-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, E6eHPdNv7TfHIscTL/DxPgKkY12oEXc9C9HrvH5p6bIGauVR3tUQOYsBZPpA3q+8 cGqZZpcNOajiadtY5zMA0Q== 0000950123-94-001095.txt : 19940705 0000950123-94-001095.hdr.sgml : 19940705 ACCESSION NUMBER: 0000950123-94-001095 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSTECHNOLOGY CORP CENTRAL INDEX KEY: 0000099359 STANDARD INDUSTRIAL CLASSIFICATION: 3577 IRS NUMBER: 954062211 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07872 FILM NUMBER: 94536342 BUSINESS ADDRESS: STREET 1: 700 LIBERTY AVENUE CITY: UNION STATE: NJ ZIP: 07083 BUSINESS PHONE: 908-964-5666 MAIL ADDRESS: STREET 1: 700 LIBERTY AVENUE CITY: UNION STATE: NJ ZIP: 07083 FORMER COMPANY: FORMER CONFORMED NAME: SPACE ORDNANCE SYSTEMS INC DATE OF NAME CHANGE: 19740717 10-K 1 TRANSTECHNOLOGY CORP. FORM 10-K 1 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 [FEE REQUIRED] For the fiscal year ended March 31, 1994 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 1-7872 --------------------- TRANSTECHNOLOGY CORPORATION (Exact name of registrant as specified in its charter) Delaware 95-4062211 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 700 Liberty Avenue 07083 Union, New Jersey (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (908) 964-5666 Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.01 (Title of class) New York Stock Exchange (Name of exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark 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. / X / As of June 13, 1994, the aggregate market value of voting stock held by nonaffiliates of the registrant based on the last sales price as reported by the New York Stock Exchange was $66,043,000.00 As of June 13, 1994, the registrant had 5,215,327 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE The registrant's Proxy Statement for the fiscal year ended March 31, 1994 (to be filed on or before July 29, 1994) is incorporated by reference into Part III hereof. 2 PART I ITEM 1. BUSINESS. GENERAL TransTechnology Corporation develops, manufacturers and sells a wide range of products in two industry segments, Industrial Products and Aerospace Products, as further described below. TransTechnology Corporation was originally organized in 1962 as a California corporation and reincorporated in Delaware in 1986. Unless the context otherwise requires, references to the "Company" or the "Registrant" in this Annual Report refer to TransTechnology Corporation (including the California corporation prior to the reincorporation) and its consolidated subsidiaries. The Company's fiscal year ends on March 31. Accordingly, all references to years in this report refer to the fiscal year ended March 31 of the indicated year. BACKGROUND The Company initially engaged in the design and manufacture of ordnance devices for use in space vehicles and missiles. During the 1970's and 1980's the Company acquired a number of diverse businesses, including manufacturers of gear driven fasteners, custom electrical interconnection systems, aircraft rescue hoists, hoists and winches for aircraft and weapon systems, certain law enforcement equipment, chaff countermeasure products, computer graphics display terminals, bank automation equipment, message- switching equipment and message-communication terminals. In May 1990, the Company sold its pyrotechnic aerospace device and systems business, Space Ordnance Systems ("Space Ordnance Systems"). In August 1991, the Company discontinued manufacturing operations at its Computer Graphics division. In March 1992, the Company sold its Financial Systems division's ("Financial Systems") bank automation equipment line. In May 1992, the Company divested its textile and construction machinery business, Gessner/Howard Brothers/Miller ("Gessner"). In June 1992, the Company sold its Lloyd Manufacturing division's ("Lloyd") elastomer product line, and, in January 1993, the Company sold its weather instrument product line, Belfort Instrument ("Belfort"). During fiscal 1994, the Company continued its program of focusing on its core businesses by acquiring two new product lines, selling one product line and establishing an exclusive distributor relationship for another product line. In July 1993 the Company acquired the assets and business of Electrical Specialties Company, a manufacturer of electrical cables and wire harnesses for the heavy equipment industry and integrated this operation into its Electronics division. In August 1993, the Company acquired the assets and business of a unit of TRW which manufactures single and multi-thread fasteners for the automotive and industrial markets. This unit is now operating as a division of TransTechnology under the name "The Palnut Company." In November 1993, the Company entered into agreements with six manufacturers of electrical connector and components located in the Commonwealth of Independent States (formerly the Soviet Union) for the design and manufacture of connectors and assemblies for the computer, telecommunications and other industrial markets. In March 1994, the Company sold its Federal Laboratories ("Federal Laboratories") tear gas and related law enforcement product lines to Mace Security International. 1 3 DISCONTINUED OPERATIONS Space Ordnance Systems, Financial Systems, Gessner, Lloyd, Belfort, Federal Laboratories and Computer Graphics' manufacturing operations are classified as "Discontinued Operations" in the Company's financial statements for fiscal years 1994, 1993 and 1992. The results of operations from each of these divisions have been excluded from continuing operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." HISTORICAL SEGMENT INFORMATION The Company's Industrial Products segment generated approximately 55% of the Company's consolidated sales for fiscal 1994. For fiscal 1994, the Industrial Products segment's principal products and services included specialty fasteners, wire harnesses, and computer graphics service. The Aerospace Products segment contributed approximately 45% to the Company's consolidated sales for fiscal 1994. This segment's principal products are helicopter rescue hoist and cargo-hook equipment, custom electrical interconnection systems and their components and metallized-glass-fiber products (chaff) and related devices. INDUSTRIAL PRODUCTS The Company's specialty fastener products are manufactured by its Breeze Industrial Products division and its Palnut Company division. Breeze Industrial Products division ("Breeze Industrial") designs and manufactures a diverse line of high-quality stainless steel hose clamps including worm drive hose clamps, T-Bolt and V-Band clamps and light duty clamps for the appliance and hardware markets. These clamps are widely used in the heavy-duty vehicle, industrial, automotive and aircraft industries by both original equipment manufacturers and replacement suppliers. Breeze Industrial's clamp products are sold to distributors and to industrial manufacturers that require engineered products for specific applications. The Company's newest division, The Palnut Company, manufactures single and multi-thread metal fasteners for the automotive and industrial products industries. These include lock nuts used for load carrying in light duty assemblies or as a supplement to ordinary nuts to assure tightness; the On-Sert fastener, which is pressed onto hollow plastic bosses to increase torque and minimize stripping; Pushnuts used as temporary fasteners that hold pre-inserted bolts in place for final assembly or in ratchet plates which fasten onto a shaft or stud; self- threaders used in the installation of automotive trim; U-Nuts that provide one-sided screw assembly and are used to fasten bumpers, fenders and grills to vehicles; and various single-threaded parts designed for insertion into metal or plastic panels. Specialty fasteners are marketed through a combination of a direct sales force, distributors and manufacturing representatives. Such products contributed 44% of the Company's consolidated sales in fiscal 1994 and 30% in each of fiscal 1993 and 1992. Through its MassTech product line, Breeze Industrial also manufactures tachometers and related items such as speed sensors that are used to measure rotational shaft speeds and direction and to indicate revolutions per minute. These products are sold to heavy-duty original equipment manufacturers and in the military and high-performance markets. 2 4 The Company's computer graphics service operations operate under the name TransTechnology Systems & Services as part of the Company's Industrial Products segment. This division maintains and services workstations in the United States and Europe, and also integrates and sells small financial systems in Europe and Australia. During the fourth quarter of fiscal 1994, the Company established a new business unit, a wholly owned subsidiary, Electronic Connections and Assemblies, Inc. ("ECA"). ECA will provide engineering and product development services to assist customers in the design of new high-volume electrical connectors and assemblies for the computer, telecommunications and other industries. ECA is also the exclusive distributor of connector products for six manufacturers organized in the Commonwealth of Independent States (formerly the Soviet Union). No sales were generated by ECA in fiscal 1994. With the acquisition of the assets and business of Electrical Specialties Company in fiscal 1994, the Company's Electronics division (whose other products are in the Aerospace Products segment) became a manufacturer of electrical cables and wire harnesses used in the heavy equipment industry. At March 31, 1994, the Company's Industrial Products segment backlog was $15 million. At March 31, 1993, the backlog was $7 million. Substantially all of the March 31, 1994 backlog is scheduled to be shipped during fiscal 1995. AEROSPACE PRODUCTS The Company's Breeze-Eastern division ("Breeze-Eastern") specializes in the design, development and manufacture of sophisticated lifting and restraining products, principally helicopter rescue hoists, reeling machines and external hook systems. In addition, Breeze-Eastern designs, develops and manufactures winches and hoists for aircraft cargo and weapon-handling systems with applications ranging from cargo handling on fixed-wing aircraft to positioning television cameras on blimps, antenna and gear drives. Breeze-Eastern is the industry market share leader in sales of personnel-rescue hoist and cargo-hook equipment. As the pioneer of helicopter hoist technology, Breeze-Eastern continues to develop sophisticated helicopter hoist systems, including systems for the current generation of Seahawk, Chinook, Dolphin, Merlin and Super Stallion helicopters. Breeze-Eastern also supplies equipment for the United States, Japanese and European Multiple-Launch Rocket Systems which use two specialized hoists to load and unload rocket pod containers. Breeze-Eastern's external cargo-lift hook systems are original equipment on most helicopters manufactured today. These hook systems range from small 1,000-pound capacity models up to the largest 36,000-pound capacity hooks employed on the Super Stallion helicopter. Breeze-Eastern also manufactures aircraft and cargo tie-downs and electronic control boxes and components for helicopter tow boom assemblies for helicopters employed in Navy minesweeping operations. Breeze-Eastern sells its products through an internal marketing representative and several independent sales representatives and distributors. Breeze-Eastern's product lines contributed 25% to the Company's consolidated sales in fiscal 1994, 36% in fiscal 1993 and 33% in fiscal 1992. 3 5 The Technical Center division (the "Technical Center") develops and produces metallized-glass-fiber products, known as chaff, and related devices and systems. Chaff reflects radar signals and is used to defend military aircraft, ships and vehicles against radar detection and attack by radar-guided missiles. The Technical Center is one of only three chaff suppliers to the United States Government. In addition, the Technical Center sells chaff products to both domestic and international customers including air-frame manufacturers, avionics-equipment suppliers and United States approved foreign governments. The Technical Center's sales are generated by an employee marketing representative and several independent sales representatives. The Technical Center contributed 12% to the Company's consolidated sales in fiscal 1994, 11% in fiscal 1993 and 14% in fiscal 1992. The Company's Electronics division ("Electronics") designs and manufactures custom electrical interconnection products for use in military and commercial aircraft, radar installations, naval weapons and missile launch systems, ground-based military vehicles and weapons systems (such as tanks and anti-armor weapons), and secure communication and computer applications. Aircraft products include cable assemblies, conduit assemblies and related hardware elements (metallic and composite) and high reliability connectors. Electronics manufactures these products for various military and commercial aircraft programs including ground support test equipment for the Air Force F-16 fighter, the Army Patriot missile system and the Navy Phalanx anti-aircraft weapons system. Electronics' sales are generated by an internal sales force and several independent sales representatives throughout the United States. Electronics' sales of Aerospace Products contributed 12% to the Company's consolidated sales in fiscal 1994, 14% in fiscal 1993 and 14% in fiscal 1992. The Aerospace Products segment backlog varies substantially from time to time due to the size and timing of orders. At March 31, 1994, the backlog of unfilled orders was $30 million, compared to $34 million at March 31, 1993. The majority of the March 31, 1994 backlog is anticipated to be shipped during fiscal 1995. DEFENSE INDUSTRY SALES Approximately 20% of the Company's consolidated revenues in fiscal 1994, 1993 and 1992, were derived from sales to the United States Government, principally the military services of the Department of Defense and its prime contractors. Such sales are attributable primarily to the Aerospace Products segment. These sales are based on firm fixed-price contracts, some of which are negotiated sole-source awards, while others are awarded on a competitive-bid basis. These contracts typically contain precise performance specifications and are subject to customary provisions which give the United States Government the contractual right of termination for convenience. In the event of termination for convenience, however, the Company is typically protected by provisions allowing reimbursement for costs incurred as well as payment of any applicable fees or profits. Although overall defense spending is down, the major cuts are primarily attributable to reductions in platforms, ships, submarines, tanks and fixed wing aircraft. Management believes that funding for defense accessories and expendables (which comprise a major portion of the Company's defense industry sales) will remain constant for the Company's 1995 fiscal year. At the same time, there can be no assurance that funding for defense accessories and expendables will remain at such a level for the foreseeable future. 4 6 ENVIRONMENTAL MATTERS Due primarily to Federal and State legislation which imposes liability, regardless of fault, upon commercial product manufacturers for environmental harm caused by chemicals, processes and practices that were commonly and lawfully used prior to the enactment of such legislation, the Company may be liable for all or a portion of the environmental clean-up costs at sites previously owned or leased by the Company (or corporations acquired by the Company). The Company's contingencies associated with environmental matters are described in Item 3 "Legal Proceedings," and Note 10 of Notes to Financial Statements included in Item 8 hereof. COMPETITION Some of the Company's various business divisions compete with entities that are larger and have substantially greater financial and technical resources than the Company. Generally, competitive factors include design capabilities, product performance and delivery and price. The Company's ability to compete successfully in many markets described above will depend on its ability to develop and apply technological innovations and to expand its customer base and product lines. There can be no assurance that the Company will continue to successfully compete in any or all of the businesses discussed above. The failure of more than one of these businesses could have a material and adverse effect on the Company's profitability. RAW MATERIALS The various components and raw materials used by the Company to produce its many products are generally available from more than one source. In those instances where only a single source is available, most of such products can generally be redesigned to accommodate materials made by other suppliers. In some cases, the Company stocks an adequate supply of the single source materials for use until a new supplier can be approved. No material part of the Company's business is dependent upon a single supplier or a few suppliers the loss of which would have a materially adverse effect on the Company's consolidated financial position. EMPLOYEES As of June 10, 1994 the Company employed 1,059 persons. There are 500 employees associated with the Industrial Products segment, 543 with the Aerospace Products segment and 16 with the corporate office. 5 7 FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS Financial information relating to each of the Company's segments has been included in Note 11 of Notes to Financial Statements included in Item 8 hereof. FOREIGN OPERATIONS AND SALES The Company's foreign-based facilities consist of the sales and service offices of the computer graphics workstation operations located in the United Kingdom and Australia and its chaff manufacturing center in Belgium. The Company had export sales of $22.2 million in fiscal 1994, $19.5 million in fiscal 1993 and $18.4 million in fiscal 1992, representing 18%, 20% and 20% of the Company's consolidated sales in each of those years, respectively. The risk and profitability attendant to these sales are generally comparable to similar products sold in the United States. Sales, profits and identifiable assets attributable to the Company's combined foreign and domestic operations, and the identification of export sales by geographic area, are set forth in Note 11 of Notes to Financial Statements in Item 8 hereof. 6 8 ITEM 2. PROPERTIES The following table sets forth certain information concerning the Company's principal facilities for its continuing operations:
Location Use of Premises Expiration Sq. Ft - - -------- --------------- ---------- ------ INDUSTRIAL PRODUCTS SEGMENT - - ---------------------------- Saltsburg, Pennsylvania Breeze Industrial offices Owned 100,000 and manufacturing plant Mountainside, New Jersey Palnut offices and Owned 142,000 manufacturing plant Bartonville, Illinois* TransTechnology 1994 30,000 Electronics offices and manufacturing plant Livonia, Michigan* TransTechnology Systems & 1999 10,400 Services sales and service office Portsmouth, U.K.* TransTechnology Systems & 2017 7,000 Services sales and service office Melbourne, Australia* TransTechnology Systems & 1995 2,800 Services service office AEROSPACE PRODUCTS SEGMENT - - ---------------- Union, New Jersey Corporate offices, Breeze- Owned 188,000 Eastern offices and manufacturing plant Peoria, Illinois* TransTechnology 2003 105,000 Electronics offices and manufacturing plant Wyoming, Illinois TransTechnology Owned 29,400 Electronics manufacturing plant Pompano Beach, Florida Lundy Technical Center Owned 92,000 offices and manufacturing plant Brussels, Belgium* Coil Lundy offices and 1997 12,000 manufacturing plant - - ----------------------
* Leased premises, including renewal options 7 9 The Company believes that such facilities are suitable and adequate for the Company's foreseeable needs and that additional space, if necessary, will be available. See Note 9 of Notes to Financial Statements in Item 8 hereof for information regarding the Company's rental expense and future rental commitments under its facilities lease agreements relating to continuing operations. ITEM 3. LEGAL PROCEEDINGS The Company has commenced environmental site assessments and cleanup feasibility studies to determine the presence, extent and sources of any environmental contamination at two facilities in Pennsylvania and the Wyoming, Illinois facility. Although no governmental action requiring remediation has been taken at this time, the Company is working in cooperation with the relevant state authorities and any remedial work required to be performed would be subject to their approval. At the Pennsylvania sites, a feasibility study has been prepared and submitted to the state. Based upon that study and upon claims for recovery which the Company has against others, a pre-tax charge of $3.6 million (net of $1.2 million in probable recoveries from third parties) was recorded in March 1993 for future cleanup costs at the Pennsylvania sites. At March 31, 1994, the balance of this clean-up reserve was $3 million (net of $1.2 million in probable recoveries). In addition, the Company is pursuing recovery of a portion of clean-up costs in litigation with several of its insurance carriers. The Company expects that remediation work at the Pennsylvania site will not be completed until fiscal 1997. In addition, the Company has been named as a potentially responsible party in various proceedings pending in several other states in which it is alleged that the Company was a generator of waste that was sent to landfills and other treatment facilities at which environmental remediation activities are pending. It is not possible to reliably estimate the costs associated with any remedial work to be performed until the studies at the Wyoming, Illinois site and these other sites have been completed, the scope of work defined and a method of remediation selected and approved by the relevant state authorities. In February 1990, a lawsuit was brought in Los Angeles Superior Court against the Company and certain of its former officers by Special Devices, Inc. ("Special Devices"), a landlord at one of the Company's former California facilities, and Placerita Land and Farming Company, a predecessor of Special Devices, in which plaintiffs seek to recover in excess of $15 million for compensatory damages and an unspecified sum for punitive damages. The plaintiffs allege that the Company's waste handling practices have diminished the value of the leased property, reduced future rental income and caused plaintiffs to incur substantial defense costs in connection with related legal proceedings. In November 1985, the Company entered into agreements with the California Department of Health Services obligating the Company to clean up soil and groundwater contaminated by hazardous materials on the property. Substantially all of the remedial work has been performed, with ongoing monitoring and water treatment activity expected to continue until 2002. Two of the Company's general liability insurance carriers have filed actions in California Superior Court asking the Court to determine that their policies do not cover California environmental cleanup costs, damages to neighboring landowners for alleged personal injury and property damage, and related defense costs. The Company continues to believe that these policies cover such costs and is negotiating with the carriers to settle these actions. The Company is also engaged in various other legal proceedings incidental to its business. 8 10 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock, par value $0.01, is traded on the New York Stock Exchange under the symbol TT. The following table sets forth the range of high and low closing sales prices on the New York Stock Exchange for the Common Stock for the calendar quarters indicated, as reported by the New York Stock Exchange.
