FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-5426
THOMAS INDUSTRIES INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 61-0505332
(State of incorporation) (I.R.S. Employer Identification Number)
4360 BROWNSBORO ROAD, LOUISVILLE, KENTUCKY 40207
(Address of principal executive offices) (Zip Code)
502/893-4600
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
SECURITIES EXCHANGE ACT OF 1934:
Title of Each Class Name of Each Exchange on which Registered
Common Stock, $1 Par Value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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. [X]
As of March 7, 1997, 10,555,782 shares of the registrant's Common Stock were
outstanding.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 7, 1997, was approximately $262,575,077.
Portions of Proxy Statement for the Annual Meeting of Shareholders on April 17,
1997, are incorporated by reference in Part III of this report.
Portions of the Annual Report to Shareholders for fiscal year ended December 31,
1996 are incorporated by reference in Parts I and II of this report.
PART I.
ITEM 1. BUSINESS
a. General Development of Business.
The Company began operations in 1928 and has grown through both internal
expansion and new business acquisitions. The Company has focused on
expansion of the Lighting Segment and the Compressors and Vacuum Pumps
Segment as its two core businesses. Significant additions to these two
core segments have been ASF, Pneumotive, Brey, WISA, and Welch, all
compressor and vacuum pump companies, acquired from 1987 through 1996;
and the Lumec and Day-Brite Lighting additions in 1987 and 1989,
respectively. These acquisitions have been strategically important as
they allow the Company to offer a more complete product line and make
the Company a more prominent participant in both the lighting and
compressor and vacuum pump markets.
The Lighting Segment operates in a multi-faceted industry, serving the
consumer, commercial, industrial, and outdoor markets. Five companies in
the U.S. and Canada, one of which is Thomas Industries, share a substantial
portion of the market. Although the industry is subject to the cyclicality
of residential and commercial construction activity, replacement and
renovation activity moderates these cycles somewhat.
Thomas is the leading supplier to the original equipment manufacturer (OEM)
medical market and a significant participant in its other OEM compressor
and vacuum pump markets. Operations of the Compressors and Vacuum Pumps
Segment help the Company moderate the impact of the Lighting Segment's
vulnerability to construction and economic cycles.
b. Financial Information about Industry Segments.
The information required by this item is set forth in Exhibit 13 under the
heading "Notes to Consolidated Financial Statements," which information is
hereby incorporated herein by reference.
c. Narrative Description of Business.
The Company's principal businesses are lighting, including consumer,
commercial, industrial, and outdoor lighting fixtures; and compressors and
vacuum pumps. The Company designs, manufactures, markets, and sells these
products. The Company operates numerous divisions and subsidiaries, with
facilities throughout the U.S. and operations in Canada, Germany, and
Mexico. The Company also maintains sales offices in Brazil, England,
Italy, Japan, and Taiwan and has joint ventures in the U.S. and Canada
with a Belgian company. The Company maintains corporate offices in
Louisville, Kentucky.
Lighting Segment
The Company's consumer lighting products are designed for a broad range
of consumers. The Company stresses product development to meet changing
needs and demands. The Company typically targets the more upscale,
single-family homeowner but also has a line for the do-it-yourself
homeowner. The Company also is strongly involved in the replacement
lighting market, which is a growing component of the overall lighting
industry. Under the Thomas and Do-It-Yourself brand names, the Company's
consumer lighting line includes high-style chandeliers and bathroom
fixtures, plus quality lighting products for foyers, dining rooms, living
rooms, entertainment areas, kitchens, bedrooms, and outdoors.
The Thomas and Do-It-Yourself lines are distributed throughout the United
States and Canada through a network of electrical distributors, lighting
showrooms, and home centers, which, in turn, sell to electrical
contractors, builders, and consumers.
Consumer lighting fixtures are manufactured and sold in the U.S., Canada,
and Mexico under the Thomas and Do-It-Yourself trade names; and those
trade names are recognized as important to this Segment's business.
The Company believes it has established a reputation as an innovator and
pioneer in track and recessed lighting technology and is one of the
nation's leading manufacturers of fluorescent and high-intensity
discharge ("HID") commercial and industrial lighting products. The
Company's commercial and industrial product line can be utilized for
virtually any application, using a variety of lamp sources, and is
designed for efficiency as well as energy savings. The Company's outdoor
lighting products are known for their high performance in efficiency,
glare control, and uniformity of illumination. Products are manufactured
and sold in the U.S., Canada, and Mexico under the
Day-Brite, Gardco, Capri, Electro/Connect, McPhilben, Omega, Emco, Lumec,
and Thomas Lighting trade names.
The Lighting Segment accounted for 67 percent of the Company's sales in
1996, compared to 68 percent in 1995 and 67 percent in 1994.
Compressors and Vacuum Pumps Segment
This Segment includes air compressors and vacuum pumps manufactured under
the Thomas and Welch names in the U.S. and ASF/Thomas in Europe. Thomas
specializes in compressor applications below the 1.5 horsepower range for
use in the finished products of other domestic or foreign manufacturers and
in the manufacture of high vacuum systems for laboratory and chemical
markets. Such compressors and vacuum pumps are used in medical equipment,
vending machines, photocopiers, computer tape drives, automotive and
transportation equipment, liquid dispensing applications, gasoline vapor
recovery, and refrigerant recovery, waste disposal, and laboratory
equipment. Thomas is the major compressor and vacuum pump participant in
the medical OEM industry worldwide. The Company offers a wide selection of
standard air compressors and vacuum pumps and will modify or design its
products to meet exacting OEM applications. Its products also are
manufactured for private-label sale in the construction compressor,
laboratory, and chemical markets.
In addition, the Company manufactures and sells compressors and related
accessories for commercial and consumer use. Sales, both domestic and
international, traditionally are made through hardware stores, home
centers, and building supply dealers.
The U.S. operations manufacture rotary vane, linear, piston, and diaphragm
compressors and vacuum pumps, as well as air motors and vacuum ejectors.
These products are distributed worldwide to original equipment
manufacturers as well as through fluid power and large compressor
distributors. Primary markets served include medical, environmental,
instrumentation, mobile, construction, laboratory, chemical, and consumer.
The European operations manufacture a complementary line of miniature
rotary vane, piston, linear, and diaphragm compressors and vacuum pumps,
with expertise in applications of less than 1/8 horsepower. These products
are currently distributed worldwide to original equipment manufacturers.
Primary applications for products manufactured in Europe include medical,
air and gas sampling, photography, and dish washing equipment, as well as
laboratory instruments and leak detection devices.
The Thomas, ASF/Thomas, Welch, Sprayit, and Medi-Pump trade names are
recognized in the market and are important to the Segment.
The Compressors and Vacuum Pumps Segment accounted for 33 percent of the
Company's sales in 1996, compared to 32 percent in 1995 and 32 percent in
1994.
---------------------
No single customer of the Company accounted for more than 10 percent of
consolidated net sales or more than 10 percent of any segment's net sales
in 1996, and no material part of the business is dependent upon a single
customer the loss of which could have a materially adverse effect on the
business of the Company.
The backlog of unshipped orders was $92 million at December 31, 1996--42
percent Lighting and 58 percent Compressors and Vacuum Pumps--and
$90 million at December 31, 1995--47 percent Lighting and 53 percent
Compressors and Vacuum Pumps. The Company believes substantially all of
such orders are firm, although some orders are subject to cancellation.
Substantially all of these orders are expected to be filled in 1997.
Competition in the lighting industry is strong in all markets served by the
Company. It is estimated that five companies share a substantial majority
of the market in the U.S. and Canada. Thomas Industries is one of these
top five. The Company stresses high quality, and energy efficient
lighting products, while providing value and strong customer support to
compete in its markets.
The Compressors and Vacuum Pumps Segment competes worldwide in the
fractional horsepower compressor and vacuum pump markets. Thomas is
the leading supplier to the OEM medical market and a significant
participant in its other OEM markets.
The Company believes that it has adequate sources of materials and supplies
for each of its businesses.
There is no significant seasonal impact on the business of any industry
segment of the Company. The lighting industry continues to be dependent on
the construction markets, which are subject to the overall health of the
economy.
Working capital is provided principally from operating profits. The
Company maintains adequate lines of credit and financial resources to meet
the anticipated cash requirements in the year ahead.
The Company has various patents and trademarks but does not consider its
business to be materially dependent upon any individual patent or
trademark.
During 1996, the Company spent $14.3 million on research activities
relating to the development of new products and the improvement of existing
products. Substantially all of this amount was Company-sponsored activity.
During 1995, the Company spent $13.4 million on these activities and during
1994, $12.7 million.
Continued compliance with present and reasonably expected federal, state,
and local environmental regulations is not expected to have any material
effect upon capital expenditures, earnings, or the competitive position of
the Company and its subsidiaries.
The Company employed approximately 3,000 people at December 31, 1996.
d. Financial Information about Foreign and Domestic Operations and Export
Sales.
See Notes to Consolidated Financial Statements, as set forth in Exhibit 13,
which information is incorporated herein by reference to the Company's 1996
Annual Report to Shareholders, for financial information about foreign and
domestic operations. Export sales for the years 1996, 1995, and 1994, were
$41,400,000, $40,900,000, and $36,600,000 respectively.
e. Executive Officers of the Registrant.
<TABLE>
<CAPTION>
Year
Office or Position First Elected
Name with Company Age as an Officer
<S> <C> <C> <C>
Timothy C. Brown Chairman of the Board, 46 1984
President, Chief Executive
Officer, Chairman of the
Executive Committee, and
Director
Richard J. Crossland Vice President; Lighting 53 1994
(A) Group Manager
Cliff C. Moulton Vice President, 49 1993
(B) Business Development
Phillip J. Stuecker Vice President of Finance, 45 1984
Chief Financial Officer,
and Secretary
Ronald D. Schneider Vice President; General 46 1992
(C) Manager C&I Business Unit
Gilbert R. Grady, Jr. Vice President, Corporate 60 1981
Employee Relations
(A) Richard J. Crossland was elected an officer effective August 18, 1994.
Mr. Crossland spent the previous 10 years with Philips Lighting Company,
Somerset, New Jersey, where he was Group Vice President/General Manager
of four divisions since 1990 and Vice President, Operations, of seven
manufacturing facilities from 1989 to 1990.
(B) Cliff C. Moulton was elected an officer effective March 1, 1993, and
held the position of Vice President; Compressor and Vacuum Pump Group
Manager. Mr. Moulton spent the previous 23 years with Honeywell
Corporation in various management positions, most recently as Vice
President and General Manager of the Skinner Valve Division, since 1987.
(C) Ronald D. Schneider was elected an officer effective April 16, 1992.
Mr. Schneider had held the position of Vice President, Lighting
Operations since 1994 and prior to that was Director, Manufacturing
Services for the Lighting Group and Manufacturing Services Manager at
the Company's Power Air Division.
All other officers listed have been executive officers for the past five
years.
</TABLE>
ITEM 2. PROPERTIES
The Corporate offices of the Company are located in Louisville, Kentucky. Due
to the large number of individual locations and the diverse nature of the
operating facilities, specific description of the properties owned and leased
by the Company is not necessary to an understanding of the Company's business.
All of the buildings are of steel, masonry, and concrete construction, are in
generally good condition, provide adequate and suitable space for the
operations at each location, and are of sufficient capacity for present and
foreseeable future needs.
The following listing summarizes the Company's properties.
Number
of Facilities Combined
Segment Owned Leased Square Feet Nature of Facilities
Lighting 8 4 1,699,887 Manufacturing plants
3 3 633,116 Distribution centers
0 4 65,550 Administrative offices
Compressors
and Vacuum 3 4 659,464 Manufacturing plants
Pumps 0 3 11,440 Distribution centers
Corporate 0 2 16,186 Corporate headquarters
3 1 299,300 Leased to third parties
2 0 210,200 Property for sale
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, the Company and its subsidiaries are parties
to legal proceedings. Management believes that these proceedings will be
resolved with no materially adverse impact on the financial condition and
results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The information required by this item is set forth in Exhibit 13 under the
headings "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Common Stock Market Prices and Dividends," and
"Notes to Consolidated Financial Statements," which information is
contained in the Company's 1996 Annual Report to Shareholders and hereby
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is set forth in Exhibit 13 under the
heading "Five-Year Summary of Operations and Statistics," which information
is contained in the Company's 1996 Annual Report to Shareholders and hereby
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is set forth in Exhibit 13 under the
headings "Management's Discussion and Analysis of Financial Condition and
Results of Operations," which information is contained in the Company's 1996
Annual Report to Shareholders and hereby incorporated herein by reference.
The Company makes forward-looking statements from time to time and desires to
take advantage of the "safe harbor" which is afforded such statements under
the Private Securities Litigation Reform Act of 1995 when they are accompanied
by meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those in the forward-looking
statements.
