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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 July 4, 1998
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 JULY 4, 1998
WAS 13,598,740.
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<PAGE>
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JULY 4, 1998
INDEX
PART I. FINANCIAL INFORMATION
Consolidated Statements of Income for the three
months ended July 4, 1998 and June 28, 1997.......................1
Consolidated Statements of Income for the six
months ended July 4, 1998 and June 28, 1997.......................2
Consolidated Balance Sheets as of
July 4, 1998 and December 31, 1997................................3
Consolidated Statements of Cash Flows for the six
months ended July 4, 1998 and June 28, 1997.......................4
Notes to Consolidated Interim Financial Statements. ................5
Management's Discussion and Analysis of
Results of Operations and Financial Condition ....................7
PART II. OTHER INFORMATION
Item 1 Legal Proceedings...........................................9
Item 6 Exhibits and Reports on Form 8-K............................9
Signature..........................................................10
<PAGE>
PART 1 FINANCIAL INFORMATION
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JULY 4, 1998 AND JUNE 28, 1997
(000'S OMITTED, EXCEPT PER SHARE DATA)
(Unaudited)
1998 1997
================================================================================
Net Sales $130,327 $120,700
Cost of Sales 84,634 79,188
- --------------------------------------------------------------------------------
Gross Profit 45,693 41,512
Selling and Administrative Expenses 33,354 32,126
- --------------------------------------------------------------------------------
Operating Profit 12,339 9,386
Interest Expense, net 980 1,164
- --------------------------------------------------------------------------------
Income Before Income Taxes 11,359 8,222
Provision for Income Taxes 4,884 3,533
- --------------------------------------------------------------------------------
Net Income $ 6,475 $ 4,689
- --------------------------------------------------------------------------------
Earnings per Share
Basic $ 0.47 $ 0.35
Diluted $ 0.47 $ 0.35
================================================================================
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 SIX MONTHS ENDED JULY 4, 1998 AND JUNE 28, 1997
(000'S OMITTED, EXCEPT PER SHARE DATA)
(Unaudited)
1998 1997
================================================================================
Net Sales $260,451 $233,998
Cost of Sales 170,282 154,247
- --------------------------------------------------------------------------------
Gross Profit 90,169 79,751
Selling and Administrative Expenses 66,205 63,262
- --------------------------------------------------------------------------------
Operating Profit 23,964 16,489
Interest Expense, net 1,824 2,135
- --------------------------------------------------------------------------------
Income Before Income Taxes 22,140 14,354
Provision for Income Taxes 9,519 6,172
- --------------------------------------------------------------------------------
Net Income $ 12,621 $ 8,182
- --------------------------------------------------------------------------------
Earnings per Share
Basic $ 0.93 $ 0.61
Diluted $ 0.92 $ 0.61
================================================================================
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 JULY 4, 1998 AND DECEMBER 31, 1997
(000'S OMITTED)
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(unaudited)
4/4/98 12/31/97
- --------------------------------------------------------------------------------
ASSETS:
- --------------------------------------------------------
Current Assets:
Cash and Cash Equivalents $ 327 $ 1,654
Accounts Receivable, less allowance for doubtful
account of $6,805 and $8,222, respectively 86,073 73,220
Inventories
Raw materials and supplies 35,099 32,324
Work in process 8,184 5,613
Finished goods 39,608 42,910
- --------------------------------------------------------------------------------
Total Inventories 82,891 80,847
- --------------------------------------------------------------------------------
Other Current Assets 18,320 18,385
- --------------------------------------------------------------------------------
Total Current Assets 187,611 174,106
- --------------------------------------------------------------------------------
Property, Plant & Equipment 219,680 213,141
Less: accumulated depreciation and amortization
on plant and equipment 158,700 153,523
- --------------------------------------------------------------------------------
Net Property, Plant & Equipment 60,980 59,618