High Low ---- --- Fiscal 1993 First Quarter $11 $ 8 Second Quarter 10-1/4 8-1/4 Third Quarter 12-1/2 8-1/2 Fourth Quarter 11-1/8 9-3/8 Fiscal 1994 First Quarter $10-1/2 $ 9-1/8 Second Quarter 12 9-1/4 Third Quarter 12 10-1/2 Fourth Quarter 17-7/8 11 Fiscal 1995 First Quarter $16-5/8 $12-3/8 (through June 13, 1994)
As of June 13, 1994, the number of stockholders of record of the Common Stock was 2,768. On June 13, 1994 the closing sales price of the Common Stock was $13.625. The Company's bank indebtedness permits quarterly dividend payments which cannot exceed 25% of the Company's cumulative net income in each year. On December 31, 1992, the Company paid a special dividend of $1.50 per share. The Company has paid a regular quarterly dividend of $0.06 per share on each of March 1, June 1, September 1 and December 1, 1993, and March 1 and June 1, 1994. 9 11 ITEM 6. SELECTED FINANCIAL DATA The following table provides selected financial data with respect to the consolidated statements of operations of the Company for the fiscal years ended March 31, 1994, 1993, 1992, 1991 and 1990 and the consolidated balance sheets of the Company at the end of each such period. SELECTED FINANCIAL DATA (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEARS ENDED MARCH 31, -------------------------------------------------------- 1994 1993 1992 1991 1990 --------- --------- --------- --------- --------- Revenues from continuing operations . . . . . . $ 121,539 $ 96,732 $ 90,831 $ 102,825 $ 107,282 Income (loss) from continuing operations before income taxes . . . . . . . . . . . . . 10,770 6,519 (979) 2,792 6,719 Provision (credit) for income taxes . . . . . . 3,902 1,325 (149) 828 3,073 --------- --------- --------- --------- --------- Income (loss) from continuing operations 6,868 5,194 (830) 1,964 3,646 Income (loss) from discontinued operations . . . . . . . . . . 16 (61) (8,585) (5,973) (12,088) --------- --------- --------- --------- --------- Net income (loss) . . . . . . . . . . . . . . . $ 6,884 $ 5,133 $ (9,415) $ (4,009) $ (8,442) ========= ========= ========= ========= ========= Earnings (loss) per share: Income (loss) from continuing operations . . . $ 1.34 $ 1.02 $ (0.16) $ 0.39 $ 0.71 Loss from discontinued operations . . . . . . . - (0.01) (1.69) (1.17) (2.35) --------- --------- --------- --------- --------- Earnings (loss) per share . . . . . . . . . . . $ 1.34 $ 1.01 $ (1.85) $ (0.79) $ (1.64) ========= ========= ========= ========= ========= Dividends declared and paid per share . . . . . $ 0.24 $ 1.56 -- $ 0.24 $ 0.96 Total assets . . . . . . . . . . . . . . . . . $ 125,857 $ 97,763 $ 104,905 $ 159,828 $ 188,569 Long-term debt . . . . . . . . . . . . . . . . $ 33,168 $ 12,387 $ 528 $ 42,052 $ 66,215 Shareholders' equity . . . . . . . . . . . . . $ 65,953 $ 61,214 $ 63,735 $ 73,162 $ 78,852 Book value per share . . . . . . . . . . . . . $ 12.71 $ 11.95 $ 12.54 $ 14.40 $ 15.36 Shares outstanding at year-end . . . . . . . . 5,189 5,122 5,084 5,080 5,135
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company's fiscal year ends on March 31. Accordingly, all references to years in this Management's Discussion refer to the fiscal year ended March 31 of the indicated year. Also when referred to herein, operating profit means net sales less operating expenses, without deduction for general corporate expenses, interest and income taxes. The Consolidated Statement of Operations has been restated with respect to discontinued operations to provide a consistent basis for comparing the performance of the Company's continuing operations for the years presented. As a result of the sale of the Financial Systems division and the discontinuance of the Computer Graphics manufacturing operation in 1992, the Advanced Technology Products segment has been eliminated as a reporting segment. 10 12 Revenue from continuing operations in 1994 was $121.5 million, an increase of $24.8 million or 26% from 1993, compared with a $5.9 million or 6% increase from 1992 to 1993. Gross profit in 1994 increased $6.7 million or 23% from 1993, compared with an increase of $9.0 million or 44% from 1992 to 1993. Operating profit from continuing operations for 1994 was $17.3 million, an increase of $1.4 million or 9% from 1993, compared with an increase of $8.9 million or 127% from 1992 to 1993. Changes in sales, operating profit and new orders from continuing operations are discussed below by segment, and additional information regarding industry segments is contained in Note 11 of the Notes to Financial Statements. Net income, including discontinued operations, for 1994 was $6.9 million or $1.34 per share, compared to $5.1 million or $1.01 per share in 1993. These changes in net income were primarily affected by operating profit, as discussed in the Business Segment sections below. Discontinued operations, including the gain on disposal which is discussed in more detail below, were essentially break-even in 1994 and accounted for net losses of $0.1 million or $.01 per share in 1993. Revenue from continuing operations for the quarter ended March 31, 1994 was $34.8 million, an increase of $7.5 million or 27% from the comparable period in 1993. In the fourth quarter of 1994, the Company recorded a reduction of $0.8 million of Federal income tax provisions. Also in the fourth quarter of 1994 the Company sold its tear gas division and recorded a pre-tax gain of $0.7 million as discussed below in the discontinued operations section. In August, 1993 the Company acquired the Palnut fastener division and the Electrical Specialties Company as discussed below in the Acquisitions section and the Business Segment sections. In the fourth quarter of 1993, the Company recorded a pre-tax charge of $3.6 million to provide for estimated future site remediation costs at two facilities located in Pennsylvania. Also during 1993, the Company reflected pre-tax charges of $0.8 million for proxy solicitation and related legal expenses associated with the contested election of directors. The Company accrued or reimbursed the expenses for both slates of directors in connection with the solicitation of proxies for the September 1992 annual meeting of stockholders. These charges were offset in the fourth quarter of 1993 by the settlement of a contract termination claim for a pre-tax profit of $1.9 million and a fourth quarter reduction of $1.9 million of federal and state income tax provisions. Interest expense increased $0.9 million in 1994 primarily as a result of increased bank borrowings used for the acquisitions of Palnut and Electrical Specialties Company, as discussed below in the Liquidity and Capital Resources section. Interest expense decreased $1.5 million from 1992 to 1993 primarily as a result of the Company using the proceeds from the sale of its Financial Systems, Gessner, Lloyd and Belfort divisions to reduce long-term debt. Fiscal 1993 and 1992 results were impacted by a pre-tax charge of $0.5 million and $2.7 million, respectively, for the costs of downsizing the corporate staff and relocating corporate headquarters from California to New Jersey. New orders received during 1994 by continuing operations totaled $125.6 million, an increase of $43.4 million or 53% from 1993. New orders received during 1993 by continuing operations totaled $82.2 million, a decrease of $9.7 million or 11% from 1992. New orders are discussed below by industry 11 13 segment. At March 31, 1994, total backlog of unfilled orders was $45.2 million, compared to $40.7 million at March 31, 1993, and $54.6 million at March 31, 1992. During 1994 two new accounting standards were adopted effective April 1, Statement of Financial Accounting Standards No. 106 and No. 109. Statement No. 106, related to post-retirement benefits other than pensions, resulted in an after-tax charge to income of $0.1 million while Statement No. 109, related to income taxes, had no material effect on 1994 earnings. The corporation's liquidity and cash flow were not affected by these accounting changes. In March 1994, the Company adopted Statement of Financial Accounting Standard No. 115, related to accounting for certain investments in debt and equity securities. Adoption of this standard resulted in a March 31, 1994 balance sheet reduction of $1.6 million to other assets and stockholders equity. ACQUISITIONS On July 28, 1993, the Company acquired the assets and business of Electrical Specialties Company for a total purchase price of $1.7 million in cash. Electrical Specialties Company manufactures electrical cables and wire harnesses for the heavy equipment industry. On August 2, 1993, the Company acquired substantially all of the assets of the Palnut fastener operation ("Palnut") of TRW Inc. for a total purchase price of $20.5 million in cash and the assumption of certain liabilities consisting primarily of trade payables and accrued expenses aggregating approximately $1.4 million. The Palnut operation manufactures single and multi-thread metal fasteners for the automotive and industrial products industries. DISCONTINUED OPERATIONS During 1992, the Company adopted a restructuring plan which provided for the sale of its Financial Systems, Gessner, Lloyd and Belfort divisions, and the discontinuation of its Computer Graphics manufacturing operation. At March 31, 1992, these businesses were classified for financial reporting purposes as discontinued operations. On March 30, 1992, the Company completed the sale of its Financial Systems division to Recognition Equipment Incorporated for total consideration of $37.8 million, consisting of a note receivable of $2.5 million and $35.3 million in cash, of which $5.1 million was placed in escrow pending the resolution of certain issues as specified in the purchase agreement. This transaction resulted in an after-tax gain of $0.7 million. At March 31, 1994, $2.1 million remained in escrow. On May 29, 1992, and June 4, 1992, the Company completed the sales of its Gessner and Lloyd divisions, respectively. The Company received cash of $4.3 million, long term notes of $2 million, and a receivable of $0.3 million. These sales resulted in a combined after-tax loss of $1.6 million reflected in the March 31, 1992 financial statements. In the fourth quarter of 1993, the Company reported a gain on disposal of these divisions of $0.4 million (net of applicable income tax provision of $0.1 million). On January 24, 1993, the Company sold its Belfort division. The Company received cash of $1.0 million and a long term note of $1.7 million. After-tax income of $0.1 million and $0.4 million were recorded in the fourth quarter of 1994 and 1993, respectively, from this transaction. Additionally, as part of the sale, the Company consigned $1.3 million of inventory under a five-year contractual purchase 12 14 agreement of which $0.8 million remained at March 31, 1994. The Company retained one weather instrument product line and is negotiating its sale separately from the above transaction. In August 1991, the Company discontinued its Computer Graphics manufacturing operation. Such operation was reclassified as a discontinued operation, and an after-tax loss from the discontinuation of $4.1 million is reflected in the Company's 1992 statement of operations. In 1994 and 1993 the Company recognized another $0.1 and $0.9 million, respectively, for additional after- tax actual and estimated future discontinuation costs. The Computer Graphics manufacturing operation incurred an after-tax operating loss of $1.2 million in 1992. Additional costs of $0.7 million, after-tax, were recorded in 1993 in connection with the Company's Space Ordnance Systems division, which was sold in May 1990, and a gain on disposal of $0.2 million, after tax, was recorded in 1994. These additional costs and income represent adjustments to previous estimates related to litigation and environmental matters. In March 1994, the Company sold its Federal Laboratories division for $1.0 million in cash, $1.2 million in notes receivable and 465,000 shares of Mace Security International, Inc. common stock. The sale of this division resulted in a gain of $0.5 million (net of applicable income tax provision of $0.2 million). INDUSTRIAL PRODUCTS SEGMENT 1994 COMPARED WITH 1993 Sales for the Industrial Products segment were $66.4 million in 1994, an increase of $29.5 million or 80% from 1993. The increase in sales was primarily due to the inclusion of eight months of Palnut fastener operations and increased sales of gear- driven fasteners. The total 1994 increase in specialty fastener sales was $23.4 million. Additionally, the increase included eight months of electrical harness operations which amounted to $5 million in sales. TransTechnology Systems & Services sales increased $1.1 million or 15% in 1994 primarily due to increased domestic and overseas demand for workstations and small financial systems as well as increased maintenance contract sales. Operating profit for the Industrial Products segment was $9.2 million in 1994, an increase of $1.8 million or 25% from 1993. The primary factors contributing to the segment's increased operating profit in 1994 were the inclusion of eight months of the Palnut threaded fastener operations and increased shipments of gear-driven fasteners which were partially offset by reduced operating profit at TransTechnology Systems & Services due to costs associated with the introduction of two new small financial systems products which were subsequently cancelled in the fourth quarter of 1994. Other contributing factors which offset the overall increase in operating profit were shipments on low margin contracts from the newly acquired electrical harness product line and losses attendant to the start-up of Electrical Connections and Assemblies, Inc.'s business. In 1994, new orders in the industrial products segment increased $38.6 million or 105% from 1993. All industrial product lines experienced increased new orders in 1994 over 1993. The specialty fastener product line and electrical harness product line contributed $29.7 million and $7.4 million of increased new orders in 1994, respectively. In 1994, TransTechnology Systems & Services new orders were up 22% over 1993. The specialty fastener increase was due primarily to the acquisition of the Palnut product line. The new order increase at TransTechnology Systems & Services was primarily due to increased penetration of 13 15 third party maintenance markets. Backlog of unfilled orders was $15.2 million at March 31, 1994, compared to $6.8 million at March 31, 1993. 1993 COMPARED WITH 1992 Sales for the Industrial Products segment were $37 million in 1993, an increase of $1.6 million or 5% from 1992. The increase in sales was primarily related to the increased sales volume of specialty fasteners which was up in 1993 by $2.3 million, an increase of 8% from 1992, as a result of new product market penetration and increased industrial and truck fastener demand. TransTechnology Systems & Services sales decreased $0.6 million in 1993 primarily due to reduced overseas demand for workstations and small financial systems, partially offset by an increase in domestic maintenance contract sales. Operating profit for the Industrial Products segment was $7.3 million in 1993, up $0.3 million or 5% from 1992, resulting primarily from increased sales and margins related to specialty fasteners and domestic maintenance contracts, and partially offset by the decreased sales and margins related to overseas workstations and small financial systems. In 1993, new orders in the Industrial Products segment increased $1.9 million or 5% from 1992. Orders for specialty fasteners increased in 1993 by $2.6 million or 9% due to increased market share. TransTechnology Systems & Services new orders were down $0.7 million or 10% mainly due to reduced demand for workstations and small financial systems. Backlog of unfilled orders was $6.8 million at March 31, 1993, compared to $7.1 million at March 31, 1992. AEROSPACE PRODUCTS SEGMENT 1994 COMPARED WITH 1993 Sales for the Aerospace Products segment were $54.1 million in 1994, a decrease of $4.9 million or 8% from 1993. Fiscal 1994 sales of hoists and winches, related spare parts and tie-downs decreased $8 million or 27% from 1993 due primarily to delays in the timing of customers placing new orders in 1994, increased competition resulting in reduced tie-down orders and the settlement of a contract termination claim for a pre-tax profit of $1.9 million in the fourth quarter of 1993. Sales of cargo hooks increased $2.6 million or 51% primarily due to timing of customer orders. Chaff product sales were down in 1994 by $0.4 million or 4%. The Company's primary customer for chaff product is the United States Department of Defense and its prime contractors. Due to reduced government defense spending and the fact that customers have adequate quantities of chaff products in inventory, domestic sales are likely to continue at reduced levels. Sales of electrical cable and conduit in 1994 were up $1.6 million or 16% primarily due to increased shipments on the F-16 fighter and other military programs. Electrical connector sales decreased in 1994 by $0.7 million or 21% due to a general decrease in demand by commercial airline customers. Operating profit for the Aerospace Products segment was $8.1 million for 1994, a decrease of $0.4 million or 5% from 1993. The decrease was primarily due to the reduced shipments of hoist and winches, related spare parts, tie-downs, and electrical connectors, offset by increased cargo hook and electrical cable and conduit shipments, as mentioned above. 14 16 New orders for the Aerospace Products segment increased in 1994 by $4.8 million or 11%. All product lines, with the exception of hoists and winches, related spare parts and tie-downs experienced increased new orders in 1994, primarily due to the timing of customer orders. The Aerospace Products segment backlog varies substantially from time to time due to the size and timing of orders. At March 31, 1994, the backlog of unfilled orders was $30 million, compared to $34 million at March 31, 1993. Sales related to United States Government contracts, which consist primarily of defense contracts and represent approximately 20% of the Company's total 1994 sales, have been declining in recent years. Management remains concerned with the continued trend toward reductions in defense spending by the United States government. However, many of the Company's programs, as well as spare parts requirements for these programs, are expected to continue for several years, and the Company continues to pursue and is currently implementing its strategy of developing its non-defense businesses through acquisitions and refocused foreign and commercial market attention. 