The statements contained in the foregoing "Management's Discussion and
Analysis of Financial Condition and Results of Operations," statements
contained in future filings with the Securities and Exchange Commission and
publicly disseminated press releases, and statements which may be made from
time to time in the future by management of the Company in presentations to
shareholders, prospective investors, and others interested in the business
and financial affairs of the Company, which are not historical facts, are
forward-looking statements that involve risks and uncertainties that could
cause actual results to differ materially from those set forth in the forward-
looking statements. Any projections of financial performances or statements
concerning expectations as to future developments should not be construed in
any manner as a guarantee that such results or developments will, in fact,
occur. There can be no assurance that any forward-looking statement will be
realized or that actual results will not be significantly different from that
set forth in such forward-looking statement. In addition to the risks and
uncertainties of ordinary business operations, the forward-looking statements
of the Company referred to above are also subject to the following risks and
uncertainties:
o The Company operates in a highly competitive business environment, and
its sales could be negatively affected by its inability to maintain or
increase prices, changes in geographic or product mix, or the decision
of its customers to purchase competitive products instead of the
Company's products. Sales could also be affected by pricing,
purchasing, financing, operational, advertising, or promotional
decisions made by purchasers of the Company's products.
o The Lighting Group Segment participates in a highly competitive market
that is dependent on the level of residential, commercial, and
industrial construction activity. Changes in consumer preferences and
acceptance of new products affects the Lighting Segment.
o The Compressor & Vacuum Pump Segment operates in a market where
technology improvements and the introduction of products for new
applications are necessary for future growth. The Company could
experience difficulties or delays in the development, production,
testing, and marketing of new products. As an original equipment
supplier, the Company's results of operations are directly affected by
the success of customer products.
o As the Company's business continues to expand outside the United States,
the Company could experience changes in its ability to obtain or hedge
against foreign currency rates and fluctuations in those rates. The
Company could also be affected by nationalizations, unstable governments
or legal systems, or inter-governmental disputes. These currency,
economic, and political uncertainties may affect the Company's results.
o The forward-looking statements made by the Company are based on
estimates which the Company believes are reasonable. This means that
the Company's actual results could differ materially from such estimates
as a result of being negatively affected as described above or otherwise
positively affected.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth in Exhibit 13 under the
headings "Consolidated Financial Statements" and "Notes to Consolidated
Financial Statements" which information is contained in the Company's 1996
Annual Report to Shareholders and hereby incorporated herein by reference.
The Report of Independent Auditors is also set forth in Exhibit 13 and hereby
incorporated herein by reference.
The supplementary data regarding quarterly results of operations is set forth
in Exhibit 13 under the heading "Notes to Consolidated Financial Statements,"
which information is contained in the Company's 1996 Annual Report to
Shareholders and hereby incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable. Reference is made to registrant's Proxy Statement for the
Annual Meeting of Shareholders to be held on April 17, 1997, under the
heading "Accountants."
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
a. Directors of the Company
The information required by this item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 17,
1997, under the headings "Election of Directors" and "Compliance with
Section 16(a)," which information is hereby incorporated herein by
reference.
b. Executive Officers of the Company
Reference is made to "Executive Officers of the Registrant" in Part I,
Item 1.e.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 17, 1997,
under the headings "Executive Compensation," "Compensation Committee
Interlocks and Insider Participation," and "Board of Directors," which
information is hereby incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 17, 1997,
under the heading "Securities Beneficially Owned by Principal Shareholders and
Management," which information is hereby incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 17, 1997,
under the headings "Board of Directors" and "Compensation Committee InterLocks
and Insider Participation" which information is hereby incorporated herein by
reference.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a. (1) Financial Statements
The following consolidated financial statements of Thomas Industries
Inc. and subsidiaries, included in the Company's 1996 Annual Report to
Shareholders, are included in Part II, Item 8:
Consolidated Balance Sheets--December 31, 1996 and 1995
Consolidated Statements of Income--Years ended December 31, 1996, 1995,
and 1994
Consolidated Statements of Shareholders' Equity--Years ended
December 31, 1996, 1995, and 1994
Consolidated Statements of Cash Flows--Years ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements--December 31, 1996
(2) Financial Statement Schedule
Schedule II -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and,
therefore, have been omitted.
(3) Listing of Exhibits
Exhibit No. Exhibit
3(a) Restated Certificate of Incorporation, as amended, filed as Exhibit
3(a) to registrant's report on Form 10-Q dated August 11, 1988,
hereby incorporated by reference.
3(b) Bylaws, as amended April 18, 1996, submitted as Exhibit 3 to
registrant's report on Form 10-Q dated May 11, 1996.
4(a) Note Agreement dated January 19, 1990, by and among the Company and
its Day-Brite Lighting, Inc., subsidiary, Allstate Life Insurance
Company, and other investors filed as Exhibit 4 to registrant's
report on Form 10-K dated March 22, 1990, hereby incorporated by
reference.
Copies of debt instruments for which the related debt is less
than 10% of consolidated total assets will be furnished to the
Commission upon request.
4(b) Rights Agreement filed as Exhibit 1 to registrant's report on Form
8-A on December 23, 1987, hereby incorporated by reference.
4(c) Amendment to Rights Agreement filed as Exhibit 1 to the registrant's
report on Form 8-K on October 18, 1990, hereby incorporated by
reference.
10(a) Employment Agreements with Timothy C. Brown, Gilbert R. Grady, Jr.,
and Phillip J. Stuecker filed as Exhibits 3(a), 3(f), and 3(j),
respectively, to registrant's report on Form 10-Q dated November 11,
1988, hereby incorporated by reference.
10(b) Employment Agreement with Cliff C. Moulton filed as Exhibit 10(b)
to registrant's report on Form 10-K dated March 25, 1993,
hereby incorporated by reference.
10(c) Employment Agreement with Richard J. Crossland filed as Exhibit
10(c) to registrant's report on Form 10-K dated March 22, 1994,
hereby incorporated by reference.
10(d) Trust Agreement, filed as Exhibit 10(1) to registrant's report on
Form 10-Q dated November 11, 1988, hereby incorporated by reference.
10(e) Form of Indemnity Agreement and Amendment thereto entered into by
the Company and each of its Executive Officers filed as Exhibits 10
(g) and (h) to registrant's report on Form 10-K dated March 23,
1988, hereby incorporated by reference.
10(f) Severance pay policy of the Company, effective October 1, 1988,
covering all Executive Officers, filed as Exhibit 10(d) to
registrant's report on Form 10-K dated March 23, 1989, hereby
incorporated by reference.
10(g) 1987 Incentive Stock Plan as Amended, filed as Annex A to the
registrant's Proxy Statement on March 17, 1989, hereby incorporated
by reference.
10(h) Nonemployee Director Stock Option Plan as Amended and Restated as
of February 5, 1997, filed herewith.
10(i) 1995 Incentive Stock Plan as Amended and Restated as of December 11,
1996, filed herewith.
10(j) Employment Agreement with Timothy C. Brown dated January 29, 1997,
filed herewith.
13 Certain portions of the Company's 1996 Annual Report to Shareholders
as specified in Parts I and II, hereby incorporated by reference in
this Annual Report on Form 10-K.
21 Subsidiaries of the Registrant.
23(a) Consent of Ernst & Young LLP.
23(b) Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule.
b. Reports on Form 8-K
There were no reports on Form 8-K for the three months ended December 31,
1996.
c. Exhibits
The exhibits filed as part of this Annual Report on Form 10-K are as
specified in Item 14(a)(3) herein.
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) 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.
THOMAS INDUSTRIES INC.
Date: March 20, 1997 By /s/ Timothy C. Brown
Timothy C. Brown, Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ Timothy C. Brown Chairman of the Board; 3/20/97
Timothy C. Brown President; Chief Executive
Officer; Chairman of the
Executive Committee; Director
(Principal Executive Officer)
/s/ Phillip J. Stuecker Vice President of Finance; 3/20/97
Phillip J. Stuecker Chief Financial Officer;
Secretary
(Principal Financial Officer)
/s/ Ronald D. Wiseman Controller; Assistant 3/20/97
Ronald D. Wiseman Secretary
(Principal Accounting Officer)
/s/ Wallace H. Dunbar Director 3/20/97
Wallace H. Dunbar
/s/ Roger P. Eklund Director 3/20/97
Roger P. Eklund
/s/ H. Joseph Ferguson Director 3/20/97
H. Joseph Ferguson
/s/ Gene P. Gardner Director 3/20/97
Gene P. Gardner
/s/ Lawrence E. Gloyd Director 3/20/97
Lawrence E. Gloyd
/s/ William M. Jordan Director 3/20/97
William M. Jordan
/s/ Ralph D. Ketchum Director 3/20/97
Ralph D. Ketchum
/s/ Franklin J. Lunding, Jr. Director 3/20/97
Franklin J. Lunding, Jr.
Report of Independent Auditors
The Board of Directors and Shareholders
Thomas Industries Inc.
We have audited the consolidated balance sheet of Thomas Industries Inc. and
subsidiaries as of December 31, 1996, and the related consolidated statements of
income, shareholders' equity, and cash flows for the year then ended. Our audit
also included the 1996 financial statement schedule listed in the Index at Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audit. The
financial statements and schedule of Thomas Industries Inc. and subsidiaries for
the years ended December 31, 1995 and 1994 were audited by other auditors whose
report dated February 7, 1996 expressed an unqualified opinion on those
statements and schedule.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Thomas
Industries Inc. and subsidiaries at December 31, 1996 and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles. Also, in our opinion,
the related 1996 financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/S/ Ernst & Young LLP
Louisville, Kentucky
February 5, 1997
Independent Auditors' Report
The Board of Directors and Shareholders
Thomas Industries Inc.
We have audited the consolidated balance sheet of Thomas Industries Inc. and
subsidiaries as of December 31, 1995, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the years in the two-
year period ended December 31, 1995. In connection with our audits of the
aforementioned consolidated financial statements, we also have audited the
financial statement schedule for each of the years in the two-year period ended
December 31, 1995, as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Thomas Industries
Inc. and subsidiaries as of December 31, 1995, and the results of their
operations and their cash flows for each of the years in the two-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information set forth
therein.
/S/ KPMG Peat Marwick LLP
Louisville, Kentucky
February 7, 1996
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Thomas Industries Inc. and Subsidiaries
December 31, 1996
ADDITIONS
Balance at Charged to Charged to Balance at
DESCRIPTION Beginning Costs Other Accounts - Deductions- End of
of Period and Expenses Describe Describe Period
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Allowance for doubtful accounts $2,014,000 $451,000 $222,000 (1) $2,243,000
Allowance for obsolete and slow moving inventory 7,751,000 3,260,000 2,140,000 (2) 8,871,000
$9,765,000 $3,711,000 2,362,000 $11,114,000
Year ended December 31, 1995
Allowance for doubtful accounts $1,773,000 $519,000 $278,000 (1) $2,014,000
Allowance for obsolete and slow moving inventory 5,724,000 4,004,000 1,977,000 (2) 7,751,000
$7,497,000 $4,523,000 $2,255,000 $9,765,000
Year ended December 31, 1994
Allowance for doubtful accounts $1,763,000 $705,000 $695,000 (1) $1,773,000
Allowance for obsolete and slow moving inventory 6,419,000 4,079,000 4,774,000 (2) 5,724,000
$8,182,000 $4,784,000 $5,469,000 $7,497,000
(1) Uncollectible accounts written off, less recoveries on accounts previously written off and effect
of currency translation in accordance with SFAS No. 52.
(2) Disposal of obsolete inventory and effect of currency translation in
accordance with SFAS No. 52.
</TABLE>
EXHIBIT INDEX
Exhibit No. Exhibit Page
10(h) Nonemployee Director Stock Option Plan
as Amended and Restated as of February 5,
1997
10(i) 1995 Incentive Stock Plan as Amended and
Restated as of December 11, 1996,
10(j) Employment agreement with Timothy C.
Brown dated January 29, 1997
13 Certain portions of the Company's 1996 Annual
Report to Shareholders as specified in Parts I
and II hereof to be incorporated by reference
in this Annual Report on Form 10-K
21 Subsidiaries of the Registrant
23(a) Consent of Ernst & Young LLP
23(b) Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
Exhibit 10(h)
THOMAS INDUSTRIES INC.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
(as amended and restated February 5, 1997)
ARTICLE I
GENERAL
1.1 Purpose.
Thomas Industries Inc., a Delaware corporation (the "Company"), hereby
adopts this Thomas Industries Inc. Nonemployee Director Stock Option Plan (the
"Plan"). The purpose of the Plan is to increase the stock ownership of
nonemployee directors and to foster and promote the long-term financial success
of the Company by attracting and retaining outstanding nonemployee directors by
enabling them to participate in the Company's growth through automatic,
nondiscretionary grants of Options (as defined in Article II).
