TransTechnology Reports Third Quarter Results
12 January 2000
TransTechnology Reports Third Quarter Results
LIBERTY CORNER, N.J.--January 12, 2000-- TransTechnology Corporation today reported that net income, for the fiscal year 2000 third quarter which ended December 26, 1999, was $2,865,000, or $.47 per share, a 21% decrease from $3,643,000, or $.58 per share for the same period last year. Revenues for the third quarter of fiscal 2000 increased 48% to $85,872,000 from $57,863,000 in the same quarter a year ago, primarily the result of the two acquisitions completed in the second quarter of the current fiscal year. Results for the current year's third quarter included a $.05 per share non-cash charge related to the amortization over a twelve month period of bank loan fees related to the bridge loan for the two acquisitions completed earlier this fiscal year. Results for the prior year's third quarter were benefited by two non-operating items which aggregated $.07 per share, an expected recovery from a note written off in last year's second quarter and the proceeds of a settlement with the United States government relative to environmental issues at one of the company's former operating facilities. All per share amounts are on a fully diluted basis, unless noted otherwise.The Company's Specialty Fastener Products segment reported a 74% increase in third quarter operating income on 61% higher sales, primarily the result of the inclusion of a full quarter's results from the August 1999 acquisition of the Tinnerman fastener business and the July 1999 acquisition of the Ellison retaining ring business. The Company's assembly fastener, hose clamp, and retaining ring businesses in the U.S. and UK all reported higher sales and operating profits for the third quarter. The Company's retaining ring businesses in Germany and Brazil reported lower sales and operating profits than in the prior year's period, primarily due to their respective continuing weak local economies, and the Company's cold headed and specialty machined parts division reported lower operating profit due to marginally lower sales and a change in the product mix. For the quarter, the Company's Aerospace Rivet division reported sales lower by 23% and an unfavorable comparison in operating income of $.06 per share as a result of the previously reported loss of a major customer.
The Company's Aerospace Products segment reported a 4% increase in operating income for the quarter on an 11% increase in sales. Both the Breeze Eastern and NORCO divisions reported higher sales and operating income in the third quarter, in spite of a six-week work stoppage at the Breeze Eastern facility during the quarter. The work stoppage ended in November 1999 with the signing of a new five-year agreement.
Michael J. Berthelot, Chairman, President and Chief Executive Officer of TransTechnology Corporation, commented, "We are very pleased with the progress being made in integrating the Tinnerman and Palnut operations into a single entity operating as TransTechnology Engineered Components ("TTEC"). The opening last month of our Sales and Advanced Engineering Center in Southfield, Michigan is a first step towards fully integrated marketing operations in our fastener businesses. The installation of a new MIS system for all four TTEC facilities is the second step, one which is also expected to substantially reduce operating costs for this product line. In England, the consolidation of our Anderton and Ellison facilities into a single operation called TransTechnology (GB) is also proceeding on plan and within budget. Improved financial results from this consolidation so far are minimal; however, the third quarter operating income margin of the UK facilities has improved by almost 50%, and most of the benefits of the consolidation remain to be realized."
"We are also pleased by the continuing improvement in our hose clamp product line, which had reported weak results for a few earlier quarters." Mr. Berthelot continued, "For the second consecutive quarter our domestic hose clamp operation continues to improve revenues and operating income, more than offsetting the weakness in our German hose clamp operation. We believe that the inefficiencies that arose in the process of greatly expanding the US hose clamp facility are now behind us. We have the capacity to once again grow there, and the crack marketing team at Breeze/Pebra is expected to take the lead in resuming the long term growth of this product line."
"While the strong dollar and the weak UK and European economies have had negative impacts upon our operations for the past several quarters, we have begun to see increasing order intake from both automotive and truck OEM's and distribution customers, with our German unit's book to bill ratio running above 1.4 for the last five weeks of the third quarter. We expect these higher booking levels portend a strong fourth quarter.
Joseph F. Spanier, Vice President and Chief Financial Officer, said, "Our third quarter earnings generated a substantial amount of cash flow, allowing us to pay down the debt by a net $1.5 million after using $2.1 million towards the consolidation of the two UK facilities. Since the end of the quarter, debt has been further reduced to $282 million, a $10 million reduction in the four and one half months since the acquisitions were completed. The recent .5% increase in LIBOR, the base from which all of our debt is priced, offset by a .25% reduction in our pricing grid due to our favorable performance, resulted in higher interest charges of $.02 per share on our debt for this quarter. We expect these interest rates to remain at this level, or slightly higher, for some time. As we prepare our operating budgets for the upcoming fiscal year, reduced working capital will be a prime focus, allowing us to reduce our debt, and the associated interest expense, to more conservative levels."