1993 COMPARED WITH 1992 Sales for the Aerospace Products segment were $59 million in 1993, an increase of $4.0 million or 7% from 1992. Fiscal 1993 sales of hoists and winches, related spare parts and tie-downs increased $6.4 million or 27% from 1992 due primarily to improved manufacturing capability. Sales of cargo hooks decreased $1.2 million or 19% from 1992. As a result of the resolution of manufacturing problems in 1992, the Company was able to significantly reduce a large amount of accumulated overdue backlog by the end of fiscal 1992. This reduction in backlog resulted in unusually high sales volume of primarily cargo hooks in the prior year. This increase was partially offset in 1993 by the product line acquisition from Kinedyne which added $0.3 million of cargo hook sales. Chaff product sales were down in 1993 by $2.9 million or 22%, due to reduced government defense spending and the fact that adequate quantities of the product were in customer inventories. Sales of electrical cable and conduit in 1993 were up by $1.8 million or 20% primarily due to increased shipments on the F-16 jet fighter program which had been delayed in 1992. Electrical connector sales decreased in 1993 by $0.3 million or 9% due to a general decrease in commercial airline orders. Operating profit for the Aerospace Products segment was $8.5 million for 1993, compared to a break-even in the prior year. Primary factors contributing to the segment's increased operating profit were increased domestic and foreign shipments of hoists, winches, related spare parts, electrical cable and conduit, and improved manufacturing systems and efficiencies in cargo hooks, hoists and winches, related spare parts and electrical cable, conduit and connector products. New orders for the Aerospace Products segment decreased in 1993 by $13.1 million or 22% from 1992. New orders for hoists and winches and related spare parts decreased in 1993 by $2.9 million or 12%. This fluctuation was primarily a result of the timing of receipt of new contracts rather than a trend related to demand for these products. Chaff product and electrical cable and connector orders were down by $14.4 million or 58%. Chaff product new orders were down $5.6 million or 50% from 1992 primarily due to reduced government defense spending and adequate quantities of the product in customer inventories, as described above. Electrical cable and connector orders decreased $8.8 million or 64% primarily as a result of delays in new orders from the military and aerospace industries and general slowdown in department of defense purchases, a trend that is likely to continue. New orders for cargo hooks, tie-downs 15 17 and electrical conduit increased by $4.1 million or 42% primarily due to the acquisition of a new product line, receipt of a multi- year order for the CH-53 Helicopter program and increased market share. At March 31, 1993, the backlog of unfilled orders was $34 million, compared to $47 million at March 31, 1992. LIQUIDITY AND CAPITAL RESOURCES The Company's debt-to-capitalization ratio was 34% as of March 31, 1994, 17% as of March 31, 1993 and 15% as of March 31, 1992. The current ratio at March 31, 1994, stood at 3.49 compared to 3.27 at March 31, 1993 and 1.94 at March 31, 1992. Working Capital was $53.8 million at March 31, 1994, up $10.4 million from March 31, 1993 and $18.1 million from March 31, 1992. At March 31, 1994, the Company's debt consisted of $25 million of borrowings under a revolving bank credit line, a $9.2 million bank term loan and $0.5 million of other borrowings. In connection with the Palnut acquisition, the Company amended its revolving bank credit line on July 29, 1993 to increase the bank's lending commitment from $25 million to $35 million. This commitment will be available to the Company through September 30, 1995, and is subject to a borrowing base formula. The agreement provides for borrowings and letters of credit based on collateralized accounts receivable and inventory. All fixed assets other than real property with the exception of certain real property located in Mountainside, New Jersey, are also included as collateral. Letters of credit, which are included in the borrowing base formula, are limited to $5 million. Letters of credit under the line at March 31, 1994 were $1.6 million. Interest is accrued at the lending bank's prime rate or, at the Company's option, the London Interbank Offered Rate plus two percentage points, which the Company was utilizing for $25 million of outstanding borrowings at March 31, 1994. The agreement contains customary operating and financial covenants typical to this form of financing and further provides that quarterly dividend payments cannot exceed 25% of the Company's cumulative net income in each year. The $9.2 million term loan is with the same lenders as the revolving credit line, is secured by the same collateral, and is due and payable on August 31, 1998. The first principal payment of $120,000 was due and paid on September 30, 1993. Thereafter, principal payments of $360,000 are due and payable on the last day of each quarter through June 30, 1998, with a final balloon payment of $3,040,000 due and payable on August 31, 1998. Interest accrues at the lending bank's prime rate plus 1/4 percentage points, but in accordance with the loan agreement will be reduced to the prime rate for fiscal 1995 because the Company exceeded $6.0 million in net income for fiscal year 1994. Interest is payable monthly. On May 13, 1994, the Company obtained authorization from its lender to repurchase up to 200,000 shares of the Company's common stock at an aggregate price not to exceed $2.5 million. At June 16, 1994, the Company had repurchased 50,000 shares. Management believes that the Company's anticipated cash flow from operations, combined with the bank credit described above, will be sufficient to support current and forecasted working capital requirements and dividend payments. Capital expenditures in 1994 were $5 million as compared with $5.5 million in 1993. The Company's two industry segments have similar cash flow requirements. The Company is subject to various contingencies related to land and groundwater contamination at several facilities. These matters are described in Note 10 of the Notes to Financial Statements. Management believes that, after taking into consideration information provided by counsel, the resolution of these matters will not have a materially adverse effect on the Company's liquidity. 16 18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Table of Contents
Page ---- Financial Statements: Independent Auditors' Report 18 Consolidated Balance Sheets as of March 31, 1994 and 1993 19 Statements of Consolidated Operations for years ended March 31, 1994, 1993 and 1992 20 Statements of Consolidated Cash Flows for years ended March 31, 1994, 1993 and 1992 21 Statements of Consolidated Stockholders' Equity for years ended March 31, 1994, 1993 and 1992 22 Notes to Consolidated Financial Statements 23 Financial Statement Schedules: Schedule I -- Consolidated Marketable Securities and Other Security Investments for the years ended March 31, 1994, 1993 and 1992 36 Schedule VIII -- Consolidated Valuation and Qualifying Accounts for years ended March 31, 1994, 1993 and 1992 37 Schedule X -- Consolidated Supplementary Income Statement Information for years ended March 31, 1994, 1993 and 1992 38
Schedules required by Article 12 of Regulation S-X, other than those listed above, are omitted because of the absence of the conditions under which they are required or because the required information is included in the financial statements or notes thereto. 17 19 INDEPENDENT AUDITORS' REPORT To the Stockholders and the Board of Directors of TransTechnology Corporation: We have audited the accompanying consolidated balance sheets of TransTechnology Corporation and subsidiaries as of March 31, 1994 and 1993 and the related statements of consolidated operations, stockholders' equity, and cash flows for each of the three years in the period ended March 31, 1994. Our audits also included the consolidated financial statement schedules listed in the Table of Contents at Item 8. These financial statements and the financial statement schedules are the responsibility of the Corporation's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of TransTechnology Corporation and subsidiaries at March 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note 8 to the consolidated financial statements, in 1994 the Corporation changed its method of accounting for postretirement benefits other than pensions to conform with Statement of Financial Accounting Standards No. 106. As discussed in Note 5 to the consolidated financial statements, in 1994 the Corporation changed its method of accounting for income taxes to conform with Statement of Financial Accounting Standards No. 109. /s/ Deloitte & Touche Deloitte & Touche Parsippany, New Jersey June 20, 1994 18 20 CONSOLIDATED BALANCE SHEETS
MARCH 31, ---------------------------------- 1994 1993 ---------------- ----------------- ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 3,027,000 $ 1,505,000 Accounts receivable: United States Government . . . . . . . . . . . . . . . . . . . 2,815,000 2,075,000 Commercial (net of allowance for doubtful accounts of $271,000 19,500,000 17,426,000 in 1994 and $318,000 in 1993) . . . . . . . . . . . . Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 2,814,000 -- Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,786,000 33,375,000 Prepaid expenses and other current assets . . . . . . . . . . . . . . 2,932,000 1,715,000 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . 4,253,000 3,393,000 Net assets of discontinued businesses . . . . . . . . . . . . . . . . 4,309,000 3,176,000 ---------------- ---------------- Total current assets . . . . . . . . . . . . . . . . . . . . . 75,436,000 62,665,000 Property: Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,223,000 2,780,000 Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,657,000 9,997,000 Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . 32,611,000 23,825,000 Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . 4,050,000 3,499,000 Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . 671,000 710,000 ---------------- ---------------- Total 58,212,000 40,811,000 Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . 22,204,000 20,079,000 ---------------- ---------------- Property-net . . . . . . . . . . . . . . . . . . . . . . . . . 36,008,000 20,732,000 Other assets: Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 4,061,000 5,643,000 Costs in excess of net assets of acquired businesses (net of accumulated amortization: 1994, $2,423,000; 1993, $2,178,000) . . . . . . . . . . . . . . . . . . . . . . . . . 3,117,000 2,728,000 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,235,000 5,995,000 ---------------- ---------------- Total other assets . . . . . . . . . . . . . . . . . . . . . . 14,413,000 14,366,000 ---------------- ---------------- Total $ 125,857,000 $ 97,763,000 ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt . . . . . . . . . . . . . . . . . . $ 1,479,000 $ 38,000 Accounts payable-trade . . . . . . . . . . . . . . . . . . . . . . . . 7,489,000 5,895,000 Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . 4,570,000 3,433,000 Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . 943,000 1,871,000 Other current liabilities . . . . . . . . . . . . . . . . . . . . . . 7,109,000 7,940,000 ---------------- ---------------- Total current liabilities . . . . . . . . . . . . . . . . . . 21,590,000 19,177,000 ---------------- ---------------- Long-term debt payable to banks and others . . . . . . . . . . . . . . . . . . 33,168,000 12,387,000 ---------------- ---------------- Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 5,146,000 4,985,000 ---------------- ---------------- Stockholders' equity: Preferred stock-authorized, 300,000 shares; none issued . . . . . . . -- -- Common stock-authorized, 14,700,000 shares of $.01 par value; issued, 5,189,104 and 5,121,604 shares in 1994 and 1993, respectively 52,000 51,000 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 45,283,000 44,616,000 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 22,186,000 16,537,000 Other stockholders' equity . . . . . . . . . . . . . . . . . . . . . . (1,568,000) 10,000 ---------------- ---------------- Total stockholders' equity . . . . . . . . . . . . . . . . . . 65,953,000 61,214,000 ---------------- ---------------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 125,857,000 $ 97,763,000 ================ ================
- - -------------------- See accompanying notes to consolidated financial statements. 19 21 STATEMENTS OF CONSOLIDATED OPERATIONS
FOR THE YEARS ENDED MARCH 31, ---------------------------------------------- 1994 1993 1992 -------------- ------------- ------------- Revenues: Sales . . . . . . . . . . . . . . . . . . . . . . . . . $ 120,507,000 $ 95,913,000 $ 90,267,000 Interest income . . . . . . . . . . . . . . . . . . . . 733,000 661,000 347,000 Other income . . . . . . . . . . . . . . . . . . . . . 299,000 158,000 217,000 -------------- ------------- ------------- Total . . . . . . . . . . . . . . . . . . . . . . . . 121,539,000 96,732,000 90,831,000 -------------- ------------- ------------- Cost of goods sold . . . . . . . . . . . . . . . . . . . 85,322,000 67,258,000 70,354,000 -------------- ------------- ------------- Gross profit . . . . . . . . . . . . . . . . . . . . . . 36,217,000 29,474,000 20,477,000 General, administrative and selling expenses . . . . . . 23,517,000 17,624,000 16,163,000 Environmental charge . . . . . . . . . . . . . . . . . . 374,000 4,167,000 358,000 Corporate office relocation . . . . . . . . . . . . . . - 468,000 2,696,000 Interest expense . . . . . . . . . . . . . . . . . . . . 1,556,000 696,000 2,239,000 -------------- ------------- ------------- Income (loss) from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 10,770,000 6,519,000 (979,000) Provision (credit) for income taxes . . . . . . . . . . 3,902,000 1,325,000 (149,000) -------------- ------------- ------------- Income (loss) from continuing operations . . . . . . . . 6,868,000 5,194,000 (830,000) Discontinued Operations: (Loss) income from operations (net of applicable tax benefits of $1,055,000 and $1,983,000 for 1994 and 1992, respectively, and including a tax provision of $3,000 for 1993) . . . . . . . . . . . . . . . . . . (744,000) 10,000 (2,797,000) Gain (loss) from disposal (includes a tax provision of $306,000 and $963,000 for 1994 and 1992, respectively, and net of applicable tax benefit of $1,337,000 for 1993) . . . . . . . . . . . . . . . . . . . . . . . . 760,000 (71,000) (5,788,000) -------------- ------------- ------------- Net income (loss) . . . . . . . . . . . . . . . . . . . . $ 6,884,000 $ 5,133,000 $ (9,415,000) ============== ============= ============= Earnings per share Income (loss) from continuing operations . . . . . . . $ 1.34 $ 1.02 $ (0.16) Loss from discontinued operations . . . . . . . . . . . - (0.01) (1.69) -------------- ------------- ------------- Income (loss) per share . . . . . . . . . . . . . . . . . $ 1.34 $ 1.01 $ (1.85) ============== ============= ============= Number of shares used in computation of per share information . . . . . . . . . . . . . . . . . . . . . . 5,143,000 5,095,000 5,081,000
- - -------------- See accompanying notes to consolidated financial statements. 20 22 STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE YEARS ENDED MARCH 31, -------------------------------------------- 1994 1993 1992 ------------- ------------ ------------- Cash Flows from Operating Activities: Net income (loss) . . . . . . . . . . . . . . . . . . . . . . $ 6,884,000 $ 5,133,000 $ (9,415,000) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . 4,505,000 3,369,000 6,318,000 Provision for losses on accounts receivable . . . . . . . . 102,000 79,000 55,000 (Gain) loss on sale or disposal of fixed assets and discontinued businesses . . . . . . . . . . . . . . . . . . (452,000) 37,000 5,211,000 Deferred income taxes . . . . . . . . . . . . . . . . . . . (1,124,000) (216,000) (1,441,000) Change in assets and liabilities net of acquisitions and dispositions: Decrease in accounts receivable . . . . . . . . . . . . . 261,000 368,000 4,080,000 Increase in inventories . . . . . . . . . . . . . . . . . (200,000) (968,000) (541,000) (Increase) decrease in net assets of discontinued businesses . . . . . . . . . . . . . . . . . . . . . . . (1,133,000) 523,000 5,033,000 Decrease (increase) in other assets . . . . . . . . . . . 193,000 4,485,000 (4,825,000) Increase (decrease) in accounts payable . . . . . . . . . 506,000 105,000 (3,789,000) Increase in accrued compensation . . . . . . . . . . . . . 1,137,000 672,000 318,000 (Decrease) increase in other liabilities . . . . . . . . . (2,895,000) (3,998,000) 7,662,000 (Decrease) increase in income tax payable . . . . . . . . (928,000) (1,238,000) 3,109,000 ------------- ------------ ------------- Net cash provided by operating activities . . . . . . . . . 6,756,000 8,351,000 11,775,000 ------------- ------------ ------------- Cash Flows from Investing Activities: Business acquisitions . . . . . . . . . . . . . . . . . . . . (22,670,000) -- -- Capital expenditures . . . . . . . . . . . . . . . . . . . . (4,973,000) (5,514,000) (3,077,000) Proceeds from sale of fixed assets and discontinued business 1,027,000 5,461,000 30,037,000 Increase in notes receivable . . . . . . . . . . . . . . . . (176,000) (687,000) (4,500,000) ------------- ------------ ------------- Net cash provided by (used in) investing activities . . . . (26,792,000) (740,000) 22,460,000 ------------- ------------ ------------- Cash Flows from Financing Activities: Proceeds from long-term borrowings . . . . . . . . . . . . . 34,400,000 28,174,000 29,700,000 Payments on long-term debt . . . . . . . . . . . . . . . . . (12,178,000) (27,414,000) (71,225,000) Proceeds from issuance of stock under stock option plan . . . 571,000 326,000 -- Stock repurchases and other . . . . . . . . . . . . . . . . . -- -- (12,000) Dividends paid . . . . . . . . . . . . . . . . . . . . . . . (1,235,000) (7,990,000) -- ------------- ------------ ------------- Net cash provided by (used in) financing activities . . . . 21,558,000 (6,904,000) (41,537,000) ------------- ------------ ------------- Net increase (decrease) in cash and cash equivalents . . . . 1,522,000 707,000 (7,302,000) Cash and cash equivalents at beginning of year . . . . . . . 1,505,000 798,000 8,100,000 ------------- ------------ ------------- Cash and cash equivalents at end of year . . . . . . . . . . $ 3,027,000 $ 1,505,000 $ 798,000 ============= ============ ============= Supplemental Information: Interest payments . . . . . . . . . . . . . . . . . . . . . . $ 1,602,000 $ 812,000 $ 5,542,000 Income tax payments . . . . . . . . . . . . . . . . . . . . . $ 4,476,000 $ 600,000 $ 190,000
- - --------------- During 1994 the Company received marketable securities valued at $3.4 million from the sale of a discontinued business. The carrying value of these securities at March 31, 1994, was $1.8 million. See accompanying notes to consolidated financial statements. 21 23 STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
ADDITIONAL OTHER FOR THE YEARS ENDED MARCH 31, PAID-IN RETAINED STOCKHOLDERS' 1994, 1993 AND 1992 SHARES AMOUNT CAPITAL EARNINGS EQUITY TOTAL - - --------------------------------- ---------- ------- ----------- --------- ------------ ------------- Balance, March 31, 1991 . . . . . 5,080,310 $51,000 $44,302,000 $28,809,000 -- $73,162,000 Net loss . . . . . . . . . . . . -- -- -- (9,415,000) -- (9,415,000) Other . . . . . . . . . . . . . . 3,482 -- (12,000) -- -- (12,000) --------- ------- ----------- ----------- ------------ ----------- Balance, March 31, 1992 . . . . . 5,083,792 51,000 44,290,000 19,394,000 -- 63,735,000 Net Income . . . . . . . . . . . -- -- -- 5,133,000 -- 5,133,000 Cash dividends ($1.56 per share) -- -- -- (7,990,000) -- (7,990,000) Issuance of stock under stock option plan . . . . . . . . . . 37,812 -- 326,000 -- -- 326,000 Foreign translation adjustments . -- -- -- -- $ 10,000 10,000 --------- ------- ----------- ----------- ------------ ----------- Balance, March 31, 1993 . . . . . 5,121,604 51,000 44,616,000 16,537,000 10,000 61,214,000 Net income . . . . . . . . . . . -- -- -- 6,884,000 -- 6,884,000 Cash dividends ($.24 per share) . -- -- -- (1,235,000) -- (1,235,000) Issuance of stock under stock option plan . . . . . . . . . . 57,415 1,000 570,000 -- -- 571,000 Issuance of stock under incentive bonus plan . . . . . . . . . . . 10,085 -- 97,000 -- (65,000) 32,000 Foreign translation adjustments . -- -- -- -- 56,000 56,000 Unrealized investment holding losses -- -- -- -- (1,569,000) (1,569,000) --------- ------- ----------- ----------- ------------ ----------- Balance, March 31, 1994 . . . . . 5,189,104 $52,000 $45,283,000 $22,186,000 $ (1,568,000) $65,953,000 ========= ======= =========== =========== ============ ===========