1.2 Participation.
Only directors who have not been for at least one year an employee or
officer of the Company or any subsidiary of the Company at the time a grant is
made shall be eligible to receive grants under the Plan.
1.3 Shares Subject to The Plan.
Shares of stock covered by grants under the Plan may be in whole or in part
authorized and unissued or treasury shares of the Company's common stock or such
other shares as may be substituted pursuant to Section 3.2 ("Common Stock").
The maximum number of shares of Common Stock which may be issued for all
purposes under the Plan shall be 250,000 (subject to adjustment pursuant to
Section 3.2). Any shares of Common Stock subject to an Option which for any
reason is cancelled or terminated without having been exercised, shall again be
available for grants under the Plan. No fractional shares shall be issued.
1.4 Gender and Number.
Except when otherwise indicated by the context, words in the masculine
gender when used in the Plan shall include the feminine gender, the singular
shall include the plural, and the plural shall include the singular.
ARTICLE II
STOCK OPTIONS
2.1 Grant of Stock Options.
Effective on the date of each annual meeting of the shareholders of the
Company at which Directors are elected ("Annual Meeting") commencing with the
Annual Meeting in 1994, each Director then in office will automatically be
awarded a stock option (an "Option") under the Plan to purchase 2000 (subject to
adjustment pursuant to Section 3.2) shares of Common Stock. The Options are not
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code of 1986, as amended.
2.2 Stock Option Certificates.
The grant of an Option shall be evidenced by a certificate executed by an
officer of the Company.
2.3 Option Price.
The purchase price of Common Stock under each Option (the "Option Price")
granted as of the Annual Meeting shall be the Fair Market Value of the Common
Stock as of the date of the Annual Meeting.
2.4 Exercise and Term of Options.
(a) Options may be exercised by the delivery of written notice of exercise
and the Option Price for the shares to be purchased to the Corporate Secretary
of the Company. The Option Price shall be paid in cash (including check, bank
draft or money order) or, unless in the opinion of counsel to the Company to do
so may result in a possible violation of law, by delivery of Common Stock
already owned by the Director valued at Fair Market Value on the date of
exercise. As soon as practicable after receipt of each notice and full payment,
the Company shall deliver to the Director a certificate or certificates
representing the acquired shares of Common Stock.
(b) Each Option may be exercised at any time after the date it is granted
until (subject to Section 3.1) the first to occur of the tenth anniversary of
the date such Option was granted or the second anniversary of the date the
Director ceases to be a Director (whether by death, disability, retirement or
resignation). In the event of the death of a former Director prior to the
exercise of any Option which were then exercisable, such Options may be
exercised as provided in Section 3.1 until the second anniversary of the date
the former Director ceased to be a Director.
ARTICLE III
MISCELLANEOUS PROVISIONS
3.1 Non Transferability; Beneficiaries.
No Option granted under the Plan shall be transferable by the Director
otherwise than by will or, if the Director dies intestate, by the laws of
descent and distribution. All grants shall be exercisable during the Director's
lifetime only by the Director or his personal representative. Any transfer
contrary to this Section 3.1 will nullify the Option. In the event of a
Director's death prior to the exercise of any Options which were then
exercisable, such Options may be exercised by the Director's beneficiary,
designated as provided below, or, in the absence of any such designation, his
estate. Each Director may name, from time to time, any beneficiary or
beneficiaries (who may be named contingently or successively) who may exercise
such Options and receive such certificates. Each designation will revoke all
prior designations by such Director, will be in writing and will be effective
only when filed with the Corporate Secretary of the Company during his lifetime.
Notwithstanding the foregoing, the Board of Directors may permit the
transferability of an Option by a Director solely to members of the Director's
immediate family or trusts or family partnerships for the benefit of such
persons subject to such terms and conditions as may be established by the Board
of Directors.
3.2 Adjustments Upon Certain Changes.
In the event of a stock dividend or stock split, or combination or other
change in the number of issued shares of Common Stock, a merger, consolidation,
reorganization, recapitalization, sale or exchange of substantially all assets
or dissolution of the Company, the Board of Directors of the Company ("Board of
Directors") shall, in order to prevent the dilution or enlargement of rights
under Options make such adjustments in the number and type of shares authorized
by the Plan, the number and type of shares covered by outstanding Options and
the Option Prices specified therein as may be required to prevent such dilution
or enlargement. In the event fractional shares would otherwise result from any
such adjustment, the number of shares so authorized and covered and the prices
thereof shall be further adjusted so as to eliminate such fractions.
3.3 Amendment, Suspension and Termination of Plan.
(a) The Board of Directors may suspend or terminate the Plan or any
portion thereof at any time and may amend it from time to time in such respects
as the Board of Directors may deem advisable in order that any grants thereunder
shall conform to or otherwise reflect any change in applicable laws or
regulations, or to permit the Company or the Directors to enjoy the benefits of
any change in applicable laws or regulations, or in any other respect the Board
of Directors may deem to be in the best interests of the Company; provided,
however, that no such amendment shall, without stockholder approval to the
extent required by law, agreement or the rules of any exchange upon which the
Common Stock is listed (a) except as provided in Section 3.2, materially
increase the number of shares of Common Stock which may be issued under the
Plan, (b) materially modify the requirements as to eligibility for participation
in the Plan, (c) materially increase the benefits accruing to Directors under
the Plan or (d) extend the termination date of the Plan. No such amendment,
suspension, or termination shall (x) impair the rights of Directors under any
outstanding Options without the consent of the Directors affected thereby or (y)
make any change that would disqualify the Plan, or any other plan of the Company
intended to be so qualified, from the exemption provided by Rule 16b-3.
(b) The provisions of Sections 2.1 and 2.3 may not be amended more than
once every six months other than to comply with changes in the Internal Revenue
Code of 1986, the Employee Retirement Income Security Act of 1974, and the rules
thereunder.
3.4 Definition of Fair Market Value.
The term "Fair Market Value" as it relates to Common Stock on any given
date means (a) the closing sales prices of the Company's Common Stock as
reported by the Company Tape of the New York Stock Exchange (or, if not so
reported, on any domestic stock exchanges on which the Common Stock is then
listed); or (b) if the Common Stock is not listed on an domestic stock exchange,
the closing sales price of the Company's Common Stock as reported by the
National Association of Securities Dealers Automated Quotation System (or, if
not so reported, by the system then regarded as the most reliable source of such
quotations) or, if there are no reported sales on such date, the mean of the
closing bid and asked prices are so reported; or (c) if the Common Stock is
listed on a domestic exchange or quoted in the domestic over-the-counter market,
but there are no reported sales or quotations, as the case may be, on the given
date, the value determined pursuant to (a) or (b) above using the reported sale
prices or quotations on the last previous date on which so reported; or (d) if
none of the foregoing clauses apply, the fair value as determined in good faith
by the Board of Directors.
3.5 Plan Not Exclusive.
The adoption of the Plan shall not preclude the adoption by appropriate
means of any other stock option or other incentive plan for Directors.
3.6 Listing, Registration and Legal Compliance.
Each Option shall be subject to the requirement that if at any time counsel
to the Company shall determine that the listing, registration or qualification
thereof or of any shares of Common Stock or other property subject thereto upon
any securities exchange or under any foreign, federal or state securities or
other law or regulation, or the consent or approval of any governmental body or
the taking of any other action to comply with or otherwise with respect to any
such law or regulation, is necessary or desirable as a condition to or in
connection with the grant of such Option or the issue, delivery or purchase of
shares of Common Stock or other property thereunder, no such Option may be
exercised unless such listing, registration, qualification, consent, approval or
other action shall have been effected or obtained free of any conditions not
acceptable to the Company and the holder of the Option will supply the Company
with such certificates, representations and information as the Company shall
request and shall otherwise cooperate with the Company in effecting or obtaining
such listing, registration, qualification, consent, approval or other action.
The Company may at any time impose any limitations upon the exercise, of any
Option which, in the opinion of the Board of Directors, are necessary or
desirable in order to cause the Plan or any other plan of the Company to comply
with Rule 16b-3. If the Company, as part of an offering of securities or
otherwise, finds it desirable because of foreign, federal or state legal or
regulatory requirements to reduce the period during which Options may be
exercised, the Board of Directors may, without the holders' consent, so reduce
such period on not less than 15 days' written notice to the holders thereof.
3.7 Rights of Directors.
Nothing in the Plan shall confer upon any Director any right to serve as a
Director for a period of time or to continue his present or any other rate of
compensation.
3.8 Requirements of Law; Governing Law.
The granting of Options and the issuance of shares of Common Stock shall be
subject to all applicable laws, rules, and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be required.
The Plan, and all agreements hereunder, shall be construed in accordance with
and governed by the laws of the State of Delaware.
3.9 Effective Date.
The Plan was approved by the shareholders of the Company on April 21, 1994
and amended and restated by the Board of Directors on February 5, 1997. No
grants shall be made hereunder after April 21, 2004.
THOMAS INDUSTRIES INC.
SUPPLEMENT NO. 1 TO NONEMPLOYEE DIRECTOR
STOCK OPTION PLAN
(EFFECTIVE FEBRUARY 5, 1997)
PURPOSE
The purpose of this Supplement is to increase the stock ownership of
Nonemployee Directors by enabling them to elect to receive their retainer and
meeting fees in shares of the Company's Common Stock and by allowing them to
defer receipt of those shares until termination of service on the Board.
ELECTION TO RECEIVE RETAINER AND MEETING FEES IN STOCK
RETAINER
A Director may elect to receive quarterly retainer fees in shares of
Company Common Stock. The election will entitle the Director to receive, on
each scheduled quarterly retainer payment date, a number of shares of Common
Stock determined by dividing the retainer fee for that quarter by the average
closing price of a share of Common Stock for the five business days immediately
preceding the scheduled quarterly retainer payment date.
MEETING FEES
Each Director may also elect to receive any meeting fees earned in a
quarter in shares of Company Common Stock. The election will entitle the
Director to receive, on each scheduled quarterly meeting fees payment date, a
number of shares of Common Stock determined by dividing the meeting fees for
that quarter by the average closing price of a share of Common Stock for the
five business days immediately preceding the scheduled quarterly meeting fees
payment date.
FRACTIONAL SHARES
Any fraction of a share shall be disregarded and the remaining amount of
the retainer or meeting fees shall be paid in cash on the respective scheduled
quarterly payment date.
METHOD OF ELECTION
An election to receive fees in shares must be in writing and delivered to
the Chief Financial Officer of the Company before the first day of a quarterly
retainer period, except that the election for the first quarter of 1997 must be
made prior to February 15, 1997. An election shall be effective for subsequent
retainer periods until terminated by the Director by 30 days written notice to
the Chief Financial Officer of the Company.
ELECTION TO DEFER SHARES
TERMS OF DEFERRAL
A Director who elects to receive retainer or meeting fees in shares of
Company Common Stock may elect to defer receipt of such shares (including any
fractions) until termination of the Director's service as a member of the Board
of Directors of the Company. An election to defer shares must be made in
writing and delivered to the Chief Financial Officer of the Company before the
first day of a quarterly retainer period except that the election for the first
quarter of 1997 must be made prior to February 15, 1997. Any election to defer
receipt of shares shall be effective for subsequent periods until terminated by
the Director by 30 days prior written notice to the Chief Financial Officer of
the Company, but any such termination shall have no effect on shares previously
deferred.
DIVIDENDS DURING DEFERRAL PERIOD
If the Company pays a dividend with respect to its Common Stock during the
deferral period, the number of deferred shares then credited to each electing
Director will be increased by a number of shares (including fractions) equal to
(a) the cash dividend the Director would have received had the Director actually
owned the deferred shares then credited to his or her account divided by (b) the
closing price of a share of Common Stock on the dividend payment date.
DELIVERY OF DEFERRED SHARES
A Director may elect to receive delivery of deferred shares either in a
single delivery on the first business day of the calendar year following the
year of termination of service on the Board or in five annual installments
commencing on that date and continuing on the next four anniversaries of that
date. Any fraction of a share shall be paid in cash. An election with respect
to the delivery of deferred shares may be amended by the Director from time-to-
time, but not later than six months prior to the date of the Director's
termination of service on the Board.
DEATH OF DIRECTOR
In the event of the death of the Director, any deferred shares shall be
delivered in a lump sum to the designated beneficiary of the Director or the
Director's estate in the absence of such a designation.
CHANGE IN CONTROL
If there is a change in control of the Company, all deferred shares shall
be delivered immediately to the Director as soon as possible after the change in
control. For these purposes, change in control is defined in Exhibit A attached
to this Supplement.
STOCK CHANGES
In the event of a stock dividend, stock split or other transaction in which
the Company changes the number of its shares of Common Stock without new
consideration to the Company, the number of deferred shares credited to each
Director shall be changed in proportion to the change in the Company's shares.
