<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 4, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-25848
SLI, INC.
(formerly "Chicago Miniature Lamp, Inc.")
(Exact name of registration specified in charter)
OKLAHOMA 73-1412000
(State of Incorporation) (I.R.S. Employer Identification No.)
500 Chapman Street, Canton, MA 02021
(Address of principal executive offices)
781/828-2948
(Registrant's telephone number, including area code)
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the last practicable date.
As of October 4, 1998, 29,046,296 shares of Registrant's Common Stock $.01 par
value, were outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1.- FINANCIAL STATEMENTS
SLI, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
October 4, November 30,
1998 1997
---- ----
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 13,777 $ 73,416
Accounts receivable, net 150,194 140,380
Inventories 148,752 124,086
Prepaid expenses and other 20,458 12,120
--------- ---------
Total current assets 333,181 350,002
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, AT COST: 366,866 281,680
Less - Accumulated depreciation 26,369 12,030
--------- ---------
340,497 269,650
--------- ---------
OTHER ASSETS:
Goodwill, net of accumulated amortization 7,368 7,651
Other intangible assets, net of accumulated amortization 26,984 12,039
Other assets 15,976 12,319
--------- ---------
Total other assets 50,328 32,009
--------- ---------
Total assets $ 724,006 $ 651,661
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 32,937 $ 5,432
Current portion of long-term debt 8,292 9,389
Accounts payable 101,761 102,104
Accrued income taxes payable 7,298 7,855
Other accrued expenses 100,581 107,616
--------- ---------
Total current liabilities 250,869 232,396
--------- ---------
LONG-TERM DEBT, LESS CURRENT PORTION 211,634 185,434
--------- ---------
OTHER LIABILITIES:
Deferred income taxes 6,514 5,532
Other long-term liabilities 43,377 62,037
Minority interests 1,328 211
--------- ---------
Total other liabilities 51,219 67,780
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value-
Authorized - 100,000,000 shares
Issued - 29,046,296 and 29,301,979
shares at October 4,1998 and November 30, 1997 respectively 290 293
Additional paid-in capital 127,333 126,835
Common stock to be issued 8,419 --
Foreign currency translation adjustment 10,930 2,377
Retained earnings 67,966 45,218
Treasury stock at cost, 353,100 shares in 1998 (4,654) (8,672)
--------- ---------
Total stockholders' equity 210,284 166,051
--------- ---------
Total liabilities and stockholders' equity $ 724,006 $ 651,661
========= =========
</TABLE>
See accompanying notes to the condensed financial statements.
2
<PAGE> 3
SLI, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 4, October 5, October 4, October 5,
1998 1997 1998 1997
(Unaudited) Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 181,957 $ 94,622 $ 560,046 $ 190,099
Cost of products sold 125,961 66,143 388,651 133,349
--------- --------- --------- ---------
Gross margin 55,996 28,479 171,395 56,750
Selling, general and administrative expenses 42,651 20,317 129,982 35,835
Restructuring charges -- 2,838 2,838
--------- --------- --------- ---------
Operating income 13,345 5,324 41,413 18,077
Other (income) expense
Interest, net 4,477 866 11,736 (949)
Other, net 583 (117) 599 (1,573)
--------- --------- --------- ---------
Income before income taxes 8,285 4,575 29,078 20,599
Income taxes 1,624 984 5,782 6,250
--------- --------- --------- ---------
Net Income $ 6,661 $ 3,591 $ 23,296 $ 14,349
========= ========= ========= =========
Net income per common share - basic
Net income per share $ 0.23 $ 0.13 $ 0.81 $ 0.50
========= ========= ========= =========
Weighted average shares outstanding 29,016 28,609 28,934 28,735
========= ========= ========= =========
Net income per common share - diluted
Net income per share $ 0.23 $ 0.12 $ 0.77 $ 0.50
========= ========= ========= =========
Weighted average shares outstanding 29,402 28,804 30,219 28,896
========= ========= ========= =========
</TABLE>
See accompanying notes to the condensed financial statements.