- - ---------------------- See accompanying notes to consolidated financial statements. 22 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TransTechnology Corporation and Subsidiaries 1. SUMMARY OF ACCOUNTING PRINCIPLES Principles of Consolidation. The accompanying consolidated financial statements include the accounts of TransTechnology Corporation ("the Company") and its subsidiaries, all of which are wholly-owned. Intercompany balances and transactions are eliminated in consolidation. Related Party. Research Industries Incorporated owns approximately 21% of the Company's outstanding common stock. Two former directors of the Company are the only shareholders of Research Industries Incorporated, and each of these directors has a consulting contract with the Company; one for $1.4 million and one for $0.7 million. Of the total $2.1 million original contracts, $1.5 million has been expensed and paid through March 31, 1994, which includes $0.9 million expensed and paid during fiscal 1994. Accounting for Contracts. All of the Company's contracts are firm fixed-price. Sales and cost of sales on such contracts are recorded as deliveries are made. Estimates of cost to complete are reviewed and revised periodically throughout the lives of the contracts, and adjustments to profit resulting from such revisions are recorded in the accounting period in which the revisions are made. Losses on contracts are recorded in full as they are identified. Cash and Cash Equivalents. The Company considers all highly liquid investments with a maturity at date of acquisition of three months or less to be cash equivalents. Accounts Receivable. Accounts receivable from the United States Government represent billed receivables and substantially all amounts are expected to be collected within one year. The Company has no amounts billed under retainage provisions of contracts. Inventories. Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Cost includes material, labor and manufacturing overhead costs. Property and Related Depreciation and Amortization. Provisions for depreciation are made on a straight-line basis over the estimated useful lives of depreciable assets ranging from three to thirty years. Amortization of leasehold improvements is computed on a straight-line basis over the shorter of the estimated useful lives of the improvements or the terms of the leases. Costs in Excess of Net Assets of Acquired Businesses. The difference between the purchase price and the fair value of the net assets of acquired businesses is included in the accompanying Consolidated Balance Sheets under the caption "Costs in Excess of Net Assets of Acquired Businesses" and is being amortized over forty years, or shorter periods where deemed appropriate. The Company has determined that there is no impairment in value since projected future operating results on an undiscounted basis through the period such costs in excess of net assets of acquired businesses is being amortized are expected to be sufficient to absorb the amortizaion. Earnings Per Share. Earnings per share are based on the weighted average number of common shares and, if dilutive, common stock equivalents (stock options) outstanding during each year. Research, Development and Engineering Costs. Research and development costs and engineering costs in support of active products, which are charged to expense when incurred, amounted to $2.3 million, $1.8 million and $1.7 million in 1994, 1993, and 1992, respectively. Included in these amounts were expenditures of $1.1 million in 1994, $0.9 million in 1993, and $0.6 million in 1992, which represent costs related to research and development activities. Income Taxes. In February 1992, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Statement No. 109 requires a change from the deferred method of accounting for income taxes of APB Option 11 to the asset and liability method of accounting for income taxes. Under the asset and liability method of Statement No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. 23 25 Effective April 1, 1993, the Company adopted Statement No. 109 and has reported the cumulative effect of this change in the method of accounting for income taxes in the Consolidated Statements of Income and Retained Earnings. The adoption of Statement No. 109 had no material effect on the financial statements. Postretirement Benefits Other Than Pensions. The Company makes contributions toward the cost of providing certain health care and life insurance benefits to certain retirees, their beneficiaries and covered dependents. Company contributions in 1992 and 1993 were expensed as paid. The accrual method of accounting for these benefits was adopted April 1, 1993 in accordance with the provisions of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The adoption of Statement No. 106 had no material effect on the financial statements. Investments. On March 1, 1994 the Company acquired 365,000 shares of Mace Security International common stock, valued at $3.4 million, as partial payment for the sale of a division. At March 31, 1994, the Company adopted Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities". The adoption of this statement resulted in a gross unrealized holding loss of $1.6 million, reported as a reduction to stockholders' equity in the March 31, 1994 Balance Sheet. The aggregate fair market value of the investment at March 31, 1994 was $1.8 million. 2. DISCONTINUED OPERATIONS In March 1994, the Company sold its Federal Laboratories division for $1.0 million in cash, $1.2 million in notes receivable and 465,000 shares of Mace Security International, Inc. common stock. The sale of this division resulted in a gain of $0.5 million (net of applicable income tax provision of $0.2 million). In March 1992, the Company sold its Financial Systems division, entered into agreements to sell its textile machinery and special elastomer products divisions, and entered into discussions with a prospective buyer regarding its weather instruments division. Financial Systems was sold for $35.3 million in cash, of which $5.1 million was placed in escrow pending resolution of matters specified in the purchase agreement, and a $2.5 million note which was reduced to $1.9 million in the first quarter of fiscal 1993, due in March 1995. The sale of Financial Systems resulted in a 1992 gain on disposal of $0.7 million (net of applicable income tax expense of $2.6 million). The sales of the textile machinery and special elastomer products divisions were completed in May and June 1992 and consisted of $4.3 million in cash, a $2.0 million note due in April 1997 and a receivable of $0.3 million. The sales of these divisions resulted in a 1992 loss on disposal of $1.6 million (net of applicable income tax benefit of $0.8 million). In the fourth quarter of 1993, the Company reported a gain on final disposal of these divisions of $0.4 million (net of applicable income tax provision of $0.1 million). The weather instruments division was sold in January 1993 for $1 million in cash and a $1.7 million note due in January 1998. In the fourth quarter of 1992, the division was written down to its net realizable value based on its expected sales price, which resulted in a loss on disposal of $0.1 million (net of applicable tax benefits of $0.1 million). In the fourth quarters of 1993 and 1994, the Company recorded additional gains on disposal relating to the weather instrument division of $0.4 million and $0.1 million, respectively (net of applicable income tax provision of $0.1 million in 1993). Additionally, as part of the sale, the Company consigned $1.3 million of inventory under a five-year contractual purchase agreement of which $0.8 million remained at March 31, 1994. The Company has retained one weather instrument product line and is continuing to negotiate its sale separately from the above transaction. In August 1991, the Company discontinued its Computer Graphics manufacturing operation. In connection with such decision, the Company recorded losses on disposal of $0.1 million and $0.9 million for 1994 and 1993, respectively (net of applicable income tax benefit of $0.3 million in 1993). In March 1990, the Company entered into an agreement to sell substantially all of the inventories and plant and equipment of its Space Ordnance Systems division. A gain on disposal of $0.2 million was recorded in 1994 (net of applicable income tax provision of $0.1 million). Losses on disposal of $0.7 million and $0.8 million were recorded in 1993 and 1992, respectively (net of applicable income tax benefits of $0.3 million and $0.5 million in 1993 and 1992, respectively). The gain and losses consist of disposal costs different from previous estimates associated primarily with legal and environmental matters and the settlement of a contract claim receivable in 1991. 24 26 Operating results of the discontinued businesses were as follows:
1994 1993 1992 -------------- --------------- ------------- Total revenues . . . . . . . . . . . . . . . . . . $ 4,965,000 $ 6,391,000 $ 77,531,000 ============== =============== ============= Income (loss) before income taxes . . . . . . . . . $ (1,799,000) $ 13,000 $ (4,780,000) Income tax provision (benefit) . . . . . . . . . . (1,055,000) 3,000 (1,983,000) -------------- --------------- ------------- Income (loss) from operations . . . . . . . . . . . $ (744,000) $ 10,000 $ (2,797,000) ============== =============== =============
The loss from operations includes interest expense of $90,000, $91,000 and $2.0 million in 1994, 1993 and 1992, respectively. Net assets of the discontinued businesses at March 31, 1994 and 1993 were as follows:
1994 1993 ------------ ------------- Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,000 $ 164,000 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186,000 454,000 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,203,000 3,116,000 Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,198,000 789,000 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (303,000) (1,347,000) ------------ ------------- Net Assets of Discontinued Businesses . . . . . . . . . . . . . . . . . . . $ 4,309,000 $ 3,176,000 ============ =============
Other assets and liabilities retained by the Company associated with the discontinued businesses at March 31, 1994 and 1993 are included in the following balance sheet captions:
1994 1993 ----------- ---------- Commercial Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . $ -- $ 87,000 Prepaid Expenses and Other Current Assets . . . . . . . . . . . . . . . . . $ 289,000 $ 632,000 Other Long-term Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 821,000 $ 688,000
3. ACQUISITIONS On July 28, 1993, the Company acquired the assets and business of Electrical Specialties Company for a total purchase price of $1.7 million in cash. Electrical Specialties Company manufactures electrical cables and wire harnesses for the heavy equipment industry. On August 2, 1993, the Company acquired substantially all of the assets of the Palnut fastener operation ("Palnut") of TRW Inc. for a total purchase price of $20.5 million in cash and the assumption of certain liabilities consisting primarily of trade payables and accrued expenses aggregating approximately $1.4 million. The Palnut operation manufactures single and multi-thread metal fasteners for the automotive and industrial products industries. 25 27 The following summarizes TransTechnology Corporation's unaudited combined Proforma Revenue, Net Income and Earnings (Loss) per Share information prepared as if the acquisitions of the Palnut threaded fastener business and Electrical Specialties Company had occurred at the beginning of the periods presented.
FOR THE YEARS ENDED MARCH 31, --------------------------------------- 1994 1993 ---------------- ---------------- Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 130,253,000 $ 124,025,000 ================ ================ Income from Continuing Operations . . . . . . . . . . . . . . . 6,729,000 7,908,000 Income (loss) from Discontinued Operations . . . . . . . . . . 16,000 (61,000) ---------------- ---------------- Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . 6,745,000 7,847,000 ================ ================ Earnings per Share from Continuing Operations . . . . . . . . . $ 1.31 $ 1.55 Loss per Share from Discontinued Operations . . . . . . . . . . -- (.01) ---------------- ---------------- Earnings per Share . . . . . . . . . . . . . . . . . . . . . . $ 1.31 $ 1.54 ================ ================
4. INVENTORIES Inventories at March 31, 1994 and 1993 are summarized as follows:
1994 1993 ------------ ------------- Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,057,000 $ 4,913,000 Work-in-process: U.S. Government contracts . . . . . . . . . . . . . . . . . . . . . . . . 1,515,000 1,412,000 Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,074,000 5,412,000 Purchased and manufactured parts . . . . . . . . . . . . . . . . . . . . . 23,140,000 21,638,000 ------------ ------------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,786,000 $ 33,375,000 ============ =============
5. INCOME TAXES The components of total income (loss) from operations before income taxes were:
1994 1993 1992 ------------- -------------- -------------- Domestic . . . . . . . . . . . . . . . . . . . . . . . . $ 11,010,000 $ 4,927,000 $ (11,771,000) Foreign . . . . . . . . . . . . . . . . . . . . . . . . . (973,000) 198,000 1,187,000 ------------- -------------- -------------- Total . . . . . . . . . . . . . . . . . . . . . . . . $ 10,037,000 $ 5,125,000 $ (10,584,000) ============= ============== ==============
26 28 The provision (benefit) for income taxes is summarized below:
1994 1993 1992 ----------- ------------ ------------ Currently payable: United States . . . . . . . . . . . . . . . . . . . $ 2,987,000 $ 1,314,000 $ (91,000) Foreign . . . . . . . . . . . . . . . . . . . . . . (109,000) 203,000 429,000 State . . . . . . . . . . . . . . . . . . . . . . . 734,000 (256,000) (66,000) ----------- ------------ ------------ $ 3,612,000 $ 1,261,000 $ 272,000 Deferred . . . . . . . . . . . . . . . . . . . . . . (459,000) (1,270,000) (1,441,000) ----------- ------------ ------------ Total . . . . . . . . . . . . . . . . . . . . . . . $ 3,153,000 $ (9,000) $ (1,169,000) =========== ============ ============
The provision (benefit) for income taxes is allocated between continuing and discontinued operations as summarized below:
1994 1993 1992 ------------ ------------- ------------ Continuing . . . . . . . . . . . . . . . . . . $ 3,902,000 $ 1,325,000 $ (149,000) Discontinued . . . . . . . . . . . . . . . . . (749,000) (1,334,000) (1,020,000) ------------ ------------- ------------ Total . . . . . . . . . . . . . . . . . . . . . $ 3,153,000 $ (9,000) $ (1,169,000) ============ ============= ============
The provision (benefit) for deferred taxes is comprised of the following tax effect of timing differences:
1993 1992 ------------- ------------- Depreciation . . . . . . . . . . . . . . . . . $ (459,000) $ 352,000 Inventory reserves . . . . . . . . . . . . . . 661,000 549,000 Bad debts . . . . . . . . . . . . . . . . . . . 79,000 63,000 Deferred income . . . . . . . . . . . . . . . . (117,000) (181,000) Accruals deductible in future years . . . . . . (1,131,000) (2,100,000) Other . . . . . . . . . . . . . . . . . . . . . (303,000) (124,000) ------------- ------------- Total . . . . . . . . . . . . . . . . . . . . . $ (1,270,000) $ (1,441,000) ============= =============
In 1992, the consolidated tax credit of $149,000 on loss from continuing operations of $979,000 is primarily attributable to tax benefits associated with the foreign sales corporation. The consolidated effective tax rates for continuing operations differ from the federal statutory rates as follows:
1994 1993 ---- ---- Statutory federal rate . . . . . . . . . . . . . . . . . . . 34.0% 34.0% State income taxes after federal income tax . . . . . . . . . 4.8% 1.2% Earnings of the foreign sales corporation . . . . . . . . . . (3.3%) (7.0%) Amortization of purchase adjustments not deductible for tax purposes . . . . . . . . . . . . . . . . 2.4% 4.0% Revision of prior years' tax accruals . . . . . . . . . . . . (7.5%) (11.0%) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0% (0.9%) ------ ------ Consolidated effective tax rate . . . . . . . . . . . . . . . 31.4% 20.3% ====== ======
27 29 Effective April 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Prior to the adoption of SFAS 109, the Company accounted for income taxes under the deferral method and prior periods have not been restated to reflect this change in accounting principle. There was no material effect on the Company's financial results as a result of adopting SFAS No. 109. The following is an analysis of accumulated deferred income taxes:
1994 1993 ----------- ----------- Assets Current Inventory . . . . . . . . . . . . . . . . . . . $ 3,582,000 $ 3,201,000 Other . . . . . . . . . . . . . . . . . . . . . 671,000 192,000 ----------- ----------- Total Current . . . . . . . . . . . . . 4,253,000 3,393,000 Non-Current Environmental . . . . . . . . . . . . . . . . . 1,317,000 1,344,000 ----------- ----------- Total Assets . . . . . . . . . . . . . . $ 5,570,000 $ 4,737,000 =========== =========== Liabilities Non-Current Depreciation . . . . . . . . . . . . . . . . . . $ 1,157,000 $ 920,000 ----------- ----------- Total Liabilities . . . . . . . . . . . $ 1,157,000 $ 920,000 =========== =========== Summary-Accumulated Deferred Income Taxes Net Current Assets . . . . . . . . . . . . . . . . $ 4,253,000 $ 3,393,000 Net Non-Current Assets . . . . . . . . . . . . . . 160,000 424,000 ----------- ----------- Total . . . . . . . . . . . . . . . . . $ 4,413,000 $ 3,817,000 =========== ===========
6. LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS Long-term debt payable to banks and others consists of the following:
1994 1993 ------------ ------------- Credit Agreement - 5.50% . . . . . . . . . . . . . . . $ 15,000,000 -- Credit Agreement - 5.375% . . . . . . . . . . . . . . . 10,000,000 -- Credit Agreement - 5.20% . . . . . . . . . . . . . . . -- $ 10,000,000 Credit Agreement - 6.0% . . . . . . . . . . . . . . . . -- 1,900,000 Term Loan - 6.50% . . . . . . . . . . . . . . . . . . . 9,160,000 -- Other . . . . . . . . . . . . . . . . . . . . . . . . . 487,000 525,000 ------------ ------------- 34,647,000 12,425,000 Less current maturities . . . . . . . . . . . . . . . . 1,479,000 38,000 ------------ ------------- Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,168,000 $ 12,387,000 ============ =============
28 30 Credit Agreement At March 31, 1994, outstanding bank debt consisted of a revolving credit facility which provides for borrowings and letters of credit of $35 million and a term loan of $9.2 million. Borrowing under the credit facility at March 31, 1994 was $25 million. The credit facility expires in September 1995. Under this facility, accounts receivable, inventory and all fixed assets other than real property, with the exception of certain real property located in Mountainside, New Jersey, are pledged as collateral. Borrowings are limited to 80% of the unpaid face amount of eligible accounts receivable, plus the lesser of 50% of eligible net inventory or $18 million. Letters of credit, which are included in the borrowing base formula, are limited to $5 million. Letters of credit under this facility at March 31, 1994 were $1.6 million. Borrowing under this facility bears interest at the lending bank's prime rate. The agreement also gives the Company the option of using the London Interbank Offered Rate (LIBOR) plus two percentage points. At March 31, 1994, the Company had $25 million of borrowings using LIBOR. The agreement contains requirements for a minimum tangible net worth of $60 million at March 31, 1994; a quarterly maximum total liabilities to tangible equity ratio of 1.0 to 1.0 at March 31, 1994; a minimum annual working capital level of $40 million; a minimum annual cash flow coverage ratio of 1.2 to 1.0; and minimum net income of $4 million per year commencing on March 31, 1993. In addition, the agreement requires the Bank's approval for the repurchase of the Company's common stock, and provides that quarterly dividend payments cannot exceed 25% of the Company's cumulative net income in each year. At March 31, 1994 $0.5 million was available for dividends. The $9.2 million term loan is with the same lenders as the revolving credit line. It is secured by the same collateral, and is due and payable on August 31, 1998. Principal payments of $360,000 are due and payable on the last day of each quarter through June 30, 1998, with a final balloon payment of $3,040,000 due and payable on August 31, 1998. Interest accrues at the lending bank's prime rate plus 1/4 percentage point, but in accordance with the loan agreement will be reduced to the prime rate for fiscal 1995 since the Company exceeded $6.0 million in net income for fiscal year 1994. Interest is payable monthly. Other Other long-term debt is comprised principally of an obligation due under a collateralized borrowing arrangement with a fixed interest rate of 3% due December 2004. Debt Maturities 1995 (current) . . . . . . . . . $ 1,479,000 1996 . . . . . . . . . . . . . . 26,481,000 1997 . . . . . . . . . . . . . . 1,482,000 1998 . . . . . . . . . . . . . . 1,483,000 1999 . . . . . . . . . . . . . . 3,444,000 Thereafter . . . . . . . . . . . 278,000 --------------- Total . . . . . . . . . $ 34,647,000 ===============
29 31 7. STOCKHOLDERS' EQUITY AND EMPLOYEE STOCK OPTIONS Under the Company's stock option plan, options to purchase shares of the Company's common stock have been granted to officers, key employees, and an officer/director at prices determined by the Board of Directors which may not be less than 100% of the fair market value at date of grant. At March 31, 1994, there were 230,537 options outstanding, of which 63,914 were exercisable at that date. The remaining options for 166,623 shares are exercisable on various dates through October 1998. The table below summarizes stock option transactions:
1994 1993 1992 ----------- ----------- ----------- Options outstanding, beginning of the year ($5.50-$29.81 per share) . . . . . . . . . 169,679 375,543 418,489 Options granted ($5.50-$18.00 per share) . . 146,500 -- 138,349 Options exercised ($5.50-$13.44 per share) . (57,415) (37,812) -- Options expired and cancelled . . . . . . . . (28,227) (168,052) (181,295) ----------- ----------- ----------- Options outstanding, end of the year . . . . 230,537 169,679 375,543 =========== =========== =========== Aggregate option price . . . . . . . . . . . $ 2,406,531 $ 2,002,194 $ 4,596,270 Options exercisable ($7.50-$29.81 per share) 63,914 107,973 202,022
