<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
____ EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
1998
or
____ 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: 0-22352
---------------
HOLOPHANE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 31-1288751
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 EAST BROAD STREET
SUITE 1400
COLUMBUS, OHIO
43215
(Address of principal executive offices)
(614) 224-3134
Registrant's telephone number, including area code
---------------
Indicate by check mark whether the registrant (1) has filed all
reports to be filed by Section 13 or Section 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 registrant's Common Stock as of
September 30, 1998: 10,752,341
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
HOLOPHANE CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
INDEX
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Condensed Consolidated Statements of Income for the three months
ended September 30, 1998 and September 30, 1997 (unaudited).......................... 1
Condensed Consolidated Statements of Income for the nine months
ended September 30, 1998 and September 30, 1997 (unaudited).......................... 2
Condensed Consolidated Balance Sheets as of September 30, 1998
(unaudited) and December 31, 1997.................................................... 3
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1998 and September 30, 1997
(unaudited).......................................................................... 4
Condensed Consolidated Statement of Stockholders' Equity as of
September 30, 1998 (unaudited)....................................................... 5
Notes to Condensed Consolidated Financial Statements................................. 6
Management Discussion and Analysis................................................... 7 - 9
PART II. OTHER INFORMATION.................................................................... 10
Signature............................................................................ 11
</TABLE>
<PAGE>
HOLOPHANE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Month Period Ended
---------------------------------------
Sept 30, Sept 30,
1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $59,730 $56,437
Cost of Goods Sold 36,001 34,124
---------------- ----------------
Gross Margin 23,729 22,313
Selling and Administrative Expenses 12,367 10,763
Research and Development 1,599 1,432
Other Expenses (93) 6
---------------- ----------------
Operating Income 9,856 10,112
Interest Expense 438 428
Interest Income (87) (124)
---------------- ----------------
Income Before Income Taxes 9,505 9,808
Provision for Income Taxes 3,498 3,647
---------------- ----------------
Net Income $6,007 $6,161
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share $0.56 $0.55
- -----------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share $0.54 $0.53
- -----------------------------------------------------------------------------------------------------------------------
Weighted Average Number of Shares Outstanding:
Basic 10,808 11,290
Diluted 11,186 11,665
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
HOLOPHANE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands except per share data)
<TABLE>
<CAPTION>
Nine Month Period Ended
---------------------------------------
Sept 30, Sept 30,
1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $158,430 $151,452
Cost of Goods Sold 96,606 92,503
---------------- ----------------
Gross Margin 61,824 58,949
Selling and Administrative Expenses 34,405 32,144
Research and Development 4,602 4,426
Other Expenses 596 389
---------------- ----------------
Operating Income 22,221 21,990
Interest Expense 1,142 1,335
Interest Income (276) (317)
---------------- ----------------
Income Before Income Taxes 21,355 20,972
Provision for Income Taxes 7,909 7,783
---------------- ----------------
Net Income $13,446 $13,189
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share $1.23 $1.16
- -----------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share $1.19 $1.13
- -----------------------------------------------------------------------------------------------------------------------
Weighted Average Number of Shares Outstanding:
Basic 10,915 11,355
Diluted 11,291 11,711
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
HOLOPHANE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
September 30 December 31
1998 1997
- --------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- --------------------------------------------------------------------------
Cash and Equivalents $ 6,912 $ 11,709
Receivables 34,822 29,903
Inventory 17,296 12,651
Other Current Assets 3,641 3,988
- --------------------------------------------------------------------------
TOTAL CURRENT ASSETS 62,671 58,251
- --------------------------------------------------------------------------
Plant, Property and Equipment, Net 48,852 42,102
Intangibles 22,127 21,285
Other Assets 5,758 5,158
- --------------------------------------------------------------------------
TOTAL ASSETS $139,408 $126,796
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------
Current Liabilities $ 25,592 $24,912
Current Portion of Long Term Debt 304 6,610
Long Term Debt 24,315 12,964
Other Long Term Liabilities 8,464 7,207
Stockholders' Equity 80,733 75,103
- --------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $139,408 $126,796
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
HOLOPHANE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine Month Period Ended
-----------------------
Sept 30, Sept 30,
1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C>
Net cash flow provided by operating activities $ 16,561 $ 21,836
- ---------------------------------------------------------------------------
