ITEM 1. BUSINESS.
GENERAL
TransTechnology Corporation develops, manufactures and sells a wide range of products in two industry segments, as 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" 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.
During 1996, the Company continued its program of focusing on core businesses by acquiring a group of companies that manufacture retaining rings (the Seeger Group, with locations in Germany, UK, Brazil and New Jersey), and selling the Company's Electronics division and the domestic and European portions of the Company's computer graphics service operations. These actions have positioned the company as a major worldwide supplier of specialty fasteners to the automotive and industrial markets. The Breeze-Eastern division makes up the rescue hoist and cargo hook products segment, and is the world's leader in these systems which are sold primarily to military and civilian agencies.
DISCONTINUED OPERATIONS
The following entities, discontinued in the years indicated, have been classified as discontinued operations in the Company's financial statements: Federal Laboratories (tear gas) (1994), the Lundy Technical Center (chaff) (1995), TransTechnology Electronics (1995), and TransTechnology Systems & Services (computer maintenance and service) (1995). For a more detailed description of these transactions, see "Note 2" of the "Notes to Consolidated Financial Statements" included in the Company's 1996 Annual Report on pages 16 and 17 which is incorporated herein by reference.
SPECIALTY FASTENER PRODUCTS
The Company's specialty fastener products are manufactured by its Seeger Group of companies ("Seeger-Orbis", "Anderton", and "Seeger Reno"), its Breeze Industrial Products division ("Breeze Industrial") and its Palnut Company division ("Palnut", "Industrial Retaining Ring Company" and "Seeger, Inc."). Seeger, Inc. was acquired as part of the Seeger Group purchase and is now included in the Palnut Company division. The Seeger Group of companies, Industrial Retaining Ring Company and Seeger, Inc. design and manufacture highly engineered retaining rings for both the domestic and international automotive and industrial markets. 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. The Palnut Company manufactures single and multi-thread metal fasteners for the automotive and industrial products markets 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(R) fastener, which is pressed onto hollow plastic
bosses to increase torque and minimize stripping; push-nuts used as temporary fasteners that hold preinserted bolts in place for final assembly or in rachet 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 81%, 70% and 64% of the Company's consolidated sales from continuing operations in 1996, 1995 and 1994, respectively.
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.
At March 31, 1996, the Company's Specialty Fastener Products segment backlog was $31.4 million, compared to $12.7 million at March 31, 1995. The increase is primarily the result of the acquisition of the Seeger Group of companies. Substantially all of the March 31, 1996 backlog is scheduled to be shipped during fiscal 1997.
RESCUE HOIST AND CARGO HOOK 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. Management believes that Breeze-Eastern is the industry market share leader in sales of personnel-rescue hoists and cargo hook equipment. As a 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 19%, 30% and 36% to the Company's consolidated sales in 1996, 1995 and 1994, respectively. The declining percentage is attributable primarily to the acquisitions of fastener businesses (Palnut, Industrial Retaining Ring and the Seeger Group).
The Rescue Hoist and Cargo Hook Product segment backlog varies substantially from time to time due to the size and timing of orders. At March 31, 1996, the backlog of unfilled orders was $30.9 million, compared to $21.8 million at March 31, 1995. The majority of the March 31, 1996 backlog is anticipated to be shipped during fiscal 1997.
DEFENSE INDUSTRY SALES
Only 8% of the Company's revenues in 1996, as compared to 18% and 23% in 1995 and 1994, respectively, were derived from sales to the United States Government, principally the military services of the Department of Defense and its prime contractors. 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. With overall defense spending down, it is expected that the defense market for the Company's products will decline in the future. However, the overall reduction in the Company's dependence on these products renders it less vulnerable to defense budget cuts.
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 Note 11 of Notes to Consolidated Financial Statements included in the Company's 1996 Annual Report on page 22 which is incorporated herein by reference.
COMPETITION
The Company's businesses compete in some markets 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 such markets will depend on its ability to develop and apply technological innovations and to expand its customer base and product lines. The Company is successfully doing so both internally and through acquisitions. There can be no assurance that the Company will continue to compete successfully in any or all of the businesses discussed above. The failure of the Company to compete in 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 products are generally available from more than one source. In those instances where only a single source for any material is available, most of such items 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 May 26, 1996 the Company employed 1,437 persons. There were 1,240 employees associated with the Specialty Fastener Products segment, 178 with the Rescue Hoist and Cargo Hook Products segment and 19 with the corporate office.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Financial information relating to each of the Company's segments has been included in Note 13 of Notes to Consolidated Financial Statements included in the Company's 1996 Annual Report on pages 22-24 and is incorporated herein by reference.
FOREIGN OPERATIONS AND EXPORT SALES
The Company's foreign-based facilities during fiscal 1996 consisted of the Seeger-Orbis facilities located in Germany, the Anderton facility located in England, and the Seeger Reno facility located in Brazil. The Company acquired these three businesses on June 30, 1995. Additionally, the Company had foreign-based facilities during fiscal 1996 that are treated as discontinued operations as of March 31, 1996. The Company had foreign sales of $45.2 million in fiscal 1996, representing 29% of the Company's consolidated sales from continuing operations. The Company had export sales of $16.9 million, $15.4 million and $14.9 million in fiscal 1996, 1995 and 1994, respectively, representing 11%, 15% and 18% of the Company's consolidated sales from continuing operations 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 foreign and domestic operations, and the identification of export sales by geographic area, are set forth in Note 13 of Notes to Consolidated Financial Statements in the Company's 1996 Annual Report on pages 22-24 and is incorporated herein by reference.