Mr. Berthelot added, "The third quarter was a period when things began to come together. We are very excited about the progress being made in our domestic and UK retaining ring operations as well as the continuing contributions from the Tinnerman acquisition. With the strengthening economy in Germany and the rest of Europe, a slightly weaker dollar, continued growth in hose clamps and aerospace products, and stabilized operations at our Aerospace Rivet facility, we expect to finish fiscal year 2000 with a strong fourth quarter."
TransTechnology Corporation is a multi-national manufacturer of specialty fasteners and aerospace products with over 2,500 employees at its fourteen manufacturing facilities in the U.S., Canada, England, Germany and Brazil. The company also maintains sales offices in Southfield, Michigan; Paris, France; and Barcelona, Spain.
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 affect worldwide results of operations.
Results for the third quarter were as follows:
(In thousands of dollars, except per share data)
TransTechnology Corporation
STATEMENTS OF CONSOLIDATED OPERATIONS
Three Months Ended Nine Months Ended
12/26/99 12/27/98 12/26/99 12/27/98
Net sales $85,872 $57,863 $204,143 $165,714
Cost of sales 60,246 39,785 143,537 112,787
--------- --------- --------- --------
Gross profit 25,626 18,078 60,606 52,927
General, administrative
& selling expenses 14,339 10,922 37,263 32,599
Interest expense 7,137 2,011 12,233 5,272
Interest income (188) (137) (324) (335)
Royalty and other
income (238) (413) (601) (603)
Allowance for possible
loss on notes receivable - (300) - 906
Provision for plant
consolidation - - 4,490 -
--------- --------- --------- --------
Income before income
taxes and
extraordinary charge 4,576 5,995 7,545 15,088
Income taxes 1,711 2,352 2,852 6,035
--------- --------- --------- --------
Income before
extraordinary charge 2,865 3,643 4,693 9,053
Extraordinary charge
for refinancing of debt(a) - - (541) (781)
--------- --------- --------- --------
Net income $2,865 $3,643 $4,152 $8,272
========= ========= ========= ========
Basic Earnings per Share:
Income before extraordinary
charge $0.47 $0.58 $0.77 $1.44
Extraordinary charge
for refinancing of debt - - (0.09) (0.12)
--------- --------- --------- --------
Net income $0.47 $0.58 $0.68 $1.32
========= ========= ========= ========
Diluted Earnings per Share:
Income before extraordinary
charge $0.47 $0.58 $0.77 $1.42
Extraordinary charge
for refinancing of debt - - (0.09) (0.12)
--------- --------- --------- --------
Net income $0.47 $0.58 $0.68 $1.30
========= ========= ========= ========
Weighted average basic
shares 6,141,000 6,248,000 6,135,000 6,278,000
Weighted average
diluted shares 6,141,000 6,314,000 6,150,000 6,385,000
(a) Extraordinary charge for refinancing of debt is net of applicable
tax benefit of $339 and $532 for the nine month periods ended
December 26, 1999 and December 27, 1998.
SEGMENT INFORMATION
Three Months Ended Nine Months Ended
12/26/99 12/27/98 12/26/99 12/27/98
Sales:
Specialty fasteners $69,804 $43,353 $161,323 $130,720
Aerospace 16,068 14,510 42,820 34,994
---------- ---------- ----------------------
$85,872 $57,863 $204,143 $165,714
========== ========== ======================
Operating profit:
Specialty fasteners(a) $9,988 $5,750 $15,682 $19,133
Aerospace 3,857 3,696 10,062 8,372
---------- ---------- ----------------------
13,845 9,446 25,744 27,505
Corporate expenses(b) (2,132) (1,440) (5,966) (7,145)
Interest expense (7,137) (2,011) (12,233) (5,272)
---------- ---------- ----------------------
Income before income
taxes and extraordinary
charge $4,576 $5,995 $7,545 $15,088
========== ========== ======================
(a) The results of operations of the Specialty Fasteners Products
segment for the nine month period ended December 26, 1999
includes a $4.5 million plant consolidation charge.
(b) The Corporate expenses for the three and nine month periods ended
December 27, 1998 includes an estimated $0.3 reduction and a $0.9
million increase to the allowance to offset a possible loss on
notes receivable.
BALANCE SHEET INFORMATION
12/26/99 3/31/1999
Current assets $132,111 $100,901
Property, plant &
equipment - net 108,060 76,384
Costs in excess of net
assets of acquired
businesses 192,618 76,731
Other assets 47,174 25,704
---------- -----------
Total assets $479,963 $279,720
========== ===========
Current portion of
long-term debt $82,547 $46
Other current liabilities 44,455 29,761
---------- -----------
Total current liabilities 127,002 29,807
Long term debt 203,136 102,463
Other liabilities 23,176 23,740
Shareholders' equity 126,649 123,710
---------- -----------
Total liabilities and
shareholders' equity $479,963 $279,720
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