Investing activities:
Capital expenditures (9,826) (5,854)
Other (1,292) (675)
-------- --------
Net cash used in investing activities (11,118) (6,529)
- ---------------------------------------------------------------------------
Financing activities:
Principal payments of long term debt (55,971) (6,340)
Proceeds from long term debt 60,702 0
Payments to pre-acquisition shareholders for
declared dividend (7,350) 0
Purchase of treasury shares (8,452) (9,032)
Proceeds from the sales of treasury shares 619 101
-------- --------
Net cash used in financing activities (10,452) (15,271)
- ---------------------------------------------------------------------------
Effects of exchange rate changes on cash 212 (45)
- ---------------------------------------------------------------------------
Net increase/(decrease) in cash and equivalents (4,797) (9)
- ---------------------------------------------------------------------------
Cash and equivalents at beginning of period 11,709 8,072
- ---------------------------------------------------------------------------
Cash and equivalents at end of period $ 6,912 $ 8,063
- ---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
HOLOPHANE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
($ in thousands)
<TABLE>
<CAPTION>
Accumulated
Other Common Stock
Comprehensive Retained Comprehensive --------------------
Income Earnings Income/(Loss) Shares Amount
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $49,150 ($1,427) 11,895,861 $119
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income $13,446 13,446
Other comprehensive income, net of tax
Foreign currency translation adjustments (687)
-------
Other comprehensive income (687) (687)
-------
Comprehensive income $12,759
-------
-------
Shares used for acquisitions
Purchase of treasury shares
Stock options exercised, including related
tax benefits
- --------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1998 $62,596 ($2,114) 11,895,861 $119
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Additional Treasury Stock
Paid-in ------------------- Stockholders'
Capital Shares Amount Equity
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 $43,143 850,014 ($15,882) $75,103
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Comprehensive income
Net income 13,446
Other comprehensive income, net of tax
Foreign currency translation adjustments
Other comprehensive income (687)
Comprehensive income
Shares used for acquisitions 91 (28,675) 613 704
Purchase of treasury shares 342,555 (8,452) (8,452)
Stock options exercised, including related
tax benefits (519) (50,374) 1,138 619
- -------------------------------------------------------------------------------------------------------
Balance at September 30, 1998 $42,715 1,143,520 ($22,583) $80,733
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
HOLOPHANE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION - The condensed consolidated balance sheet as of September
30, 1998, the condensed consolidated statements of income for the three months
ended September 30, 1998 and September 30, 1997 and the condensed consolidated
statements of income, cash flows and stockholders' equity for the nine months
ended September 30, 1998 and September 30, 1997 have been prepared by the
Company, without audit. In the opinion of management, all adjustments, which
include only normal recurring adjustments, necessary to present fairly the
financial position, results of operations, changes in stockholders' equity and
changes in cash flows for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These consolidated financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's December 31, 1997 annual report on Form 10-K. The results of
operations for the nine month period ended September 30, 1998 are not
necessarily indicative of the operating results for the full year.
CLASSIFICATION OF INVENTORY
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Raw Materials $10,230 $ 7,610
Work in Process 5,702 3,850
Finished Goods 2,144 1,838
------- -------
TOTAL 18,076 13,298
Less Valuation Allowance (780) (647)
------- -------
TOTAL $17,296 $12,651
------- -------
------- -------
</TABLE>
6
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
COMPARISON OF THIRD QUARTER 1998 TO THIRD QUARTER 1997
Third quarter 1998 includes the results of operations for Holophane, S.A. de
C.V., ("HSA") acquired in June 1998. The Company acquired all of the stock of
HSA, a franchisee located in Mexico City, from ID Mexico, a closely held
company. HSA has manufactured and marketed certain of the Company's lighting
products since 1962.
Worldwide net sales for the third quarter were $59.7 million, up $3.3 million,
or approximately 6% from 1997. Excluding HSA, net sales increased approximately
1%. Sales in the United States were flat compared to 1997 due in part to a
decline in export sales activity and delays in approval of the Federal
Transportation Equity Act that slowed sales of roadway products in the quarter.
Holophane Europe sales in local currency were up approximately 7% compared to
third quarter 1997. European business conditions remain mixed with weak sales in
Germany and strong sales activity in the United Kingdom and the rest of
continental Europe. Canadian sales were up over 27% in local currency compared
to 1997 due to stronger outdoor roadway business conditions.
Gross margin percent was 39.7% in 1998 compared to 39.5% in 1997. Operating
expenses were $13.9 million, up $1.7 million in the quarter. The addition of HSA
to the results of operations in 1998 increased operating expenses by $0.7
million. Expenses related to the second national sales conference/centennial
celebration, product promotion and outside purchased services account for most
of the remaining increase.
