
Reserves for Inventory Obsolescence 289,023 201,737 52,015
Amortizations of Leaseholds 35,150 53,293
Valuation Allowance (30,800) (45,000)
-------------- -------------- --------------
Gross Deferred Tax Assets 1,104,162 891,175 714,568
============== ============== ==============
Deferred Tax Liabilities:
Goodwill 94,721
Depreciation 224,150 177,747 146,561
Accelerated Catalog & Postage
Write-Offs 186,537 92,674 203,347
-------------- -------------- --------------
Gross Deferred Tax Liabilities 505,408 270,421 349,908
------- ------- -------
Net Deferred Tax Assets $ 598,754 $ 620,754 $ 364,660
============== ============== ==============
The Company has available foreign net operating loss carryforwards totaling
approximately $358,000. These carryforwards have an unlimited expiration period
and their use is limited to the Company's future taxable income.
Note 11 - Other Income
- ----------------------
Other income in 1997 was comprised primarily of the gain on the sale of land.
Note 12 - Consulting Agreement
- ------------------------------
On February 28, 1995, William J. Berk, former President of Transmation, Inc.
retired. In accordance with terms of a deferred compensation agreement between
the Company and Mr. Berk, payments due under such agreement commenced on March
1, 1995. Mr. Berk is entitled to annual payments amounting to $96,456 for life.
His wife will receive 60% of the annual benefit for her lifetime should she
survive him. This deferred compensation agreement was not funded and the
estimated present value of the future benefits was recorded as an expense and a
liability over the term of Mr. Berk's actual employment. There were no charges
to expense for retirement benefits to be paid to Mr. Berk under his now expired
employment contract during 1996-1998.
Note 13 - Deferred Profit Sharing
- ---------------------------------
Effective April 1, 1981, the Transmation, Inc. Deferred Profit Sharing Plan was
adopted. Effective April 1, 1987, this plan was amended from a non-contributory
to a contributory defined contribution plan and renamed the Transmation, Inc.
Long-Term Savings and Deferred Profit Sharing Plan. All United States employees
of Transmation, Inc. are eligible to participate in the plan providing certain
qualifications are met. Employer contributions are made to the plan at the
discretion of the Board of Directors of the Company. Payments of benefits
accrued for plan participants will be made upon retirement or upon termination
of employment prior to retirement providing certain conditions have been met by
the employee prior to termination. There were no company profit sharing
contributions made under this plan in any of the periods 1996-1998.
Note 14 - Fair Value of Financial Instruments
- ---------------------------------------------
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31
The Company has determined the fair value of its debt and other financial
instruments using available market information and appropriate valuation
methodologies as follows:
Cash and accounts receivable:
The carrying amounts reported in the balance sheet for cash
and receivables approximate their fair value.
Long-term debt:
The carrying amount of debt under the Company's floating rate
revolving credit agreement with a bank approximates it fair
value.
Note 15 - Supplemental Information
- ----------------------------------
Supplemental cash flow information and non-cash investing and financing
activities are as follows:
Acquisitions: 1998 1997
---- ----
Fair value of assets acquired $12,670,050 $ 1,905,003
Liabilities assumed $ 4,929,355 $ 1,528,617
Fair value of assets exchanged $22,000,000 $ 4,800,000
Stock issued $ 1,837,500
Note 16 - Acquisitions
- ----------------------
On April 4, 1997, the Company acquired certain assets of E.I.L. Instruments,
Inc. for $22,000,000 cash and the value of certain defined assumed liabilities.
The transaction was accounted for under the purchase method of accounting and,
accordingly, the results of operations of E.I.L. for the period April 4, 1997
through March 31, 1998 are included in the accompanying consolidated financial
statements. The purchase price has been allocated to assets acquired and
liabilities assumed based on fair market value at the date of the acquisition.
The following unaudited pro forma financial information for the Company gives
effect to the E.I.L. acquisition had it occurred on April 1, 1996. 1997 amounts
include results for Transmation's year ended March 31, 1997 added together with
results for E.I.L. for their fiscal year ended October 31, 1996, the last year
for which such results are available. These pro forma results have been prepared
for comparative purposes only and do not purport to be indicative of results of
operations which actually would have resulted if the acquisition had occurred on
the date indicated, or which may result in the future.
