TransTechnology Reports 137% Increase in Operating Income for Third Fiscal Quarter; To Sell Norco Operation
UNION, N.J.--(BUSINESS WIRE)--Jan. 15, 2003--TransTechnology
Corporation (NYSE:TT) today reported income from continuing operations
of $1.4 million or $0.23 per share for the third fiscal quarter ended
December 29, 2002, compared to a loss from continuing operations of
$0.7 million, or $0.11 per share, for the same period one year ago.
The current quarter's results included a $1.2 million, or $0.20
per share, after-tax non-cash gain from financial derivatives
associated with a change in the value of warrants to purchase the
company's stock during the quarter.
Net sales for the third quarter of fiscal 2003 increased 24% to
$15.6 million from $12.7 million in the same quarter a year ago.
Including a loss from discontinued operations of $3.5 million, or
$0.55 per share, the company reported a net loss for the third quarter
of fiscal 2003 of $2.0 million, or $0.32 per share. For the same
period last year the company reported a net loss of $6.2 million, or
$1.01 per share, including a loss from discontinued operations of $5.5
million or $0.90 per share.
The company reported operating income before interest and taxes of
$3.5 million for the quarter, up 137% compared to $1.5 million in last
year's third quarter, after adjusting each period for charges for
forbearance fees and corporate office restructuring costs. Operating
earnings before interest, taxes, depreciation and amortization
(EBITDA) rose 124% to $4.3 million from $1.9 million in last year's
third quarter level. Free cash flow, or net income after cash taxes
plus depreciation, amortization and non-cash mark-to-market
adjustments less capital expenditures, rose to $1.1 million compared
to negative free cash flow of $0.6 million in last year's third
quarter.
The company reported that the loss from discontinued operations in
the current quarter included operating income from discontinued
businesses of $1.8 million; allocated interest expense of $1.7
million; and a $5.5 million non-cash charge to recognize increased
loss reserves associated with units that have been divested, which
were offset by a tax benefit of $1.9 million. The loss from
discontinued operations reported for the third quarter of fiscal 2002
included increases in the losses anticipated upon the sale of the
various retaining rings businesses (the last of which were sold in the
second quarter of fiscal 2003), the forecasted operating income and
interest expense associated with the industrial products segment
through the anticipated closing dates of the divestitures of those
units, and the accrual of certain phase out costs through the
completion of the restructuring process.
For the nine months ended December 29, 2002, the company reported
a loss from continuing operations of $0.4 million, or $0.07 per share,
compared to a loss of $4.2 million or $0.68 per share, in the prior
year's nine-month period. For the nine months of fiscal 2003 the
company reported a loss from discontinued operations of $7.6 million,
or $1.22 per share. For the same period of the prior year the company
reported a loss from discontinued operations of $55.8 million, or
$9.03 per share. The net loss for the nine months ended December 29,
2002 was $8.0 million or $1.29 per share, compared to a net loss of
$60.0 million or $9.71 per share in the prior year's nine-month
period. Sales for the nine months of fiscal 2003 were $41.3 million
compared to $35.5 million in the prior year's same period, an increase
of 16%.
Norco subsidiary to be sold
The Company also announced that it intends to sell its Norco, Inc.
subsidiary and that it is in discussions relative to such a
transaction. Norco is the world's leading manufacturer of hold-open
rods for aircraft engine nacelles.
Michael J. Berthelot, Chairman, President and CEO of the company,
said, "On July 17th we stated that we would look at a number of
possible alternatives that might maximize the value of our company for
its shareholders, including the sale of all or parts of the company or
a restructuring of our balance sheet. At the current time, we believe
that our best is to focus our efforts on the military and government
markets. As a result, we have decided to divest our Norco, Inc.
subsidiary, which generates more than 60% of its business from the
commercial aerospace markets. Following this divestiture, our company
will be comprised of a single business unit, Breeze-Eastern, which is
the world's leading designer and manufacturer of helicopter rescue
hoists and cargo hooks while also emerging as a leader in the
development of weapons loading systems and cargo winches for the
military market. Approximately 95% of our revenues will now be derived
through direct or indirect sales to military or government agencies
throughout the world."
Joseph F. Spanier, the Vice President and Chief Financial Officer
of TransTechnology, said, "As a result of our decision to divest
Norco, we will reclassify its financial results to discontinued
operations, effective immediately and all results reflected in this
release include only Breeze-Eastern as continuing operations."