Operating income was $9.9 million, down from $10.1 million in 1997 due
principally to higher operating expenses in the current period.
Net interest expense increased less than $0.1 million in 1998 due to higher
average outstanding indebtedness but lower average interest rates.
The tax rate in 1998 was 36.8%, compared to 37.2% in 1997.
Net income and diluted earnings per share were $6.0 million and $0.54,
respectively, compared with $6.2 million and $0.53 in 1997. Average diluted
shares for the quarter were 11.2 million shares compared to 11.7 million shares
last year. Basic earnings per share were $0.56 on 10.8 million shares compared
to $0.55 on 11.3 million shares in 1997.
7
<PAGE>
COMPARISON OF FIRST NINE MONTHS 1998 TO FIRST NINE MONTHS 1997
Net sales for the 1998 period were $158.4 million, up $7.0 million or
approximately 5% from the same period in 1997. Excluding HSA, sales have
increased approximately 3% in 1998. Sales in the United States increased 2%
compared to 1997 due to strong growth in historically styled outdoor products,
somewhat offset by softness in industrial and other commercial product lines.
European sales in local currency have decreased approximately 4% compared to the
prior year period due to soft business conditions in Germany. In local currency,
Canadian sales have increased over 24% compared to 1997 due to generally
stronger business conditions.
Gross margin percent was 39.0% in 1998, up 0.1% from 1997. Operating expenses
are $39.6 million, up from $37.0 million in 1997. The addition of HSA accounts
for $0.9 million of the increase in operating and other expenses. Operating
income in 1998 was $22.2 million compared to $22.0 million in 1997. The increase
in operating income is due to higher volume, partially offset by higher
operating expenses.
Net interest expense decreased by $0.2 million in 1998 compared to 1997. The
decrease in interest expense was due to lower average outstanding indebtedness
and lower interest rates.
The tax rate in 1998 was 37.0%, compared to 37.1% in 1997.
Net income increased to $13.4 million, up from $13.2 million in 1997. Diluted
earnings per share were $1.19 on an average of 11.3 million shares, compared to
$1.13 on 11.7 million shares in 1997. Basic earnings per share were $1.23 on
10.9 million shares, up from $1.16 on 11.4 million shares in 1997.
CAPITAL RESOURCES AND LIQUIDITY
The Company has an unsecured $30 million three-year revolving credit commitment
through National City Bank. The commitment expires on April 1, 2001. At
September 30, 1998, the Company had $6 million available under this arrangement.
Cash on hand, funds generated from operations and amounts available under the
credit agreement are expected to adequately fulfill Holophane's anticipated
requirements for the remainder of 1998.
Working capital was $36.8 million as of Septenber 30, 1998, up $10.0 million
from year-end 1997. $4.4 million of the increase is the result of the
acquisition of HSA. Cash has decreased by $4.8 million and net current
maturities of $6.3 million have been reclassified to long term debt due to the
new three-year revolving credit commitment.
8
<PAGE>
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: Except for historical information contained herein, the matters set forth
in this filing constitute forward-looking statements that are dependent on
certain risks and uncertainties including such factors, among others, as weather
conditions throughout the remainder of the fiscal year, the general state of the
national and international economies and other risks detailed in the Company's
Securities Exchange Act of 1934 filings.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not Applicable.
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Holophane
has duly caused this report to be signed on its behalf of the undersigned
thereunto duly authorized.
HOLOPHANE CORPORATION
(Registrant)
DATE: October 30, 1998 /s/ Bruce A. Philp
--------------------------- -----------------------------
Bruce A. Philp
Vice President, Finance and
Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,912
<SECURITIES> 0
<RECEIVABLES> 36,277
<ALLOWANCES> 1,455
<INVENTORY> 17,296
<CURRENT-ASSETS> 62,671
<PP&E> 101,876
<DEPRECIATION> 53,024
<TOTAL-ASSETS> 139,408
<CURRENT-LIABILITIES> 25,896
<BONDS> 24,315
0
0
<COMMON> 119
<OTHER-SE> 80,614
<TOTAL-LIABILITY-AND-EQUITY> 139,408
<SALES> 158,431
<TOTAL-REVENUES> 158,431
<CGS> 96,606
<TOTAL-COSTS> 39,007
<OTHER-EXPENSES> 596
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,142
<INCOME-PRETAX> 21,355
<INCOME-TAX> 7,909
<INCOME-CONTINUING> 13,446
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,446
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.19
</TABLE>