In the case of any merger, consolidation or combination of the Company with
or into another corporation as defined in Section 10(c) of the 1995 Incentive
Stock Plan other than a transaction which constitutes a change in control, any
deferred shares shall be converted into the Acquisition Consideration as defined
in Section 10(c) of the 1995 Plan.
UNFUNDED OBLIGATION
The Company's obligation with respect to deferred shares shall not be
secured or funded in any manner. Nothing contained herein shall give any
Director any rights that are greater than those of a general creditor of the
Company.
NONASSIGNABILITY
A Director will have no right to anticipate any delivery of shares to be
made pursuant to this Supplement or to alienate, dispose or encumber any of the
Director's rights with respect to deferred shares. The Company will not
recognize any assignment or alienation of the deferred shares either in whole or
in part, nor shall any deferred shares be subject to attachment, garnishment or
execution following judgment or other legal process.
Exhibit A
A change of control of the Company shall be deemed to occur upon the
happening of any of the following:
(a) any "person" (as that term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, but excluding the Company, its
affiliates and any qualified or non-qualified plan maintained by the
Company or its affiliates) becomes the "beneficial owner" (as defined in
Rule 13d-3 promulgated under such Act), directly or indirectly, of
securities of the Company representing more than 20% of the combined voting
power of the Company's then outstanding securities;
(b) during any period of two consecutive years, individuals who at the
beginning of any such period constitute the directors of the Company cease
for any reason to constitute at least a majority thereof unless the
election, or the nomination for election by the Company's shareholders, of
each new director of the Company was approved by a vote of at least two-
thirds of such directors of the Company then still in office who were
directors of the Company at the beginning of any such period;
(c) the Company is combined (by merger, share exchange, consolidation,
or otherwise) with another corporation and as a result of such combination,
less than 75% of the outstanding securities of the surviving or resulting
corporation are owned in the aggregate by the former shareholders of the
Company; or
(d) the Company sells, leases, or otherwise transfers all or
substantially all of its properties or assets to another person or entity.
Exhibit 10(i)
THOMAS INDUSTRIES INC.
1995 INCENTIVE STOCK PLAN
(AS AMENDED AND RESTATED DECEMBER 11, 1996)
1. Purpose. The Thomas Industries Inc. 1995 Incentive Stock Plan (the
"Plan") is intended to provide incentives which will attract and retain highly
competent persons as officers and key employees of Thomas Industries Inc. (the
"Company") and its subsidiaries, by providing them opportunities to acquire
shares of Common Stock of the Company ("Common Stock") or to receive monetary
payments based on the value of such shares pursuant to the Benefits described
herein.
2. Administration. The Plan will be administered by the Compensation
Committee of the Board of Directors of the Company or another committee (the
"Committee"), appointed by the Board from among its members consisting of two or
more non-employee Directors as set forth in Securities and Exchange Commission
Regulation Section 240.16b-3 ("Rule 16b-3") or any successor regulation.
3. Participants. Participants will consist of such key employees
(including officers) of the Company or its subsidiaries as the Committee in its
sole discretion determines to be significantly responsible for the success and
future growth and profitability of the Company and whom the Committee may
designate from time to time to receive Benefits under the Plan. Designation of
a participant in any year shall not require the Committee to designate such
person to receive a Benefit in any other year or, once designated, to receive
the same type or amount of Benefit as granted to the participant in any year.
The Committee shall consider such factors as it deems pertinent in selecting
participants and in determining the type and amount of their respective
Benefits.
4. Types of Benefits. Benefits under the Plan may be granted in any one
or a combination of (a) Incentive Stock Options; (b) Non-qualified Stock
Options; (c) Stock Appreciation Rights; (d) Stock Awards and Performance Share
Awards; and (e) Tax-Offset Bonus Rights; all as described below.
5. Shares Reserved under the Plan. There is hereby reserved for issuance
under the Plan an aggregate of 600,000 shares of Common Stock, which may be
authorized but unissued or treasury shares. In addition, any shares of Common
Stock remaining available for Benefits under the Company's 1987 Incentive Stock
Plan, as amended, (the "1987 Plan") on the date of the 1995 annual meeting of
shareholders of the Company and any shares of Common Stock subject to Benefits
under the Company's 1987 Plan on such date which thereafter lapse, expire or are
terminated shall thereafter be available for Benefits hereunder. All of such
shares may, but need not, be issued pursuant to the exercise of Incentive Stock
Options. The maximum number of option shares which may be awarded to any
participant in any fiscal year during the term of the Plan is 50,000 shares. No
more than 100,000 shares may be issued as Stock Awards not based on performance
goals during the term of the Plan. Any shares subject to stock options or Stock
Appreciation Rights or issued under such options or rights or as Stock Awards
may thereafter be subject to new options, rights or awards under this Plan if
there is a lapse, expiration or termination of any such options or rights prior
to issuance of the shares or if shares are issued under such options or rights
or as such awards, and thereafter are reacquired by the Company without
consideration pursuant to rights reserved by the Company upon issuance thereof.
6. Stock Options. Incentive Stock Options and Non-qualified Stock
Options will consist of stock options to purchase Common Stock at purchase
prices not less than 100% of the fair market value of the Common Stock on the
date the option is granted. Said purchase price may be paid by check or, in the
discretion of the Committee, by the delivery (or certification of ownership) of
shares of Common Stock of the Company owned by the participant for a period of
at least six months. In the discretion of the Committee, payment may also be
made by delivering a properly executed exercise notice to the Company, together
with a copy of the irrevocable instructions to a broker to deliver promptly to
the Company the amount of sale or loan proceeds to pay the exercise price. Non-
qualified Stock Options shall be exercisable not later than fifteen years after
the date they are granted and Incentive Stock Options shall be exercisable not
later than ten years after the date they are granted. In the event of
termination of employment, all stock options shall terminate at such times and
upon such conditions or circumstances as the Committee shall in its discretion
set forth in such option at the date of grant. The aggregate fair market value
(determined as of the time the option is granted) of the Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by a
participant during any calendar year (under all option plans of the Company and
its subsidiary corporations) shall not exceed $100,000. The Committee may
provide, either at the time of grant or subsequently, that a stock option
include the right to acquire a replacement stock option upon exercise of the
original stock option (in whole or in part) prior to termination of employment
of the participant and through payment of the exercise price in shares of Common
Stock. The terms and conditions of a replacement option shall be determined by
the Committee in its sole discretion.
7. Stock Appreciation Rights. The Committee may, in its discretion,
grant Stock Appreciation Rights to the holders of any stock options granted
hereunder. In addition, Stock Appreciation Rights may be granted independently
of and without relation to options. Each Stock Appreciation Right shall be
subject to such terms and conditions consistent with the Plan as the Committee
shall impose from time to time, including the following:
(a) A Stock Appreciation Right relating to an option may be made part
of such option at the time of its grant or at any time thereafter.
(b) Each Stock Appreciation Right will entitle the holder to elect to
receive the appreciation in the fair market value of the shares subject thereto
up to the date the right is exercised. In the case of a right issued in
relation to a stock option, such appreciation shall be measured from not less
than the option price and in the case of a right issued independently of any
stock option, such appreciation shall be measured from not less than the fair
market value of the Common Stock on the date the right is granted. Payment of
such appreciation shall be made in cash or in Common Stock, or a combination
thereof, as set forth in the award, but no Stock Appreciation Right shall
entitle the holder to receive, upon exercise thereof, more than the number of
shares of Common Stock (or cash of equal value) with respect to which the right
is granted.
(c) Each Stock Appreciation Right will be exercisable at the times
and to the extent set forth therein, but no Stock Appreciation Right may be
exercisable more than fifteen years after it was granted. Exercise of a Stock
Appreciation Right shall reduce the number of shares issuable under the Plan
(and the related option, if any) by the number of shares with respect to which
the right is exercised.
8. Stock Awards and Performance Share Awards. Stock Awards will consist
of Common Stock transferred to participants without other payment therefor as
additional compensation for services to the Company and its subsidiaries. Stock
Awards shall be subject to such terms and conditions as the Committee determines
appropriate, including, without limitation, restrictions on the sale or other
disposition of such shares, rights of the Company to reacquire such shares upon
termination of the participant's employment within specified periods and
conditions requiring that the shares be earned in whole or in part upon the
achievement of performance goals established by the Committee over a designated
period of time.
The Committee may award performance shares (which may include dividend
equivalents) to participants subject to such terms and conditions as the
Committee determines appropriate. Performance shares may be earned in whole or
in part if certain goals established by the Committee are achieved over a period
of time designated by the Committee, which may include overlapping performance
periods. The goals established by the Committee may be based on business
criteria selected by the Committee including total shareholder return, economic
value added, net income, return on equity or assets, earnings per share, cash
flow and cost control. The maximum number of performance shares payable for a
performance period to any participant that is intended to satisfy the
requirements for "performance-based compensation" under Section 162(m) of the
Internal Revenue Code of 1954 shall not exceed 20,000.
9. Tax-Offset Bonus Rights. The Committee, in its sole discretion, may
grant Tax-Offset Bonus Rights with respect to Non-qualified Stock Options. Such
Tax-Offset Bonus Rights may be granted to a participant at the time of the grant
of the related Non-qualified Stock Option or subsequent thereto, but only with
respect to the related Non-qualified Stock Option. A Tax-Offset Bonus Right
shall entitle the participant to receive from the Company or a subsidiary upon
exercise of the related Non-qualified Stock Option an amount in cash equal to
(1) the excess, if any, of the aggregate fair market value of shares acquired by
the exercise of a Non-qualified Stock Option on the date of exercise over the
aggregate purchase price of the shares acquired by such exercise, multiplied by
(2) a fraction, the numerator of which is not more than the maximum marginal
individual income tax rate, and the denominator of which is one minus such rate.
The Committee shall determine all of the terms and provisions of any Tax-Offset
Bonus Right including but not limited to the date of grant, the term, the effect
of employment termination and death. No Tax-Offset Bonus Right shall be
assignable or transferable except to the extent the Committee permits such Tax-
Offset Bonus Right to be assigned by will or through the laws of descent and
distribution.
10. Adjustment Provisions.
(a) If the Company shall at any time change the number of issued
shares of Common Stock without new consideration to the Company (such as by
stock dividends or stock splits), the total number of shares reserved for
issuance under this Plan and the number of shares covered by each outstanding
Benefit shall be adjusted so that the aggregate consideration payable to the
Company and the value of each such Benefit shall not be changed. The Committee
may also provide for the continuation of Benefits or for other equitable
adjustments after changes in the Common Stock resulting from reorganization,
sale, merger, consolidation or similar occurrence.
(b) Notwithstanding any other provision of this Plan, and without
affecting the number of shares otherwise reserved or available hereunder, the
Committee may authorize the issuance or assumption of Benefits in connection
with any merger, consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem appropriate.
(c) In the case of any merger, consolidation or combination of the
Company with or into another corporation, other than a merger, consolidation or
combination in which the Company is the continuing corporation and which does
not result in the outstanding Common Stock being converted into or exchanged for
different securities, cash or other property, or any combination thereof (an
"Acquisition"):
(i) any participant to whom a stock option has been granted
under the Plan shall have the right (subject to the provisions of the Plan and
any limitation applicable to such option) thereafter and during the term of such
option, to receive upon exercise thereof the Acquisition Consideration (as
defined below) receivable upon such Acquisition by a holder of the number of
shares of Common Stock which might have been obtained upon exercise of such
option or portion thereof, as the case may be, immediately prior to such
Acquisition;
(ii) any participant to whom a Stock Appreciation Right has been
granted under the Plan shall have the right (subject to the provisions of the
Plan and any limitation applicable to such right) thereafter and during the term
of such right to receive upon exercise thereof the difference between the
aggregate fair market value on the applicable date (as set forth in such right)
of the Acquisition Consideration receivable upon such Acquisition by a holder of
the number of shares of Common Stock which might have been obtained upon
exercise of the option related thereto or any portion thereof, as the case may
be, immediately prior to such Acquisition and the aggregate option price of the
related option, or the aggregate fair market value on the date of grant of the
right, whichever is applicable.
The term "Acquisition Consideration" shall mean the kind and amount of
shares of the surviving or new corporation, cash, securities, evidence of
indebtedness, other property or any combination thereof receivable in respect of
one share of Common Stock of the Company upon consummation of an Acquisition.
11. Nontransferability. Each Benefit granted under the Plan to an
employee shall not be transferable by him otherwise than by will or the laws of
descent and distribution, and shall be exercisable, during his lifetime, only by
him. In the event of the death of a participant, each Benefit theretofore
granted to him shall be exercisable within the period after his death
established by the Committee at the time of grant (but not beyond the stated
duration of the Benefit) and then only:
(a) By the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's rights
under the Benefit shall pass by will or the laws of descent and distribution;
and
(b) To the extent that the deceased participant was entitled to do so
at the date of his death.