Year Ending March 31,
---------------------
1997
----
Net Sales $92,203,824
Income before provision
For Income Taxes $ 2,505,236
Net Income $ 1,540,946
Diluted Earnings Per Share $.26
On April 3, 1996 the Company acquired all of the common stock of Altek
Industries Corp. (Altek), a manufacturer of electronic calibration equipment,
for a purchase price of $4,800,000 in cash and notes plus 300,000 shares of
Transmation, Inc. common stock. The transaction was accounted for under the
purchase method of accounting, and accordingly, the results of operations of
Altek for the period April 3, 1996 through March 31, 1997 are included in the
accompanying consolidated financial statements. The purchase price has been
allocated to assets acquired and liabilities assumed based on fair market value
at the date of the acquisition.
31
32
The following unaudited pro forma financial information for the company gives
effect to the Altek acquisition had it occurred on April 1, 1995. These pro
forma results have been prepared for comparative purposes only and do not
purport to be indicative of the results of operations which actually would have
resulted if the acquisition had occurred on the date indicated, or which may
result in the future.
Year Ending March 31,
---------------------
1996
----
Net Sales $42,487,000
Income before provision
For Income Taxes $1,759,500
Net Income $1,144,000
Diluted Earnings Per Share $.20
Note 17 - Quarterly Financial Information (Unaudited)
- -----------------------------------------------------
DILUTED
EARNINGS
1998 NET SALES GROSS PROFIT NET INCOME PER SHARE
- ---------------------------- ---------------- ---------------- ---------------- ----------------
Fourth Quarter $19,982,735 $6,610,609 $332,896 $.05
Third Quarter $19,775,043 $6,162,063 $158,700 $.03
Second Quarter $19,612,705 $6,232,345 $264,753 $.04
First Quarter $19,113,082 $6,037,261 $241,622 $.04
DILUTED
EARNINGS
1997 NET SALES GROSS PROFIT NET INCOME PER SHARE
- ---------------------------- ---------------- ---------------- ---------------- ----------------
Fourth Quarter $12,840,734 $5,022,125 $1,012,542 $.17
Third Quarter $12,210,882 $4,833,515 $427,538 $.07
Second Quarter $11,211,991 $4,407,536 $315,782 $.06
First Quarter $11,047,617 $4,314,161 $303,874 $.05
32
33
TRANSMATION, INC.
-----------------
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
-------------------------------------------------
Y E A R E N D E D M A R C H 3 1,
-----------------------------------
Additions
Balance at Charged to Acquired Bal. at
Beginning of Profit and in End of
Year Loss Acquisition Year
---- ---- ----------- ----
1998
----
Allowance for
Doubtful Accounts $404,000 $37,000 $151,000 $592,000
======== ======= ======== ========
1997
----
Allowance for
Doubtful Accounts $436,000 ($33,000) $404,000
======== ========= ========
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
--------------------
None
33
34
Part III
--------
The information required by each of the following items is presented in
the definitive proxy statement to be filed pursuant to Regulation 14A which
Transmation will file within the period prescribed in connection with the annual
meeting of shareholders to be held on August 18, 1998 and which is incorporated
herein by reference.
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
Report of Independent Accountants
Consolidated Balance Sheet - March 31, 1998, 1997
Consolidated Statement of Income - March 31, 1998, 1997, 1996
Consolidated Statement of Cash Flows - March 31, 1998, 1997, 1996
Consolidated Statement of Stockholders' Equity - March 31, 1998,
1997, 1996
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Schedule VIII - Valuation and Qualifying Accounts -
March 31, 1998, 1997
All other schedules have been omitted because they are not
applicable or the required information is shown in the Financial
Statements or notes thereto.
3. Index to Exhibits
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession.