8. EMPLOYEE BENEFIT PLANS The Company has an incentive bonus plan which provides for cash payments to selected employees based upon formulas approved by the Board of Directors. Provisions for awards under the plan approximated $1,419,000 in 1994, $779,000 in 1993 and $226,000 in 1992. The Company has two defined contribution savings plans. Expenses related to these plans were $1,786,000, $1,493,000, and $1,106,000 in 1994, 1993, and 1992, respectively. A division of the Company also makes contributions to a union-sponsored multi-employer pension plan in accordance with the negotiated labor contract. Contributions to the plan were $226,000, $218,000 and $179,000 in 1994, 1993 and 1992, respectively. Effective April 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106 ("SFAS No. 106") on Employers' Accounting for Postretirement Benefits Other Than Pensions. This statement requires that the cost of these benefits, which are primarily health care related, be recognized in the financial statements during the employee's active working career. The Company's previous practice was to recognize expense as claims were paid. The plan maintained by the Company provides postretirement benefits to union employees at one of the Company's divisions. Adopting the new standard created a previously unrecognized obligation covering prior years. This transition obligation, estimated at $2.9 million, before tax effects, is being amortized on a straight-line basis over the average remaining service life of active employees, estimated by the Company to be approximately 20 years. During fiscal year 1994, the Company adopted an amendment to the plan resulting in a decrease of $859,000 to the transition obligation. The current period charge was $443,000 before tax effects. The estimated current period charge, using the Company's previous practice of recognizing expense 30 32 as claims were paid, would have been approximately $127,000 before tax effects. Accrued postretirement benefit cost is included in other liabilities on the balance sheet. The periodic postretirement benefit cost for the year ended March 31, 1994, included the following components: Service cost (benefits earned during the year) . . . . . . . . . . . . . . . . . . . . . . $ 124,000 Interest cost on projected postretirement benefit obligation . . . . . . . . . . . . . . . 196,000 Amortization of transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,000 ------------ Total periodic postretirement benefit cost . . . . . . . . . . . . . . . . . . . . . . $ 443,000 ============
The funded status and accrued postretirement benefit cost on March 31, 1994 are as follows: Accumulated postretirement benefit obligation: Retirees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (893,000) Fully eligible plan participants . . . . . . . . . . . . . . . . . . . . . . . . . . . (295,000) Other active plan participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,149,0000) ------------ Accumulated postretirement benefit obligation . . . . . . . . . . . . . . . . . . . . . . . (2,337,000) Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- ------------ Accumulated postretirement benefit obligation in excess of plan assets . . . . . . . . . . (2,337,000) Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,000 Unrecognized transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,927,000 ------------ Accrued postretirement benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (316,000) ============
The assumptions used in accounting for the plan in 1994 was a 14% health care cost trend rate for substantially all participants (decreasing 1% each year to 10% in the year 1998 and then decreasing 0.5% each year to 6% in the year 2006 and beyond) and an 8% discount rate. As of March 31, 1994, the discount rate used to measure the accumulated postretirement benefit obligation was changed to 7.5%. A 1% increase in the health care trend rate would increase the accumulated postretirement benefit obligation by 14.2% at year end 1994 and the net periodic cost by 22.8% for the year. 31 33 9. COMMITMENTS Rent expense under operating leases for the years ended March 31, 1994, 1993, and 1992 was $1,450,000, $1,150,000, and $1,731,000, respectively. The Company has no material capital leases. The Company and its subsidiaries have minimum rental commitments under noncancellable operating leases (relating primarily to leased buildings) which are as follows: Year ending March 31: 1995 . . . . . . . . . . . . . . . . . . . $ 1,943,000 1996 . . . . . . . . . . . . . . . . . . . 1,850,000 1997 . . . . . . . . . . . . . . . . . . . 1,702,000 1998 . . . . . . . . . . . . . . . . . . . 926,000 1999 . . . . . . . . . . . . . . . . . . . 584,000 Thereafter . . . . . . . . . . . . . . . . 1,789,000 ------------ Total . . . . . . . . . . . . . . $ 8,794,000 ============
Included in the above amounts is the aggregate lease commitment associated with the Company's former corporate office. In connection with the relocation of the corporate office, the loss incurred on this lease (net of estimated sublease rentals) and other costs associated with the move totalling $0.5 million and $2.7 million were charged to expense during the years ended March 31, 1993 and March 31, 1992, respectively. Other-long-term liabilities at March 31, 1994, include a $0.6 million obligation associated with the lease. The Company has consulting agreements with certain former members of the Board of Directors and former executives. The remaining commitments under such agreements for the year ending March 31, 1994 are $819,000. 10. CONTINGENCIES The Company has commenced environmental site assessments and cleanup feasibility studies to determine the presence, extent and sources of any environmental contamination at two facilities in Pennsylvania, and one facility in Illinois. Although no governmental action requiring remediation has been taken at this time, the Company is working in cooperation with the relevant state authorities and any remedial work required to be performed would be subject to their approval. At the Pennsylvania sites, a feasibility study has been prepared and submitted to the state. Based upon that study and upon claims for recovery which the Company has against others, a pre-tax charge of $3.6 million (net of $1.2 million in probable recoveries) was recorded in March 1993 for estimated cleanup costs at the Pennsylvania sites. At March 31, 1994, the balance of this clean-up reserve was $3 million (net of $1.2 million in probable recoveries). In addition, the Company is pursuing recovery of a portion of such costs in litigation with several of its insurance carriers. The Company expects that remediation work at the Pennsylvania site will not be completed until fiscal 1997. In addition, the Company has been named as a potentially responsible party in various proceedings pending in several other states in which it is alleged that the Company was a generator of waste that was sent to landfills and other treatment facilities at which environmental remediation activities are pending. It is not possible to reliably estimate the costs associated with any remedial work to be performed until the studies at the Illinois site and these other sites have been completed, the scope of work defined and a method of remediation selected and approved by the relevant state authorities. 32 34 In February 1990, a lawsuit was brought in Los Angeles Superior Court against the Company and certain of its former officers by Special Devices, Inc. ("Special Devices"), a landlord at one of the Company's former California facilities, and Placerita Land and Farming Company, a predecessor of Special Devices, in which plaintiffs seek to recover in excess of $15 million for compensatory damages and an unspecified sum for punitive damages. The plaintiffs allege that the Company's waste handling practices have diminished the value of the leased property, reduced future rental income and caused plaintiffs to incur substantial defense costs in connection with related legal proceedings. In November 1985, the Company entered into agreements with the California Department of Health Services obligating the Company to clean up soil and groundwater contaminated by hazardous materials on the property. Substantially all of the remedial work has been performed, with ongoing monitoring and water treatment activity expected to continue until 2002. Two of the Company's general liability insurance carriers have filed actions in California Superior Court asking the Court to determine that their policies do not cover California environmental cleanup costs, damages to neighboring landowners for alleged personal injury and property damage, and related defense costs. The Company continues to believe that these policies cover such costs and is negotiating with the carriers to settle these actions. The Company is also engaged in various other legal proceedings incidental to its businesses. It is the opinion of the management that, after taking into consideration information furnished by its counsel, the above matters will not have a material effect on the consolidated financial position of the Company. 11. SEGMENT INFORMATION The Company develops, manufactures and sells a wide range of technically sophisticated products. Industrial Products include: (1) gear-driven band fasteners and threaded fasteners for the marine, auto, toy and aircraft industries; (2) electrical wiring harnesses and (3) service and distribution of drafting (CADD) display workstations. Aerospace Products include: (1) lifting, control, and restraint devices-principally helicopter rescue hoists and external hook systems, winches and hoists for aircraft and weapon-handling systems, and aircraft and cargo tie-downs; (2) custom electrical interconnection systems and their components used in computers, communications equipment, aircraft, and military applications and (3) metallized-glass-fiber products (referred to as chaff and used to reflect hostile radar signals) and related devices and systems. Operating profit is net sales less operating expenses. General corporate expenses, interest and income taxes have not been deducted in determining operating profit. Assets, depreciation and amortization, and capital expenditures are those identifiable to a particular segment by their use. Approximately 20% of sales in 1994, 1993 and 1992 were derived from sales to the United States Government and its prime contractors which are attributable primarily to the Aerospace Products segment. 33 35 As a result of the sale of the Financial Systems division and the discontinuance of the Computer Graphics manufacturing operation, the Advanced-Technology products segment has been eliminated as a reporting segment.
OPERATING DEPRECIATION/ FISCAL PROFIT CAPITAL AMORTIZATION IDENTIFIABLE YEAR SALES (LOSS)(1) EXPENDITURES(2) EXPENSE(2) ASSETS ------ ----- --------- --------------- ------------ ------------ Industrial Products . . . . 1994 $ 66,436,000 $ 9,165,000 $2,519,000 $ 2,461,000 $ 48,187,000 1993 36,955,000 7,341,000 1,784,000 1,122,000 24,273,000 1992 35,322,000 6,996,000 1,339,000 956,000 25,168,000 Aerospace Products . . . . 1994 $ 54,071,000 $ 8,113,000 $1,862,000 $ 1,552,000 $ 51,936,000 1993 58,958,000 8,540,000 2,993,000 1,826,000 54,405,000 1992 54,945,000 5,000 794,000 1,810,000 52,834,000 - - -------------------------------------------------------------------------------------------------------------------- Total Segments . . . . . . 1994 120,507,000 17,278,000 4,381,000 4,013,000 100,123,000 1993 95,913,000 15,881,000 4,777,000 2,948,000 78,678,000 1992 90,267,000 7,001,000 2,133,000 2,766,000 78,002,000 Corporate . . . . . . . . . 1994 -- (5,791,000) 57,000 282,000 25,734,000 1993 -- (9,301,000)(3) 97,000 227,000 19,085,000 1992 -- (6,058,000) 37,000 64,000 26,903,000 Corporate Interest and Other 1994 -- 839,000 -- -- -- 1993 -- 635,000 -- -- -- 1992 -- 317,000 -- -- -- Interest Expense . . . . . 1994 -- (1,556,000) -- -- -- 1993 -- (696,000) -- -- -- 1992 -- (2,239,000) -- -- -- Consolidated . . . . . . . 1994 120,507,000 10,770,000 4,438,000 4,295,000 125,857,000 1993 95,913,000 6,519,000 4,874,000 3,175,000 97,763,000 1992 90,267,000 (979,000) 2,170,000 2,830,000 104,905,000 ====================================================================================================================
(1) Operating profit represents net sales less operating expenses which include all costs and expenses related to the Company's operations in each segment. General corporate expenses and investments and other income earned at the corporate level are included in the corporate section. Interest expense is also separately reported. The amount of the "Consolidated" line represents "Income from Continuing Operations Before Income Taxes." Loss from discontinued operations is not included. (2) The capital expenditures and depreciation/amortization expense from discontinued operations are excluded from the above schedule. (3) Corporate operating profit in 1993 includes a pre-tax charge of $3,613,000 for estimated future environmental site remediation costs. 34 36 In 1994, 1993 and 1992, the Company had revenues from export sales as follows:
1994 1993(a) 1992(a) ------------- ------------- ------------- LOCATION Middle East . . . . . . . . . . . . . . . . . . . . . . . . $ 158,000 $ 128,000 $ 219,000 Mexico, Central and South America . . . . . . . . . . . . . 765,000 321,000 984,000 Western Europe . . . . . . . . . . . . . . . . . . . . . . 10,682,000 13,448,000 11,601,000 Canada . . . . . . . . . . . . . . . . . . . . . . . . . . 4,812,000 1,753,000 1,544,000 Pacific and Far East . . . . . . . . . . . . . . . . . . . 5,637,000 3,483,000 3,423,000 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,000 323,000 614,000 ------------- ------------- ------------- Total . . . . . . . . . . . . . . . . . . $ 22,199,000 $ 19,456,000 $ 18,385,000 ============= ============= =============
- - --------------- (a) Restated to reflect only continuing operations. 12. UNAUDITED QUARTERLY FINANCIAL DATA (in thousands except per share amounts)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL -------- ------- ------- ------- ----- 1994 - - ---- Total Revenues . . . . . . . . . . $ 24,006 $29,207 $33,525 $34,801 $121,539 Gross Profit . . . . . . . . . . . 7,279 8,406 9,834 10,698 36,217 Income from Continuing Operations . 1,653 1,530 1,982 1,703 6,868 Income (loss) from Discontinued Operations . . . . . . . . . . . . (139) (299) (377) 831 16 Net Income . . . . . . . . . . . . 1,514 1,231 1,605 2,534 6,884 Earnings (Loss) Per Share: Income from Continuing Operations $ 0.32 $ 0.30 $ 0.39 $ 0.33 $ 1.34 Income (loss) from Discontinued Operations . . . . . . . . . . . (0.03) (0.06) (0.07) 0.16 -- Net Income . . . . . . . . . . . $ 0.30(a) $ 0.24 $ 0.31(a) $ 0.49 $ 1.34 1993 - - ---- Total Revenues . . . . . . . . . . $ 23,127 $22,336 $23,952 $27,317 $ 96,732 Gross Profit . . . . . . . . . . . 6,750 6,363 7,150 9,211 29,474 Income from Continuing Operations . 1,265 957 1,469 1,503 5,194 Income (loss) from Discontinued Operations . . . . . . . . . . . 150 45 (172) (84) (61) Net Income . . . . . . . . . . . . 1,415 1,002 1,297 1,419 5,133 Earnings (Loss) Per Share: Income from Continuing Operations $ 0.25 $ 0.19 $ 0.29 $ 0.29 $ 1.02 Income (loss) from Discontinued Operations . . . . . . . . . . 0.03 0.01 (0.03) (0.02) (0.01) Net Income . . . . . . . . . . . $ 0.28 $ 0.20 $ 0.25(a) $ 0.28(a) $ 1.01
- - --------------- (a) Per share amounts do not always add because the figures are required to be independently calculated. 35 37 TRANSTECHNOLOGY CORPORATION SCHEDULE I CONSOLIDATED MARKETABLE SECURITIES AND OTHER SECURITY INVESTMENTS FOR YEARS ENDED MARCH 31, 1994, MARCH 31, 1993 AND MARCH 31, 1992
DESCRIPTION - - ----------- NUMBER OF BALANCE SHEET 1994 SHARES HELD COST MARKET VALUE CARRYING AMOUNT - - ---- ----------- --------------- --------------- ----------------- MACE SECURITY INTERNATIONAL COMMON STOCK . . . . . . . . 465,000 $ 3,371,000 $ 1,802,000 $ 1,802,000 1993 - - ---- -- -- -- -- -- 1992 - - ---- -- -- -- -- --
36 38 TRANSTECHNOLOGY CORPORATION SCHEDULE VIII CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS For Years Ended March 31, 1994, March 31, 1993 and March 31, 1992
BALANCE AT CHARGED TO CHARGED TO BALANCE BEGINNING OF COSTS AND OTHER AT END DESCRIPTION PERIOD EXPENSES ACCOUNTS(A) DEDUCTIONS(B) OF PERIOD - - --------------- ------------ ---------- ----------- ------------- --------- 1994 - - ---- Allowances for doubtful accounts and sales returns $318,000 $102,000 $72,000 $221,000 $271,000 1993 - - ---- Allowances for doubtful accounts and sales returns $ 268,000 $124,000 $31,000 $105,000 $318,000 1992 - - ---- Allowances for doubtful accounts and sales returns $ 959,000 $ 55,000 $12,000 $758,000(C) $268,000
(A) Amount consists primarily of sales adjustments charged to revenue accounts. (B) Amount represents write-off of uncollectible accounts. (C) Amount includes $576,000 reserves for uncollectible accounts of discontinued operations included in assets of discontinued operations. 37 39 TRANSTECHNOLOGY CORPORATION SCHEDULE X CONSOLIDATED SUPPLEMENTARY INCOME STATEMENT INFORMATION For Years Ended March 31, 1994, March 31, 1993 and March 31, 1992 The amounts summarized below were charged to costs and expenses:
1994 1993 1992 ---------- ---------- ---------- Maintenance and Repairs $2,352,000 $1,631,000 $1,819,000
38 40 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item will be contained in the Company's Proxy Statement for the year ended March 31, 1994 and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this item will be contained in the Company's Proxy Statement for the year ended March 31, 1994 and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item will be contained in the Company's Proxy Statement for the year ended March 31, 1994 and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item will be contained in the Company's Proxy Statement for the year ended March 31, 1994 and is incorporated herein by reference. 39 41 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) List of documents filed as part of the Annual Report: 1. Financial Statements: Consolidated Balance Sheets at March 31, 1994 and March 31, 1993 Statements of Consolidated Operations for the years ended March 31, 1994, March 31, 1993 and March 31, 1992 Statements of Consolidated Cash Flows for the years ended March 31, 1994, March 31, 1993 and March 31, 1992 Statements of Consolidated Stockholders' Equity for the years ended March 31, 1994, March 31, 1993 and March 31, 1992 Notes to Consolidated Financial Statements 2. Financial Statement Schedules: Schedule I - Consolidated Marketable Securities and Other Security Investments for the years ended March 31, 1994, 1993 and 1992 Schedule VIII - Consolidated Valuation and Qualifying Accounts for the years ended March 31, 1994, 1993 and 1992 Schedule X - Consolidated Supplementary Income Statement Information for the years ended March 31, 1994, 1993 and 1992 3. Exhibits: The exhibits listed on the accompanying Index to Exhibits are filed as part of this Annual Report. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ended March 31, 1994. 40 42 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: June 24, 1994 TRANSTECHNOLOGY CORPORATION By: /s/Michael J. Berthelot --------------------------------------- Michael J. Berthelot, Chairman of the Board, President and Chief Executive Officer 41 43 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/Michael J. Berthelot Chairman of the Board, President June 24, 1994 - - ----------------------------------- and Chief Executive Officer MICHAEL J. BERTHELOT (Principal Executive Officer) /s/Patrick K. Bolger Executive Vice President, Chief June 24, 1994 - - ----------------------------------- Operating Officer and Director PATRICK K. BOLGER /s/Chandler J. Moisen Senior Vice President, Treasurer and June 24, 1994 - - ----------------------------------- Chief Financial Officer CHANDLER J. MOISEN (Principal Financial Officer) /s/Richard Mascuch Director June 16, 1994 - - ----------------------------------- RICHARD MASCUCH /s/Walter Belleville Director June 16, 1994 - - ----------------------------------- WALTER BELLEVILLE /s/George S. Hofmeister Director June 16, 1994 - - ----------------------------------- GEORGE S. HOFMEISTER /s/Thomas V. Chema Director June 16, 1994 - - ----------------------------------- THOMAS V. CHEMA /s/H. Gary Carlson, Ph.D. Director June 16, 1994 - - ----------------------------------- H. GARY CARLSON, Ph.D. /s/James A. Lawrence Director June 16, 1994 - - ----------------------------------- JAMES A. LAWRENCE
42 44 INDEX TO EXHIBITS
