================================================================================
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 April 3, 1999
Commission File Number 0-16960
---------------
THE GENLYTE GROUP INCORPORATED
AND SUBSIDIARIES
4360 BROWNSBORO ROAD
LOUISVILLE, KY 40207
(502) 893-4600
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 MAY 7, 1999
WAS 13,600,618.
================================================================================
<PAGE>
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED APRIL 3, 1999
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income for the three months ended
April 3, 1999 and April 4, 1998..............................1
Consolidated Balance Sheets as of
April 3, 1999 and December 31, 1998..........................2
Consolidated Statements of Cash Flows for the three
months ended April 3, 1999 and April 4, 1998.................3
Notes to Consolidated Interim Financial Statements...............4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS .......................7
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS...........................................10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...........................10
Signatures..........................................................11
Exhibit 27: Financial Data Schedule.................................12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED APRIL 3, 1999 AND APRIL 4, 1998
(000'S OMITTED, EXCEPT PER SHARE DATA)
(Unaudited)
1999 1998
----------------------------
Net sales $ 237,476 $ 130,124
Cost of sales 160,098 85,648
----------------------------
Gross profit 77,378 44,476
Selling and administrative expenses 58,466 32,851
----------------------------
Operating profit 18,912 11,625
Interest expense, net 1,196 844
Minority interest 5,514 --
----------------------------
Income before income taxes 12,202 10,781
Income tax provision 5,247 4,635
----------------------------
Net income $ 6,955 $ 6,146
============================
Earnings per share
Basic $ 0.50 $ 0.46
Diluted $ 0.50 $ 0.45
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF APRIL 3, 1999 AND DECEMBER 31, 1998
(000'S OMITTED)
<TABLE>
<CAPTION>
(Unaudited)
04/03/99 12/31/98
----------------------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 7,282 $ 8,555
Accounts receivable, less allowance for doubtful
accounts of $11,778 and $10,907, respectively 162,297 146,167
Inventories
Raw materials and supplies 43,562 43,167
Work in process 15,192 14,529
Finished goods 84,391 79,308
----------------------------
Total inventories 143,145 137,004
Other current assets 25,761 25,520
----------------------------
Total current assets 338,485 317,246
Plant and equipment, at cost 312,443 309,032
Less: accumulated depreciation and amortization 208,167 203,353
----------------------------
Net plant and equipment 104,276 105,679
Cost in excess of net assets of acquired businesses 58,227 57,944
Other assets 21,550 20,733
----------------------------
Total assets $ 522,538 $ 501,602
============================
LIABILITIES & STOCKHOLDERS' INVESTMENT:
Current Liabilities:
Short-term borrowings $ 16,076 $ 1,932
Accounts payable 77,360 73,852
Accrued expenses and current portion of long-term debt 56,486 61,430
----------------------------
Total current liabilities 149,922 137,214
Long-term debt 55,893 60,852
Deferred income taxes 30,031 30,293
Minority interest 90,142 84,649
Other liabilities 22,614 22,362
----------------------------
Total liabilities 348,602 335,370
Stockholders' Investment:
Common stock 136 136
Additional paid-in capital 16,490 16,207
Retained earnings 127,481 120,526
Accumulated other comprehensive income 29,829 29,363
----------------------------
Total stockholders' investment 173,936 166,232
----------------------------
Total liabilities & stockholders' investment $ 522,538 $ 501,602
============================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 3, 1999 AND APRIL 4, 1998
(000'S OMITTED)
(Unaudited)
1999 1998
-------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,955 $ 6,146
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 5,887 3,028
Loss (gain) from disposal of plant and equipment 623 --
(Increase) decrease in:
Accounts receivable (16,130) (8,013)
Inventories (6,141) (3,190)
Other current assets (241) (2,587)
Other assets (1,713) (144)
Increase (decrease) in:
Accounts payable and accrued expenses (1,436) (2,078)
Deferred income taxes (262) 3
Minority interest 5,493 --
Other liabilities 252 122
Minimum pension liability 230 --
All other, net (573) --
-------------------------
Net cash used in operating activities (7,056) (6,713)
CASH FLOWS FROM INVESTING ACTIVITIES: -------------------------
Purchases of plant and equipment (4,335) (2,501)
CASH FLOWS FROM FINANCING ACTIVITIES: -------------------------
Stock options exercised 283 240
Increase in debt, net 9,185 8,294
-------------------------
Net cash provided by financing activities 9,468 8,534
-------------------------
Effect of exchange rate changes on cash and cash equivalents 650 260
-------------------------
Net increase (decrease) in cash and cash equivalents (1,273) (420)
Cash and cash equivalents at beginning of period 8,555 1,654
-------------------------
Cash and cash equivalents at end of period $ 7,282 $ 1,234
=========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 960 $ 710
Income taxes $ 837 $ 476
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
3
<PAGE>
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
AS OF APRIL 3, 1999
(000'S OMITTED, EXCEPT PER SHARE DATA)
(Unaudited)
1. BASIS OF PRESENTATION
Throughout this Form 10-Q, the term "Company" as used herein refers to
The Genlyte Group Incorporated, including the consolidation of The
Genlyte Group Incorporated and Genlyte Thomas Group LLC. The term
"Genlyte" as used herein refers only to The Genlyte Group Incorporated.
