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.
TransTechnology Corporation's core business areas are specialty fastener products and aerospace products. During 2000, the Company continued its program to improve its position as one of the world's major suppliers of specialty fasteners to the transportation and industrial markets. Key aspects of this program include growth through acquisitions and the consolidation and rationalization of its manufacturing operations. Actions taken during 2000 to accomplish these goals included the acquisition of the Engineered Fasteners Division of Eaton Corporation ("Tinnerman") on August 31, 1999 and the acquisition of Ellison Holdings PLC ("Ellison") on July 19, 1999. For a more detailed description of these transactions, see Note 3 of "Notes to Consolidated Financial Statements" included in the Company's 2000 Annual Report on page 19 which is incorporated herein by reference. The Company has substantially completed consolidation of the manufacturing plants in Great Britain as part of the Ellison acquisition program. This action has further strengthened the Company's position as one of the world's major suppliers of specialty fastener products to the transportation and industrial markets.
Breeze-Eastern and NORCO, Inc. ("NORCO") make up the Company's aerospace products segment, and are the world's leading designers and manufacturers of sophisticated helicopter rescue hoists, cargo winches, cargo hook systems, mechanical components such as hold open rods, and application-specific mechanical and linear motion systems. These products are sold primarily to military and civilian agencies and aerospace contractors. The acquisition of all of the outstanding stock of NORCO was accomplished in fiscal 1999. For a more detailed description of this transaction, see Note 3 of "Notes to Consolidated Financial Statements" included in the Company's 2000 Annual Report on page 19 which is incorporated herein by reference.
SPECIALTY FASTENER PRODUCTS
The Company's specialty fastener products are manufactured by its Engineered Components Group (Palnut and the recently acquired Tinnerman companies), its Engineered Products Group (Breeze Industrial, Pebra, TCR and ARM) and its Engineered Rings Group (Seeger-Orbis, TransTechnology Brasil, Waldes/IRR, TransTechnology (GB)). TransTechnology (GB) represents the consolidation of the Anderton and the recently acquired Ellison plants into a single manufacturing facility in Great Britain.
The Engineered Components Group includes single and multi-thread metal fasteners, retaining rings and headlight adjusters for the automotive and industrial markets. These fasteners include: lock nuts 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 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; various single threaded parts designed
for insertion into metal or plastic panels; and a variety of automotive headlight adjusters.
Within the Engineered Products Group, 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 use in the heavy truck and industrial equipment industries by original equipment manufacturers and replacement suppliers. Pebra designs and manufactures hose clamps primarily for heavy truck manufacturers in Europe. TCR designs and manufactures sophisticated externally threaded fastening devices and custom industrial components by combining its expertise in cold forging and machining technologies. TCR products are used by industrial customers worldwide, with key market groups, including automotive, hydraulic and recreational product industries. ARM designs and manufactures rivets and externally threaded fasteners primarily for the aerospace industry.
Within the Engineered Rings Group, Seeger-Orbis, TransTechnology Brasil, Waldes/IRR and TransTechnology (GB) manufacture a large range of retaining and snap rings used in the automotive, marine, household and computer applications that require retention of parts to shafts and axles.
Specialty fasteners are marketed through a combination of a direct sales force, distributors and manufacturing representatives. Such products comprised 80%, 78% and 83% of the Company's consolidated net sales in 2000, 1999 and 1998, respectively.
At March 31, 2000, the Company's Specialty Fastener Products segment backlog was $65.4 million, compared to $45.9 million at March 31, 1999. The increase is primarily the result of the Tinnerman and Ellison acquisitions. Substantially all of the March 31, 2000 backlog is scheduled to be shipped during fiscal 2001.
AEROSPACE PRODUCTS
The Company's aerospace products are designed, developed and manufactured by Breeze-Eastern and NORCO. 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. NORCO designs, develops and manufactures mechanical components and systems such as hold open rods, quick connect/disconnect locking systems, helicopter blade restraint systems, latch assemblies, safety locks and application-specific mechanical systems. Its power transmission line of products include rollnuts, rollnut longspan assemblies, ball reversers, ball oscillators, FlenNute assemblies and other application-specific linear motion assemblies.
Breeze-Eastern and NORCO sell their products through internal marketing representatives and several independent sales representatives and distributors. The Aerospace product lines contributed 20%, 22% and 17% to the Company's consolidated net sales in 2000, 1999 and 1998, respectively.
The Aerospace Product segment backlog varies substantially from time to time due to the size and timing of orders. At March 31, 2000, the backlog of unfilled orders was $44.2 million, compared to $43.8 million at March 31, 1999. The majority of the March 31, 2000 backlog is expected to be shipped during fiscal 2001.
DEFENSE INDUSTRY SALES
Approximately 8% of the Company's consolidated net sales in 2000, as compared to 10% and 11% in 1999 and 1998, 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.
