================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 28, 1996
Commission File Number 0-16960
-------------
THE GENLYTE GROUP INCORPORATED
AND SUBSIDIARIES
2345 VAUXHALL ROAD
UNION, N. J. 07083-1948
(908) 964-7000
Incorporated in Delaware I.R.S. Employer
Identification No. 22-2584333
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
The number of shares outstanding of the issuer's common stock as of September
27, 1996 was 12,928,907.
================================================================================
<PAGE>
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 28, 1996
INDEX
PART I. FINANCIAL INFORMATION
Consolidated Statements of Income for the three
months ended September 28, 1996 and September 30, 1995........ 1
Consolidated Statements of Income for the nine
months ended September 28, 1996 and September 30, 1995........ 2
Consolidated Balance Sheets as of September 28, 1996
and December 31, 1995......................................... 3
Consolidated Statements of Cash Flows for the nine
months ended September 28, 1996 and September 30, 1995........ 4
Notes to Consolidated Interim Financial Statements. ............ 5
Management's Discussion and Analysis of
Results of Operations and Financial Condition ................ 6
PART II. OTHER INFORMATION
Item 1 Legal Proceedings....................................... 8
Item 6 Exhibits and Reports on Form 8-K........................ 8
Signature....................................................... 9
<PAGE>
PART 1 FINANCIAL INFORMATION
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
(000'S OMITTED, EXCEPT PER SHARE DATA)
(Unaudited)
1996 1995
================================================================================
Net Sales $116,036 $112,908
Cost of Sales 76,688 79,074
- --------------------------------------------------------------------------------
Gross Profit 39,348 33,834
Selling and Administrative Expenses 31,963 28,224
- --------------------------------------------------------------------------------
Operating Profit 7,385 5,610
Interest Expense, net 1,361 1,978
- --------------------------------------------------------------------------------
Income Before Income Taxes 6,024 3,632
Provision for Income Taxes 2,588 1,568
- --------------------------------------------------------------------------------
Net Income $ 3,436 $ 2,064
- --------------------------------------------------------------------------------
Average Number of Common
Shares Outstanding 13,091 12,817
- --------------------------------------------------------------------------------
Earnings per Share $ .26 $ .16
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
(000'S OMITTED, EXCEPT PER SHARE DATA)
(Unaudited)
1996 1995
================================================================================
Net Sales $337,138 $334,113
Cost of Sales 224,861 234,336
- --------------------------------------------------------------------------------
Gross Profit 112,277 99,777
Selling and Administrative Expenses 92,943 84,075
- --------------------------------------------------------------------------------
Operating Profit 19,334 15,702
Interest Expense, net 4,457 6,194
- --------------------------------------------------------------------------------
Income Before Income Taxes 14,877 9,508
Provision for Income Taxes 6,399 4,121
- --------------------------------------------------------------------------------
Net Income $ 8,478 $ 5,387
- --------------------------------------------------------------------------------
Average Number of Common
Shares Outstanding 13,002 12,793
- --------------------------------------------------------------------------------
Earnings per Share $ .65 $ .42
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 28, 1996 AND DECEMBER 31, 1995
(000'S OMITTED)
================================================================================
(Unaudited)
9/28/96 12/31/95
- --------------------------------------------------------------------------------
ASSETS:
- ----------------------------------------------------
Current Assets:
Cash and cash equivalents $ 1,524 $ 263
Accounts receivable, less allowances for
doubtful accounts of $5,620 and $5,302 73,811 62,024
Inventories:
Raw materials and supplies 25,423 25,891
Work in progress 9,120 9,288
Finished goods 40,300 41,042
- --------------------------------------------------------------------------------
Total Inventories 74,843 76,221
- --------------------------------------------------------------------------------
Other current assets 11,894 12,550
- --------------------------------------------------------------------------------
Total current assets 162,072 151,058
- --------------------------------------------------------------------------------
Property, plant and equipment, at cost 207,670 229,416
Less: accumulated depreciation and amortization
on plant and equipment 147,366 165,267
- --------------------------------------------------------------------------------
Net property, plant and equipment 60,304 64,149
- --------------------------------------------------------------------------------
Cost in excess of net assets of purchased businesses 11,823 12,026
Other assets 3,600 3,801
- --------------------------------------------------------------------------------
TOTAL ASSETS 237,799 $ 231,034
================================================================================
LIABILITIES & STOCKHOLDERS' INVESTMENT:
- ----------------------------------------------------
Current Liabilities:
Short-term borrowings $ 3,200 $ 1,236
Current maturities of long-term debt 51 50
Accounts payable 37,340 38,795
Accrued expenses 38,619 35,208
- --------------------------------------------------------------------------------
Total current liabilities 79,210 75,289
- --------------------------------------------------------------------------------
Long-term debt 59,859 65,896
Deferred income taxes 3,710 4,662
Other liabilities 15,993 15,287
- --------------------------------------------------------------------------------
Total liabilities 158,772 $ 161,134
- --------------------------------------------------------------------------------
Stockholders' Investment:
Common stock 130 129
Paid-in capital 10,811 10,135
Foreign currency translation adjustment (2,044) (2,020)
Retained earnings 70,130 61,656
- --------------------------------------------------------------------------------
Total stockholders' investment 79,027 69,900
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
INVESTMENT $ 237,799 $ 231,034
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