Military sales continue to drive growth
The Company reported that a favorable mix of spares, repair and
overhaul business to new equipment deliveries as well as the first
shipments of the HLU-196 Munitions Hoist to the U.S. Navy resulted in
strong sales growth for the third quarter. As almost 95% of the
company's sales are to the US or foreign military or government
agencies on a sole-source basis, the company is not affected by the
slowdown in the commercial aerospace sector. New orders received
during the third quarter were $20.4 million, with a book to bill ratio
for the quarter of 1.31, compared to just .93 in last year's third
quarter. The company's backlog at the end of the third quarter was up
$5.7 million or 15% to $42.7 million from $37.0 million at the end of
the third quarter of last year and up $4.8 million from $37.9 million
at the end of the second quarter of the current fiscal year.
Mr. Berthelot said, "Our Breeze-Eastern division has performed
above our operating targets, driven by strong growth in new orders,
shipments, and operating income. The initial shipments of the HLU-196
Munitions Hoist, for which we have over $8.5 million of contracts with
the U.S. Navy and an additional option under negotiation, has provided
a substantial boost to the growth of our weapons handling product
line."
Mr. Berthelot continued, "Third quarter results show the
continuing improvement not only in our core operating businesses, but
also in our efforts to reduce the size and cost of our corporate
office and to delever our balance sheet. Corporate office expenses,
without regard to amortization of bank fees or severance costs
associated with our continuing restructuring, decreased $0.5 million
from last year's third quarter and are currently on a $4.2 million run
rate, about where our target was set last year. We see additional
opportunities for cost reductions at the corporate level, and have
recognized $0.5 million of severance costs this quarter to reduce our
corporate office staff from nine to six over the next few months. As a
result of these changes, we expect to save about $1.0 million per
year. We continue to look for further such reductions. As a result of
the reduction of our senior debt through the application of proceeds
from the divestiture of our fastener businesses and other asset sales,
our total interest expense was reduced by $1.6 million from last
year's third quarter, even though third quarter interest expense from
continuing operations shows a $0.7 million increase as a result of the
allocation formula required under GAAP."
Robert L.G. White, President of TransTechnology's Aerospace
Products Group and its Breeze-Eastern division, said, "We believe that
Breeze-Eastern is a solid platform for our company. Our revenues have
grown from $34.5 million in fiscal 1997 to $47.8 million in fiscal
2002, a compound annual growth rate of 7%. Our operating income,
before corporate office expenses, has grown from $6.9 million to $12.9
million over the same period, a compound growth rate of 13%, as we
have focused on lean manufacturing and increased our spare parts,
overhaul and repair businesses."
Mr. White continued, "We believe we are well positioned in the
military and government aerospace/defense markets. Our rescue hoists
are number one in the world, as are our cargo hooks. We lead the
market for aircraft cargo winches of less than 2,000-pound capacity.
Our weapons handling products are gaining rapid acceptance, as shown
by the commencement of shipments of the HLU-196 Munitions Hoist this
quarter. We continue to work on weapons loading equipment for such new
programs as the High Mobility Artillery Rocket Systems ("HIMARS") and
the Line of Sight Anti-Tank Weapon System ("LOSAT), both produced by
Lockheed Martin, and Boeing's Unmanned Combat Air Vehicle, the X-45,
now in development. Our cargo winch is standard equipment on the V-22
Osprey tilt rotor aircraft now in operational testing, and we are
working with Boeing to develop a rescue hoist to meet the unique needs
of this aircraft. Increased utilization of our equipment in the field
has resulted in strong aftermarket sales of spare systems, spare
parts, and repair and overhaul services."
Divestiture of Fastener Businesses Completed
The company reported that the sale of substantially all of the
assets and business of its TCR Corporation on January 3, 2003,
completed its exit from the specialty fastener business. During the
course of this divestiture program, begun in December 2000, the
company shed eight business units with twelve factories, two sales
offices, and 2,000 employees in seven countries with fiscal 2001
revenues of $257 million; generating more than $180 million of cash in
the process, which reduced debt from a peak of $285 million in 2000 to
today's level of $96 million.
Mr. Spanier, said, "With regard to the current quarter's gain from
the financial derivatives associated with our second quarter warrant
amendment, last quarter we recognized a $1.2 million non-cash non-tax
deductible expense associated with this derivative as our share price
rose from $10.64 on the date we amended our subordinated debt and
warrant agreements to $13.46 at the end of the second quarter. In the
third quarter, however, the price of our stock dropped back to $10.62,
resulting in the recognition of a non-cash, non-taxable gain of $1.2
million.
