TransTechnology Reports Increase in Net Income for Fiscal 1999 3Q
13 January 1999
TransTechnology Reports 16% Increase in Net Income for Fiscal 1999 Third Quarter
LIBERTY CORNER, N.J.--Jan. 13, 1999-- TransTechnology Corporation today reported that net income for the fiscal year 1999 third quarter, which ended December 27, 1998, increased 16% to $3,643,000 from $3,153,000 for the same period last year. On a fully-diluted per share basis, net income for the third quarter of fiscal 1999 was up 7% to $.58 on 6.314 million shares outstanding from $.54 on 5.867 million shares outstanding in the prior year's third quarter. Revenues for the third quarter of fiscal 1999 increased 19% to $57,863,000 from $48,452,000 in the same quarter a year ago.
The Specialty Fasteners segment reported sales growth of 10% and a decrease in operating income of 15% from the prior year's third quarter. The decline in operating income was primarily attributable to lower operating margins at the company's domestic and European hose clamp operations, partially offset by the June 1998 acquisition of the Aerospace Rivet Manufacturers Corporation. All domestic Specialty Fastener divisions, except the retaining ring operation, reported higher revenues in the current year's third quarter. The domestic Specialty Fastener divisions also reported higher operating income, except the hose clamp division, which saw its operating margin decline on lower unit volumes and price pressure, and the domestic retaining ring division, which had an unfavorable comparison primarily due to lower sales volume. Excluding Brazil, all international retaining ring divisions reported higher revenues and operating income for the quarter. The Brazilian retaining ring operation posted lower sales and a small operating loss as a result of the weak Brazilian economy. The German hose clamp operation continued to benefit from the slower than previously anticipated withdrawal of the Mercedes heavy truck business.
For the fiscal 1999 third quarter, the Aerospace Products segment reported a 62% revenue increase and a 60% improvement in operating income over the prior year's third quarter, primarily due to the acquisition of the NORCO aircraft hold open rod business in July, 1998. New Aerospace Products orders booked in the third quarter amounted to $13.5 million as compared to $9.3 million in the prior year's third quarter. The backlog of orders at the end of the third quarter stood at $48 million as compared to $32.1 million a year earlier.
Michael J. Berthelot, TransTechnology's Chairman and Chief Executive Officer, commented, "We posted very positive results in a very difficult quarter. Real weakness in the beginning of the quarter turned and strengthened, particularly domestically, as the period wore on. In Europe, however, weakness continues. Given this outlook we are prepared to move in advance of the changing economy, and to capitalize on opportunities to gain market share. We will also continue to seek strategic acquisitions, particularly as softened market conditions create opportunities." For the first nine months of fiscal 1999, income (before an extraordinary item of $781,000, or $.12 per share) was $9,053,000, or $1.42 per fully diluted share, compared to $7,680,000, or $1.41 per share for the prior year's period. The fiscal 1998 nine-month period includes a loss from discontinued operations of $388,000, or $.07 per share. Fiscal 1999 amounts are calculated using 17% more shares outstanding. Total sales for the nine months of fiscal 1999 advanced 12% to $165,714,000 from $148,388,000 for the corresponding period a year ago.
Joseph F. Spanier, Vice President and Chief Financial Officer, said "Our cash flow for the quarter was very strong. We repaid more than $2 million of debt from cash generated by operations, while funding both growth in working capital and our normal capital expenditures program. As we commence our financial and operating planning process for the fourth quarter and the new fiscal year, we will focus on increasing cash flows from operations and further debt reductions."
Looking forward to the remainder of the 1999 fiscal year and into 2000, the company said that it would continue to focus on lowering costs, improving productivity, and preparing for a more competitive environment in a weaker economy. To that end, TransTechnology has, since September 1998, reduced its employment level by more than 8%, eliminating almost 170 positions worldwide. Individual operations have undergone staffing reductions ranging from 2% to 22%. TransTechnology has not established a separate restructuring reserve, but did recognize all of the costs associated with the reductions as expense in the third quarter, which aggregated approximately $150,000. The company has also recognized approximately $350,000 of costs associated with its terminated acquisition of a German specialty plastics manufacturer in the third quarter. Offsetting these two unusual items, however, was the recognition of two items not included in operating profit for segment reporting purposes which aggregated approximately $600,000. These items included an agreement with the United States government as to reimbursement of previously expensed environmental costs related to the company's former tear gas production facility and a reduction in a previously established reserve relating to an uncollectable note receivable from the sale of a former business unit.
In considering the Company's anticipated results for the fiscal year ending March 31, 1999, Mr. Berthelot said "We will continue to focus on cost and inventory reductions, efficiency improvement, and improved customer service. We anticipate our cost reductions in the third quarter will be beneficial in the fourth quarter of fiscal 1999 and into 2000. We have several new pieces of cost reducing capital equipment coming on-line in the fourth quarter, and our completed plant consolidations should continue to show improved results. We fully expect to achieve our targets for the fourth quarter."