(000'S OMITTED) (Unaudited)
================================================================================
1996 1995
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
- ----------------------------------------------------
Net Income $ 8,478 $ 5,387
Adjustments to reconcile net income to net cash
flows provided (used) by operating activities:
Depreciation and amortization 10,349 11,020
(Increase) decrease in:
Accounts receivable (11,787) (6,066)
Inventories 1,378 1,369
Other current assets 656 (2,913)
Other assets 25 (2,518)
Increase (decrease) in:
Accounts payable and accrued expenses 1,956 (3,762)
Other liabilities 702 3,158
Deferred income taxes (952) 23
- --------------------------------------------------------------------------------
Net cash flows povided by operating activities 10,805 5,698
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- --------------------------------------------------------------------------------
Purchase of plant and equipment (6,125) (7,388)
Disposal of plant and equipment 0 1,386
- --------------------------------------------------------------------------------
Net cash flows used in investing activities (6,125) (6,002)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- --------------------------------------------------------------------------------
Options exercised 677 147
Decrease in debt to outsiders (4,072) (439)
- --------------------------------------------------------------------------------
Net cash flows used in financing activities (3,395) (292)
- --------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES (24) (233)
- --------------------------------------------------------------------------------
Net increase/(decrease) in cash and cash equivalents 1,261 (829)
Cash and cash equivalents at beginning of year 263 3,240
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of period 1,524 $ 2,411
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - CASH PAID DURING THE NINE
MONTH PERIOD FOR:
- --------------------------------------------------------------------------------
Interest $ 3,862 $ 5,780
- --------------------------------------------------------------------------------
Income taxes $ 6,833 $ 4,903
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
AS OF SEPTEMBER 28, 1996
(Unaudited)
1. Basis of Presentation
The financial information included is unaudited; however, such information
reflects all adjustments (consisting solely of normal recurring
adjustments; also, see Note 2) which are, in the opinion of management,
necessary for a fair statement of results for the interim periods.
The results for interim periods are not necessarily indicative of the
results to be expected for the full year.
2. During the quarter, the Company changed its method of accounting for
certain inventories from the last-in, first-out ("LIFO") method to the
first-in, first-out ("FIFO") method. This change, adopted through the
retroactive restatement of all prior period financial statements, was made
for the following reasons: (1) it will improve the measurement of operating
results in light of reduced inflation rates; (2) it will enhance the
comparability of the Company's financial statements by changing to the
predominant method utilized in the industry; and (3) the change to FIFO
will allow the Company to reduce the costs incurred in administering the
current LIFO system and avoid the expenditure of future costs to design and
implement a LIFO cost accounting system in connection with the current
modification and upgrade of the Company's management information system.
The effects of this accounting change had no impact on previously reported
1996 results. The effects on results previously reported in 1995 are as
follows:
<TABLE>
<CAPTION>
================================================================================================
1995 1995 1995
1st 2nd 3rd
Quarter Quarter Quarter YTD
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Profit as Previously Reported $ 4,930 $ 5,486 $ 5,772 $ 16,188
- ------------------------------------------------------------------------------------------------
Effect of Change in Accounting Method (140) (184) (162) (486)
- ------------------------------------------------------------------------------------------------
Operating Profit as Adjusted $ 4,790 $ 5,302 $ 5,610 $ 15,702
================================================================================================
Net Income as Previously Reported $ 1,622 $ 1,911 $ 2,169 $ 5,702
- ------------------------------------------------------------------------------------------------
Effect of Change in Accounting Method (91) (119) (105) (315)
- ------------------------------------------------------------------------------------------------
Net Income as Adjusted $ 1,531 $ 1,792 $ 2,064 $ 5,387
================================================================================================
PER SHARE DATA
- ------------------------------------------------
Earnings Per Share as Previously Reported $ 0.13 $ 0.15 $ 0.17 $ 0.45
- ------------------------------------------------------------------------------------------------
Effect of Change in Accounting Method (0.01) (0.01) (0.01) (0.03)
- ------------------------------------------------------------------------------------------------
Earnings Per Share as Adjusted $ 0.12 $ 0.14 $ 0.16 $ 0.42
================================================================================================
================================================================================================
STATEMENT OF RETAINED EARNINGS 1/1/96 1/1/95
- ------------------------------------------------------------------------------------------------
Opening Balance as Previously Reported $ 65,713 $ 57,383
- ------------------------------------------------------------------------------------------------
Cumulative Effect of Change in Accounting Method (4,057) (3,636)
- ------------------------------------------------------------------------------------------------
Opening Balance as Previously Adjusted $ 61,656 $ 53,747
================================================================================================
</TABLE>
5
<PAGE>
Management's Discussion and Analysis
RESULTS OF OPERATIONS:
Comparison of Third Quarter 1996 to Third quarter 1995
Genlyte's net sales for the third quarter of 1996 were $116.0 million, a $3.1
million, or 2.8 percent increase from the third quarter of 1995. Net income
increased $1.4 million from the third quarter of 1995 to $3.4 million and
earnings per share increased 62.5 percent from $.16 to $.26.