Until the provisions of the amended warrants that provide their
holders the ability to "put" the warrants to the company for $5 per
share are extinguished, at the end of each subsequent quarter we will
recognize income or loss based upon changes in the company's common
stock price."
Mr. Spanier continued, "Because we did not redeem the warrants
before December 31, 2002, effective on that date we have 427,602
additional shares outstanding in computing earnings per share, a
dilution factor of approximately 7%. In addition, because the sale of
Norco will constitute a liquidity event under the terms of our
subordinated debt agreements, the warrant holders will have the right
to put these warrants back to the company at a price of $5 per share
for 120 days following the completion of the sale of Norco. The
maximum cash exposure of the company related to these warrants and
their put rights, if any, is $2.1 million. The interest rate
on our subordinated debt increased to 18% effective December 31,
2002, with cash interest remaining at 13% and the payment in kind
("PIK") rate going to 5.0% from 3.0%. Until the subordinated debt is
repaid in full, at the end of each quarter the PIK rate will increase 0.25%."
Mr. Berthelot stated "We believe that focusing our efforts upon
Breeze-Eastern and the military and government aerospace defense
markets is our best of course of action. As we complete the sale of
Norco, we will evaluate what options are available to strengthen our
balance sheet, improve our earnings and cash flow, and provide a solid
future for our customers, employees, and shareholders."
TransTechnology Corporation, operating as Breeze-Eastern, is the
world's leading designer and manufacturer of sophisticated lifting
devices for military and civilian aircraft, including rescue hoists,
cargo hooks, and weapons-lifting systems. The company, which employs
approximately 180 people at its facility in Union, New Jersey,
reported sales from continuing operations of $47.8 million in the
fiscal year ended March 31, 2002.
INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
Certain statements in this press release constitute
"forward-looking statements" within the meaning of the Securities Act
of 1933, as amended, and the Securities Exchange Act of 1934, as
amended (the "Acts"). Any statements contained herein that are not
statements of historical fact are deemed to be forward-looking
statements.
The forward-looking statements in this press release are based on
current beliefs, estimates and assumptions concerning the operations,
future results, and prospects of the Company. As actual operations and
results may materially differ from those assumed in forward-looking
statements, there is no assurance that forward-looking statements will
prove to be accurate. Forward-looking statements are subject to the
safe harbors created in the Acts.
Any number of factors could affect future operations and results,
including, without limitation, the Company's ability to dispose of
business operations proposed for divestiture for the consideration
currently estimated to be received by the Company or within the time
frame anticipated by the Company; the Company's ability to be
profitable with a smaller and less diverse base of operations that
will generate less revenue; the value of replacement operations, if
any; determination by the Company to dispose of additional existing
assets; general industry and economic conditions; events impacting the
U.S. and world financial markets and economies; interest rate trends;
capital requirements; competition from other companies; changes in
applicable laws, rules and regulations affecting the Company in the
locations in which it conducts its business; the availability of
equity and/or debt financing in the amounts and on the terms necessary
to support the Company's future business; and those specific risks
that are discussed in the Company's previously filed Annual Report on
Form 10-K for the fiscal year ended March 31, 2002.
The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information or
future events.