NOT APPLICABLE
(3) Articles of Incorporation and By-Laws
(i) The Articles of Incorporation, as amended, are
incorporated herein by reference to Exhibit 4(a)
to the Registrant's Registration Statement on Form
S-8 (Registration No. 33-61665) filed on August 8,
1995. Certificate of Amendment thereto is
incorporated herein
34
35
by reference to Exhibit I to the
Registrant's Form 10-Q for the quarter ended
September 30, 1996.
(ii) Bylaws, as amended through August 18, 1987,
are incorporated herein by reference to
Exhibit (3) to the Registrant's Form 10-K
for the year ended March 31, 1988.
(4) Instruments defining the rights of security holders,
including indentures.
Revolving Credit Agreement between the Registrant and
Manufacturers and Traders Trust Company is incorporated
herein by reference to Exhibit 1 to the Registrant's
Form 10-Q for the fiscal quarter ended September 30,
1994. Agreement and Amendment No. 1 thereto is
incorporated herein by reference to Exhibit 4(c) to the
Registrant's Form 10Q for the fiscal quarter ended
September 30, 1995. Agreement and Amendment No. 2
thereto is incorporated herein by reference to Exhibit
4(d) to the Registrant's Form 10Q-A for the fiscal
quarter ended December 31, 1995. Agreement and Amendment
No. 3 thereto is incorporated herein by reference to
Exhibit 4(e) to the Registrant's Form 10Q for the fiscal
quarter ended December 31, 1996.
Revolving Credit and Term Loan Agreement dated April 4,
1997 among Transmation, Inc. and Manufacturer's and
Traders Trust Company and State Street Bank and Trust
Company is incorporated herein by reference to Exhibit
4(c) to the Registrant's Form 8-K dated April 18, 1997.
*Amendment No. 1 thereto is included herein as Exhibit
4(a). Upon written request, the Registrant will provide
to security holders copies of any of the referenced
omitted schedules.
(9) Voting Trust Agreement
NOT APPLICABLE
(10) Material Contracts
The documents listed under (4) are incorporated herein
by reference.
Amendment No. 1 to Transmation, Inc. Amended and
Restated Directors' Warrant Plan is incorporated herein
by reference to Exhibit II to the Registrant's Form 10-Q
for the quarter ended September 30, 1996.
Amendments No. 1 and No. 2 to the Transmation, Inc.
Amended and Restated 1993 Stock Option Plan are
incorporated herein by reference to Exhibits III and IV
to the Registrant's Form 10-Q for the quarter ended
September 30, 1996.
Amendment No. 2 to the Transmation, Inc. Employee's
Stock Purchase Plan is incorporated herein by reference
to Exhibit V
35
36
to the Registrant's Form 10-Q for the quarter ended
September 30, 1996.
Stock Purchase Agreement dated March 28, 1996 among the
Registrant, E. Lee Garelick and James N. Wurtz is
incorporated herein by reference to Exhibit 2(a) to the
Registrant's Form 8-K dated April 3, 1996.
Asset Purchase Agreement dated April 4, 1997 between
Transmation, Inc. and E.I.L. Instruments, Inc. is
incorporated herein by reference to Exhibit 2(a) to the
Registrant's Form 8-K dated April 18, 1997.
Amendment No. 3 to the Transmation, Inc. Directors'
Stock Plan is incorporated herein by reference to
Exhibit 10(a) to the Registrant's Form 10K for the year
ended March 31, 1997.
Amendment No. 1 to Stock Purchase Agreement dated
February 5, 1997 among the Registrant, E. Lee Garelick
and James N. Wurtz is incorporated herein by reference
to Exhibit 10(b) to the Registrant's Form 10K for the
year ended March 31, 1997.
Amendment No. 4 to the Transmation, Inc. Directors'
Stock Plan is incorporated herein by reference to
Exhibit 10(h) to the Registrant's Form 10-Q for the
quarter ended June 30, 1997.
Amendment No. 2 to the Transmation, Inc. Amended and
Restated Directors' Warrant Plan is incorporated herein
by reference to Exhibit 10(i) to the Registrant's Form
10-Q for the quarter ended June 30, 1997.
Amendments No. 3 and 4 to the Transmation, Inc. Amended
and Restated 1993 Stock Option Plan are incorporated
herein by reference to Exhibit 10(j) to the Registrant's
Form 10-Q for the quarter ended September 30, 1997.