3
<PAGE> 4
SLI, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
October 4, October 5,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (4,248) $ (6,453)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property,plant, and equipment (39,099) (5,746)
Proceeds from disposal of property, plant and equipment 5,975 --
Proceeds from sale of interest in subsidiary -- 1,300
Acquisitions, net of cash acquired (30,024) (161,467)
--------- ---------
Net cash used in investing activities (63,148) (165,913)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (repayments) of lines of credit 10,176 (27,793)
Proceeds from long-term debt borrowings 49,532 152,395
Payments of long-term debt (27,702) (1,450)
Repurchase of common stock (5,593) (8,672)
Exercise of common stock options 2,490 667
Capitalization of offering costs -- (230)
--------- ---------
Net cash provided by (used in) financing activities 28,903 114,917
Effect of exchange rate changes on cash (302) (188)
--------- ---------
Net increase (decrease) in cash and cash equivalents (38,795) (57,637)
Cash and cash equivalents, beginning of period 52,572 110,900
--------- ---------
Cash and cash equivalents, end of period $ 13,777 $ 53,263
========= =========
</TABLE>
See accompanying notes to the condensed financial statements.
4
<PAGE> 5
SLI, Inc. and Subsidiaries
Consolidated Notes To Financial Statements
Note 1 General
The interim consolidated financial statements presented have been
prepared by SLI, Inc. ("Company") without audit and, in the opinion of
management, reflect all adjustments of a normal recurring nature necessary for a
fair statement of (a) the results of operations and cash flows for the three and
nine month periods ended October 4, 1998 and October 5, 1997 and (b) the
financial position at October 4, 1998. Interim results are not necessarily
indicative of results for a full year.
The consolidated balance sheet presented as of November 30, 1997 has
been derived from the consolidated financial statements that have been audited
by the Company's independent public accountants. The consolidated financial
statements and notes are condensed and do not contain certain information
included in the annual financial statements and notes of the Company. The
consolidated financial statements and notes in the financial statements included
herein should be read in conjunction with the financial statements and notes
included in the Company's Form 10-K filed with the Securities and Exchange
Commission and dated March 9, 1998.
Note 2 Inventories
Inventories are stated at the lower of cost or market and include
materials, labor and overhead. Cost is determined by the first-in, first-out
(FIFO) method. Inventories consist of the following at October 4, 1998 and
November 30, 1997 (dollars in thousands):
<TABLE>
<CAPTION>
October 4, November 30,
1998 1997
---- ----
<S> <C> <C>
Raw Materials $35,482 $28,262
Work in process 18,579 14,693
Finished Goods 94,691 81,131
------- ------
$148,752 $124,086
</TABLE>
Note 3 Stock Split
On February 11, 1998, the Company approved a three-for-two stock split
of its outstanding common stock to be effected in the form of a 50% stock
dividend. The dividend was paid on March 6, 1998 to shareholders of record
February 23, 1998. All share and per share data have been adjusted to reflect
this stock split.
5
<PAGE> 6
SLI, Inc. and Subsidiaries
Consolidated Notes To Financial Statements (continued)
Note 4 Comprehensive income
As of January 5, 1998, the Company adopted Statement 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or shareholders'
equity. Statement 130 requires foreign currency translation adjustments, which
prior to adoption were reported separately in shareholders' equity to be
included in other comprehensive income.
During the three months ended October 4, 1998 and October 5, 1997,
total comprehensive income amounted to $24.0 million and $4.9 million,
respectively. During the nine months ended October 4, 1998 and October 5, 1997,
total comprehensive income amounted to $35.0 million and $14.6 million,
respectively.
Note 5 Earnings per share
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share. Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary, restated to
conform to the Statement 128 requirements.
Note 6 Fiscal Year
In January 1998, the Company changed its financial reporting year-end
to the Sunday nearest to December 31 of each year. Previously, the fiscal year
ended the Sunday nearest December 1. As a result of this change the Company
disclosed interim financial results for the one month period ended January 4,
1998 in Form 10-Q for the quarterly period ended April 5, 1998.
6
<PAGE> 7
SLI, Inc. and Subsidiaries
Consolidated Notes To Financial Statements (continued)
Note 7 Seasonality
As a result of the acquisition of Sylvania Lighting International (SLI,
B.V.), it is expected that the Company's operations will experience certain
seasonal patterns. Generally, SLI, B.V.'s sales have been highest in the late
fall and winter months due to abbreviated daylight hours and increased holiday
light usage. December is effected by a natural slow down in the natural trade
cycle in the countries where the Company operates due to the holiday season.
Note 8 Common stock to be issued
In connection with certain 1998 acquisitions, the Company is holding
255,000 shares of common stock to be issued pursuant to the terms of the
purchase agreements.
Note 9 Income taxes
An effective tax rate lower than the U.S. statutory effective tax rate
is due to the impact of income in countries with effective tax rates lower than
those in the U.S. and realization of tax attributes, including net operating
loss carry forwards.