Notwithstanding the foregoing, at the discretion of the Committee, an award of a
Benefit may permit the transferability of the Benefit by the participant solely
to members of the participant's immediate family or trusts or family
partnerships for the benefit of such persons subject to such terms and
conditions as may be established by the Committee.
12. Other Provisions. The award of any Benefit under the Plan may also be
subject to such other provisions (whether or not applicable to the Benefit
awarded to any other participant) as the Committee determines appropriate,
including without limitation, provisions for the installment purchase of Common
Stock under Stock Options, provisions for the installment exercise of Stock
Appreciation Rights, provisions to assist the participant in financing the
acquisition of Common Stock, restrictions on resale or other disposition,
provisions for the acceleration of exercisability of Benefits in the event of a
change of control of the Company, provisions for the payment of the value of the
Benefits to participants in the event of a change of control of the Company,
provisions to comply with Federal and state securities laws, or understandings
or conditions as to the participant's employment in addition to those
specifically provided for under the Plan.
13. Rules. The Committee may establish such rules and regulations as it
considers desirable for the administration of the Plan.
14. Manner of Action by Committee. A majority of the members of the
Committee qualified to act on a question may act by meeting or by writing signed
without meeting and may execute, or delegate to one of its members authority to
execute any instrument or document required. The Committee may delegate the
performance of ministerial functions in connection with the Plan to such person
or persons as the Committee may select. The costs of administration of the Plan
will be paid by the Company.
15. Fair Market Value. For purposes hereof, fair market value of Common
Stock shall be the closing sale price for the Company's Common Stock as
reflected in the New York Stock Exchange Composite Transaction Quotations for
the date of calculation (or on the next preceding trading date if Common Stock
was not traded on the date of calculation).
16. Taxes. The Company shall be entitled if necessary or desirable to pay
or withhold the amount of any tax attributable to any amounts payable under the
Plan after giving the person entitled to receive such amount notice as far in
advance as practicable, and the Company may defer making payment as to any
Benefit if any such tax may be pending until indemnified to its satisfaction.
When a person is required to pay to the Company an amount required to be
withheld under applicable tax laws in connection with exercises of Non-qualified
Stock Options or other Benefits under the Plan, the Committee may, in its
discretion and subject to such rules as it may adopt, permit such person to
satisfy the obligation, in whole or in part, by electing to have the Company
withhold shares of Common Stock having a fair market value equal to the amount
required to be withheld.
17. Tenure. A participant's right, if any, to continue to serve the
Company and its subsidiaries as an officer, employee, or otherwise, shall not be
enlarged or otherwise affected by his designation as a participant under the
Plan.
18. Amendment and Termination. The terms and conditions applicable to any
Benefit granted under the Plan may be amended or modified by mutual agreement
between the Company and the participant or such other persons as may then have
an interest therein. Also, by mutual agreement between the Company and a
participant hereunder, or under any other present or future plan of the Company,
stock options or other Benefits may be granted to such participant in
substitution and exchange for, and in cancellation of, any Benefits previously
granted such participant under this Plan, or any Benefit previously or hereafter
granted to him under any other present or future plan of the Company. The Board
of Directors may amend the Plan from time to time or terminate the Plan at any
time. However, no action authorized by this paragraph shall reduce the amount
of any existing Benefit or change the terms and conditions thereof without the
participant's consent. No amendment of the Plan shall, without approval of the
shareholders of the Company, (i) increase the total number of shares which may
be issued under the Plan or increase the amount or type of Benefits that may be
granted under the Plan; (ii) change the minimum purchase price, if any, of
Common Stock which may be made subject to the Benefits under the Plan; or (iii)
modify the requirements as to eligibility for Benefits under the Plan. However,
the Board of Directors may amend the Plan in any respect without shareholder
approval if shareholder approval is not then required to comply with Rule 16b-3
or other similar requirements.
19. Shareholder Approval. The Plan was approved by the shareholders of
the Company on April 20, 1995 and amended and restated by the Board of Directors
on December 11, 1996. This Plan shall continue in effect until terminated by
the Board pursuant to Section 18; provided, however, that no Incentive Stock
Option shall be granted more than ten years after the date of the adoption of
this Plan by the Board.
Exhibit 10(j)
January 29, 1997
Mr. Timothy C. Brown
1401 Hawkshead Lane
Louisville, Kentucky 40220
Dear Mr. Brown:
This letter agreement sets forth the terms and conditions of your
continuing employment with Thomas Industries Inc. Please affix your signature
to the enclosed copy of this letter to document your agreement with these terms
and conditions and return the copy to me at your earliest convenience.
1. Position. During the term of your employment with the Company, you
will continue to serve as President and Chief Executive Officer of the Company.
You agree to devote your full business time and attention to the duties of such
offices and use your best efforts to protect, encourage and promote the
interests of the Company during the term. You shall not during your employment
be employed by, or, without the consent of the Board of Directors, be a director
of, any other business. However nothing shall prevent you from continuing to
serve as a director of National City Bank, Kentucky, or to serve as a director
of any civic or charitable organization.
2. Term. Your term of employment under this Agreement shall be for a
three-year period, commencing as of January 1, 1997. The term shall be
automatically extended at the end of each day for an additional day so that the
remaining term of the Agreement shall be three years. Such automatic extensions
shall terminate upon your receipt of written notice from the Board of Directors
of the Company that the Agreement will not be so extended at the completion of
its remaining three-year term.
3. Compensation. As compensation for the services which you will render
pursuant to this Agreement, you will receive the following payments and
benefits:
a. Salary. You will be paid an annual salary of $360,000 for
the calendar year 1997. Your salary will automatically increase to
$375,000 for 1998 and $390,000 for 1999. Thereafter, your performance
will be subject to review by the Compensation Committee on an annual
basis in accordance with the usual review procedures from time to time
in effect for senior management of the Company and your salary may be
increased (but not decreased) from time to time based on those
reviews.
b. Bonus. You will participate in the Company's annual
executive bonus program for senior executives. Your annual target
bonus will be not less than 60% of your salary and will be earned if
the Company achieves annual financial performance goals established by
the Compensation Committee.
c. Long-Term Incentives. You will participate in the Company's
1995 Incentive Stock Plan and will be awarded stock options and
performance share awards as determined from time to time by the
Compensation Committee based upon the Committee's evaluation of your
performance and the performance of the Company from year to year.
d. Benefits. You will be entitled to participate in all
employee benefit plans and programs of the Company (other than any
severance pay plan) which are made available from time to time to
senior officers of the Company, relating to medical care, dental care,
annual physical examination, long-term disability, and retirement.
The Company's objective is to provide you compensation at a level of at least
the 50% quartile of competitive compensation for chief executive officers in
companies of comparable revenues. The Company intends to reach this objective
over a 3 to 5-year period.
4. Expenses. The Company will pay or reimburse you for any expenses you
reasonably incur in furtherance of your duties hereunder upon submission of
vouchers or itemized reports prepared in compliance with Company policies and as
may be required in order to qualify such payments as proper deductions for tax
purposes. The Company shall also lease or purchase an automobile for your use
in the rendition of services hereunder and you shall be reimbursed for all
expenses incurred in the use of the automobile.
5. Vacation. You shall be entitled to paid vacation during each year of
the term of your employment in accordance with Company policy applicable to
salaried employees.
6. Death. In the event of your death during the employment term, the
Company will pay your estate, or designated beneficiary, any unpaid salary or
other accrued compensation through the date of termination and a pro rata
portion of your target bonus for the year in which your death occurs.
7. Disability. Any physical or mental ailment which prevents you from
performing your duties hereunder for a period of more than 180 consecutive days
and which is expected to be of permanent duration shall constitute total
permanent disability hereunder. In the event of your permanent total
disability, your employment will terminate, the Company will pay you or your
representative your salary through the date of termination and a pro rata
portion of your target bonus for the year in which disability occurs, and all
rights, duties and obligations of both parties under this Agreement (other than
your obligation of noncompetition and confidentiality under paragraph 12 hereof)
shall cease and you shall be entitled to all the benefits then being provided to
senior officers of the Company who become so disabled.
8. Resignation. If you voluntarily terminate your employment at any time
during the term, all obligations of the Company under this Agreement shall
immediately cease, except for obligations involving accrued but unpaid
compensation under this Agreement through the date of such termination.
9. Termination for Cause. The Company may terminate your employment at
any time for cause. For purposes hereof, the term "cause" shall have the same
meaning as it does in the "Employment Agreement" between the parties dated
October 1, 1988 (the "1988 Agreement"). All obligations of the Company under
this Agreement shall immediately cease upon termination of your employment for
cause except for obligations involving accrued but unpaid compensation under
this Agreement through the date of such termination.
10. Severance. If your employment is terminated by the Company without
cause, the Company shall continue to pay you your base salary for a 36-month
period from the date of termination, continue your medical and other insurance
coverage for that period and make a payment to you equal to the present value of
three annual contributions to the Company's retirement plan (based on average of
the Company's last two contributions). Any payments under this paragraph shall
constitute liquidated damages and shall be your sole right to compensation in
the event of such termination of employment. The amount of any payment provided
for under this paragraph 10 shall not be reduced by any compensation earned by
you as a result of employment by another employer after the date of termination.
11. Change of Control. In the event of a change of control of the
Company, the provisions of the 1988 Agreement shall supersede the provisions of
this letter agreement for the "Employment Period" described in the
1988 Agreement. If you are still employed by the Company at the end of that
Employment Period, the terms and conditions of this letter agreement shall apply
to your continuing employment as if the change of control had not occurred.
"Change of control" shall have the same meaning in this letter agreement as it
does in the 1988 Agreement.
12. Noncompetition; Confidential Information.
a. You agree that for a period of one year following your
termination of employment you will not participate in the management
of, or maintain any interest in, any organization which offers
services or products similar to those offered by the Company or its
subsidiaries without the prior written approval of the Board of
Directors of the Company. This subparagraph shall not apply if
termination of your employment is effected by the Company without
cause.
b. Upon termination of your employment, you agree not to take
or retain any records, papers, files or other documents (including
copies thereof) and shall not disclose to any person or entity any
confidential information of any kind relating to the business,
financial or other affairs of the Company or its affiliates without
the prior written approval of the Board of Directors of the Company.
13. Arbitration. Any controversy relating to this Agreement shall be
settled exclusively by arbitration in Louisville, Kentucky in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on an arbitrator's award relating to this Agreement in any court
having jurisdiction.
14. Notices. All notices or other communications hereunder shall be in
writing and shall be effectively given when mailed by registered mail, return
receipt requested, and directed to the party at the address given herein, or to
such other address as either party may hereafter designate to the other in
writing.
If to Executive:
Mr. Timothy C. Brown
1401 Hawkshead Lane
Louisville, Kentucky 40220
If to the Company:
Thomas Industries Inc.
4360 Brownsboro Road
Suite 300
Louisville, Kentucky 40232-5120
Attention: Phillip J. Stuecker
15. Entire Agreement. This letter agreement constitutes the entire
agreement between you and the Company relating to your current employment and
supersedes all previous agreements or understandings either oral or written with
respect thereto, except for the 1988 Agreement which continues in full force and
effect.
16. Amendment. The terms and conditions of this Agreement may be amended
at any time by written agreement between you and the Company.
17. Continued Employment. If you remain employed by the Company after
termination of this letter agreement, your annual salary shall continue at the
rate in effect immediately prior to termination and you shall continue to
participate in the Company's bonus, incentive and benefit plans (including the
Severance Pay Policy for Officers).
18. Enforceability. The invalidity or unenforceability of any provision
of this letter Agreement shall not affect its other provisions and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provision had not been included. Any waiver by the Company of a breach of any
provision of this Agreement by you shall not operate or be construed as a waiver
of any subsequent breach of the Agreement by you.
Very truly yours,
______________________
Chairman
Compensation Committee
I agree to the above terms
and conditions.
____________________________________
Timothy C. Brown
Date: ________________________, 1997
Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net income for 1996 was $17.4 million, an increase of $4.6 million, or 36.3%
over 1995. Net sales increased 4.0% to $510.1 million in 1996 from $490.6
million in 1995.
For 1995, net income was $12.8 million, an increase of $2.2 million, or 21.2%
over 1994; while net sales increased 7.4% to $490.6 million from $456.6
million in 1994. The 1994 net income includes an after-tax gain of $3.0
million from the sale of two non-core divisions.
The Compressor and Vacuum Pump Segment achieved record net sales of $170.1
million, an increase of 7.8% over 1995, following an increase of 7.8% in 1995
over 1994. The increase in 1996 was due to the acquisition of Welch Vacuum
Technology and the continued successful introduction of new products for new
applications. The increase in 1995 was attributed to new product applications
primarily in the European operations. Operating income for the Segment
increased 1.4% in 1996 from 1995 due to the addition of Welch. For 1995,
operating income for the Segment decreased by 2.8% from 1994, principally due
to competitive pricing pressure in the North American medical market.
