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SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the quarterly period ended July 2, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from  to
 Commission file number 1-7872
 
 TRANSTECHNOLOGY CORPORATION
  Delaware
(State or other jurisdiction of
incorporation or organization)
700 Liberty Avenue
Union, New Jersey
(Address of principal executive offices)
    
    95-4062211
(I.R.S. employer
identification no.)
07083
(Zip Code)
   þ o
  o o þ
  o þ




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##### 



INDEX
 Page No.PART I. Financial InformationItem 1. Condensed Financial Statements (Unaudited)
    
    3Condensed Statements of Consolidated Operations Three
Month Periods Ended July 2, 2006 and
June 26, 2005 (Unaudited)
    
    4Condensed Consolidated Balance Sheets
July 2, 2006 (Unaudited) and March 31, 2006
    
    5Condensed Statements of Consolidated Cash Flows
Three Month Periods Ended July 2, 2006 and
June 26, 2005 (Unaudited)
    
    6Notes
to Condensed Consolidated Financial Statements (Unaudited)
    
    7-14Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    15-20Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    20Item 4. Controls and Procedures
    
    20PART II. Other InformationItem 1. Legal Proceedings
    
    21Item 6. Exhibits
    
    21SIGNATURES
    
    22EXHIBIT 31.1
    
    23EXHIBIT 31.2
    
    24EXHIBIT 32
    
    25EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32: CERTIFICATION
  2




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PART I. FINANCIAL INFORMATION
 
 Item 1. CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
   3




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TRANSTECHNOLOGY CORPORATION
 
 CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
 (UNAUDITED)
  Three Months EndedJuly 2, 2006
    
    
    June 26, 2005Net sales
    
    $
    16,242
    
    
    $
    12,982Cost of sales
    
    
    8,817
    
    
    
    7,345Gross profit
    
    
    7,425
    
    
    
    5,637General, administrative
and selling expenses
    
    
    4,746
    
    
    
    3,154Interest expense
    
    
    1,269
    
    
    
    2,195Other expense (income)-net
    
    
    49
    
    
    
    (37
    )Loss on extinguishment of debt
    
    
    1,331
    
    
    
    Income before income taxes
    
    
    30
    
    
    
    325Provision for income taxes
    
    
    12
    
    
    
    124Net income
    
    $
    18
    
    
    $
    201Basic earnings per share:Net income
    
    $
    0.00
    
    
    $
    0.03Diluted earnings per share:Net income
    
    $
    0.00
    
    
    $
    0.03Number of shares used in computation
of per share information: (Note 1)Basic
    
    
    9,230,000
    
    
    
    6,698,000Diluted
    
    
    9,314,000
    
    
    
    6,729,000
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TRANSTECHNOLOGY CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
  (Unaudited)July 2, 2006
    
    
    March 31, 2006AssetsCurrent assets:Cash
    
    $
    231
    
    
    $
    161Accounts receivable (net of allowance for doubtful accounts
of $26 at July 2, 2006 and $25 at March 31, 2006)
    
    
    12,405
    
    
    
    17,061Inventories  net
    
    
    19,788
    
    
    
    18,035Prepaid expenses and other current assets
    
    
    750
    
    
    
    686Deferred income taxes
    
    
    2,426
    
    
    
    2,426Total current assets
    
    
    35,600
    
    
    
    38,369Property, plant and equipment
    
    
    16,329
    
    
    
    16,322Less accumulated depreciation
    
    
    11,657
    
    
    
    11,512Property, plant and equipment  net
    
    
    4,672
    
    
    
    4,810Other assets:Deferred income taxes
    
    
    28,003
    
    
    
    28,015Goodwill
    
    
    402
    
    
    
    402Other
    
    
    9,919
    
    
    
    10,349Total other assets
    
    
    38,324
    
    
    
    38,766Total
    
    $
    78,596
    
    
    $
    81,945Liabilities and Stockholders EquityCurrent liabilities:Revolving credit facility
    
    $
    5,108
    
    
    $
    2,369Current portion of long-term debt
    
    
    3,007
    
    
    
    2,193Accounts payable-trade
    
    
    5,286
    
    
    
    7,641Accrued compensation
    
    
    1,762
    
    
    
    3,448Accrued income taxes
    
    
    721
    
    
    
    763Accrued interest
    
    
    312
    
    
    
    711Other current liabilities
    
    
    3,989
    
    
    
    4,144Total current liabilities
    
    
    20,185
    
    
    
    21,269Long-term debt payable to banks
    
    
    36,755
    
    
    
    39,415Other long-term liabilities
    
    
    9,181
    
    
    
    8,933Contingencies (Note 7)Stockholders equity:Preferred stock  authorized, 300,000 shares; none issued
    
    
    
    
    
    
    Common stock  authorized, 14,700,000 shares of $.01 par value;
issued 9,620,853 and 9,618,853 at July 2, 2006 and March 31, 2006, respectively
    
    
    96
    
    
    
    96Additional paid-in capital
    
    
    91,521
    
    
    
    91,392Accumulated deficit
    
    
    (72,715
    )
    
    
    (72,733
    )18,902
    
    
    