Note 10 Treasury stock
In August 1998, the board of directors authorized, subject to certain
business and market conditions, the repurchase of shares of the Company's stock.
At October 4, 1998 a total of 470,700 shares have been repurchased under this
1998 stock repurchase plan. Retirements of treasury stock, as of October 4,
1998, totaled 760,945 shares.
As of October 4, 1998, treasury stock totaled 353,100 shares
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations for
the three months and nine months ended October 4, 1998 should be read in
conjunction with the Company's Consolidated Financial Statements and
accompanying notes. Except for historical matters contained herein, the matters
discussed herein are forward-looking statements and are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements reflect assumptions and involve risks and
uncertainties which may affect the Company's business and prospects and cause
actual results to differ materially from these forward-looking statements.
GENERAL
The Company is one of three major international lighting companies that
are vertically integrated designers, manufacturer and sellers of lighting
systems, which are comprised of lamps, fixtures and ballasts. The Company offers
a complete range of lamps (incandescent, fluorescent, high intensity discharge,
halogen, miniature incandescent, neon, LED and special lamps), a comprehensive
range of fixtures, ballasts and fiber optic lighting systems. The Company serves
a diverse international customer base and markets, and operates 31 manufacturing
facilities as well as 30 sales offices and distribution facilities in more than
30 countries.
In fiscal 1997, the Company acquired Sylvania Lighting International
B.V. (SLI, B.V.), the third largest lighting company in Europe, for $161.5
million in cash, which was financed with a combination of proceeds of sales of
the Company's common stock, bank borrowings and cash flows from operations. In
addition, the Company made the following acquisitions in fiscal 1997: (i) Gustav
Bruckner GmbH ("Bruckner"), an engineer, designer and manufacturer of automated
lamp making equipment; (ii) PLP, a manufacturer of magnetic and electronic
ballasts; (iii) Solium, Inc. ("Solium"), a designer and manufacturer of
electronic ballasts; and (iv) a minority stake in Electro-Mag International,
Inc. ("Electro-Mag"), which owns certain ballast technology. In fiscal 1998, the
Company acquired four lighting companies engaged in the manufacture of lamps and
also required the remaining outstanding capital stock of Electro-Mag.
The Company's acquisition strategy is integral to the establishment of
the Company as a vertically integrated lighting manufacturer. However, these
acquisitions have a significant impact on year-to-year comparisons of its
results of operations.
In January 1998, the Company changed its financial reporting year end
from the Sunday nearest to December 1 to the Sunday nearest to December 31.
8
<PAGE> 9
RESULTS OF OPERATIONS
Three months ended October 4, 1998 compared to the three months ended October 5,
1997.
Net sales. Net sales increased 92.3% from $94.6 million for the three
months ended October 5, 1997 to $182.0 million for the three months ended
October 4, 1998. Included in the three months ended October 4, 1998 was a full
quarter of sales contribution from SLI, B.V., totaling $128.2 million, compared
to one month in the 1997 quarter, totaling $44.2 million.
Gross Margin. Gross margin increased 96.6% from $28.5 million for the
three months ended October 5, 1997 to $56.0 million for the three months ended
October 4, 1998, due primarily to the increase in sales volume attributed to the
SLI, B.V. acquisition. Gross margin, as a percentage of net sales, increased
from 30.1% for the three months ended October 5, 1997 to 30.8%, for the three
months ended October 4, 1998. The SLI, B.V. gross margin, as a percentage of
SLI, B.V. sales, was 30.6% for the three months ended October 4, 1998. The
Company expects SLI, B.V.'s gross margin percentage to improve as restructuring
plans developed at the time of such acquisition are fully implemented. The
Company's gross margin percentage is subject to the impact of seasonality and
product mix.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $20.3 million for the three months ended
October 5, 1997 to $42.7 million for the three months ended October 4, 1998.
This increase was largely due to the impact of the SLI, B.V. acquisition. As a
percentage of net sales, selling, general and administrative expenses increased
from 21.5% for the three months ended October 5, 1997 to 23.4% for the three
months ended October 4, 1998, primarily as a result of the SLI, B.V.
acquisition. The Company's strategy is to decrease selling, general and
administrative expenses at SLI, B.V. through implementation of restructuring
plans developed and accrued for at the time of such acquisition. Additionally,
the Company seeks to decrease the selling, general and administrative expenses
as a percentage of net sales by utilizing the infrastructure of SLI, B.V. as a
base for further sales growth.