- --------------------------------------------------------------------------------
Cost in excess of net assets of purchased business 12,528 12,434
Other Assets 7,856 7,870
- --------------------------------------------------------------------------------
TOTAL ASSETS $ 268,975 $ 254,028
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LIABILITIES & STOCKHOLDERS' INVESTMENT
- --------------------------------------------------------
Current Liabilities:
Short-Term Borrowings $ 1,000 $ --
Current Maturities of Long-term Debt 58 $ --
Accounts Payable 53,721 49,433
Accrued Expenses 37,263 42,712
- --------------------------------------------------------------------------------
Total Current Liabilities 92,042 92,145
- --------------------------------------------------------------------------------
Long-term Debt 35,755 32,785
Deferred Income Taxes 6,824 6,828
Other Liabilities 17,782 18,541
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Total Liabilities 152,403 150,299
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Stockholders' Investment
Common Stock 136 135
Paid-in Capital 13,474 12,889
Accumulated Other Comprehensive Income (3,425) (3,061)
Retained Earnings 106,387 93,766
- --------------------------------------------------------------------------------
Total Stockholders' Investment 116,572 103,729
- --------------------------------------------------------------------------------
TOTAL LIABILITIES & STOCKHOLDERS' INVESTMENT $ 268,975 $ 254,028
================================================================================
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 SIX MONTHS ENDED JULY 4, 1998 AND JUNE 28, 1997
(000'S OMITTED) (Unaudited)
<TABLE>
<CAPTION>
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1998 1997
- ------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
- ---------------------------------------------------------------------
<S> <C> <C>
Net Income $ 12,621 $ 8,182
Adjustments to reconcile net income to net cash
flows provided (used) by operating activities:
Depreciation and amortization 6,461 6,099
(Increase) decrease in:
Accounts receivable (12,853) (11,768)
Inventories (2,044) (922)
Other current assets 65 (1,847)
Other assets (80) (4,966)
Increase (decrease) in:
Accounts payable and accrued expenses (1,161) (10,418)
Other liabilities (759) 2,848
Deferred income taxes (4) 2,983
- ------------------------------------------------------------------------------------------
Net cash flows provided (used in) by operating activities 2,246 (9,809)
- ------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- ------------------------------------------------------------------------------------------
Purchase of plant and equipment, net of disposal (7,823) (6,204)
- ------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------------------------------------------------------------
Options exercised 586 325
Increase in debt to outsiders 4,028 14,133
- ------------------------------------------------------------------------------------------
Net cash flows provided by financing activities 4,614 14,458
- ------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES (364) (187)
- ------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (1,327) (1,742)
Cash and cash equivalents at beginning of period 1,654 2,895
- ------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 327 $ 1,153
- ------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - CASH PAID DURING
THE SIX MONTH PERIOD FOR:
- ------------------------------------------------------------------------------------------
Interest $ 1,504 $ 1,558
- ------------------------------------------------------------------------------------------
Income taxes $ 8,972 $ 10,439
==========================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
4
<PAGE>
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
AS OF JULY 4, 1998
(000'S OMITTED)(Unaudited)
1. Basis of Presentation
The financial information included is unaudited; however, such
information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim
periods.
The results of operations for the six month period ended July 4,
1998 are not necessarily indicative of the results to be expected
for the full year.
2. During the first quarter of 1998, the Company adopted the
Statement of Financial Accounting Standards No. 130 "Reporting
Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 establishes
standards for the reporting and display of comprehensive income
and its components in a full set of general purpose financial
statements. Comprehensive income includes net income and other
adjustments to income, which for the Company, primarily comprises
foreign currency translation adjustments.