Page Sequentially Numbered ------------ 3.1 Certificate of Incorporation of the Company.(1) -- 3.2 Bylaws of the Company.(2) -- 4.1 Specimen Certificate of Common Stock 45 10.1 1982 Stock Option Plan of the Company, as amended.(3) -- 10.2 Form of Incentive Stock Option Agreement used under the Company's 1982 Stock Option Plan.(4) -- 10.3 Form of Nonqualified Stock Option Agreement used under the Company's 1982 Stock Option Plan.(4) -- 10.4 1992 Long Term Incentive Plan of the Company.(5) -- 10.5 Indemnification Agreement dated February 11, 1987 between the Company and each of its officers and directors.(6) -- 10.6 Executive Life Insurance Plan.(7) -- 10.7 Revolving Loan and Security Agreement dated as of June 21, 1991 between the Company and National Canada Finance Corp.(8) -- 10.8 First Amendment to Revolving Loan and Security Agreement dated as of December 12, 1991 between the Company and National Canada Finance Corp.(9) -- 10.9 Second Amendment to Revolving Loan and Security Agreement dated as of December 10, 1992 between the Company and National Canada Finance Corp.(9) -- 10.10 Letter Agreement and General Release dated June 27, 1991 between Paul Grosher and the Company.(11) -- 10.11 Amended Compensation Agreement dated April 2, 1993 between Arch Scurlock and the Company.(12) -- 10.12 Amended Compensation Agreement dated April 2, 1993 between John H. Grover and the Company.(12) -- 10.13 Severance and Consulting Agreement dated December 12, 1991 between Ralph Hutchins and the Company.(10) -- 10.14 Third Amendment to Revolving Loan and Security Agreement dated August 2, 1993 between the Company and National Canada Finance Corp. 46 10.15 Form of Restricted Stock Award Agreement used under the Company's 1992 Long Term Incentive Plan 66 21.1 List of Subsidiaries of the Company. 79 23.1 Independent Auditor's Consent. 80
- - ---------------------- (1) Incorporated by reference from the Company's Form 8-A Registration Statement No. 2-85599 dated February 9, 1987. 43 45
Page Sequentially Numbered ------------ (2) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the Quarter ended September 27, 1992. -- (3) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1983. -- (4) Incorporated by reference from the Company's Post-Effective Amendment No. 1 to Form S-8 Registration Statement No. 33-19390. -- (5) Incorporated by reference from the Company's Registration Statement on Form S-8 No. 33-59546 dated March 15, 1993. -- (6) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1987. -- (7) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1989. -- (8) Incorporated by reference from the Company's Annual Report on Form 10-K from the Fiscal Year ended March 31, 1991. -- (9) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the Quarter ended December 27, 1992. -- (10) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the Quarter ended December 29, 1991. -- (11) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the Quarter ended September 29, 1991. -- (12) Incorporated by reference from the Company's Annual Report on Form 10-K for the Fiscal Year ended March 31, 1993. --
44 EX-4.1 2 SPECIMEN CERTIFICATE OF COMMON STOCK 1 EXHIBIT 4.1 NUMBER COMMON STOCK COMMON STOCK SHARES NYS THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR IN THE CITY OF NEW YORK OR CERTAIN DEFINITIONS IN WINSTON-SALEM, NORTH CAROLINA CUSIP 893889 10 5 (TRANSTECHNOLOGY CORPORATION LOGO) INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE This Certifies that is the record holder of FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.01 PER SHARE OF THE COMMON STOCK OF Transtechnology Corporation, transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid until countersigned and registered by the Transfer Agent and Registrar. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: /S/ Michael J. Berthelot ----------------------- Chairman of the Board (LOGO) /S/ Valentina Doss /S/ Michael J. Berthelot ------------------ ---------------------- Secretary President Countersigned and Registered: Wachovia Bank of North Carolina, N.A. (Winston-Salem, N.C.) Transfer Agent and Registrar By Authorized Signature 45 EX-10.14 3 THIRD AMENDMENT TO REVOLV. LOAN & SECURITY AGMNT. 1 EXHIBIT 1O.14 THIRD AMENDMENT TO THE REVOLVING LOAN AND SECURITY AGREEMENT THIS THIRD AMENDMENT TO THE REVOLVING LOAN AND SECURITY AGREEMENT (the "Third Amendment") is entered into by and among NATIONAL CANADA FINANCE CORP., NATIONAL BANK OF CANADA (New York, New York) (collectively, "Bank"), and TRANSTECHNOLOGY CORPORATION, a Delaware corporation ("Borrower"). RECITALS A. On June 21, 1991, Borrower and Bank entered into a certain Revolving Loan And Security Agreement (the "Loan Agreement," all terms defined therein being used in this Third Amendment with the same meaning unless otherwise stated) under the terms of which Bank loaned to Borrower $9,000,000 on a revolving loan basis and $4,000,000 in the form of letters of credit pursuant to the provisions set forth in the Loan Agreement. B. On December 18, 1991, Borrower and Bank entered into a certain First Amendment To The Revolving Loan And Security Agreement (the "First Amendment") to provide for (1) the elimination of the $4,000,000 sub-limit imposed on Borrower by Bank with respect to funding of the Letter of Credit Facility, (2) the modification of certain covenants, and (3) the waiver by Bank of Borrower's compliance with Section 7.1(N) of the Loan Agreement relating to Borrower's net worth for the period ended September 29, 1991. C. On December 10, 1992, Borrower and Bank entered into a certain Second Amendment To The Revolving Loan And Security Agreement (the "Second Amendment") to provide for (1) an increase in the maximum principal amount of borrowings under the Revolving Loan from $13,000,000 to $25,000,000 (inclusive of the issuance by Bank to Borrower of a maximum of $5,000,000 of standby letters of credit), (2) a modification to the rate of interest charged on borrowings under the Revolving Loan to provide for a rate of interest based on the Base Rate or LIBOR (as defined therein), (3) a modification to the Borrowing Base to permit loan advances against the Eligible Inventory of Borrower, (4) the modification of Bank's Collateral of Borrower to include machinery and equipment of Borrower, (5) the modification of certain financial covenants of Borrower, (6) the payment by Borrower of certain dividends, and (7) the extension of the Termination Date of the Loan Agreement. D. On December 31, 1992, Borrower and Bank entered into a letter agreement (the "Letter Agreement") to permit Borrower to pay dividends in accordance with Section 7.2(H) of the Loan Agreement, as amended, commencing with the quarter ending December 31, 1992. E. Borrower and Bank now desire to amend the Loan Agreement, as amended, to (1) increase the maximum principal amount of borrowings under the Revolving Loan from $25,000,000 to $35,000,000 46 2 (inclusive of the issuance by Bank to Borrower of a maximum of $5,000,000 of standby letters of credit), (2) provide for a term loan facility in the principal amount of $10,000,000 with interest accruing at a rate equal to one-quarter (1/4) percentage points above the Base Rate, (3) provide Bank with a mortgage on the Palnut Property (as defined below), (4) modify the Borrowing Base to increase the amount of funds Borrower may borrow against Eligible Inventory from $13,000,000 to $18,000,000, and (5) establish a termination fee upon the prepayment by Borrower of the term loan, all in accordance with the provisions of this Third Amendment. PROVISIONS NOW, THEREFORE, in consideration of the foregoing, the parties agree as follows: SECTION I. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is amended as follows: A. On and after the effective date of this Third amendment each reference in the Loan Agreement to "this Agreement," "hereunder," and "hereof," or words of like import referring to the Loan Agreement shall mean and refer to the Loan Agreement, as amended by the First Amendment, the Second Amendment, the Letter Agreement and this Third Amendment. The Loan Agreement, as amended by the First Amendment, the Second Amendment, the Letter Agreement and this Third Amendment, is, and shall continue to be, in full force and effect and hereby is ratified and confirmed in all respects. B. Paragraphs (G), (J), (M), (N), (0), (MM), (XX) and (CCC) of Section 1.1 of the Loan Agreement are amended in their entirety as follows: (G) Borrowing Base. Subject to the provisions of Section 2.1 of this Agreement, an amount equal to the lesser of: (1) The sum of (a) eighty percent (80%) of the unpaid face amount of Eligible Accounts, plus (b) the lesser of (i) fifty percent (50%) of the lower of cost (determined on a first-in, first-out basis) or market value of Eligible Inventory or (ii) $18,000,000; or (2) The Revolving Loan Credit Limit. (J) Collateral. The Accounts, Inventory, Fixed Collateral, Palnut Property and all other Property of -2- 47 3 Borrower now or at any time or times hereafter subject to a Lien in favor of Bank. (M) Adjusted Base Rate. A fluctuating rate of interest equal to (1) with respect to the Revolving Loan, zero (0) percentage points above the Base Rate, and (2) with respect to the Term Loan, one-quarter (1/4) percentage points above the Base Rate; provided, however, that the Adjusted Base Rate applicable to the Term Loan shall be reduced by one-quarter (1/4) percentage points if Borrower's Net Income (as defined in Section 7.2(H) of this Agreement) equals or exceeds $6,000,000 for the fiscal year ended March 31, 1994. Any such reduction in the Adjusted Base Rate applicable to the Term Loan shall become effective two (2) business days following the receipt by Bank from Borrower of Borrower's unaudited interim financial statements for its fiscal year ending March 31, 1994; provided, however, if Borrower's audited financial statements for such fiscal year report Net Income of less than $6,000,000, such rate reduction shall be discontinued and any interest savings realized by Borrower based on such rate reduction shall be immediately due and payable to Bank. (N) Credit Documents. This Agreement, the Promissory Note, the Term Note, the Mortgage, and all other agreements, instruments, and documents (including, but not limited to, all assignments, security agreements, lien waivers, subordinations, guarantees, powers of attorney, and consents) heretofore, now, or hereafter executed by Borrower and delivered to Bank (other than the legal opinions) with respect to the transactions contemplated by this Agreement, in each instance as the foregoing may be amended from time to time. (O) Revolving Loan Credit Limit. An amount equal to Thirty-Five Million Dollars ($35,000,000). (MM) Promissory Note. The Promissory Note executed by Borrower and delivered to Bank, dated June 21, 1991, as amended by the First Amendment To Promissory Note, dated December 10, 1992, and the Second Amendment To Promissory Note in the form attached hereto as Exhibit A (with such changes or modifications, if any, to which Borrower and National Canada Finance Corp. may agree) evidencing the Revolving Loan made by National Canada Finance Corp. pursuant to Section 2.1(A) of this Agreement, together with all amendments thereto and all notes issued in substitution therefor or replacement thereof. -3- 48 4 (XX) Adjusted LIBOR Rate. A rate of interest equal to two (2) percentage points above LIBOR. (CCC) Interest Period. A period of one hundred twenty (120) days commencing on the applicable borrowing date of each LIBOR Loan and ending on each Interest Adjustment Date with respect thereto; provided, however, that if any such period would be affected by prepayment as provided in Section 2.4(C) of this Agreement or maturity of the Revolving Loan as provided in Section 2.1(B) of this Agreement, such period shall be shortened to end on such date. C. Paragraphs (GGG), (HHH), (III) and (JJJ) are added to Section 1.1 of the Loan Agreement as follows: (GGG) Mortgage. The Open-End Mortgage And Security Agreement executed by Borrower in substantially the same form as attached to the Third Amendment as Exhibit B. (HHH) Palnut Property. As defined in Section 4.1(E) of this Agreement. (III) Term Loan. As defined in Section 2.2(A) of this Agreement. (JJJ) Term Note. The Term Note to be executed by Borrower in substantially the form attached to the Third Amendment as Exhibit C (with such changes or modifications, if any, to which Borrower and National Canada Finance Corp. may agree) evidencing the Term Loan made by National Canada Finance Corp. pursuant to Section 2.2(A) of this Agreement, together with all amendments thereto and all notes issued in substitution therefor or replacement thereof. D. Section 2 of the Loan Agreement is amended in its entirety as follows: 2. LOANS, ADVANCES, AND LETTERS OF CREDIT Subject to the provisions of this Agreement and each of the other Credit Documents including, but not limited to, those provisions or Credit Documents that provide that no loan advances need be made or standby letters of credit issued by Bank if, at the date of request for loan advances or the issuance of standby letters of credit hereunder by Borrower, an Event of Default, or event or condition which, with notice, lapse of time or both, would constitute an Event of Default, then exists, Bank shall provide the credit facilities described in this Section 2 for the account of Borrower. -4- 49 5 2.1 Revolving Loan. (A) Establishment of Revolving Loan. Subject to the provisions of this Agreement, and subject at all times to Bank's right to the creation of reserves for accrued interest and otherwise as Bank deems necessary or appropriate from time to time, Bank shall make such loans to Borrower as are requested by Borrower subject to the provisions of this Agreement consisting of advances made by Bank against the value of Eligible Accounts and Eligible Inventory (the "Revolving Loan"); provided, however, that the aggregate unpaid principal of the Revolving Loan outstanding at any one time shall not at any time exceed the Borrowing Base reduced by the aggregate face amount of all outstanding letters of credit under the Letter of Credit Facility, together with all unpaid draws thereon. (B) Payment. The Revolving Loan shall bear interest as provided in this Section 2.1 and shall be evidenced by, and repayable in accordance with, the Promissory Note but, in the absence of the Promissory Note, shall be evidenced by Bank's record of disbursements and repayments. Without in any way limiting Bank's right at any time to demand payment of the entire principal amount of the Revolving Loan and all interest accrued thereon, upon the occurrence of an Event of Default, which right is absolute and unconditional, the entire principal amount of the Revolving Loan, together with all interest accrued thereon, shall become due and payable in full on the Termination Date without notice, presentment, demand, notice of dishonor, or any notice of any kind. (C) Adjusted Base Rate Revolving Loans or Adjusted LIBOR Rate Revolving Loans. Borrower shall have the option, subject to the provisions set forth in this Agreement, to borrow under this Agreement, repay the same in whole but not in part, and re-borrow again at any time and from time to time, up to the applicable Borrowing Base (if any), (1) Revolving Loans, the outstanding principal balance of which shall bear interest at a rate per annum which shall be the Adjusted Base Rate from time to time in effect, or (2) Revolving Loans, the outstanding principal balance of which shall bear interest at a rate per annum which shall be equal to the Adjusted LIBOR Rate. (D) Payment of Interest on Revolving Loans Bearing the Adjusted Base Rate. Borrower shall pay interest (based on a year having 360 days and calculated for the actual number of days elapsed) on the unpaid principal -5- 50 6 amount of the Adjusted Base Rate Loans outstanding from time to time from the date thereof until paid, payable as of the last day of each month commencing December 31, 1992, and continuing on the last day of each month thereafter, and, at the maturity thereof, at a rate per annum which shall be equal to the Adjusted Base Rate from time to time in effect. Any increase or decrease in the Adjusted Base Rate resulting from a change in the Base Rate shall become effective on the date of such change. (E) Payment of Interest on Revolving Loans Bearing the Adjusted LIBOR Rate. Borrower shall pay interest (based on a year having 360 days and calculated for the actual number of days elapsed) at a fixed rate for each Interest Period on the unpaid principal amount of the LIBOR Loans outstanding from time to time from the date thereof until paid, payable as of each Interest Adjustment Date with respect to an Interest Period, at the rate per annum equal to the Adjusted LIBOR Rate, fixed in advance of each Interest Period as herein provided for each such Interest Period. (F) Conversion of Loans. At the request of Borrower, Bank shall convert Revolving Loans bearing interest at the Adjusted Base Rate to Revolving Loans bearing interest at the Adjusted LIBOR Rate at any time, and shall convert Revolving Loans bearing interest at the Adjusted LIBOR Rate to Revolving Loans bearing interest at the Adjusted Base Rate, on any Interest Adjustment Date applicable to the Revolving Loan, but each request for loans under this Section 2.1 must bear interest only at the Adjusted Base Rate or at the Adjusted LIBOR Rate. Any Revolving Loan bearing interest at the Adjusted LIBOR Rate automatically shall begin bearing interest at the Adjusted Base Rate, if Borrower fails to request the Adjusted LIBOR Rate (i) when the Revolving Loan is made or (ii) prior to the expiration of the Interest Period of the Revolving Loan. In addition, if an Event of Default has occurred, Borrower shall be required, at the expiration of the then current Interest Period, to convert Revolving Loans bearing interest at the Adjusted Libor Rate to Revolving Loans bearing interest at the Adjusted Base Rate, and all Revolving Loans shall continue to bear interest at the Adjusted Base Rate until such Event of Default is cured. 2.2 Term Loan. (A) Establishment of Term Loan. Subject to the provisions of this Agreement, Bank shall make a term loan to Borrower in the amount of Ten Million Dollars ($10,000,000; the "Term Loan"). -6- 51 7 (B) Payment. The Term Loan shall bear interest as provided in paragraph (C) of this Section 2.2 and shall be evidenced by, and repayable in accordance with, the Term Note in the form of Exhibit C attached to the Third Amendment but, in the absence of such Term Note, shall be evidenced by Bank's records of disbursements and repayments. Without in any way limiting Bank's right at any time to demand payment of the entire principal amount of the Term Loan, and all interest accrued thereon, upon the occurrence of an Event of Default, which right is absolute and unconditional, the entire principal amount of the Term Loan, together with all interest accrued thereon, shall become due and payable in full on August 31, 1998, without notice, presentment, demand, notice of dishonor, or any notice of any kind. (C) Interest on Term Loan. Borrower shall pay interest (based on a year having 360 days and calculated for the actual number of days elapsed) on the unpaid principal amount of the Term Loan outstanding from time to time from the date thereof until paid, payable as of the last day of each month commencing August 31, 1993, and continuing on the last day of each month thereafter, and, at the maturity thereof, at a rate per annum which shall be equal to the Adjusted Base Rate from time to time in effect. Any increase or decrease in the Adjusted Base Rate resulting from a change in the Base Rate shall become effective on the date of such change. 2.3 Letter of Credit Facility. Subject to the provisions of this Agreement, National Canada Finance Corp. or its parent corporation, National Bank of Canada (New York, New York), shall issue for and on behalf of Borrower standby letters of credit the issued and outstanding amounts of which, together with all unpaid draws thereon, (1) shall not exceed the lesser of (a) the Borrowing Base or (b) $5,000,000 (the "Letter of Credit Facility"), and (2) shall reduce, on a dollar for dollar basis, the Borrowing Base and the Revolving Loan Credit Limit. All draws made upon any issued and outstanding standby letter of credit shall bear interest at the Adjusted Base Rate from time to time in effect and all payments of principal, and accrued interest thereon, shall be due and payable in accordance with the provisions of Section 2.1(B) and (D) above. 