The Lighting Segment net sales for 1996 of $340.0 million were also a record
and represent an increase of 2.2% over 1995 net sales, following an increase
of 9.5% in 1995. The increase in 1996 resulted from improvements in the
Consumer Division and additional shipments in the Canadian market. For 1995,
the increase was principally from improvements in the Commercial and
Industrial Division. Operating income for the Lighting Segment improved to
$16.3 million in 1996, up from $11.4 million in 1995 and $4.9 million in
1994. The 1996 operating income represents a 43.1% improvement over 1995,
while the 1995 level was 135.3% greater than 1994. The improvements were due
to the additional volume, improved manufacturing efficiencies and continued
implementation of cost containment programs. The 1994 Lighting Segment
results include a gain of $2.0 million due to LIFO inventory quantity
reductions at certain operating divisions.
In 1994, the Company recorded an after-tax gain of $3.0 million from the
sales of the Portland Willamette and Builders Brass Works Divisions. The
operations, whose products were fireplace screens and accessories and
architectural hardware and door controls, were divested as part of the
Company's focus on its two core businesses.
Interest expense for 1996 declined $.9 million or 11.0% from 1995, while the
1995 interest expense declined $1.0 million, or 10.7%, from 1994. The
interest expense reductions in both years were due to the lower levels of
long-term and short-term debt.
The Company, like other similar manufacturers, is subject to environmental
rules and regulations regarding the use, disposal and cleanup of substances
regulated under environmental protection laws. It is the Company's policy to
comply with these rules and regulations, and the Company believes that its
practices and procedures are designed to meet these requirements. The Company
is involved in remedial efforts at certain of its present and former
locations; and when costs can be reasonably estimated, the Company records
appropriate liabilities for such matters.
During 1996, the Company employed an average of 3,150 people, compared to
3,100 in 1995. The addition is due primarily to the acquisition of Welch.
LIQUIDITY AND SOURCES OF CAPITAL
Cash and cash equivalents increased to $18.8 million at December 31, 1996,
compared to $18.3 million and $5.1 million at December 31, 1995, and 1994,
respectively. Cash flows from operations were $30.1 million in 1996 compared
to $39.4 million in 1995 and $20.0 million in 1994. These funds, along with
the proceeds from divestitures, have been utilized in funding of capital
expenditures and dividends over the three-year period, along with the net pay
down of long-term and short-term debt during 1996, 1995, and 1994 totaling
$33.4 million.
Working capital increased $5.0 million during 1996 from the December 31, 1995
level, which had increased $3.3 million from December 31, 1994. From 1995 to
1996, accounts receivable increased $6.3 million and inventory increased $1.2
million due to the higher sales volume and the Welch acquisition.
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Working capital $85,838 $80,837 $77,558
Current ratio 2.02 1.96 2.00
Long-term debt, less current portion $62,632 $70,791 $79,693
Long-term debt to total capital 28.4 % 33.1 % 37.3 %
</TABLE>
Certain loan agreements of the Company include restrictions on working
capital, operating leases, tangible net worth and the payment of cash
dividends and stock distributions. Under the most restrictive of these
arrangements, retained earnings of $28.8 million are not restricted at
December 31, 1996.
As of December 31, 1996, the Company had available credit of $63.7 million
with banks under short-term borrowing arrangements and a revolving line of
credit, $60.5 million of which was unused. Anticipated funds from operations,
along with available short-term credit, are expected to be sufficient to meet
cash requirements in the year ahead.
COMMON STOCK MARKET PRICES AND DIVIDENDS
The Company's common stock is traded on the New York Stock Exchange (ticker
symbol TII). On February 5, 1997, there were 2,198 security holders of
record. High and low stock prices and dividends for the last two years were:
<TABLE>
<CAPTION>
1996 1995
CASH Cash
MARKET PRICE DIVIDENDS Market Price Dividends
QUARTER ENDED HIGH LOW DECLARED High Low Declared
<S> <C> <C> <C> <C> <C> <C>
March 31 $23-7/8 $20-3/8 $.10 $17 $13-5/8 $.10
June 30 21-3/4 19-1/8 .10 16-7/8 15-1/2 .10
September 30 20-1/8 16-1/2 .10 20-1/4 16-1/8 .10
December 31 21-3/8 18-3/4 .10 24-1/8 18-7/8 .10
</TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended December 31
(In thousands, except per share data) 1996 1995 1994
<S> <C> <C> <C>
Net sales $510,111 $490,573 $456,565
Cost of products sold 358,778 352,551 329,338
GROSS PROFIT 151,333 138,022 127,227
Selling, general and administrative expenses 117,175 108,284 104,091
Interest expense 7,333 8,242 9,225
Interest income and other (863) 443 (4,287)
123,645 116,969 109,029
INCOME BEFORE INCOME TAXES 27,688 21,053 18,198
Income taxes 10,272 8,278 7,656
NET INCOME $ 17,416 $ 12,775 $ 10,542
NET INCOME PER SHARE $ 1.63 $ 1.25 $ 1.05
See accompanying notes.
</TABLE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
(In thousands, except share data) 1996 1995
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 18,826 $ 18,305
Accounts receivable, less allowance
(1996 - $2,243 ; 1995 - $2,014) 68,239 61,975
Inventories 69,247 68,065
Deferred income taxes 7,167 5,775
Other current assets 6,885 10,619
TOTAL CURRENT ASSETS 170,364 164,739
Property, plant and equipment, net 77,795 75,710
Intangible assets, net 58,687 61,379
Other assets 12,804 11,705
TOTAL ASSETS $319,650 $313,533
Liabilities and shareholders' equity
Current liabilities:
Notes payable to banks $ 6,986 $ 7,679
Accounts payable 27,377 27,778
Accrued expenses and other current liabilities 41,352 38,427
Dividends payable 1,053 1,010
Current portion of long-term debt 7,758 9,008
TOTAL CURRENT LIABILITIES 84,526 83,902
Deferred income taxes 8,603 7,875
Long-term debt, less current portion 62,632 70,791
Other long-term liabilities 6,187 7,788
TOTAL LIABILITIES 161,948 170,356
Shareholders' equity:
Preferred stock, $1 par value, 3,000,000 shares
authorized - none issued - -
Common stock, $1 par value, shares authorized:
60,000,000; shares issued: 1996-11,549,940; 1995-11,485,865 11,550 11,486
Capital surplus 115,206 117,974
Retained earnings 50,420 40,003
Foreign currency translation (1,482) (616)
Minimum pension liability (780) (2,690)
Less cost of treasury shares: 1996-1,023,646; 1995-1,366,695 (17,212) (22,980)
TOTAL SHAREHOLDERS' EQUITY 157,702 143,177
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $319,650 $313,533
See accompanying notes.
</TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Years ended December 31
(In thousands) 1996 1995 1994
<S> <C> <C> <C>
Common stock:
Beginning of year $ 11,486 $ 11,448 $ 11,416
Stock options exercised 64 38 32
END OF YEAR 11,550 11,486 11,448
Capital surplus:
Beginning of year 117,974 117,557 117,264
Treasury stock retired (3,866) - -
Welch pooling of interests 347 - -
Stock options exercised 751 417 293
END OF YEAR 115,206 117,974 117,557
Retained earnings:
Beginning of year 40,003 31,264 24,746
Welch pooling of interests (928) - -
Net income 17,416 12,775 10,542
Treasury stock retired (1,902) - -
Cash dividends of $.40 per share (4,169) (4,036) (4,024)
END OF YEAR 50,420 40,003 31,264
Foreign currency translation:
Beginning of year (616) (2,478) (2,156)
Adjustment (866) 1,862 (322)
END OF YEAR (1,482) (616) (2,478)
Minimum pension liability:
Beginning of year (2,690) (1,045) (3,241)
Adjustment 1,910 (1,645) 2,196
END OF YEAR (780) (2,690) (1,045)
Treasury stock:
Beginning of year (22,980) (22,980) (22,980)
Treasury stock retired 5,768 - -
END OF YEAR (17,212) (22,980) (22,980)
TOTAL SHAREHOLDERS' EQUITY $157,702 $143,177 $133,766
See accompanying notes.
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31
(In thousands) 1996 1995 1994
<S> <C> <C> <C>
Operating activities
Net income $ 17,416 $ 12,775 $ 10,542
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,682 14,803 15,524
Deferred income taxes 198 75 1,391
Provision for losses on accounts receivable 451 519 705
Loss (gain) on asset disposals, net 99 123 (4,223)
Changes in operating assets and liabilities
net of effect of acquisitions/divestitures:
Accounts receivable (5,434) (1,037) (3,412)
Inventories 766 4,312 (4,739)
Other current assets 998 1,282 1,004
Accounts payable (174) 1,779 1,565
Accrued expenses and other liabilities (366) 4,366 1,037
Other 479 404 560
NET CASH PROVIDED BY OPERATING ACTIVITIES 30,115 39,401 19,954
Investing activities nvesting activities
Purchases of property, plant and equipment (15,071) (12,288) (16,301)
Proceeds from sales of property, plant and
equipment and other assets 159 1,458 12,747
NET CASH USED IN INVESTING ACTIVITIES (14,912) (10,830) (3,554)
Financing activities Financing activities
Payments on notes payable to banks, net (704) (1,231) (8,615)
Payments on long-term debt (12,458) (8,914) (1,508)
Dividends paid (4,127) (4,033) (4,022)
Other 925 287 169
NET CASH USED IN FINANCING ACTIVITIES (16,364) (13,891) (13,976)
EFFECT OF EXCHANGE RATE CHANGE 1,682 (1,425) 262
Net increase in cash and cash equivalents 521 13,255 2,686
Cash and cash equivalents at beginning of year 18,305 5,050 2,364
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 18,826 $ 18,305 $ 5,050
See accompanying notes.
</TABLE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE ONE - DESCRIPTION OF BUSINESS
Thomas Industries Inc. and subsidiaries (the Company) operate two core
businesses: lighting and compressors and vacuum pumps. The Company
designs, manufactures, markets and sells these products. Manufacturing
facilities are located in North America and Europe with additional sales
operations located in South America and Asia. Lighting products are sold
principally in North America for commercial, industrial and consumer
applications. Compressor and vacuum pump products are sold worldwide with
principal markets in North America and Europe, primarily for applications
of original equipment manufacturers.
NOTE TWO - ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company.
Affiliates not required to be consolidated are accounted for using the
equity method, under which the Company's share of earnings of these
affiliates is included in income as earned. Intercompany accounts and
transactions are eliminated.
INVENTORIES
Inventories are valued at the lower of cost or market. Inventories valued
using the last-in, first-out (LIFO) method represented approximately 78%
and 74% of consolidated inventories at December 31, 1996, and 1995,
respectively. Inventories not on LIFO are valued using the first-in,
first-out (FIFO) method. Inventories consisted of the following:
<TABLE>
<CAPTION>
(In thousands 1996 1995
<S> <C> <C>
Finished goods $33,072 $29,951
Raw materials 21,622 25,107
Work in process 14,553 13,007
Total inventories $69,247 $68,065
</TABLE>
On a current cost basis, inventories would have been $11,505,000 and
$12,727,000 higher than reported at December 31, 1996, and 1995,
respectively.
Inventory quantities at certain operating units decreased in 1994. As a
result, cost of products sold included cost of inventories based on prior
years' LIFO values which were less than current replacement costs, the
effect of which increased net income by $1,192,000 ($.12 per share) in
1994.
PROPERTY, PLANT AND EQUIPMENT
The cost of property, plant and equipment is depreciated principally by
the straight-line method over the asset's estimated useful life. Property,
plant and equipment consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
<S> <C> <C>
Land $ 6,331 $ 6,258
Buildings 31,470 30,950
Leasehold improvements 11,627 11,005
Machinery and equipment 100,292 98,690
149,720 146,903
Accumulated depreciation and amortization 71,925 71,193
Total property, plant and equipment, net $ 77,795 $ 75,710
</TABLE>
INTANGIBLE ASSETS
Intangible assets represent the excess of cost over the fair value of net
assets of companies acquired and are stated net of accumulated
amortization of $18,368,000 and $16,548,000 at December 31, 1996, and
1995, respectively. The excess is being amortized over 40 years by the
straight-line method.
NET INCOME PER SHARE
Net income per share is based on the weighted daily average number of
common shares outstanding during the year, adjusted for the dilutive
effect of common stock equivalents, consisting of stock options,
calculated using the treasury stock method.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs, which include costs of product
improvements and design, are expensed as incurred ($14,338,000 in 1996,
$13,405,000 in 1995 and $12,705,000 in 1994).
FAIR VALUES OF FINANCIAL INSTRUMENTS
Various methods and assumptions are used by the Company in estimating its
fair value disclosures for significant financial instruments. Fair values
of cash equivalents approximate their carrying amounts because they are
highly liquid investments with a maturity of less than three months when
purchased. Fair values of notes payable to banks and the current portion
of long-term debt approximate their carrying amounts. The fair value of
long-term debt is based on the present value of the underlying cash flows
discounted at the current estimated borrowing rates available to the
Company.