For the three months ended July 4, 1998 and June 28, 1997
1998 1997
------- -------
Net Income $ 6,475 $ 4,689
Foreign currency translation
adjustments net of tax (624) (28)
------- -------
Comprehensive Income $ 5,851 $ 4,661
For the three months ended July 4, 1998 and June 28, 1997
1998 1997
------- -------
Net Income $ 12,621 $ 8,182
Foreign currency translation
adjustments net of tax (364) (187)
-------- -------
Comprehensive Income $ 12,257 $ 7,995
3. During the fourth quarter of 1997, the Company adopted Statement
of Financial Accounting Standards No. 128 "Earnings Per Share"
("SFAS No. 128"). SFAS No. 128 requires the presentation of basic
earnings per share and diluted earnings per share. "Basic
earnings per share" represents net income divided by the
weighted-average number of common shares outstanding during the
period. "Diluted earnings per share" represents net income
divided by the weighted-average number of common shares
outstanding during the period adjusted for the incremental
dilution of outstanding stock options and is consistent with the
Company's historical presentation.
5
<PAGE>
For the three months ended July 4, 1998 and June 28, 1997
1998 1997
------ ------
Average common shares
outstanding 13,666 13,340
Incremental common shares issuable:
Stock option plans 33 33
------ ------
Average common shares
outstanding assuming dilution 13,699 13,373
For the three months ended July 4, 1998 and June 28, 1997
1998 1997
------ ------
Average common shares
outstanding 13,633 13,312
Incremental common shares issuable:
Stock option plans 21 45
------ ------
Average common shares
outstanding assuming dilution 13,654 13,357
4. On April 28, 1998, The Company entered into definitive agreements
with Thomas Industries Inc. ("Thomas") to combine the lighting
business of Thomas with the business of Genlyte through a Joint
Venture to be called Genlyte Thomas Group LLC. Genlyte will
contribute to the Joint Venture substantially all of its assets
in exchange for a 68% interest in the Joint Venture and the Joint
Venture's assumption of substantially all of its liabilities.
Thomas will contribute to the Joint Venture substantially all of
its lighting assets in exchange for a 32% interest in the Joint
Venture and the Joint Venture's assumption of certain
liabilities. Genlyte and Thomas will continue to exist as
separate publicly traded companies. Genlyte will consolidate the
results of the Joint Venture. Thomas' interest in the Joint
Venture will be reflected in Genlyte's consolidated balance sheet
as a minority interest liability.
The assets contributed by Genlyte to the Joint Venture will be
reflected at their historical cost. The contribution of Genlyte's
business to the Joint Venture will trigger the recognition of a
one-time gain of approximately $60 million in the period in which
the Transaction occurs. Such contribution includes, for
accounting purposes, a sale of 32% of Genlyte's contributed
business to Thomas and the resultant gain represents the excess
of fair value over book value for the 32% of Genlyte's
contributed business.
Genlyte will account for the contribution of Thomas' lighting
business to the Joint Venture as a purchase in accordance with
Accounting Principles Board Opinion No. 16. Purchase accounting
for the combination is similar to the accounting treatment used
in the acquisition of any asset group. Although Thomas will
retain a 32% interest in the Joint Venture, Thomas' contributed
business will be reflected at its aggregate fair value in the
financial statements of the Joint Venture. The fair value of
Thomas's contributed business was mutually determined by the
parties and was the basis for determining the ownership interests
to be issued in the Joint Venture.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS:
COMPARISON OF SECOND QUARTER 1998 TO SECOND QUARTER 1997
Genlyte's net sales for the second quarter of 1998 were $130.3 million, a $9.6
million, or 8.0 percent increase from the second quarter of 1997. The majority
of Genlyte's major product lines grew during the second quarter as a result of a
strong commercial construction market and increased demand for more commercial
space in the markets Genlyte serves. Net income increased $1.8 million from the
second quarter of 1997 to $6.5 million and earnings per share increased 34.0
percent from $.35 to $.47.
Cost of sales for the second quarter of 1998, when compared to the second
quarter of 1997, decreased to 64.9 percent of sales from 65.6 percent as the
company continued its focus on improving productivity and moving production to
its lower cost facilities. Selling, general and administrative expenses
decreased during the second quarter of 1998 to 25.6 percent of sales, down from
26.6 percent of sales for the comparable period in 1997. Operating profit
increased in the second quarter of 1998 to $12.3 million, a 31.5 percent
improvement from the second quarter of 1997.