2.4 Fees and Additional Charges. (A) Commitment Fee. On the date of execution of the Third Amendment, Borrower shall pay to Bank a commitment fee of $175,000 (the "Commitment Fee"). -7- 52 8 (B) Unused Line Fee. Commencing July 31, 1991, and continuing on the last day of each month thereafter until such time as the Revolving Loan is terminated as provided herein and Borrower's Obligations are paid in full, Borrower shall pay to Bank an amount equal to one-quarter of one percent (1/4%) per annum of the difference between the Revolving Loan Credit Limit and the sum of (1) the issued and outstanding standby letters of credit and (2) the outstanding principal balance of the Revolving Loan during the preceding month (the "Unused Line Fee"). (C) Termination Fee. Prior to the Termination Date, Borrower may terminate this Agreement as of the last day of any month by giving Bank at least ninety (90) days prior written notice of the date on which this Agreement is to terminate, which date must be the last day of a month, and by paying to Bank on such termination date all of the outstanding principal balance due and payable under the Promissory Note, the Term Note, all other Obligations, and all accrued and unpaid interest thereon; provided, however, that if such specified date of termination is on or before the Termination Date, Borrower shall pay Bank an amount equal to one percent (1%) of the sum of the Revolving Loan Credit Limit and the original principal amount of the Term Loan (the "Termination Fee"). The Termination Fee shall be paid to Bank at the same time and in the same manner in which Borrower pays in full the then outstanding principal amounts and interest thereon due and owing under the Promissory Note, the Term Note and all other Obligations. (D) Letter of Credit Fee. Borrower shall be obligated to pay Bank a per-annum amount equal to one and one-half percent (1.5%) of the face amount of each standby letter of credit issued by Bank for the benefit of Borrower (the "Letter of Credit Fee"). Each Letter of Credit Fee shall be due and payable in equal quarterly installments. The first quarterly installment of each Letter of Credit Fee shall be due and payable on the date of issuance of such Letter of Credit and any additional quarterly installments shall be due and payable in advance for each subsequent quarter in which a standby letter of credit is issued and outstanding for the benefit of Borrower. 2.5 Accountings. Any accounting rendered by Bank to Borrower shall be deemed correct and conclusively binding upon Borrower unless (A) Borrower notifies Bank by certified mail, return receipt requested, within thirty (30) calendar days after the date when each such accounting is mailed or otherwise delivered to Borrower, or (B) there exists a bona fide mistake in such -8- 53 9 accounting regardless of which party discovers such mistake. 2.6 All Advances to Constitute One Loan. The Revolving Loan, the Term Loan, and all other amounts owed by Borrower to Bank under this Agreement, whether or not evidenced by a promissory note or term note, shall constitute one obligation of Borrower, secured by Bank's lien on and security interest in all of the Collateral. Borrower shall be liable to Bank for all of the Obligations, regardless of whether such Obligations arise as a result of advances made directly to Borrower, it being stipulated and agreed that all monies advanced by Bank hereunder inure to the benefit of Borrower, and that Bank is relying on the liability of Borrower in extending credit and otherwise making advances under this Agreement. 2.7 Excess Interest. In no contingency or event whatsoever shall the interest rate charged pursuant to the terms of this Agreement exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that Bank has received interest under this Agreement in excess of the highest applicable rate, such excess interest shall first be applied to any unpaid principal balance owed by Borrower and, if the then remaining excess interest is greater than the unpaid principal balance, Bank promptly shall refund such excess interest to Borrower. Notwithstanding anything to the contrary contained in this Agreement, the Promissory Note, or the Term Note, if the rate of interest payable on the Promissory Note or the Term Note is ever reduced as a result of this Section 2.7 and at any time thereafter the maximum rate permitted by applicable law shall exceed the rate of interest provided for in the Promissory Note or the Term Note, then the rate provided for in the Promissory Note or the Term Note, as the case may be, shall be increased to the maximum rate permitted by applicable law for such period as is required so that the total amount of interest received by Bank is that which would have been received by Bank but for the operation of this Section 2.7. 2.8 Revival. To the extent that Borrower makes a payment or payments to Bank or to the extent Bank receives any payment or proceeds of the Collateral for Borrower's benefit, which payment or proceeds or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside, and/or required to be repaid to a trustee, receiver, or any other party -9- 54 10 under any bankruptcy act, state or Federal law, common law, or equitable cause, then, to the extent of such payment or proceeds received by Borrower, the Obligations or part thereof intended to be satisfied shall be revived and shall continue in full force and effect as if such payment or proceeds had not been received by Bank. 2.9 Optional Charge Against Revolving Loan. To the extent Borrower does not remit, when due, any payments of interest or, in the case of the Term Loan or any other loans or Obligations other than the Revolving Loan, any payment of principal or any other payment required to be made by Borrower to Bank pursuant to the terms of any of the Credit Documents within any applicable grace periods, Bank, at its option, may make such payment by increasing the outstanding principal balance of the Revolving Loan in order to prevent such amount from becoming past due, but it is expressly acknowledged and covenanted that Bank shall be under no obligation to do so. 2.10 Specific Conditions Applicable to Requests for Revolving Loan. In addition to all other conditions set forth in this Agreement, each request by Borrower for a Revolving Loan also is subject to the following specific conditions: (A) Notice of Request. Borrower shall notify Bank in writing or telephonically of Borrower's request for a Revolving Loan, which request shall be received by Bank not later than 2:00 p.m., Cleveland, Ohio time and shall state the total amount of the Revolving Loan requested. (B) Borrowing Base Certificate. Borrower's written request shall be accompanied by a duly completed and executed "Borrowing Base Certificate" in the form attached to this Agreement as Exhibit 2.9(B). If Borrower's request is made telephonically, the Borrowing Base Certificate shall be delivered to Bank no later than the next business day after such telephonic request is made. Each Borrowing Base Certificate shall demonstrate that the principal amount of the Revolving Loan, when added to the aggregate principal amount of all Revolving Loans then outstanding, shall not exceed the Borrowing Base, as determined based on the last Borrowing Base Certificate timely delivered to Bank pursuant to Section 5.4(B) of this Agreement. (C) Borrower's Acceptance of Proceeds. The acceptance by Borrower of the proceeds of any Revolving Loan, as of the date of such acceptance, shall be deemed (1) to constitute a representation and warranty by Borrower that all conditions to the making of such -10- 55 11 Revolving Loan set forth in this Agreement have been satisfied, and (2) a confirmation by Borrower of the granting and continuance of the Lien in favor of Bank created pursuant to this Agreement and the Credit Documents. (D) Conditions to Making Revolving Loan. Bank shall not make any Revolving Loan unless (1) it shall have received Borrower's written or telephonic request and Borrowing Base Certificate in the prescribed time as set forth in paragraph (A) of this Section 2.10, (2) no Event of Default shall then exist or, immediately after the making of any Revolving Loan, would exist, (3) all provisions or covenants contained in Section 7 of this Agreement shall have been complied with or performed, (4) all of the Credit Documents shall be in full force and effect, (5) the representations and warranties contained in Section 6 of this Agreement shall be true and correct in all material respects as if made on and as of the date of such borrowing except to the extent that any thereof expressly relate to an earlier date, and (6) Bank shall not have made demand for the payment of the Obligations or otherwise terminated the availability of any Revolving Loan. 2.11 Manner of Payments. On or before the date they become due, Borrower shall make payments to Bank in immediately available funds, even if it contests any statement rendered by Bank; provided, however, that if any statement is subsequently proved to be incorrect, Bank, at the option of Borrower, shall (A) refund any overpaid amount to Borrower, or (B) grant a credit against amounts due for the following month in the appropriate amount. As to Obligations which become due and payable other than on a fixed date by their terms or as a result of demand for payment and/or acceleration on account of an Event of Default, Borrower immediately shall pay to Bank such Obligations in immediately available funds. Whenever any payment to be made hereunder including, but not limited to, any payment to be made on the Promissory Note or the Term Note, is stated to be due on a day which is not a banking day, such payment may be made on the next succeeding banking day and such extension of time in each such case shall be included in the computation of the interest payable on the Promissory Note or the Term Note or such other Obligation. Unless otherwise provided in this Agreement, all payments or prepayments made or due hereunder (including, but not limited to, payments with respect to the Promissory Note and the Term Note) shall be made in immediately available funds to Bank prior to 2:00 p.m., Cleveland, Ohio time, on the date when due. Payments -11- 56 12 received by Bank after 2:00 p.m., Cleveland, Ohio time, shall be deemed to have been made on the next following banking day. 2.12 Default Interest. Upon and after the occurrence of an Event of Default, and during the continuation thereof, the Obligations shall bear interest at the Default Rate, calculated daily on a 360-day year basis, based upon the actual number of days elapsed. E. Section 4.1 of the Loan Agreement is amended in its entirety as follows: 4.1 Grant of Security Interest. To secure the prompt payment and performance of the Obligations, and in addition to any other Collateral or Lien securing the Obligations, Borrower hereby grants to Bank a continuing security interest in and to all of the following Property of Borrower, whether now owned or existing or hereafter acquired or arising and wheresoever located: (A) Inventory. All Inventory. (B) Accounts. All Accounts. (C) Deposits. With respect to the Inventory and the Accounts (and all products and proceeds thereof): any and all deposits or other sums at any time credited by or due from Bank to Borrower, whether in a Depository Account or other account, together with any and all instruments, documents, policies, and certificates of insurance, securities, goods, choses in action, general intangibles, chattel paper, cash, or other Property, and the proceeds of each of the foregoing, to the extent owned by Borrower or in which Borrower has an interest and which now or hereafter are at any time in the possession or control of Bank or in transit by mail or carrier to or from Bank or in the possession of any Person acting in Bank's behalf, without regard to whether Bank received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise, or whether Bank had conditionally released the same, and any and all balances, sums, proceeds, and credits of Borrower with, and any claims of Borrower against, Bank. (D) Fixed Collateral. All Fixed Collateral. (E) Palnut Property. The real property located at Glen Road, in Mountainside, New Jersey, 07092 including all buildings and improvements thereon (the "Palnut Property"), as further described on Exhibit A to the Mortgage. -12- 57 13 (F) Accessions, Products, and Proceeds. All accessions to, substitutions for, and all replacements, products, and proceeds of the Property described in Subsections (A), (B), (C), (D) and (E) above including, but not limited to, proceeds of insurance policies insuring such Property and proceeds of all such proceeds. (G) Books and Records. All books, records, and other property (including, but not limited to, credit files, programs, printouts, computer software, programs, and disks, magnetic tape and other magnetic media, and other materials and records) of Borrower pertaining to any of the Property described in Subsections (A), (B), (C), (D), (E) or (F) of this Section 4.1. F. The phrase "Contract Rate" set forth in Section 4.4 of the Loan Agreement is amended and replaced with the phrase "Adjusted Base Rate applicable to the Revolving Loan." G. The reference to Section 2.9(B) set forth in Section 5.4 of the Loan Agreement is hereby amended to mean and refer to Section 2.10(B). H. Section 6.1(Q) of the Loan Agreement is amended in its entirety as follows: (Q) Fraudulent Conveyance. The security interests and liens granted by Borrower and/or the utilization of the proceeds of the borrowings described in this Agreement are not, and will not be, in violation or contravention of the general corporate laws of Delaware and New Jersey, the Uniform Fraudulent Conveyance Act as adopted in Delaware and New Jersey, or any other law designed for the protection of the rights of creditors. I. Section 7.1(L) of the Loan Agreement is amended in its entirety as follows: (L) Government Accounts. If any of the Accounts arise out of a contract with the United States of America, or any department, agency, subdivision, or instrumentality thereof (the "U.S. Government"), promptly notify Bank thereof in writing and execute any instruments and take any other action required or requested by Bank to perfect Bank's security interest in such Accounts under the provisions of the Assignment of Claims Act of 1940, as amended. Borrower further agrees to provide to Bank, within thirty (30) days from the last day of each fiscal year of Borrower during the term of this Agreement, a list of unexpired contracts with the U.S. Government as of the last day of such fiscal year with a value of $75,000 or more, together with (1) the -13 - 58 14 amount of proceeds yet to be received by Borrower under each such contract, and (2) the name, address and telephone number of each of the administrative contracting officer and the disbursing officer for each such contract. J. Item (11) of the table in Section 7.1(N) of the Loan Agreement is deleted in its entirety and item (10) of such table is amended in its entirety as follows: Minimum Tangible Date Net Worth ---- --------- (10) As of March 31, 1995, and as of the last day of each quarter thereafter 65,000,000 K. Paragraph (1) of Section 7.1(N) of the Loan Agreement is amended in its entirety as follows: (1) The net book value of all intangible assets including, but not limited to, goodwill, trademarks, trade names, copyrights, and rights in any thereof, and "special technologies"; provided, however, for purposes of this paragraph (1), intangible assets shall not include unamortized debt discount and expense or any intangibles arising from the Kinnedyne or the Coil Systems acquisitions by Borrower. L. Section 7.1(N) of the Loan Agreement is amended by adding the following paragraph to the end of such section: For purposes of this Section 7.1(N) and Section 7.1(0), "Tangible Net Worth" shall be increased by the amount of the FAS 106 liability recorded by Borrower (if any) for the fiscal year ending March 31, 1994, up to a maximum of Two Million Five Hundred Thousand Dollars ($2,500,000). M. Section 7.1(O) of the Loan Agreement is amended in its entirety as follows: (O) Total Debt/Tangible Net Worth Ratio. Maintain at the close of each calendar quarter during the following time periods a "Total Debt to Tangible Net Worth" ratio which is equal to or less than as set forth below: Total Debt/ Tangible Net -14- 59 15 Date Worth Ratio ---- ----------- (1) As of the date hereof and 0.8 to 1.0 through March 30, 1993 (2) As of March 31, 1993, and 0.75 to 1.0 through the day immediately prior to the date of execution of the Third Amendment (3) As of the date of execution 1.0 to 1.0 of the Third Amendment and through March 30, 1995 (4) As of March 31, 1995, and at 0.9 to 1.0 the end of each quarter thereafter N. The first sentence of Section 7.1(P) of the Loan Agreement is amended in its entirety as follows: At all times commencing on the date of the Third Amendment, maintain Working Capital of not less than $40,000,000. O. Section 7.2(H) of the Loan Agreement is amended in its entirety as follows: (H) Capital Distributions. Except as permitted in Section 7.2(B) of this Agreement, pay dividends or make any distributions in cash or otherwise or effect any redemption or other distribution of property to any shareholder of Borrower or invest in or purchase any stock or securities of any individual, firm, or corporation (other than Borrower or existing Affiliates); provided, however, that commencing with the quarter ended December 31, 1992, and continuing for each calendar quarter thereafter, Borrower shall be entitled to pay after the close of each such quarter dividends with respect to its issued and outstanding shares which, when added to all additional dividends previously paid for such fiscal year, do not exceed 25% of Borrower's Net Income for the portion of such fiscal year ending the last day of such quarter (the "Permitted Capital Transactions"). "Net Income" shall mean Borrower's net income determined in accordance with GAAP; provided, however, that for the fiscal year ending March 31, 1994, "Net Income" shall mean Borrower's net income determined in accordance with GAAP increased by the FAS 106 expense of Borrower (if any) recorded for such year up to a maximum of Two Million Five Hundred Thousand Dollars ($2,500,000). -15- 60 16 P. Section 7.2(J) of the Loan Agreement is amended in its entirety as follows: (J) Capital Expenditures. Make Capital Expenditures which would cause the Capital Expenditures of Borrower, determined in the aggregate in each fiscal year, to exceed the amounts set forth below: Maximum Capital Date Expenditures ---- ------------ (1) From April 1, 1992, $6,000,000 through March 31, 1993 (2) From April 1, 1993, 8,500,000 through March 31, 1994 (3) From April 1, 1994, 9,500,000 through March 31, 1995, and each fiscal year thereafter Q. Section 10.1(A) of the Loan Agreement is amended in its entirety as follows: (A) Payment of Debt Service. Failure by Borrower to (1) make payment of principal or interest on the Promissory Note or the Term Note on or within two (2) days after the due date thereof, (2) pay any other Obligation on or within ten (10) days after the due date thereof, (3) remit Accounts or deposit funds as required by the terms of this Agreement; or (4) make payment of any other sum on the Promissory Note or the Term Note within ten (10) days after receipt by Borrower from Bank of notice of such failure to pay. R. Section 10.2 of the Loan Agreement is amended in its entirety as follows: 10.2 Acceleration of the Obligations. Upon and after the occurrence of an Event of Default and upon notice by Bank to Borrower in the manner set forth in Section 12.10 hereof, all of the Obligations due or to become due from Borrower to Bank, whether under this Agreement, the Promissory Note, the Term Note, or otherwise, at the option of Bank immediately shall become due and payable, anything in the Promissory Note, the Term Note, or other evidence of the Obligations or in any of the other Credit Documents to the contrary notwithstanding. -16- 61 17 S. Section 10.3(E) of the Loan Agreement is amended by adding the following sentence to the end of such section: In addition, all moneys, securities and other properties of Borrower, and the proceeds thereof, now or hereafter held or received by Bank from or for the account of Borrower, including any and all deposits, account balances and credits of Borrower with Bank at any time existing, may be set-off and applied against any Obligations in accordance with the provisions of this Agreement without any necessity on Bank's part to resort to other security or sources of reimbursement for the Obligations. SECTION II. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER. Borrower represents, warrants, and covenants that it has good and marketable title to the Collateral free and clear of all liens, claims, mortgages, security, interests, pledges, charges or encumbrances whatsoever (other than Permitted Liens or as have otherwise been permitted by Bank pursuant to the Loan Agreement, as amended), except as have been granted to Bank. A. To the extent such representations, warranties and covenants pertain to or are to be performed by Borrower, all representations, warranties and covenants in the Loan Agreement, as amended by the First Amendment, the Second Amendment, and the Letter Agreement, shall continue and be binding on Borrower under this Third Amendment. SECTION III. CONDITIONS PRECEDENT. Borrower acknowledges that the effectiveness of this Third Amendment is subject to the following: A. Receipt by Bank of the following documents on the date of this Agreement, all in form and substance satisfactory to Bank and its counsel: 1. A certified copy of resolutions of Members of the Board of Directors of Borrower approving this Third Amendment and all of the matters described in this Third Amendment, and authorizing the execution, delivery, and performance by Borrower of this Third Amendment, the Second Amendment To Promissory Note, the Term Note, the Mortgage, and every other document required to be delivered pursuant to this Third Amendment. -17- 62 18 2. The Second Amendment To Promissory Note executed by Borrower and accepted by Bank in substantially the same form as is attached to this Third Amendment as Exhibit A. 3. The Term Note, executed by Borrower. 