    18,755Less treasury stock, at cost - 390,135 shares at July 2, 2006
and at March 31, 2006
    
    
    (6,427
    )
    
    
    (6,427
    )Total stockholders equity
    
    
    12,475
    
    
    
    12,328Total
    
    $
    78,596
    
    
    $
    81,945
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TRANSTECHNOLOGY CORPORATION
 
 CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
 (UNAUDITED)
  Three Months EndedJuly 2, 2006
    
    
    June 26, 2005Cash Flows from Operating Activities:Net income
    
    $
    18
    
    
    $
    201Adjustments to reconcile net income to net cash (used in) provided by
operating activities:Write off of unamortized loan fees
    
    
    944
    
    
    
    Depreciation and amortization
    
    
    345
    
    
    
    295Noncash interest expense, net
    
    
    23
    
    
    
    257Stock based compensation
    
    
    59
    
    
    
    Increase in provision for bad debt
    
    
    1
    
    
    
    2Changes in assets and liabilities:Increase in accounts receivable and other receivables
    
    
    4,655
    
    
    
    2,596Increase in inventories
    
    
    (1,753
    )
    
    
    (32
    )Decrease in deferred taxes, net
    
    
    6
    
    
    
    124Increase in other assets
    
    
    (208
    )
    
    
    (210
    )Decrease in accounts payable
    
    
    (2,267
    )
    
    
    (163
    )(Decrease) increase in accrued compensation
    
    
    (1,686
    )
    
    
    71Decrease in income taxes payable
    
    
    (42
    )
    
    
    (183
    )Decrease in other liabilities
    
    
    (264
    )
    
    
    (96
    )Net cash (used in) provided by operating activities
    
    
    (169
    )
    
    
    2,862Cash Flows from Investing Activities:Additions to property, plant and equipment
    
    
    (204
    )
    
    
    (425
    )Collection of notes receivable
    
    
    
    
    
    
    100Increase in restricted cash
    
    
    (1
    )
    
    
    Net cash used in investing activities
    
    
    (205
    )
    
    
    (325
    )Cash Flows from Financing Activities:Payments on long-term debt
    
    
    (41,913
    )
    
    
    (750
    )Proceeds from long-term debt and borrowings
    
    
    40,000
    
    
    
    Borrowings (repayments) of other debt
    
    
    2,739
    
    
    
    (386
    )Payment of debt issue costs
    
    
    (406
    )
    
    
    Exercise of stock options
    
    
    18
    
    
    
    21Excess tax benefit from stock based compensation
    
    
    6
    
    
    
    Net cash provided by (used in) financing activities
    
    
    444
    
    
    
    (1,115
    )Increase in cash
    
    
    70
    
    
    
    1,422Cash at beginning of period
    
    
    161
    
    
    
    1,039Cash and cash equivalents at end of period
    
    $
    231
    
    
    $
    2,461Supplemental information:Interest payments
    
    
    1,538
    
    
    
    2,035Income tax payments
    
    
    42
    
    
    
    183Increase in term loans and senior subordinated note for paid-in-kind interest
    
    
    66
    
    
    
    227Non-cash investing activity for additions to property, plant and equipment
    
    
    33
    
    
    
    109
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  Earnings Per Share
 The computation of basic earnings per share is based on the weighted-average number of common
            shares outstanding. The computation of diluted earnings per share assumes the foregoing and,
in addition, the exercise of all dilutive stock options using the treasury stock method.
 The components of the denominator for basic earnings per common share and diluted earnings
per common share are reconciled as follows:
 Three Months EndedJuly 2,
    
    June 26,2006
    
    2005Basic Earnings per Common Share:Weighted-average common stock outstanding
for basic earnings per share calculation
    
    
    9,230,000
    
    
    
    6,698,000Diluted Earnings per Common Share:Weighted-average common shares outstanding
    
    
    9,230,000
    
    
    
    6,698,000Stock options*
    
    
    84,000
    
    
    
    31,000Weighted-average common stock outstanding
for diluted earnings per share
calculation
    
    
    9,314,000
    
    
    
    6,729,000
 *
    
    During the three month period ended July 2, 2006 and June 26, 2005, options to purchase
26,000 and 194,000 shares of common stock, respectively, were not included in the computation
of diluted earnings per share because the exercise prices of the options were greater than the
average market price of the common shares.
 Stock-Based Compensation
  7




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Three Months EndedJune 26, 2005Net income as reported
    
    $
    201Add: Stock-based employee compensation expense
included in reported net income, net of related tax
effects
    
    
    18Deduct: Total stock-based
compensation expense
determined under fair value
based method for all
awards, net of related tax
effects
    
    
    (50
    )Proforma net income
    
    $
    169Basic earnings per share:As reported
    
    $
    0.03Proforma
    
    $
    0.03Diluted earnings per share:As reported
    
    $
    0.03Proforma
    
    $
    0.03
   8




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2006Dividend yield
    
    
    0.0
    %Volatility
    
    
    53.3
    %Risk-free interest rate
    
    
    3.9
    %Expected term of options (in years)
    