FOREIGN CURRENCY TRANSLATION
The local currency is the functional currency for the Company's foreign
subsidiaries. Results are translated into U.S. dollars using monthly
average exchange rates, while balance sheet accounts are translated using
year-end exchange rates. The resulting translation adjustments are
included as a foreign currency translation adjustment in shareholders'
equity.
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.
OTHER
Certain prior year amounts have been reclassified to conform to the
current year presentation.
NOTE THREE - ACQUISITIONS AND DIVESTITURES
On March 15, 1996, the Company acquired Welch Vacuum Technology, Inc., of
Skokie, Illinois, a manufacturer of high vacuum systems for laboratory and
chemical markets. Welch was acquired in exchange for 343,049 shares of
common stock of Thomas Industries Inc. in a transaction accounted for as a
pooling of interests. Due to immateriality, prior-year financial
statements have not been restated.
In 1994, the Company sold various non-core operations resulting in a pre-
tax gain of $4,175,000 and a net gain of $3,000,000 ($.30 per share).
Proceeds from these transactions included cash of $10,900,000 and
interest-bearing notes receivable of $4,500,000.
NOTE FOUR - INCOME TAXES
A summary of the provision for income taxes follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
<S> <C> <C> <C>
Current:
Federal $ 6,946 $5,138 $3,614
State 630 300 850
Foreign 2,498 2,765 1,801
10,074 8,203 6,265
Deferred:
Federal and state 128 211 1,366
Foreign 70 (136) 25
198 75 1,391
Total provision for income taxes $10,272 $8,278 $7,656
</TABLE>
Deferred income taxes are provided for significant income and expense
items recognized in different years for tax and financial reporting
purposes. Temporary differences which gave rise to significant deferred
tax assets and liabilities follow:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 3,060 $2,045
Allowance for uncollectible accounts receivable 680 610
Inventory reserves 2,786 2,060
Accrued compensation expenses 2,731 2,661
Other 2,740 2,116
11,997 9,492
Less valuation allowance 3,060 2,045
Net deferred tax assets 8,937 7,447
Deferred tax liabilities:
Depreciation of property, plant and equipment 6,705 6,406
Inventory valuation 1,858 1,397
Pension expense 1,140 1,026
Other 881 443
10,584 9,272
Net deferred tax liability 1,647 1,825
Classification:
Current asset 7,167 5,775
Long-term asset 1,770 1,672
Current liability 1,981 1,397
Long-term liability 8,603 7,875
Net deferred tax liability $ 1,647 $1,825
</TABLE>
Deferred tax assets and liabilities are classified according to the
related asset and liability classification on the consolidated balance
sheet.
The valuation allowance is provided for income tax loss carryforwards in
U.S. and foreign jurisdictions, the realization of which is not assured
within the carryforward periods.
The U.S. and foreign components of income before income taxes follow:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
<S> <C> <C> <C>
United States $20,731 $14,973 $13,628
Foreign 6,957 6,080 4,570
Income before income taxes $27,688 $21,053 $18,198
</TABLE>
A reconciliation of the normal statutory federal income tax rate to the
Company's effective income tax rate follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
U.S. statutory rate 35.0% 35.0% 35.0%
State income taxes, net of
federal tax benefits 1.5 .9 3.0
Nondeductible amortization of
intangible assets 2.0 2.6 3.1
Foreign losses (1.4) (1.1) (1.4)
Foreign tax rates 1.8 2.3 1.9
Other (1.8) (.4) .5
Effective income tax rate 37.1% 39.3% 42.1%
</TABLE>
The Company's foreign subsidiaries have accumulated undistributed earnings
($26,962,000 at December 31, 1996) on which U.S. taxes have not been
provided. Under current tax regulations and with the availability of
certain tax credits, it is management's belief that the likelihood of the
Company incurring significant taxes on any distribution of such
accumulated earnings is remote. Dividends, if any, would be paid
principally from current earnings.
At December 31, 1996, the Company had U.S. net operating loss
carryforwards for income tax purposes of $1,580,000, of which $465,000,
$595,000 and $520,000 expire on January 1, 2007, 2009 and 2010,
respectively.
At December 31, 1996, the Company had foreign net operating loss
carryforwards for income tax purposes of $2,840,000, of which $1,990,000
and $850,000 expire on January 1, 2000, and 2001, respectively.
The Company made federal, state and foreign income tax payments of
$13,179,000 in 1996, $7,200,000 in 1995 and $7,025,000 in 1994.
NOTE FIVE - LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consists principally of 9.36% senior notes with annual
maturities through 2005 ($61,810,000 and $69,540,000 at December 31, 1996,
and 1995, respectively).
The fair value of the Company's long-term debt (excluding the current
portion) at December 31, 1996, and 1995 was $66,700,000 and $78,400,000,
respectively.
Maturities of long-term debt for the next five years are as follows: 1997
- $7,758,000; 1998 - $7,782,000; 1999 - $7,784,000; 2000 - $7,786,000; and
2001 - $7,788,000.
Certain loan agreements include restrictions on working capital and
tangible net worth and the payment of cash dividends and stock
distributions. Under the most restrictive of these arrangements, retained
earnings of $28,800,000 were not restricted at December 31, 1996.
As of December 31, 1996, the Company had available credit of $63,700,000
with banks under short-term borrowing arrangements and a revolving line of
credit; $60,500,000 of which was unused.
Cash paid for interest was $7,591,000 in 1996, $8,533,000 in 1995 and
$9,253,000 in 1994. The weighted average interest rates on short-term
borrowings at December 31, 1996, and 1995 were 4.04% and 5.22%,
respectively.
NOTE SIX - SHAREHOLDERS' EQUITY
STOCK INCENTIVE PLANS
At the April 20, 1995 Annual Meeting, the Company's shareholders approved
the Company's 1995 Incentive Stock Plan. An aggregate of 600,000 shares of
common stock, plus all shares remaining under the Company's 1987 Incentive
Stock Plan, were reserved for issuance under this Plan. Under this Plan,
options may be granted to employees at not less than market value at date
of grant. All options granted have 10-year terms and vest and become fully
exercisable at the end of five years of continued employment. The
Company's 1987 Incentive Stock Plan was terminated, except with respect to
outstanding options which may be exercised through 2005.
At the April 21, 1994 Annual Meeting, the Company's shareholders approved
the Nonemployee Director Stock Option Plan. Under this Plan, each
continuing non-employee director in office on the date of each annual
meeting is awarded options to purchase 2,000 shares of common stock at not
less than market value at date of grant. All options granted have 10-year
terms, and vest and become fully exercisable six months after grant. This
Plan provides for options to be awarded at each annual meeting through
2004 or until 250,000 options have been granted. At December 31, 1996,
there were eight non-employee directors in office, and 52,000 options had
been awarded under this Plan.
In 1996, the Company adopted Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). In
accordance with SFAS 123, the Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) and related Interpretations, in accounting for its
stock based compensation because, as discussed below, the alternative fair
value accounting provided for under SFAS 123 requires use of option
valuation models that were not developed for use in valuing stock options.
Under APB 25, because the exercise price of the Company's stock options
equaled the market price of the underlying stock on the date of grant, no
compensation expense was recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1994, under the fair value method of
SFAS 123. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions: risk-free interest rate of 6.5%; dividend
yield of 2%; volatility factors of the expected market price of the
Company's common stock of .273 and a weighted average expected life of the
options of eight years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restriction and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions, including the
expected stock price volatility. Because the Company's stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows:
<TABLE>
<CAPTION>
(In thousands, except per share data) 1996 1995
<S> <C> <C> <C>
Net income As reported $17,416 $12,775
Pro forma 17,024 12,669
Earnings per share As reported 1.63 1.25
Pro forma 1.59 1.24
</TABLE>
Because SFAS 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until
1999.
A summary of stock option activity for all plans follows:
<TABLE>
<CAPTION>
1996 1995 1994
WEIGHTED Weighted Weighted
OPTIONS AVERAGE PRICE Options Average Price Options Average Price
<S> <C> <C> <C> <C> <C> <C>
Beginning of year 684,192 $15.02 558,051 $12.88 412,801 $12.25
Granted 179,000 $20.97 179,000 $21.20 205,500 $13.48
Exercised (65,283) $12.89 (44,108) $15.38 (32,083) $10.12
Forfeited or expired (15,169) $16.79 (8,751) $12.87 (28,167) $11.29
End of year 782,740 $16.52 684,192 $15.02 558,051 $12.88
Exercisable at end
of year 337,593 $13.11 315,190 $12.69 292,967 $12.78
</TABLE>
The weighted average fair value of options granted was $7.59 in 1996 and
$7.72 in 1995 using a Black-Scholes option pricing model. Options outstanding
at December 31, 1996, had option prices ranging from $9.87 to $21.87 and
expire at various dates between December 17, 1997, and December 11, 2006
(with a weighted-average remaining contractual life of 7.65 years). There are
534,610 shares reserved for future grant, of which 198,000 shares are
reserved for the Non-Employee Director Stock Option Plan.
In addition to the options listed above, 8,810 performance share awards were
granted on December 11, 1996. Awards may be earned based on the total
shareholder return of the Company during the three-year period commencing
January 1, 1997.
SHAREHOLDER RIGHTS PLAN
The Board of Directors of the Company has adopted a shareholder rights plan
(the Rights Plan) pursuant to which preferred stock purchase rights (the
Rights) were declared and distributed to the holders of the Company's common
stock. The Rights Plan, as adopted in 1987 and amended in 1990, provides that
the Rights separate from the common stock and become exercisable if a person
or group of persons working together acquires at least 20% of the common
stock (a 20% Acquisition) or announces a tender offer which would result in
ownership by that person or group of at least 20% of the common stock (a 20%
Tender Offer). Upon a 20% Acquisition, the holders of Rights may purchase the
common stock at half-price. If, following the separation of the Rights from
the common stock, the Company is acquired in a merger or sale of assets,
holders of Rights may purchase the acquiring company's stock at half-price.
Notwithstanding the foregoing discussion, under the Rights Plan, the Board of
Directors has flexibility in certain events. In order to provide maximum
flexibility, the Board of Directors may delay the date upon which the Rights
become exercisable in the event of a 20% Tender Offer. In addition, the Board
of Directors has the option to exchange one share of common stock for each
outstanding Right at any time after a 20% Acquisition, but before the
acquirer has purchased 50% of the outstanding common stock. The Rights may
also be redeemed at two cents per Right at any time prior to a 20%
Acquisition or a 20% Tender Offer.
NOTE SEVEN - RETIREMENT PLANS
The Company has noncontributory defined benefit pension plans principally
covering its hourly union employees. Such plans primarily provide flat
benefits of stated amounts for each year of service. The Company's policy is
to fund pension costs deductible for income tax purposes.
The Company also sponsors defined contribution pension plans substantially
covering all U.S. employees whose compensation is not determined by
collective bargaining. Annual contributions are determined by the Board of
Directors.
A summary of pension expense follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
<S> <C> <C> <C>
Defined benefit plans:
Service cost-benefits earned during the period $ 502 $ 362 $ 503
Interest cost on accumulated benefit obligation 1,806 1,598 1,492
Actual return on plan assets (3,130) (4,368) (3)
Net amortization and deferral 1,283 3,264 (1,394)
Net pension cost of defined benefit plans 461 856 598
Defined contribution plans 3,206 2,685 2,540
Multi-employer plans for certain union
employees and other 154 217 264
Total pension expense $ 3,821 $ 3,758 $ 3,402
</TABLE>
The assumptions used in the accounting for the funded status of defined
benefit plans follow:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Weighted average discount rates 8.00% 7.15% 9.00%
Expected long-term rates of return on assets 9.00% 9.00% 9.00%
</TABLE>
The following table sets forth the funded status and amounts recognized in
the consolidated balance sheets for the Company's defined benefit pension
plans:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
ASSETS EXCEED ACCUMULATED Assets Exceed Accumulated
ACCUMULATED BENEFITS EXCEED Accumulated Benefits Exceed
BENEFITS ASSETS Benefits Assets
<S> <C> <C> <C> <C>
Actuarial present value
of benefit obligations:
Vested benefit obligation $16,775 $ 8,067 $5,925 $16,630
Accumulated benefit obligation 17,245 8,266 6,212 16,984
Plan assets at fair value 19,012 7,062 6,396 15,157
Accumulated benefit obligation less
than (in excess of) plan assets 1,767 (1,204) 184 (1,827)
Unrecognized net (gain) loss (172) 780 575 2,718
Unrecognized net obligation,
net of amortization 716 1,374 248 802
Additional minimum liability - (2,154) - (3,520)
Prepaid pension asset (liability) $ 2,311 $ (1,204) $1,007 $ (1,827)
The plans' assets consist primarily of listed stocks and bonds.