In the quarter ended October 5, 1997, the Company approved
restructuring plans, which resulted in charges of $2.8 million. The
restructuring included the plant closure, personnel termination, and asset
liquidation of the lamp-making operation of CML Europe, which became redundant
due to the SLI B.V. acquisition. The facility's land and building was sold, and
the equipment was sold or scrapped. Employee severance cost at the Company's
Badalex (U.K.) machinery making operation resulted from the downsizing due to
the duplication of functions after the SLI B.V. acquisition. Additionally, the
Company's leased Illinois warehouse and distribution location was closed and
personnel were terminated. Also, the Company's Oklahoma manufacturing operation
was considered redundant in light of the SLI B.V. acquisition and the lamp
making equipment was disposed.
9
<PAGE> 10
Interest (income) expense, net. Interest expense, net, increased from
$866,000 for the three months ended October 5, 1997 to interest expense, net, of
$4.5 million for the three months ended October 4, 1998, primarily as a result
of the bank debt incurred in connection with the SLI, B.V. acquisition.
Other (income) expense. Other income decreased from ($117,000) for the
three months ended October 5, 1997 to other expense of $583,000 for the three
months ended October 4, 1998. Included in other (income) expense for the three
months ended October 4, 1998 was a loss on sale of assets totaling $408,000.
Substantially all of the remainder of other (income) expense resulted from
recording the effects of foreign exchange transactions. The Company, which has
substantial foreign operations and activity, enters into foreign currency
contracts to protect the Company from the risk that sales and purchases of
products in foreign currencies will be adversely affected by changes in exchange
rates. The Company does not hold or issue financial instruments for trading
purposes.
Income before income taxes. As a result of the above factors, income
before income taxes increased from $4.6 million for the three months ended
October 5, 1997 to $8.3 million for the three months ended October 4, 1998. As a
percentage of net sales, income before provision for income taxes decreased from
4.8.% for the three months ended October 5, 1997 to 4.6% for the three months
ended October 4, 1998, primarily as a result of the SLI, B.V. acquisition.
Income taxes. For the three months ended October 4, 1998, the Company
recorded a tax provision of $1.6 million on pretax income of $8.3 million, for
an effective rate of 20%, compared to an effective rate of 22% for the three
months ended October 5, 1997. The lower than U.S. statutory tax rate is due to
the impact of income in countries with effective tax rates lower than those in
the U.S. and realization of tax attributes, including net operating loss carry
forwards. An effective tax rate lower than the U.S. statutory effective tax rate
is expected to continue for several years due to the significant international
operations of the Company.
Nine months ended October 4, 1998 compared to the nine months ended October 5,
1997.
Net sales. Net sales increased 194.6% from $190.1 million for the nine
months ended October 5, 1997 to $560.0 million for the nine months ended October
4, 1998. This increase was primarily attributable to the SLI, B.V. acquisition
which accounted for $361.7 million of the increase in net sales. Net sales for
SLI B.V. totaled $405.9 for the nine months ended October 4, 1998 compared to
$44.3 million for the one month included in the nine months ended October 5,
1997.
Gross Margin. Gross margin increased 202.0% from $56.8 million for the
nine months ended October 5, 1997 to $171.4 million for the nine months ended
October 4, 1998, due primarily to the increase in sales volume attributed to the
SLI, B.V. acquisition. Gross margin, as a percentage of net sales, increased
from 29.9% for the nine months ended October 5, 1997 to 30.6%, for the nine
months ended October 4, 1998. The SLI, B.V. gross margin,
10
<PAGE> 11
as a percentage of SLI, B.V. sales, was 30.9% for the nine months ended October
4, 1998. The Company expects SLI, B.V.'s gross margin percentage to improve as
restructuring plans developed at the time of such acquisition are implemented.
The Company's gross margin percentage is subject to the impact of seasonality
and product mix.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $35.8 million for the nine months ended
October 5, 1997 to $130.0 million for the nine months ended October 4, 1998.
This increase was largely due to the impact of the SLI, B.V. acquisition. As a
percentage of net sales, selling, general and administrative expenses increased
from 18.9% for the nine months ended October 5, 1997 to 23.2% for the nine
months ended October 4, 1998, primarily as a result of the SLI, B.V. acquisition
and one time charges totaling $525,000 related to a proposed public offering
withdrawn in May 1998. The Company's strategy is to decrease selling, general
and administrative expenses at SLI, B.V. through implementation of restructuring
plans developed and accrued for at the time of such acquisition. Additionally,
the Company seeks to decrease the selling, general and administrative expenses
as a percentage of net sales by utilizing the infrastructure of SLI, B.V. as a
base for further sales growth.