Gross profit for the third quarter of 1996 when compared to the third quarter of
1995 increased to 33.9 percent of sales from 30.0 percent of sales as the
company improved its product mix and continued to realize the benefits of its
facility optimization plan. Selling and administrative expenses increased during
the third quarter of 1996 to 27.6 percent of sales, up from 25.0 percent of
sales for the comparable period in 1995. This increase primarily resulted from
relocation expenditures incurred as part of the facility optimization plan,
selling expenditures associated with new product introduction and service
provisioning and additional reserves for potential losses related to certain
accounts receivable.
Operating profit increased in the third quarter of 1996 to $7.4 million, a 31.6
percent improvement from the third quarter of 1995. The improvement in operating
profit was attributable to the improved product mix, principally in the
commercial and outdoor divisions, and an intense focus on costs in each of the
divisions. A significant element of this cost focus is the facility optimization
plan which includes the negotiation of a partial lease termination of the
Compton, CA manufacturing facility, the sale of the Tijuana, Mexico property,
the relocation of Corporate headquarters from a leased facility to an owned
facility and the termination of a long-term lease in Edison, NJ.
Interest expense amounted to $1.4 million, representing a decrease of $0.6
million, or 31.2 percent, over the comparable quarter of 1995. This decrease was
attributable to lower average borrowings.
The effective tax rate was approximately 43.0 percent for the first three
quarters of 1996 and 1995.
Comparison of First Nine Months 1996 to First Nine Months 1995
During the first nine months of 1996, Genlyte's net sales were $337.1 million,
an increase of 0.9 percent compared to $334.1 million during the first nine
months of 1995. Net income increased 57.4 percent to $8.5 million from $5.4
million in 1995 and earnings per share increased 54.8 percent from $.42 to $.65,
The second half of 1996 is beginning to reflect the benefits of the completed
expansion of Genlyte's Camargo, Mexico facility, where an array of products for
all of its divisions are manufactured at relatively lower cost. Genlyte expanded
production in Camargo in the third quarter. In addition, the Genlyte Technical
Center, located at the Lightolier Fall River facility, was completed. This
state-of-the-art facility showcases products from all Genlyte divisions and
enables our sales professionals to show our customers the full capabilities of
Genlyte's lighting applications and total lighting solutions.
Gross profit for the first nine months of 1996 was 33.3 percent of sales,
compared to 29.9 percent of sales from the comparable period reflecting a
continual reduction in excess capacity and improved product mix. Selling and
administrative expenses for the first nine months of 1996 were 27.6 percent of
sales as compared to 25.2 percent during the first nine months of 1995. This
increase is primarily attributable to relocation expenditures in connection with
facility optimization, costs incurred to terminate certain lease obligations and
additional reserves for potential losses related to certain accounts receivable.
6
<PAGE>
Operating profit increased in the first nine months of 1996 to $19.3 million, a
23.1 percent improvement from the comparable period of 1995. Most of the
divisions' performances exceeded 1995 due to an improved product mix and a
favorable impact of the facility optimization plan.
Interest expense decreased to $4.5 million from $6.2 million for the comparable
period of 1995. The decrease was due to lower average borrowings.
The effective tax rate was approximately 43.0 percent for the first three
quarters of 1996 and 1995.
Financial Condition
Working capital for the end of third quarter of 1996 was 18.4 percent of sales
compared to 21.6 percent for the end of third quarter of 1995 primarily due to
reduced inventory levels and enhanced cash flow management. Days sales
outstanding has remained relatively constant.
Long-term debt has decreased approximately 10% ($6.0 million) since year end.
Year-to-date net cash generation continues to outpace last year's generation
which resulted, over the entire year, in significant liquidation of long-term
debt.
The company believes that currently available cash, borrowing facilities, and
its ability to increase its credit line if needed, combined with internally
generated funds should be sufficient to fund capital expenditures as well as any
increase in working capital that would be required to accommodate a higher level
of business activity.