ITEM 2.
ITEM 2. PROPERTIES
The following table sets forth certain information concerning the Company's principal facilities for its continuing operations:
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. The Company continues to own or lease property that it no longer needs in its operations. These properties are located in California, Pennsylvania, New York, Illinois and North Carolina. In some instances, the properties are leased or subleased and in nearly all instances these properties are for sale.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The information required has been included in Note 11 of Notes to Consolidated Financial Statements included in the Company's 1996 Annual Report on page 22 and is incorporated herein by reference.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5.
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.
As of May 30, 1996, the number of stockholders of record of the Common Stock was 2,483. On May 30, 1996 the closing sales price of the Common Stock was $19.25.
The Company's bank indebtedness permits quarterly dividend payments which cannot exceed 25% of the Company's cumulative net income in each year. The Company paid a regular quarterly dividend of $0.06 per share on June 1, 1994, and an increased dividend of $0.065 per share on September 1 and December 1, 1994, March 1, June 1, September 1 and December 1, 1995 and March 1, 1996.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The information required has been included in the Company's 1996 Annual Report on page 1 and is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required has been included in the Company's 1996 Annual Report on pages 26-30 and is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements: The information required has been included in the Company's 1996 Annual Report on pages 11-25 and is incorporated herein by reference.
Quarterly Financial Data: The information required has been included in Note 14 of Notes to Consolidated Financial Statements in the Company's 1996 Annual Report on page 24 and is incorporated herein by reference.
Financial Statement Schedules:
Schedule II --
Consolidated Valuation and Qualifying Accounts for years ended March 31, 1996, 1995 and 1994.
Schedules required by Article 5 of Regulation S-X, other than those listed above, are omitted because of the absence of the conditions under which they are required.
INDEPENDENT AUDITORS' REPORT
To the Stockholders and the Board of Directors of TransTechnology Corporation:
We have audited the financial statements of TransTechnology Corporation as of March 31, 1996 and 1995, and for each of the three years in the period ended March 31, 1996, and have issued our report thereon dated May 28, 1996; such financial statements and report are included in your 1996 Annual Report and are incorporated herein by reference. Our audits also included the financial statement schedule of TransTechnology Corporation, listed in Item 14. This financial statement schedule is the responsibility of the Corporation's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/Deloitte & Touche LLP - ------------------------
Parsippany, New Jersey May 28, 1996
TRANSTECHNOLOGY CORPORATION
SCHEDULE II
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
FOR YEARS ENDED MARCH 31, 1996, MARCH 31, 1995 AND MARCH 31, 1994
(A) Amount represents write-off of uncollectible accounts. (B) Amount represents balance acquired from Seeger acquisition. (C) Amount consists primarily of sales adjustments charged to revenue accounts. (D) Amount includes $97,000 reserves for uncollectible accounts of discontinued operations reclassed to net assets held for sale.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is contained in the Company's Proxy Statement for the year ended March 31, 1996 and is incorporated herein by reference.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is contained in the Company's Proxy Statement for the year ended March 31, 1996 and is incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is contained in the Company's Proxy Statement for the year ended March 31, 1996 and is incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained in the Company's Proxy Statement for the year ended March 31, 1996 and is incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report:
1. Financial Statements: The following financial statements have been included in the Company's 1996 Annual Report on pages 11-25 and are incorporated herein by reference:
Consolidated Balance Sheets at March 31, 1996 and March 31,
Statements of Consolidated Operations for the years ended March 31, 1996, March 31, 1995 and March 31, 1994
Statements of Consolidated Cash Flows for the years ended March 31, 1996, March 31, 1995 and March 31, 1994
Statements of Consolidated Stockholders' Equity for the years ended March 31, 1996, March 31, 1995 and March 31, 1994
Notes to Consolidated Financial Statements
Independent Auditors' Report
2. Financial Statement Schedules:
Schedule II - Consolidated Valuation and Qualifying Accounts for the years ended March 31, 1996, 1995 and 1994
3. Exhibits:
The exhibits listed on the accompanying Index to Exhibits are filed as part of this report.
(b) Reports on Form 8-K:
In July 1995, a report on Form 8-K was filed to report the acquisition of substantially all of SKF USA Inc.'s Seeger Division and all of the outstanding stock of SKF GmbH's Seeger-Orbis GmbH subsidiary on June 30, 1995.
A report on Form 8-K/A was filed in September 1995 amending the report on Form 8-K previously filed in July 1995.
A report on Form 8-K/A was filed in November 1995 supplementing the report on Form 8-K previously filed in July 1995 and containing required financial statements.
In November 1995, a report on Form 8-K was filed to report the sale of substantially all of the assets of the Company's TransTechnology Electronics Division to ElecSys Incorporated on August 18, 1995.
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 17, 1996
TRANSTECHNOLOGY CORPORATION
By: /s/Michael J. Berthelot ----------------------------- Michael J. Berthelot, Chairman of the Board and Chief Executive Officer
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.
INDEX TO EXHIBITS