4. The Mortgage executed by Borrower and delivered to the escrow agent to be used by Borrower and TRW, Inc. ("TRW") relating to Borrower's acquisition of the Palnut Property. 5. A legal opinion of Riordan & McKinzie. 6. Legal opinions from Borrower's local counsel in each of New Jersey, Pennsylvania and Illinois. 7. A certificate signed by a duly authorized officer of Borrower to the effect that: (a) As of the date hereof, no Event of Default has occurred and is continuing, and no event has occurred and is continuing that, with the giving of notice or passage of time or both, would be an Event of Default; and (b) The representations and warranties set forth in Section 6.1 of the Loan Agreement are true as of the date of this Third Amendment. 8. A certificate of Borrower's corporate secretary certifying (a) to the incumbency and signatures of the officers of Borrower signing this Third Amendment and every other document to be delivered pursuant to the Third Amendment, (b) to the effect that Borrower's Certificate of Incorporation has not been amended since the execution of the Loan Agreement, and (c) to the effect that Borrower's Bylaws have not been amended since the execution of the Second Amendment, and each of Borrower's Certificate of Incorporation and Bylaws are in full force and effect. 9. UCC-1 Financing Statements signed by a duly authorized officer of Borrower. 10. On or before August 13, 1993, an updated list of Borrower's government contracts, and documentation executed by Borrower necessary to effectuate an assignment of the proceeds under such contracts to Bank. 11. A title commitment policy relating to the Palnut Property. 12. Such other documents as Bank may reasonably request to implement this Third Amendment and the transactions described in this Third Amendment. -18- 63 19 B. The consummation of the acquisition by Borrower from TRW Inc. ("TRW") of TRW's Fastener Division (including, but not limited to, the Palnut Property). C. Approval of the transfer of the Palnut Property by any and all state and local environmental agencies of the state of New jersey, and the resolution of all environmental issues to the satisfaction of Bank and its counsel. SECTION IV. APPLICABLE LAW. This Third Amendment shall be deemed to be a contract under the laws of the State of New Jersey, and for all purposes shall be construed in accordance with the laws of such State. SECTION V. COUNTERPARTS. This Third Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any one of the parties hereto may execute this Third Amendment by signing any such counterpart. IN WITNESS WHEREOF, the parties have executed this Third Amendment by their duly authorized officers this 2nd day August, 1993. TRANSTECHNOLOGY CORPORATION NATIONAL CANADA FINANCE CORP. By: /s/ Chandler J. Moisen By: /s/ Robert T. Strathern ------------------------ ----------------------------- Title: Sr. VP & CFO Title: Vice President - Manager -------------------- ------------------------- NATIONAL BANK OF CANADA (NEW (NEW YORK, NEW YORK) By: /s/ Robert T. Strathern ----------------------------- Title: Agent -------------------------- -19- 64 20 SCHEDULE OF EXHIBITS Exhibit A - Form of Second Amendment To Promissory Note Exhibit B - Form of Mortgage Exhibit C - Form of Term Note -20- 65 EX-10.15 4 FORM OF RESTRICTED STOCK AWARD AGREEMENT 1 EXHIBIT 10.15 Participant: ------------------- No. of Shares: ----------------- TRANSTECHNOLOGY CORPORATION Restricted Stock Award Agreement This Agreement is entered into as of this --- day of----------, 19--, by and between TransTechnology Corporation, a Delaware corporation (the "Company"), and the undersigned participant in the Company's 1992 Long Term Incentive Plan (the "Participant"). R E C I T A L S A. Pursuant to the Company's 1992 Long Term Incentive Plan (the "Plan"), the Compensation and Incentives Committee of the Company (the "Committee") has authorized an award to Participant of shares of the Company's Common Stock, par value $.01 per share (the "Restricted Stock"). B. Pursuant to the Plan, the Committee has determined that the Restricted Stock to be so awarded shall be issued subject to certain conditions and restrictions, which conditions and restrictions are set forth in this Agreement. THEREFORE, in consideration of the covenants herein set forth, the parties agree as follows: 66 2 1. Award; Acceptance of Award. Subject to the terms and conditions contained herein, the Company shall issue to Participant, as an award pursuant to the Plan and without payment by Participant of any consideration therefor, - - -------- shares of Restricted Stock, and Participant hereby accepts such award. 2. Forfeiture of Restricted Stock Upon Termination of Employment. In the event that Participant ceases to be a full-time employee of the Company or any corporation a majority of the voting stock of which is owned by the Company (a "Subsidiary") for any reason whatsoever (including without limitation by reason of the termination of such employment by the Company or a Subsidiary with or without cause, by reason of disability, death or retirement or by reason of Participant leaving the employ of the Company or a Subsidiary voluntarily), then a portion (determined as hereinafter set forth) of the shares of Restricted Stock awarded pursuant to this Agreement shall thereupon automatically, and without further notice, demand, period of time or legal or administrative proceeding, be forfeited and cancelled, and all right, title and interests therein of Participant shall terminate and expire, without payment by the Company or any Subsidiary of any consideration therefor and without any liability on the part of the Company or any Subsidiary. Such forfeiture provisions shall apply as follows: 2. 67 3 (a) If the Participant so ceases to be such an employee on or after ---------, 19-- (the "Award Date") but prior to that date which occurs one year thereafter (the "First Anniversary Date"), 100% of the total number of shares of Restricted Stock awarded pursuant to this Agreement shall be so forfeited and cancelled; (b) If the Participant so ceases to be such an employee on or after the First Anniversary Date but prior to that date which occurs two years after the Award Date (the "Second Anniversary Date"), then 66-2/3% of the total number of shares of Restricted Stock awarded pursuant to this Agreement shall be so forfeited and cancelled; (c) If the Participant so ceases to be such an employee on or after the Second Anniversary Date but prior to that date which occurs three years after the Award Date (the "Third Anniversary Date"), then 33-1/3% of the total number of shares of Restricted Stock awarded pursuant to this Agreement shall be so forfeited and cancelled; and (d) If the Participant remains a continuous full-time employee of the Company or a Subsidiary until the Third Anniversary Date, then none of the shares of Restricted Stock 3. 68 4 awarded pursuant to this Agreement shall be forfeited or cancelled. For purposes of the foregoing, the Participant shall not lose his or her status as a full-time employee of the Company or a Subsidiary by reason of time away from such employment as a result of authorized vacation, authorized leave of absence, and leave by reason of sickness or disability of not longer than three consecutive months (or such longer period as the Committee may specifically permit, in its sole discretion, in any particular instance upon written request by the Participant to do so). Notwithstanding the foregoing, the Participant may elect to extend the period during which shares of Restricted Stock are subject to forfeiture and cancellation (the "Restriction Period") as follows. If the Participant desires to extend the Restriction Period, the Participant shall deliver to the Company a written request that the Restriction Period be extended for a specified period or until a specified event. Such election shall be subject in each case to the Committee's approval and to such terms as are determined by the Committee, all in its sole discretion. The Committee shall notify the Participant of its approval and such terms as have been determined by the Committee, or of its disapproval (as the case may be), within 30 days of its receipt of the Participant's 4. 69 5 written request to extend the Restriction Period. Subject to any exceptions adopted by the Committee, each request must generally be made at least twelve months prior to the applicable date, set forth above in this Section 2, upon which shares of Restricted Stock may no longer be forfeited or cancelled. 3. Forfeiture Procedures. If, pursuant to Sections 2 or 7 of this Agreement, any shares of Restricted Stock are forfeited and cancelled, such forfeiture and cancellation shall be documented pursuant to the appropriate one of the following procedures: (a) If a certificate or certificates representing the number of shares of Restricted Stock so forfeited and cancelled are in the possession of the Company pursuant to Section 4 hereof, then the officer of the Company having custody of such certificate shall, forthwith upon the occurrence of the event resulting in such forfeiture and cancellation, transmit such certificates to the Company's transfer agent and registrar (or, if the Company has no such transfer agent or registrar, then the appropriate officer of the Company) with information as to the number of shares so forfeited and cancelled and, if the certificates evidence a number of shares greater than the amount to be so cancelled, with instructions that a certificate representing the shares not so cancelled be issued in the name of 5. 70 6 the Participant; and (b) If, pursuant to the provisions of Sections 2 or 7 of this Agreement, any shares of Restricted Stock are forfeited and cancelled and the Company does not have in its possession a certificate or certificates representing the shares so forfeited and cancelled, then the Participant shall, upon written demand from the Company, furnish to the Company a certificate duly endorsed and assigned to the Company representing the number of shares of Restricted Stock so forfeited and cancelled and, upon its receipt thereof, the Company shall follow the procedures indicated in the preceding paragraph. The Participant agrees to provide the Company, upon its request therefor, with one or more stock assignments separate from certificate, executed by the Participant without completing the information as to share amount transferred or name of transferee, and with such other and further instruments of assignment or other documents which may be reasonably required in order to implement the forfeiture and cancellation provisions of Sections 2 and 7 of this Agreement. 4. Issuance of Restricted Stock; Retention of Certificate by Company. Within a reasonable time after the 6. 71 7 execution of this Agreement by the Company and the Participant, the Company shall issue, in the name of the Participant as the registered holder thereof, certificates representing, in the aggregate, the number of shares of Restricted Stock awarded pursuant to Section 1 hereof. At the time of such issuance and at all times thereafter, the Company shall deliver to Participant, upon the Participant's request, one or more certificates (in such denominations as the Participant may direct) representing in the aggregate a number of shares of Common Stock which does not at any time exceed the number of shares not subject to forfeiture and cancellation under Section 2 hereof. Certificates representing the remaining shares of Restricted Stock awarded hereunder (which shares are subject to possible forfeiture and cancellation pursuant to Section 2 hereof) shall be retained in the custody of the Secretary or any Assistant Secretary of the Company (or any other officer of the Company designated by the Board of Directors of the Company) for the purpose of implementing the forfeiture and cancellation provisions of this Agreement. 5. Stock Splits, Stock Dividends, Mergers and Reorganizations. If, at any time or from time to time when there are shares of Restricted Stock subject to forfeiture and cancellation under Section 2 hereof: 7. 72 8 (a) There is any stock dividend or liquidating dividend of cash and/or property, stock split or other change in the character or amount of any of the outstanding securities of the Company; or (b) There is any consolidation, merger or sale of all, or substantially all, of the assets of the Company; then, in such event, any and all new, substituted or additional securities or other property to which the Participant is entitled by reason of his or her ownership of the shares of Restricted Stock which are so subject to forfeiture and cancellation shall be immediately and similarly subject to such forfeiture and shall be included in the words and treated as "Restricted Stock" for all purposes of such forfeiture provisions and all other terms and conditions hereof with the same force and effect as the original shares of Restricted Stock subject to such forfeiture provisions. Notwithstanding the above, upon the dissolution or liquidation of the Company or upon any reorganization, merger or consolidation in which the Company does not survive, the forfeiture and cancellation provisions of Section 2 shall terminate as to any shares of Restricted Stock not previously forfeited and cancelled pursuant to such provisions. 8. 73 9 6. Indemnification of Company. The Participant hereby agrees to indemnify the Company and to hold the Company harmless from and against any loss, liability, cost or expense, including attorneys' fees and expenses, which the Company may incur or to which the Company may be subject by any reason of or based upon the fact that the Company has custody of any certificates representing Restricted Stock retained in accordance with Section 4 hereof and that such stock, or any right, title or interest therein, may become involved in any legal, administrative or arbitration proceeding. 7. Transfer or Hypothecation of Stock. The Participant agrees that he or she will not transfer, sell, pledge, assign or in any other way hypothecate, alienate or dispose of any shares of Restricted Stock awarded under this Agreement so long as such shares are subject to forfeiture and cancellation under Section 2 hereof. It is agreed that if the Participant does, or attempts to do, or suffers any of such prohibited acts or events specified in the immediately preceding sentence, then forthwith upon the occurrence of such act or event such shares shall be automatically forfeited and cancelled, without payment by the Company of any consideration therefor and without any notice, demand, period of time or legal or administrative proceeding. 9. 74 10 8. Ownership Rights. Subject only to the provisions of this Agreement, the Participant shall have all of the rights, powers and privileges of an owner of shares of Common Stock, including without limitation the right to vote such shares and to receive non-liquidating cash dividends and non-liquidating distributions thereon, with respect to shares of Restricted Stock awarded hereunder notwithstanding that certificates representing any or all of such shares are retained by the Company pursuant to Section 4 hereof; provided, however, that all such rights shall terminate automatically with respect to any shares forfeited and cancelled pursuant to Sections 2 or 7 of this Agreement. 9. Endorsement on Share Certificates. The Participant agrees that the certificates representing any Restricted Stock subject to the forfeiture and cancellation provisions of Section 2 may have endorsed upon them in a conspicuous manner a legend in substantially the following form: "THE VOLUNTARY OR INVOLUNTARY TRANSFER OR ENCUMBRANCE OF THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY, AND SUCH SHARES ARE SUBJECT TO, THE PROVISIONS OF A CERTAIN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER HEREOF (WHICH AGREEMENT, AMONG OTHER THINGS, SUBJECTS SUCH SHARES TO POSSIBLE FORFEITURE AND CANCELLATION), A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED TO THE HOLDER OF THIS CERTIFICATE UPON REQUEST WITHOUT CHARGE." 10. 75 11 When the forfeiture and cancellation provisions of Section 2 hereof expire or terminate as to any of such shares, the Company shall, upon the Participant's request and at no charge to the Participant, exchange the certificates representing the shares that contain the endorsement provided for herein for new certificates representing those of the shares as to which such rights have expired or terminated containing no such endorsement and certificates containing such endorsement representing the balance of the shares as to which such rights have not expired or terminated. 10. No Contract of Employment. The Participant acknowledges and agrees that this Agreement shall not be construed to give Participant any right to be retained in the employ of the Company or any Subsidiary, and that the right and power of the Company or any Subsidiary to dismiss or discharge the Participant (with or without cause) is strictly reserved. The Participant recognizes that, in the event of any such discharge, the forfeiture provisions of Section 2 hereof shall be fully applicable. 11. Tax Withholding. Participant acknowledges that the Company is required, and hereby specifically authorizes the Company, to deduct and withhold from the wages, salary or other income payable by the Company to Participant from time to time, 11. 76 12 the requisite amounts required to be so deducted and withheld for federal, state or local taxes with respect to the award of Restricted Stock hereunder. Participant specifically authorizes the Company to withhold such amounts from time to time, as required by law, in connection with the termination or expiration of the forfeiture provisions of Section 2 hereof. Participant agrees that the Company may, at its election, require Participant to pay to the Company (for such withholding on behalf of Participant) any amounts required to be so withheld if such amounts are not directly withheld from such wages, salary or other income, and in such event Participant shall forthwith make such payments. 12. Governing Law. This Agreement and the rights and obligations of the parties hereto shall be governed by and construed in accordance with the internal substantive laws of the State of Delaware. 13. Notices. Any notice or other communication required or permitted hereunder shall be sufficiently given only if delivered personally or sent by registered or certified mail, postage prepaid, to the Company at its principal place of business, or to the Participant at the address below or any address of Participant appearing on the Company's stock records, or to such other address or addresses as shall be furnished in 12. 77 13 writing in the foregoing manner by either party to the other party, and shall be deemed to have been given as of the date so personally delivered or two days after the date deposited in the United States mail, as the case may be. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. TRANSTECHNOLOGY CORPORATION By: --------------------------------- Its: -------------------------------- PARTICIPANT: Name: ------------------------------- [Type or print] ----------------------------------- [Signature] Address: ---------------------------- ------------------------------------ ------------------------------------ 13. 78 EX-21.1 5 LIST OF SUBSIDIARIES 1 EXHIBIT 21.1 SUBSIDIARIES OF THE COMPANY LISTED BELOW ARE THE WHOLLY OWNED SUBSIDIARIES OF TRANSTECHNOLOGY CORPORATION AS OF JUNE 13, 1993
Jurisdiction of Incorporation ------------- Coil Lundy Europe, N.V. Belgium Electronic Connections and Assemblies, Inc. Delaware Palnut Fasteners, Inc. Delaware Rancho TransTechnology Corporation California SSP Industries (1) California TransTechnology Australasia Pty. Ltd. Australia TransTechnology (Europe) Ltd. U.K. TransTechnology International Corporation Virgin Islands TransTechnology Systems & Services, Inc. Michigan
(1) SSP Industries owns all of the outstanding stock of SSP International Sales, Inc., a California corporation. 79 EX-23.1 6 INDEPENDENT AUDITOR'S CONSENT 1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Post-Effective Amendment No. 1 to Registration Statement No. 33-19390, Post-Effective Amendment No. 1 to Registration Statement No. 2-84205, and Registration Statement No. 33-59546 on Forms S-8 of our report dated June 20, 1994, appearing in this Annual Report on Form 10-K of TransTechnology Corporation for the year ended March 31, 1994. /s/ Deloitte & Touche Parsippany, New Jersey June 27, 1994 80 -----END PRIVACY-ENHANCED MESSAGE-----