In the quarter ended October 5, 1997, the Company approved
restructuring plans, which resulted in charges of $2.8 million. The
restructuring included the plant closure, personnel termination, and asset
liquidation of the lamp-making operation of CML Europe, which became redundant
due to the SLI B.V. acquisition. The facility's land and building was sold, and
the equipment was sold or scrapped. Employee severance cost at the Company's
Badalex (U.K.) machinery making operation resulted from the downsizing due to
the duplication of functions after the SLI B.V. acquisition. Additionally, the
Company's leased Illinois warehouse and distribution location was closed and
personnel were terminated. Also, the Company's Oklahoma manufacturing operation
was considered redundant in light of the SLI B.V. acquisition and the lamp
making equipment was disposed.
Interest (income) expense, net. Interest expense, net, increased from
interest income, net, of ($1.0) million for the nine months ended October 5,
1997 to interest expense, net, of $11.7 million for the nine months ended
October 4, 1998, primarily as a result of the bank debt incurred in connection
with the SLI, B.V. acquisition. Interest income, net, was generated for the nine
months ended October 5, 1997, primarily from the investment of unused proceeds
received from the Company's public offering in October 1996.
Other (income) expense. Other income decreased from ($1.6) million for
the nine months ended October 5, 1997 to other expense of $599,000 for the nine
months ended October 4, 1998. Included in other (income) expense for the nine
months ended October 4, 1998 was a loss on sale of assets totalling $408,000.
Substantially all of the remainder of other (income) expense resulted from
recording the effects of foreign exchange transactions. The other income for the
nine months ended October 5, 1997 includes the effects of foreign exchange
transactions and a $985,000 gain recognized upon the sale of 49% interest in CML
Fiberoptics to Schott Corporation in connection with the formation of the
Schott-CML
11
<PAGE> 12
Fiberoptic joint venture. The Company, which has substantial foreign operations
and activity, enters into foreign currency contracts to protect the Company from
the risk that sales and purchases of products in foreign currencies will be
adversely affected by changes in exchange rates. The Company does not hold or
issue financial instruments for trading purposes.
Income before income taxes. As a result of the above factors, income
before income taxes increased from $20.6 million for the nine months ended
October 5, 1997 to $29.1 million for the nine months ended October 4, 1998. As a
percentage of net sales, income before provision for income taxes decreased from
10.8% for the nine months ended October 5, 1997 to 5.2% for the nine months
ended October 4, 1998, primarily as a result of the SLI, B.V. acquisition.
Income taxes. For the nine months ended October 4, 1998, the Company
recorded a tax provision of $5.8 million on pretax income of $29.1 million, for
an effective rate of 20%, compared to an effective rate of 30% for the nine
months ended October 5, 1997. The lower tax rate in the current year is due to
the impact of income in countries with effective tax rates lower than those in
the U.S. and realization of tax attributes, including net operating loss carry
forwards, attributable to the acquisition of SLI, B.V. An effective tax rate
lower than the U.S. statutory effective tax rate is expected to continue for
several years due to the significant international operations of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's major uses of cash have historically been for
acquisitions, working capital to support sales growth and ongoing capital
expenditures. Sources of cash have typically included operating cash flow, bank
borrowings and proceeds from the sale of Common Stock.
The Company's cash on hand as of October 4, 1998 was $13.8 million. Net
cash used in operating activities was $4.2 million for the nine months ended
October 4, 1998 and the cash used in investing activities totaled $63.1 million.
The investing activities for the period included primarily acquisitions totaling
approximately $30.0 million, and capital expenditures totaling $39.0 million.
For the same period net cash provided by financing activities aggregated $28.9
million, which included payments of long-term debt borrowings totaling $27.7
million, repurchases of common stock totaling $5.6 million, cash provided
through proceeds of short term debt totaling $10.2 million, proceeds of
long-term debt totaling $49.5 million and proceeds from the exercise of stock
options totaling $2.5 million.
The Company has a $250 million multi-currency revolving credit
facility, which includes (i) a $50 million Non-US-dollar borrowing facility and
(ii) a $15 million letter of credit facility. The facility terminates and is
repayable in full on August 30, 2002. As of October 4, 1998, approximately
$202.3 million was outstanding under the revolving credit facility including
borrowings denominated in US dollars, German deutschemarks, Belgian franc and
Japanese yen. The face amount of letters of credit issued and outstanding under
the Credit Facility totaled approximately $8.4 million.