Amendment No. 3 to the Transmation, Inc. Employees'
Stock Purchase Plan is incorporated herein by reference
to Exhibit 10(k) to the Registrant's Form 10-Q for the
quarter ended September 30, 1997.
Second Amendment to the Stock Registration and
Repurchase Agreement dated December 12, 1997 between the
Registrant and William J. Berk is incorporated herein by
reference to the Registrant's Registration Statement on
Form S-3 (Registration No. 333-42345).
(a)* Amendment No. 5 to the Transmation, Inc. Directors'
Stock Plan is included herein as Exhibit 10(a).
(b)* Amended and Restated Employment Agreement dated as
of April 1, 1998 by and between Transmation, Inc. and
Robert G. Klimasewski is included herein as Exhibit
10(b).
(c)* Employment Agreement dated as of April 1, 1998 by
and between Transmation, Inc. and Eric W. McInroy is
included herein as Exhibit 10(c).
36
37
(d)* Non-Statutory Stock Option Agreement dated as of
April 21, 1998 by and between Transmation, Inc. and
Barry F. Wharity is included herein as Exhibit 10(d).
(11) Statement re Computation of Per Share Earnings
Computation can be clearly determined from Note 9 to the
Financial Statements included herein at Item 8.
(12) Statements re Computation of Ratios
NOT APPLICABLE
(13) Annual Report to Security Holders, Form 10-Q on
Quarterly Report to Security Holders
NOT APPLICABLE
(16) Letter re Change in Certifying Accountant
NOT APPLICABLE
(18) Letter re Change in Accounting Principles
NOT APPLICABLE
(21) Subsidiaries of Registrant
*Subsidiaries of the Registrant are included herein as
Exhibit 21.
(22) Published Report Regarding Matters Submitted to Vote of
Security Holders
NOT APPLICABLE
(23) Consents of Experts and Counsel
*Consent of Price Waterhouse LLP is included herein as
Exhibit 23.
(24) Power of Attorney
NOT APPLICABLE
(27) Financial Data Schedule
*Financial Data Schedule is included herein as Exhibit
27.
(99) Additional Exhibits
NOT APPLICABLE
(b) No reports on Form 8-K were filed during the quarter ended March 31, 1998.
(c) See (a) 3. above.
37
38
(d) (1) NOT APPLICABLE
(2) NOT APPLICABLE
(3) See Item 8
38
39
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
TRANSMATION, INC.
By: /s/ Robert G. Klimasewski By: /s/ Cornelius J. Murphy
- ----------------------------------- ----------------------------------
Robert G. Klimasewski Cornelius J. Murphy
President & Chief Executive Officer Chairman of the Board of Directors
(Principal Executive Officer)
Date: June 16, 1998 Date: June 16, 1998
- ----------------------------------- ----------------------------------
By: /s/ Angelo J. Chiarella By: /s/ Harvey J. Palmer
- ----------------------------------- ----------------------------------
Angelo J. Chiarella, Director Dr. Harvey J. Palmer, Director
Date: June 16, 1998 Date: June 16, 1998
- ----------------------------------- ----------------------------------
By: /s/ E. Lee Garelick By: /s/ Arthur M. Richardson
- ----------------------------------- ----------------------------------
E. Lee Garelick, Director Arthur M. Richardson, Director
Date: June 16, 1998 Date: June 16, 1998
- ----------------------------------- ----------------------------------
By: /s/ Nancy D. Hessler By:
- ----------------------------------- ----------------------------------
Nancy D. Hessler, Director Philip P. Schulp, Director
Date: June 16, 1998 Date: June 16, 1998
- ----------------------------------- ----------------------------------
By: /s/ John W. Oberlies By: /s/ John A. Misiaszek
- ----------------------------------- ----------------------------------
John W. Oberlies, Director John A. Misiaszek
Vice President, Finance
(Principal Financial Officer and
Principal Accounting Officer)
Date: June 16, 1998 Date: June 16, 1998
- ----------------------------------- ----------------------------------
39