    
    7.0
  Aggregate
    
    Approximate
    
    Weighted-Intrinsic
    
    Remaining
    
    AverageNumber
    
    Value
    
    Contractual
    
    Exerciseof Shares
    
    (in thousands)
    
    Term (Years)
    
    PriceOutstanding at March 31, 2006
    
    
    450,500
    
    
    
    
    
    
    
    
    
    
    $
    9.36Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (2,000
    )
    
    
    (a
    )
    
    
    
    
    
    $
    8.99Canceled or expired
    
    
    (125,000
    )
    
    
    
    
    
    
    
    
    
    $
    12.77Outstanding at July 2, 2006
    
    
    323,500
    
    
    $
    1,101
    
    
    
    7
    
    
    $
    8.04Options exercisable at July 2, 2006
    
    
    234,834
    
    
    $
    772
    
    
    
    6
    
    
    $
    8.42Options un-exercisable at July 2, 2006
    
    
    88,666
    
    
    $
    329
    
    
    
    9
    
    
    $
    7.04Available for future grants
    
    
    340,059
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Weighted Average GrantNumber of
    
    DateShares
    
    Fair ValueNon-vested at March 31, 2006
    
    
    30,098
    
    
    $
    7.11Granted
    
    
    3,852
    
    
    $
    10.00Vested
    
    
    
    
    
    
    Cancelled
    
    
    
    
    
    
    Non-vested at July 2, 2006
    
    
    33,950
    
    
    $
    7.44
  Inventories
  July 2, 2006
    
    
    March 31, 2006Finished goods
    
    $
    22
    
    
    $
    Work in process
    
    
    3,336
    
    
    
    3,847Purchased and manufactured parts
    
    
    16,430
    
    
    
    14,188Total
    
    $
    19,788
    
    
    $
    18,035
 Long-Term Debt Payable
  10




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July 2, 2006
    
    
    March 31, 2006Senior Credit Facility
    
    $
    44,870
    
    
    $
    43,977Less current maturities
    
    
    8,115
    
    
    
    4,562Total long-term debt
    
    $
    36,755
    
    
    $
    39,415
 Senior Credit Facility 
 Former Senior Credit Facility
 Employee Benefit Plans
    11




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Postretirement BenefitsThree Months EndedJuly 2, 2006
    
    
    June 26, 2005Components of net periodic benefit costs:Interest Cost
    
    $
    10
    
    
    $
    19Amortization of net (gain)
    
    
    (10
    )
    
    
    13Net periodic benefit cost
    
    $
    
    
    
    $
    32
 Pension PlanThree Months EndedJuly 2, 2006
    
    
    June 26, 2005Components of net periodic benefit costs:Interest Cost
    
    $
    30
    
    
    $
    51Amortization of net loss
    
    
    1
    
    
    
    Net periodic benefit cost
    
    $
    31
    
    
    $
    51
 New Accounting Standards
   12




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Contingencies
 Environmental Matters
    13




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Asset Sale
 Litigation
 Segment and Geographic Location
   Three Months EndedJuly 2, 2006
    
    
    June 26, 2005Location:United States
    
    $
    8,829
    
    
    $
    7,973Europe
    
    
    5,207
    
    
    
    2,907Pacific and Far East
    
    
    1,371
    
    
    
    598Other non-United
States
    
    
    835
    
    
    
    1,504Total
    
    $
    16,242
    
    
    $
    12,982
 
 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 14




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General
    Results of Operations
 Three Months Ended July 2, 2006 Compared with Three Months Ended June 26, 2005
 Net Sales
 Gross Profit
 General, administrative and selling expenses
 Interest expense
 Net Income
 15




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New orders
 Backlog
 Liquidity and Capital Resources
    Working Capital
   16




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Capital Expenditures
  Senior Credit Facility
 Senior Credit Facility 
 Tax Benefits from Net Operating Losses
   17




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Summary Disclosure About Contractual Obligations and Commercial Commitments
  2011 and(Dollars in thousands)
    
    2007
    
    2008
    
    2009
    
    2010
    
    thereafter
    
    TotalLong-term debt
    
    $
    1,955
    
    
    $
    3,057
    
    
    $
    3,057
    
    
    $
    3,057
    
    
    $
    28,636
    
    
    $
    39,762Operating leases
    
    
    175
    
    
    
    86
    
    
    
    46
    
    
    
    32
    
    
    
    15
    
    
    
    354Total
    
    $
    2,130
    
    
    $
    3,143
    
    
    $
    3,103
    
    
    $
    3,089
    
    
    $
    28,651
    
    
    $
    40,116
  Inflation
  Environmental Matters
   18




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Litigation
  19




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Forward Looking Statements
     Recently Issued Accounting Standards
  (
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
  20




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
  
 Item 6. Exhibits
 31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 21




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SIGNATURES
  TRANSTECHNOLOGY CORPORATION(Registrant)Dated:  August 21, 2006
    By:
    /s/ Joseph F. SpanierJoseph F. Spanier, Vice President,Chief Financial Officer and Treasurer * 
 *
    
    On behalf of the Registrant and as Principal Financial and Accounting Officer. 22