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 12 of "Notes to Consolidated Financial Statements" included in the Company's 2000 Annual Report on page 25 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, 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 successfully compete 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 materially 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, 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. The Company's business is not 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 2, 2000, the Company employed 2,581 people. There were 2,277 employees associated with the Specialty Fastener Products segment, 283 with the Aerospace Products segment and 21 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 2000 Annual Report on pages 25-27 and is incorporated herein by reference.
FOREIGN OPERATIONS AND SALES
The Company's foreign-based facilities during fiscal 2000 consisted of the Seeger-Orbis and Pebra facilities located in Konigstein and Frittlingen, Germany, TransTechnology (GB) Limited's facility located in Glusburn, England, sales offices in Paris, France, Barcelona, Spain and Surrey, England, TransTechnology Brasil's facility located in Sao Paulo, Brazil and TransTechnology Canada Corporation's facility located in Hamilton, Ontario. The Company acquired the Seeger-Orbis and TransTechnology Brazil businesses on June 30, 1995. Pebra was acquired on June 18, 1996. TransTechnology (GB) resulted from the consolidation on December 1, 1999, of Anderton International Limited, acquired on June 30, 1995, and Ellison Holdings PLC, was acquired on July 19, 1999. TransTechnology Canada Corporation was incorporated on August 12, 1999 to hold the Canadian based assets of Eaton's Engineered Fasteners Division acquired on August 31, 1999. The Company had foreign sales of $66.2 million, $56.7 million and $57.2 million in fiscal 2000, 1999 and 1998, respectively, representing 22%, 25% and 28% of the Company's consolidated net sales in each of those years, respectively. The Company had export sales of $43.3 million, $31.2 million and $20.3 million in fiscal 2000, 1999 and 1998, respectively, representing 15%, 14% and 10% of the Company's consolidated net sales in each of those years, respectively. The risk and profitability attendant to these sales is generally comparable to similar products sold in the United States. Net 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 2000 Annual Report on pages 25-27 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 England. 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 12 of "Notes to Consolidated Financial Statements" included in the Company's 2000 Annual Report on page 25 and is incorporated herein by reference.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during the three month period ended March 31, 2000.
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 of shares of the Company's Common Stock for the calendar quarters indicated, as reported by the New York Stock Exchange.
As of June 21, 2000, the number of stockholders of record of the Common Stock was 1,824. On June 21, 2000, the closing sales price of the Common Stock was $12.0625 per share.
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 $0.065 per share on June 1, September 1 and December 1, 1998, March 1, June 1, September 1 and December 1, 1999 and March 1, 2000.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The information required has been included in the Company's 2000 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 2000 Annual Report on pages 28-33 and is incorporated herein by reference.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required has been included in the Company's 2000 Annual Report on pages 32-33 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 2000 Annual Report on pages 13-33 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 2000 Annual Report on page 27 and is incorporated herein by reference.
Financial Statement Schedules:
Schedule II --
Consolidated Valuation and Qualifying Accounts for years ended March 31, 2000, 1999 and 1998.
Schedules referenced in Article 5 of Regulation S-X, other than that listed above, are not required and have been omitted.
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 Registrant's Proxy Statement for the 2000 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is contained in the Registrant's Proxy Statement for the 2000 Annual Meeting of Shareholders 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 Registrant's Proxy Statement for the 2000 Annual Meeting of Shareholders and is incorporated herein by reference.
For purposes of the calculation of the aggregate market value of voting stock held by non-affiliates, the Company has assumed that the shares of Common Stock beneficially owned by Dr. Arch C. Scurlock are not held by an affiliate of the Company.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained in the Registrant's Proxy Statement for the 2000 Annual Meeting of Shareholders 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 the Annual Report:
The exhibits listed on the accompanying Index to Exhibits are filed as part of this report.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three-month period ended March 31, 2000.
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 23, 2000
TRANSTECHNOLOGY CORPORATION
By: /s/Michael J. Berthelot --------------------------------------- Michael J. Berthelot, Chairman of the Board, President 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.
INDEPENDENT AUDITORS' REPORT
To the Stockholders and the Board of Directors of TransTechnology Corporation:
We have audited the consolidated financial statements of TransTechnology Corporation and subsidiaries as of March 31, 2000 and 1999, and for each of the three years in the period ended March 31, 2000, and have issued our report thereon dated May 18, 2000; such consolidated financial statements and report are included in your 2000 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 consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey May 18, 2000
TRANSTECHNOLOGY CORPORATION
SCHEDULE II
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
FOR YEARS ENDED MARCH 31, 2000, 1999 AND 1998 (IN THOUSANDS)
(A) Amount represents balance acquired from Tinnerman and Ellison acquisitions.
(B) Amount represents balances acquired from ARM and NORCO, Inc. acquisitions.
(C) Amount represents balance acquired from TCR Corporation acquisition.
INDEX TO EXHIBITS
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