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.
These results include the operations of Genlyte Thomas Group LLC for
the first quarter of 1999 but not for the first quarter of 1998. See
Note 5 regarding the formation of Genlyte Thomas Group LLC.
The results of operations for the three-month period ended April 3,
1999 are not necessarily indicative of the results to be expected for
the full year.
2. USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from these estimates.
3. COMPREHENSIVE INCOME
During the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 130 "Reporting Comprehensive
Income." The Statement establishes standards for the reporting and
display of comprehensive income and its components. For the three
months ended April 3, 1999 and April 4, 1998 total comprehensive income
was $7,421 and $6,406, respectively.
4
<PAGE>
4. EARNINGS PER SHARE
The calculation of the average common shares outstanding assuming
dilution for the three months ended April 3, 1999 and April 4, 1998
follows:
1999 1998
---------- ---------
Average common shares outstanding 13,789 13,507
Incremental common shares issuable:
Stock option plans -- 105
---------- ---------
Average common shares outstanding
assuming dilution 13,789 13,612
========== =========
5. FORMATION OF GENLYTE THOMAS GROUP LLC
On August 30, 1998, Genlyte and Thomas Industries Inc. ("Thomas")
completed the combination of the business of Genlyte with the lighting
business of Thomas ("Thomas Lighting"), in the form of a limited
liability company named Genlyte Thomas Group LLC ("Genlyte Thomas").
Genlyte Thomas manufactures, sells, markets and distributes consumer,
commercial, industrial and outdoor lighting fixtures and controls.
Genlyte contributed substantially all of its assets and liabilities to
Genlyte Thomas and received a 68% interest in Genlyte Thomas. Thomas
contributed substantially all of its assets and certain related
liabilities comprising Thomas Lighting and received a 32% interest in
Genlyte Thomas.
On an unaudited pro forma basis, assuming the business combination
described above had occurred at the beginning of the three-month period
ended April 4, 1998, the results would have been:
Three Months Ended
April 3, 1999 April 4, 1998
------------- -------------
Net sales $ 237,476 $ 227,879
Net income $ 6,955 $ 5,428
Earnings per share $ 0.50 $ 0.40
The pro forma results do not purport to state exactly what the
Company's results of operations would have been had the business
combination in fact been consummated as of the assumed date.
5
<PAGE>
6. SEGMENT REPORTING
During the fourth quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of
an Enterprise and Related Information" (SFAS No. 131). The Company's
reportable operating segments include the Commercial Segment, the
Residential Segment, and the Industrial and Other Segment.
Inter-segment sales are eliminated in consolidation and therefore not
presented in the table below. For the three months ended April 3, 1999
and April 4, 1998:
Industrial
Commercial Residential and Other Total
--------------------------------------------------
1999
Net sales $ 168,513 $ 34,910 $ 34,053 $ 237,476
Operating profit $ 14,589 $ 1,386 $ 2,937 $ 18,912
1998
Net sales $ 98,427 $ 18,701 $ 12,996 $ 130,124
Operating profit $ 9,215 $ 1,095 $ 1,315 $ 11,625
The Company has operations throughout North America. Information about
the Company's operations by geographical area for the three months
ended April 3, 1999 and April 4, 1998 follows. Foreign balances
represent primarily Canada and some Mexico.