12
<PAGE> 13
The Company conducts business in countries outside of the United
States, which exposes the Company to fluctuations in foreign currency exchange
rates. The Company may enter into short-term forward exchange contracts to hedge
this risk; nevertheless, fluctuations in foreign currency exchange rates could
have an adverse effect on the Company's business. The Company does not hold or
issue financial instruments for trading or speculative purposes. The Company has
significant operations in Europe and, to a lesser extent, in Latin America. The
introduction of a single European currency is expected to reduce the currency
risks associated with inter-European transactions. However, risks will remain
with respect to transactions with customers or suppliers outside of the zone
covered by the single European currency. The Company's operations in Latin
America are carried out primarily in Brazil, Costa Rica and Colombia. Although
currently not classified as a hyper-inflationary country, Brazil has been
classified as such in the past.
As part of management's continuing evaluation and finalization of the
purchase accounting accruals related to SLI B.V., $11.5 million of the amount
initially recorded was reversed in the third quarter of 1998. This resulted in
an offsetting reduction to fixed assets, which were written up in purchase
accounting.
The Company believes that cash from operations and borrowings available
under the Company's revolving credit facility will be sufficient to meet the
Company's working capital and capital expenditures needs for the next twelve
months and the foreseeable future thereafter.
SEASONALITY
As a result of the acquisition of SLI, B.V., it is expected that the
Company's operations will experience certain seasonal patterns. Generally, SLI,
B.V.'s sales have been highest in the fourth quarter of each year due to
abbreviated daylight hours in the Northern Hemisphere and increased holiday
light usage.
13
<PAGE> 14
SLI, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Items 1-5 None
Item 6 (a) Exhibits
27.1 Financial Data Schedule (For SEC Use Only)
27.2 Restated Financial Data Schedule (For SEC Use Only)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
SLI, Inc.
By: /s/ Frank M. Ward
----------------------------------
Frank M. Ward, President and Chief
Executive Officer
Date: November 18, 1998
By: /s/ Richard F. Parenti
----------------------------------
Richard F. Parenti,
Chief Accounting Officer
Date: November 18, 1998
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-START> JAN-05-1998
<PERIOD-END> OCT-04-1998
<CASH> 13,777
<SECURITIES> 0
<RECEIVABLES> 150,194
<ALLOWANCES> 0
<INVENTORY> 148,752
<CURRENT-ASSETS> 333,181
<PP&E> 366,866
<DEPRECIATION> 26,369
<TOTAL-ASSETS> 724,006
<CURRENT-LIABILITIES> 250,869
<BONDS> 211,634
0
0
<COMMON> 290
<OTHER-SE> 209,994
<TOTAL-LIABILITY-AND-EQUITY> 724,006
<SALES> 560,046
<TOTAL-REVENUES> 560,046
<CGS> 388,651
<TOTAL-COSTS> 518,633
<OTHER-EXPENSES> 599
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,736
<INCOME-PRETAX> 29,078
<INCOME-TAX> 5,782
<INCOME-CONTINUING> 23,296
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,296
<EPS-PRIMARY> .81<F1>
<EPS-DILUTED> .77
<FN>
<F1>Reflects basic EPS.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-04-1998<F1>
<PERIOD-START> JAN-06-1997
<PERIOD-END> OCT-05-1997
<CASH> 53,263
<SECURITIES> 0
<RECEIVABLES> 124,784
<ALLOWANCES> 0
<INVENTORY> 133,594
<CURRENT-ASSETS> 326,511
<PP&E> 257,118
<DEPRECIATION> 8,368
<TOTAL-ASSETS> 603,319
<CURRENT-LIABILITIES> 230,672
<BONDS> 152,373
0
0
<COMMON> 195
<OTHER-SE> 156,788
<TOTAL-LIABILITY-AND-EQUITY> 603,319
<SALES> 190,099
<TOTAL-REVENUES> 190,099
<CGS> 133,349
<TOTAL-COSTS> 172,022
<OTHER-EXPENSES> (1,573)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (949)
<INCOME-PRETAX> 20,599
<INCOME-TAX> 6,250
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,349
<EPS-PRIMARY> .50<F2>
<EPS-DILUTED> .50
<FN>
<F1>Filed due to change in financial reporting year end to Sunday nearest to
December 31 of each year. Previously, the fiscal year ended the Sunday nearest
December 1.
<F2>Reflects basic EPS.
</FN>
</TABLE>