7
<PAGE>
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
Genlyte has been named as one of a number of corporate and individual
defendants in an adversary proceeding filed on June 8, 1995, arising
out of the Chapter 11 bankruptcy filing of Keene Corporation
("Keene"). Except for the last count, as discussed below, the claims
and causes of action are substantially the same as were brought
against Genlyte in the U.S. District Courts in New York in August
1993, which cases have been permanently enjoined from proceeding as a
result of Keene's reorganization plan. The new complaint is being
prosecuted by the Creditors' Trust created for the benefit of Keene's
creditors (the "Trust"), seeking from the defendants, collectively,
damages in excess of $700 million, rescission of certain asset sale
and stock transactions and other relief. With respect to Genlyte, the
complaint principally maintains that certain lighting assets of Keene
were sold to a predecessor of Genlyte in 1984 at less than fair value,
while both Keene and Genlyte were wholly-owned subsidiaries of Bairnco
Corporation. The complaint also challenges Bairnco's spin-off of
Genlyte in August 1988. Other allegations are that Genlyte, as well as
the other corporate defendants, are liable as corporate successors to
Keene. The complaint fails to specify the amount of damages sought
against Genlyte. The complaint also alleges a violation of the
Racketeer Influenced and Corrupt Organizations Act.
Following confirmation of the Keene reorganization plan, the parties
have moved to withdraw the case from the bankruptcy court to the
Southern District of New York Federal District Court. No answer or
other pleading shall be due until thirty (30) days following
withdrawal of the case.
Genlyte believes that it has meritorious defenses to the adversary
proceeding and will defend said action vigorously.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit 18: Preferability Letter re: Change in Accounting
Principles
(b) Exhibit 27: Requirements for the Format and Input of Financial
Data Schedules
(c) Reports on Form 8-K : None
8
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Genlyte has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
THE GENLYTE GROUP INCORPORATED
------------------------------
(Registrant)
Date: /s/ Neil M. Bardach
-------------------- --------------------------------------
Neil M. Bardach
VP Finance -- CFO & Treasurer
9
ARTHUR
ANDERSEN
October 17, 1996
___________________________
Arthur Andersen LLP
The Genlyte Group Incorporated ___________________________
1345 Avenue of the Americas
Re: Form 10-Q Report for the quarter ended New York, NY 10105-0032
September 28, 1996
Gentlemen:
This letter is written to meet the requirements of Regulation S-K calling for a
letter from a registrant's independent accountants whenever there has been a
change in accounting principle or practice.
We have been informed that, as of July 1, 1996, the Company changed from the
last-in, first-out ("LIFO") method of accounting for certain inventories to the
first-in, first-out ("FIFO") method. According to the management of the Company,
this change was made for the following reasons: (1) it will improve the
measurement of operating results in light of reduced inflation rates; (2) it
will enhance the comparability of the Company's financial statements by changing
to the predominant method utilized in the industry; and (3) the change to FIFO
will allow the Company to reduce the costs incurred in administering the current
LIFO system and avoid the expenditure of future costs to design and implement a
LIFO cost accounting system in connection with the current modification and
upgrade of the Company's management information system.
A complete coordinated set of financial and reporting standards for determining
the preferability of accounting principles among acceptable alternative
principles has not been established by the accounting profession. Thus, we
cannot make an objective determination of whether the change in accounting
described in the preceding paragraph is to a preferable method. However, we have
reviewed the pertinent factors, including those related to financial reporting,
in this particular case on a subjective basis, and our opinion stated below is
based on our determination made in this manner.
We are of the opinion that the Company's change in method of accounting is to an
acceptable alternative method of accounting, which, based upon the reasons
stated for the change and our discussions with you, is also preferable under the
circumstances in this particular case. In arriving at this opinion, we have
relied on the business judgment and business planning of your management.
We have not audited the application of this change to the financial statements
of any period subsequent to December 31, 1995. Further, we have not examined and
do not express any opinion with respect to your financial statements for the
nine months ended September 28, 1996.
Very truly yours,
/s/ Arthur Andersen LLP
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Sep-28-1996
<CASH> 1,524
<SECURITIES> 0
<RECEIVABLES> 73,811
<ALLOWANCES> 5,620
<INVENTORY> 74,843
<CURRENT-ASSETS> 162,072
<PP&E> 207,670
<DEPRECIATION> 147,366
<TOTAL-ASSETS> 237,799
<CURRENT-LIABILITIES> 79,210
<BONDS> 59,859
0
0
<COMMON> 130
<OTHER-SE> 78,897
<TOTAL-LIABILITY-AND-EQUITY> 237,799
<SALES> 337,138
<TOTAL-REVENUES> 337,138
<CGS> 224,861
<TOTAL-COSTS> 317,804
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,457
<INCOME-PRETAX> 14,877
<INCOME-TAX> 6,399
<INCOME-CONTINUING> 8,478
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,478
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.65
</TABLE>