United States Foreign Total
--------------------------------------------
1999
Net sales $ 209,425 $ 28,051 $ 237,476
Operating profit $ 16,989 $ 1,923 $ 18,912
1998
Net sales $ 112,937 $ 17,187 $ 130,124
Operating profit $ 10,292 $ 1,333 $ 11,625
No Material changes have occurred in total assets since December 31,
1998.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
COMPARISON OF FIRST QUARTER 1999 TO FIRST QUARTER 1998
Net sales for the first quarter of 1999 were $237.5 million, an increase of 82.5
percent from the first quarter of 1998. Net income for the first quarter of 1999
was $6,955 ($.50 per share), a 13.2 percent increase over the first quarter 1998
net income of $6,146 ($.46 per share). Sales and earnings for the first quarter
of 1999 include the consolidated results of Genlyte Thomas, but earnings are
reduced by Thomas' minority interest. Net sales on a comparable division basis
grew 4.2 percent for the first quarter over last year as the commercial
construction markets that the Company serves continued their year-to-year growth
for 1999.
Cost of sales for the first quarter of 1999 was 67.4 percent of net sales,
compared to 65.8 percent in the first quarter of 1998. This increase results
from the higher mix of commodity fluorescent products in the 1999 first quarter
from Genlyte Thomas sales compared to the former Genlyte divisions. Selling and
administrative expenses decreased to 24.6 percent of sales in the first quarter
of 1999 from 25.2 percent in the first quarter of 1998 because expenses of the
corporate headquarters were lower in 1999 and sales were 82.5 percent higher.
Operating profit increased 62.7 percent to $18.9 million in the first quarter of
1999 from $11.6 million in the first quarter of 1998 because of the consolidated
results of Genlyte Thomas.
Interest expense was $1.2 million in the first quarter of 1999, compared to $.8
million in the first quarter of 1998, primarily because of an increase in
short-term borrowings to fund an increase in working capital related to the
formation of Genlyte Thomas. Minority interest of $5.5 million represents the 32
percent interest of Thomas in the earnings of Genlyte Thomas for the first
quarter of 1999.
The effective tax rate was approximately 43.0 percent for the first quarters of
both 1999 and 1998.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased to $7.3 million at April 3, 1999, compared
to $8.6 million at December 31, 1998. Total debt increased to $72.0 million at
April 3, 1999 compared to $62.8 million at December 31, 1998. Working capital at
April 3, 1999 was approximately $189 million, compared to $180 million at
December 31, 1998. Due to the seasonal requirements of the Company's business,
accounts receivable and inventory increased during the first quarter, resulting
in a need for additional short-term borrowings. Cash used in operating
activities during the first quarter was $7.1 million, primarily because of the
increases in accounts receivable and inventory, compared to cash used in
operating activities of $6.7 million in the first quarter last year. Cash used
in investing activities was $4.3 million for plant and equipment purchases; cash
provided by financing activities was $9.5 million, reflecting a $5.0 million
decrease in long-term debt and a $14.2 million increase in short-term
borrowings. The Company believes that currently available cash and borrowing
facilities, combined with internally generated funds, should be sufficient to
fund capital expenditures as well as any increase in working capital required to
accommodate business needs in the foreseeable future.
Genlyte Thomas has a $125 million revolving credit facility that matures in
August 2003. Total borrowings under this facility at April 3, 1999 were $23
million, classified as long-term. The Company's remaining long-term debt at
April 3, 1999 consisted of $22.3 million payable to Thomas, $10.5 million in
industrial revenue bonds and $.1 million other.
YEAR 2000 ISSUES
All divisions in the Company have established and are in the process of
executing plans to prepare the Company's information technology (IT) systems and
non-information technology systems with embedded technology (ET) for the year
2000 issue. These plans encompass the use of both internal and external
resources to identify, correct and test systems for year 2000 readiness.