TransTechnology Corporation
STATEMENTS OF CONSOLIDATED OPERATIONS
(In Thousands of Dollars Except Share Data)
Three Months Ended Nine Months Ended
12/29/02 12/30/01 12/29/02 12/30/01
Net sales $15,562 $12,686 $41,303 $35,520
Cost of sales 8,076 7,184 22,132 21,354
--------- --------- --------- ----------
Gross profit 7,486 5,502 19,171 14,166
General, administration and
selling
Expenses 4,012 4,033 11,885 12,488
Interest expense 2,418 1,726 6,538 4,205
Interest and other income -
net 151 (72) 118 (154)
Unrealized gain on warrants (1,228) -- (9) --
Forbearance fees -- 473 764 2,635
Corporate office restructuring
charge 515 400 515 1,629
--------- --------- --------- ---------
Income (loss) from
continuing
operations before
income taxes 1,618 (1,058) (640) (6,637)
Provision for income taxes
(benefit) 181 (381) (225) (2,409)
--------- ---------- --------- ---------
Income (loss) from continuing
operations 1,437 (677) (415) (4,228)
Discontinued operations:
Income from sale of businesses
and income
from operations of
discontinued
businesses (less applicable
income taxes
of $8,012 for the nine month
period ended December 30,
2001). -- -- -- 16,414
Loss on disposal of
discontinued
businesses (less applicable
income tax
benefits of $1,930 and $3,908
for the
three and nine month periods
ended
December 29, 2002 and $2,350
and $37,816 for the three and
nine month periods ended
December 30, 2001,
respectively). (3,458) (5,538) (7,588) (72,201)
---------- --------- --------- ---------
Net loss $(2,021) $(6,215) $(8,003) $(60,015)
========== ========= ========= =========
Basic Earnings (Loss) per
Share:
Earnings (loss) from
continuing operations $0.23 $(0.11) $(0.07) $(0.68)
Loss from discontinued
operations (0.56) (0.90) (1.22) (9.03)
---------- --------- ---------- --------
Net loss $(0.33) $(1.01) $(1.29) $(9.71)
========== ========= ========== ========
Diluted Earnings (Loss) per
Share:
Earnings (loss) from
continuing operations $0.23 $(0.11) $(0.07) $(0.68)
Loss from discontinued
operations (0.55) (0.90) (1.22) (9.03)
---------- --------- --------- ---------
Net loss $(0.32) $(1.01) $(1.29) $(9.71)
========== ========= ========= =========
Weighted average basic shares 6,199,000 6,178,000 6,196,000 6,177,000
Weighted average diluted
shares 6,295,000 6,178,000 6,196,000 6,177,000
BALANCE SHEET INFORMATION
12/29/02 3/31/02
Current assets $31,722 $34,947
Assets held for sale 33,712 64,977
--------- --------
Total current assets 65,434 99,924
Property, plant & equipment - net 2,404 2,307
Costs in excess of net assets of acquired businesses 402 402
Other assets 46,285 42,113
-------- ---------
Total assets $114,525 $144,746
======== =========
Current portion of long-term debt $7,850 $ --
Liabilities of discontinued businesses 2,918 21,142
Other current liabilities 18,131 21,279
--------- --------
Total current liabilities 28,899 42,421
Long-term debt 95,086 107,564
Other liabilities 16,076 10,968
Shareholders' deficit (25,536) (16,207)
-------- ---------
Total liabilities and shareholders' deficit $114,525 $144,746
======== =========
Reconciliation of Reported Income from Continuing Operations to EBITDA
Three Months Ended Nine Months Ended
12/29/02 12/30/01 12/29/02 12/30/01
Sales $ 5,562 $12,686 $41,303 $35,520
Cost of sales 8,076 7,184 22,132 21,354
-------- -------- ------- -------
Gross profit 7,486 5,502 19,171 14,166
SG&A - operations 2,319 2,169 6,605 5,962
Corporate office expenses 1,693 1,864 5,280 6,526
-------- -------- ------- -------
Total SG&A 4,012 4,033 11,885 12,488
-------- -------- ------- -------
Operating income 3,474 1,469 7,286 1,678
Add back depreciation & amortization 803 441 1,671 2,060
-------- -------- ------- -------
EBITDA $4,277 $1,910 $8,957 $3,738
======== ======== ======= =======
Operating Income $3,474 $1,469 $7,286 $1,678
Bank forbearance fees -- 473 764 2,635
Interest expense 2,418 1,726 6,538 4,205
Interest and other income, net 151 (72) 118 (154)
Unrealized gain on warrants (1,228) -- (9) --
Corporate office restructuring charge 515 400 515 1,629
-------- ------- ------- -------
Reported earnings (loss) before
taxes $1,618 $(1,058) $(640) $(6,637)
======== ======= ======= =======
Three Months Ended Nine Months Ended
12/29/02 12/30/01 12/29/02 12/30/01
Calculation of free cash flow:
Income from continuing operations $1,437 $(677) $(415) $(4,228)
Add depreciation & amortization 803 441 1,671 2,060
Add (deduct) non-cash taxes 181 (381) (225) (2,409)
Less non-cash loss on warrants (1,228) -- (9) --
Less capital spending (65) (14) (502) (137)
--------- ------- ------- ------
Free cash flow $1,128 $(631) $520 $(4,714)
========= ======= ======= =======
Total Interest Expense:
Continuing operations $2,418 $1,726 $6,538 $4,205
Discontinued operations 1,672 3,941 5,313 16,557
Total interest expense $ 4,090 $5,667 $11,851 $20,762
======== ======= ======= =======
CONTACT:
TransTechnology Corporation, Union
Michael J. Berthelot
908-688-2440
|
Breeze-Eastern Corporation