Interest expense amounted to $1.0 million, representing a decrease of $0.2
million, or 15.8 percent, from the comparable quarter of 1997. This decrease was
attributable to lower average borrowings.
The effective tax rate was approximately 43.0 percent for the second quarters of
both 1998 and 1997.
COMPARISON OF FIRST SIX MONTHS 1998 TO FIRST SIX MONTHS 1997
During the first six months of 1998, Genlyte's net sales were $260.5 million, an
increase of 11.3 percent compared to $234.0 million during the first six months
of 1997. Net income increased 54.2 percent to $12.6 million from $8.2 million in
1997 and earnings per share increased 52.4 percent from $.61 to $.92.
Cost of sales for the first six months of 1998 was 65.4 percent of sales,
compared to 65.9 percent of sales from the comparable period in 1997, reflecting
a continual reduction in excess capacity and improved product mix. Selling,
general and administrative expenses for the first six months of 1998 was 25.4
percent of sales as compared to 27.0 percent during the first six months of
1997.
Operating profit increased in the first six months of 1998 to $23.9 million, a
45.3 percent improvement from the comparable period of 1997. Most of the
divisions' performance exceeded that of 1997 due to an improved product mix and
a favorable impact of the facility optimization plan.
Interest expense decreased to $1.8 million from $2.1 million for the comparable
period of 1997. The decrease was due to lower average borrowings.
The effective tax rate was approximately 43.0 percent for the first two quarters
of 1998 and 1997.
7
<PAGE>
FINANCIAL CONDITION:
Working capital for the end of second quarter of 1998 was 18.3 percent of sales
compared to 18.5 percent for the end of year 1997.
Short term borrowings increased approximately $1.0 million and long-term debt
has increased by $3.0 million since year end 1997 primarily due to seasonal cash
usage. 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.
8
<PAGE>
PART II OTHER INFORMATION
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 Court in New York in August
1993, which have been permanently enjoined from proceedings 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 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 moved to
withdraw the case from bankruptcy court to the Southern District of New York
Federal District Court. The case is now pending before the Federal District
Court. Genlyte and other defendants filed motions to dismiss the complaint and
motions for summary judgment on statute of limitations grounds on September 15,
1997, which were fully briefed and presented to the Court on December 15, 1997.
Oral argument was conducted on the summary judgment motion on February 13, 1998
and Genlyte is awaiting decisions of the Court on the other motions. Discovery
has been stayed until further order of the Court. Genlyte believes that it has
meritorious defenses to the adversary proceeding and will defend said action
vigorously.
Additionally, the company is a defendant and/or potentially responsible party,
with other companies, in actions and proceedings under state and Federal
environment laws including the Federal Comprehensive Environmental Response
Compensation and Liability Act, as amended ("Superfund"). Such actions include,
but are not limited to, the Keystone Sanitation Landfill site located in
Pennsylvania, in which the United States Environmental Protection Agency has
sought remedial action and reimbursement for past costs.
Management does not believe that the disposition of the lawsuits and/or
proceedings will have a material effect on the Company's financial condition or
results of operations.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit 27: Requirements for the Format and Input of Financial Data
Schedules
(b) A Form 8-K was filed on April 29, 1998, announcing that the Board of
Directors of The Genlyte Group Incorporated and Thomas Industries Inc.
unanimously approved a definitive agreement for a transaction that creates a
lighting joint venture between the two companies. Under the agreement, Genlyte
will contribute substantially all of its assets and liabilities to the joint
venture, which will be in the form of a limited liability company. Thomas will
contribute substantially all of its lighting assets and related liabilities to
the joint venture. Genlyte will own a 68% interest in the joint venture and
Thomas will own a 32% interest. The transaction is conditioned upon the
approvals of shareholders of each company and other customary closing conditions
and is anticipated to be completed in the third quarter of 1998.
9
<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: July 31, 1998 /s/ NEIL M. BARDACH
--------------------------------
Neil M. Bardach
VP Finance-- CFO & Treasurer
10
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<NAME> Genlyte Group, Inc.
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
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136
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