External resources include nationally recognized consulting firms and other
specialized technology resource providers.
The identification and documentation of affected IT and ET components are
substantially complete. This inventory includes mainframe hardware and software,
personal computer hardware and software, communications hardware and software,
and various other devices controlled by ET (security systems, telephone systems,
HVAC systems, manufacturing machinery, etc.) which may contain date processing
functions. The assessment of this inventory with regard to year 2000 readiness
is currently underway. The Company has determined or plans to determine the
status of these components with regard to year 2000 readiness by contacting
third party providers of these components or performing analyses utilizing
internal or external resources. All components identified to date as non-year
2000 compliant have either been made compliant or are in the process of being
replaced or upgraded to be made compliant.
The Company is also currently addressing the year 2000 readiness of third
parties whose business interruption could have a material negative impact on the
Company's business. These parties include customers, raw material vendors and
other service providers. Customers, vendors and service providers have or will
be contacted to determine their readiness.
8
<PAGE>
Through April 3, 1999 the Company has spent approximately $2.3 million on
external resources, hardware and software required to address the year 2000
issue. Of this amount, approximately $.4 million was spent in the first quarter
of 1999. It is estimated that an additional $2.0 million will be spent in the
remainder of 1999 to attain substantial year 2000 readiness.
Several divisions of the Company plan to replace customer service information
systems that are not year 2000 ready with systems that are year 2000 ready. As
of April 3, 1999 one division has implemented the replacement system. The
inherent complexity of these systems makes the exact implementation dates of the
remaining replacement systems somewhat uncertain. In order to compensate for
this uncertainty, the Company is in the process of executing contingency plans
for the possibility that the existing customer service systems targeted for
replacement would fail before the implementation of the new systems. A portion
of the estimated additional expenditures above is for the execution of these
contingency plans.
Despite diligent preparation, unanticipated third-party failures, more general
public infrastructure failures or failure to successfully conclude the Company's
remediation efforts as planned could have a material adverse impact on results
of operations, financial condition and/or cash flows in 1999 and beyond.
However, management believes the execution of this plan will not cause
significant disruptions in the Company's business.
The statements contained in the foregoing year 2000 readiness disclosure are
subject to certain protection under the Year 2000 Information and Readiness
Disclosure Act.
FORWARD-LOOKING STATEMENTS
The statements in this document with respect to future results, future
expectations, and plans for future activities may be regarded as forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, and actual results may differ materially from those currently expected.
The Company makes no commitment to disclose any revision to forward-looking
statements, or any facts, events or circumstances after the date hereof that may
bear upon forward-looking statements.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At Genlyte's Annual Meeting of Stockholders held April 21, 1999, the following
actions were taken by stockholders:
Avrum I. Drazin was re-elected to the Board of Directors with 10,976,727 shares
voted for and 60,167 shares withheld.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K: None
10
<PAGE>
SIGNATURES
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: 5-14-99 /s/ LARRY K. POWERS
---------------------- --------------------------------------
Larry K. Powers
President and Chief Executive
Officer
Date: 5-14-99 /s/ WILLIAM G. FERKO
---------------------- --------------------------------------
William G. Ferko
V.P. Finance-CFO & Treasurer
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000833076
<NAME> Genlyte Group, Inc.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> APR-03-1999
<EXCHANGE-RATE> 1
<CASH> 7,282
<SECURITIES> 0
<RECEIVABLES> 162,297
<ALLOWANCES> 11,778
<INVENTORY> 143,145
<CURRENT-ASSETS> 338,485
<PP&E> 312,443
<DEPRECIATION> 208,167
<TOTAL-ASSETS> 522,538
<CURRENT-LIABILITIES> 149,922
<BONDS> 55,893
0
0
<COMMON> 136
<OTHER-SE> 173,800
<TOTAL-LIABILITY-AND-EQUITY> 522,538
<SALES> 237,476
<TOTAL-REVENUES> 237,476
<CGS> 160,098
<TOTAL-COSTS> 218,564
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,196
<INCOME-PRETAX> 12,202
<INCOME-TAX> 5,247
<INCOME-CONTINUING> 6,955
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,955
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
</TABLE>