TransTechnology Corporation is a multi-national manufacturer of specialty fasteners and aerospace products with over 1,780 employees at its twelve facilities in the U.S., England, Germany and Brazil.
This release contains forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Such risks and uncertainties include, but are not limited to, unanticipated slowdowns in the Company's major markets, the impact of competition, the effectiveness of operational changes expected to increase efficiency and productivity, and worldwide economic and political conditions and foreign currency fluctuations that may effect worldwide results of operations.
Results for the Third quarter and nine months were as follows:
(In thousands of dollars, except per share data)
TransTechnology Corporation
STATEMENTS OF CONSOLIDATED OPERATIONS
Third Quarter Ended Nine Months Ended
12/27/98 12/28/97 12/27/98 12/28/97
Net sales $57,863 $48,452 $165,714 $148,388
Cost of sales 39,785 31,998 112,787 100,653
------ ------ ------- -------
Gross profit 18,078 16,454 52,927 47,735
General, administrative
& selling expenses 10,922 9,438 32,599 29,287
Interest expense 2,011 1,810 5,272 5,970
Allowance for possible
loss on notes receivable (300) ----- 906 -----
Interest income (137) (309) (335) (875)
Royalty and other income (413) (111) (603) (331)
------ ------ ------- -------
Income from continuing
operations before
income taxes 5,995 5,626 15,088 13,684
Income taxes 2,352 2,312 6,035 5,616
------ ------ ------- -------
Income from continuing
operations 3,643 3,314 9,053 8,068
Loss from discontinued
operations (a) ----- (161) ----- (388)
------ ------ ------- -------
Income before
extraordinary item 3,643 3,153 9,053 7,680
Extraordinary charge for
refinancing of debt(b) ----- ----- (781) -----
------ ------ ------- -------
Net income $3,643 $3,153 $8,272 $7,680
====== ====== ====== =======
Basic Earnings per Share:
Income from continuing
operations $ 0.58 $ 0.58 $ 1.44 $ 1.53
Loss from discontinued
operations ----- (0.03) ----- (0.07)
Extraordinary charge for
refinancing of debt ----- ----- (0.12) -----
------ ------ ------- -------
Net income $ 0.58 $ 0.55 $ 1.32 $ 1.46
====== ======= ======= =======
Diluted Earnings per Share:
Income from continuing
operations $ 0.58 $ 0.57 $ 1.42 $ 1.48
Loss from discontinued
operations ----- (0.03) ----- (0.07)
Extraordinary charge for
refinancing of debt ----- ----- (0.12) -----
------ ------ ------- -------
Net income $ 0.58 $ 0.54 $ 1.30 $ 1.41
====== ======= ======= =======
Weighted average basic
shares 6,248,000 5,682,000 6,278,000 5,260,000
Weighted average
diluted shares 6,314,000 5,867,000 6,385,000 5,442,000
(a) Loss from discontinued operations is net of applicable tax
benefits of $112 and $270 for the third quarter and nine month
periods ended December 28, 1997, respectively.
(b) Extraordinary charge for refinancing of debt is net of applicable
tax benefit of $532 for the nine month period ended December 27,
1998.
SEGMENT INFORMATION
Third Quarter Ended Nine Months Ended
12/27/98 12/28/97 12/27/98 12/28/97
Sales:
Specialty fasteners $ 43,353 $ 39,481 $ 130,720 $ 122,179
Aerospace 14,510 8,971 34,994 26,209
-------- -------- --------- ---------
Total $ 57,863 $ 48,452 $ 165,714 $ 148,388
======== ======== ========= =========
Operating profit:
Specialty fasteners $ 5,750 $ 6,734 $ 19,133 $ 19,159
Aerospace 3,696 2,304 8,372 6,049
-------- -------- --------- ---------
Total 9,446 9,038 27,505 25,208
Corporate expenses(a) (1,440) (1,602) (7,145) (5,554)
Interest expense (2,011) (1,810) (5,272) (5,970)
-------- -------- --------- ---------
Income from continuing
operations before
income taxes $ 5,995 $ 5,626 $ 15,088 $ 13,684
======== ======== ======== ========
(a) The Corporate expense for the third quarter and nine month
periods ended December 27,1998, include an estimated $0.3 million
reduction and a $0.9 million increase to the allowance to offset a
possible loss on notes receivable.
BALANCE SHEET INFORMATION
12/27/98 3/31/98
Current assets $ 104,220 $ 104,512
Property, plant & equipment - net 77,738 63,686
Costs in excess of net assets of acquired
businesses 81,980 45,094
Other assets 27,941 22,781
--------- ---------
Total assets $ 291,879 $ 236,073
========= =========
Current portion of long-term debt $ 45 $ 12,137
Other current liabilities 37,290 35,944
--------- ---------
Total current liabilities $ 37,335 $ 48,081
Long term debt 110,780 51,350
Other liabilities 21,435 20,810
Shareholders' equity 122,329 115,832
Total liabilities and shareholders' equity $ 291,879 $ 236,073
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