</TABLE>
NOTE EIGHT - OTHER POSTRETIREMENT BENEFIT PLANS
The Company provides postretirement medical and life insurance benefits for
certain retirees and employees, and accrues the cost of such benefits during
the service lives of such employees.
A summary of postretirement benefit cost follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
<S> <C> <C> <C>
Service cost on benefits earned during the period $ 50 $ 42 $ 93
Interest cost on benefit obligation 356 439 491
Net amortization and deferral 233 344 294
Net periodic postretirement benefit cost $639 $825 $878
</TABLE>
The following table sets forth the status and amounts recognized in the
consolidated balance sheets for the Company's postretirement benefit plans:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
<S> <C> <C>
Retiree participants $ 3,834 $ 4,910
Fully eligible active participants 239 229
Other active participants 701 794
Accumulated postretirement benefit obligation 4,774 5,933
Unrecognized prior service cost (38) (40)
Unrecognized net gain (loss) 725 (371)
Unrecognized transition obligation (3,699) (3,931)
Accrued postretirement benefit liability $ 1,762 $ 1,591
</TABLE>
Assumptions used to measure expected health care costs follow:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Discount rate 8.00% 7.15% 9.00%
Initial health care cost trend rate 9.00% 9.00% 10.00%
Ultimate health care cost trend rate 5.00% 5.50% 5.00%
Year ultimate trend rate is achieved 2004 2004 2004
</TABLE>
The healthcare cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed healthcare cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1996, by $410,000 and
the aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year ended December 31, 1996, by $39,000.
NOTE NINE - LEASES, COMMITMENTS AND CONTINGENCIES
Total rental expense was $4,664,000 in 1996; $4,554,000 in 1995 and
$4,840,000 in 1994. Future minimum rentals for the five years ending December
31, 2001, and in the aggregate thereafter, are as follows: 1997 - $3,154,000;
1998 - $2,563,000; 1999 - $1,900,000; 2000 - $1,237,000; 2001 - $1,035,000
and thereafter - $6,192,000.
The Company has letters of credit outstanding in the amount of $6,096,000 at
December 31, 1996.
The Company, like other similar manufacturers, is subject to environmental
rules and regulations regarding the use, disposal and cleanup of substances
regulated under environmental protection laws. It is the Company's policy to
comply with these rules and regulations, and the Company believes that its
practices and procedures are designed to meet this compliance. The Company is
involved in remedial efforts at certain of its present and former locations;
and when costs can be reasonably estimated, the Company records appropriate
liabilities for such matters.
In the normal course of business, the Company is party to legal proceedings.
When costs can be reasonably estimated, the Company records appropriate
liabilities for such matters.
NOTE TEN - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
A summary of accrued expenses and other current liabilities follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
<S> <C> <C>
Accrued wages, taxes and withholdings $10,173 $ 9,420
Accrued insurance 4,952 5,338
Accrued sales expense 5,447 4,937
Income taxes payable 3,565 5,126
Other current liabilities 17,215 13,606
Total accrued expenses and other current liabilities $41,352 $38,427
</TABLE>
NOTE ELEVEN - SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Unaudited quarterly results of operations follow (In thousands, except per
share data):
<TABLE>
<CAPTION>
NET INCOME
NET SALES GROSS PROFIT NET INCOME PER SHARE
1996 1995 1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1st Qtr. $123,524 $117,609 $ 35,119 $ 31,228 $ 2,625 $ 1,588 $0.25 $0.16
2nd Qtr. 127,868 127,367 37,209 36,499 4,448 3,876 0.42 0.38
3rd Qtr. 129,611 128,750 39,188 36,908 5,902 4,702 0.55 0.46
4th Qtr. 129,108 116,847 39,817 33,387 4,441 2,609 0.41 0.25
$510,111 $490,573 $151,333 $138,022 $17,416 $12,775 $1.63 $1.25
</TABLE>
NOTE TWELVE - INDUSTRY SEGMENT INFORMATION
Industry segment information follows:
<TABLE>
<CAPTION>
COMPRESSORS &
(In thousands) LIGHTING VACUUM PUMPS OTHER CORPORATE CONSOLIDATED
<S> <C> <C> <C> <C> <C>
1996
Net sales $340,047 $170,064 $ - $ - $510,111
Operating income 16,348 28,857 - - 45,205
General corporate expenses - - - 11,047 11,047
Identifiable assets 211,173 86,259 - 22,218 319,650
Depreciation and
amortization expense 8,934 6,537 - 211 15,682
Capital expenditures 7,675 7,122 - 274 15,071
1995
Net sales $332,842 $157,731 $ - $ - $490,573
Operating income 11,425 28,446 - - 39,871
General corporate expenses - - - 10,133 10,133
Identifiable assets 204,707 82,299 - 26,527 313,533
Depreciation and
amortization expense 8,784 5,803 - 216 14,803
Capital expenditures 5,849 6,241 - 198 12,288
1994
Net sales $304,047 $146,323 $6,195 $ - $456,565
Operating income (loss) 4,856 29,252 (263) - 33,845
General corporate expenses - - - 10,709 10,709
Identifiable assets 213,904 76,753 - 14,414 305,071
Depreciation and
amortization expense 9,829 5,224 241 230 15,524
Capital expenditures 6,364 9,758 83 96 16,301
</TABLE>
Intersegment and interlocation sales are not significant and have been
eliminated from the above tabulation. Operating income by segment is gross
profit less operating expenses, excluding interest, general corporate
expenses, other income and income taxes.
Information by geographic area follows:
<TABLE>
<CAPTION>
UNITED
(In thousands) STATES CANADA EUROPE ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
1996
Net sales to unaffiliated
customers $421,758 $38,704 $49,649 $ - $510,111
Inter-area sales 12,387 674 7,009 (20,070) -
Total net sales 434,145 39,378 56,658 (20,070) 510,111
Operating income 38,432 750 6,023 - 45,205
Identifiable assets 260,661 28,107 30,882 - 319,650
1995
Net sales to unaffiliated
customers $403,955 $35,051 $51,567 $ - $490,573
Inter-area sales 10,484 541 6,630 (17,655) -
Total net sales 414,439 35,592 58,197 (17,655) 490,573
Operating income 32,765 729 6,377 - 39,871
Identifiable assets 253,438 26,336 33,759 - 313,533
1994
Net sales to unaffiliated
customers $381,195 $31,605 $43,765 $ - $456,565
Inter-area sales 9,879 266 5,248 (15,393) -
Total net sales 391,074 31,871 49,013 (15,393) 456,565
Operating income 28,719 412 4,714 - 33,845
Identifiable assets 253,372 22,653 29,046 - 305,071
</TABLE>
REPORTS OF MANAGEMENT AND INDEPENDENT AUDITORS
<TABLE>
<CAPTION>
RESPONSIBILITY FOR FINANCIAL REPORTING REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS THE BOARD OF DIRECTORS AND SHAREHOLDERS
THOMAS INDUSTRIES INC. THOMAS INDUSTRIES INC.
<S> <C>
The financial statements herein have been prepared under We have audited the consolidated balance sheet
management direction from accounting records which management of Thomas Industries Inc. and subsidiaries as of December 31,
believes present fairly the transactions and financial 1996, and the related consolidated statements of income,
position of the Company. They were developed in accordance shareholders' equity, and cash flows for the year then ended.
with generally accepted accounting principles appropriate in These financial statements are the responsibility of the
the circumstances. Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The
Management has established internal controls systems and financial statements of Thomas Industries Inc. and
procedures, including an internal audit function, to provide subsidiaries for the years ended December 31, 1995, and 1994
reasonable assurance that assets are maintained and accounted were audited by other auditors whose report dated February 7,
for in accordance with its authorizations and that 1996, expressed an unqualified opinion on those statements.
transactions are recorded in a manner to ensure reliable
financial information. The Company has a formally stated and We conducted our audit in accordance with generally accepted
communicated policy demanding of employees high ethical auditing standards. Those standards require that we plan and
standards in their conduct of its business. perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
The Audit Committee of the Board of Directors is composed of audit includes examining, on a test basis, evidence supporting
outside directors who meet regularly with management, internal the amounts and disclosures in the financial statements. An
auditors and independent auditors to review audit plans and audit also includes assessing the accounting principles used
fees, independence of auditors, internal controls, financial and significant estimates made by management, as well as
reports and related matters. The Committee has unrestricted evaluating the overall financial statement presentation. We
access to the independent and internal auditors with or believe that our audit provides
without management attendance. a reasonable basis for our opinion.
In our opinion, the 1996 financial statements referred to
Timothy C. Brown above present fairly, in all material respects, the
Chairman of the Board consolidated financial position of Thomas Industries Inc. and
President subsidiaries at December 31, 1996, and the consolidated
Chief Executive Officer results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting
principles.
Phillip J. Stuecker /s/ Ernst & Young LLP
Vice President of Finance
Chief Financial Officer Louisville, Kentucky
February 5, 1997
Louisville, Kentucky
February 5, 1997
</TABLE>
<TABLE>
<CAPTION>
FIVE-YEAR SUMMARY OF OPERATIONS AND STATISTICS
Year ended December 31
(Dollars in thousands, except per share data) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
EARNINGS STATISTICS
Net sales $510,111 $490,573 456,565 $450,149 $420,754
Cost of products sold 358,778 352,551 329,338 326,396 303,428
Selling, general and
administrative expenses 117,175 108,284 104,091 102,440 101,473
Interest expense 7,333 8,242 9,225 10,279 10,428
Income before income taxes 27,688 21,053 18,198 7,820 248
As a percentage of net sales 5.4% 4.3% 4.0% 1.7% 0.1%
Income taxes 10,272 8,278 7,656 4,015 2,280
Effective tax rate 37.1% 39.3% 42.1% 51.3% n/a
Net income (loss) 17,416 12,775 10,542(A) 3,805(B) (2,032) (C)
FINANCIAL POSITION
Working capital $ 85,838 $ 80,837 $ 77,558 $ 78,466 $ 70,448
Current ratio 2.0 to 1 2.0 to 1 2.0 to 1 2.1 to 1 2.0 to 1
Property, plant and equipment - net 77,795 75,710 75,962 76,587 79,799
Total assets 319,650 313,533 305,071 302,760 294,453
Return on ending assets 5.4% 4.1% 3.5% 1.3% (0.7)%
Long-term debt, less current portion 62,632 70,791 79,693 87,509 89,900
Long-term debt to capital 28.4% 33.1% 37.3% 41.2% 41.0%
Shareholders' equity 157,702 143,177 133,766 125,049 129,545
Return on average shareholders' equity 11.6% 9.2% 8.1% 3.0% (1.5)%
DATA PER COMMON SHARE
Net income $ 1.63 $ 1.25 $ 1.05 $ .38 $ (.20)
Cash dividends declared .40 .40 .40 .40 .40
Shareholders' equity 14.98 14.15 13.27 12.44 12.94
Price range 23 7/8 - 16 1/2 24 1/8 - 13 5/8 16 3/8 - 12 3/4 14 - 9 1/8 14 1/8 - 8 3/8
Closing price 20 7/8 23 1/2 14 3/8 13 1/8 9 1/8
Price/earnings ratio 12.8 18.8 13.7 34.5 n/a
OTHER DATA
Cash dividends declared $ 4,169 $ 4,036 $ 4,024 $ 4,014 $ 4,004
Expenditures for property, plant & equipment 15,071 12,288 16,301 13,908 13,152
Depreciation and amortization 15,682 14,803 15,524 16,517 16,339
Average number of employees 3,150 3,100 3,190 3,390 3,480
Average sales per employee 161.9 158.2 143.1 132.8 120.9
Number of shareholders of record 2,232 2,407 2,677 2,903 3,154
Average shares outstanding 10,680,684 10,232,552 10,060,436 10,035,172 10,010,746
SEGMENT INFORMATION
Net sales
Lighting $340,047 $332,842 $304,047 $298,432 $286,417
Compressors & Vacuum Pumps 170,064 157,731 146,323 127,896 110,022
Other - - 6,195 23,821 24,315
Total net sales $510,111 $490,573 $456,565 $450,149 $420,754
Operating income
Lighting $ 16,348 $ 11,425 $ 4,856 $ 120 (B) $ 2,659(C)
Compressors & Vacuum Pumps 28,857 28,446 29,252 26,183 19,147
Other - - (263) 710 412
Total operating income $ 45,205 $ 39,871 $ 33,845 $ 27,013 $ 22,218
Note: See accompanying Notes to the Consolidated Financial Statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations
(A) Divestitures - major divestitures and the effect on net income in the year of divestiture include Builders Brass Works and
Portland Willamette in 1994 for a gain of $3,000,000
(B) Includes after-tax charge of $2,040,000 (pre-tax of $3,500,000) restructuring costs and credit of $1,148,000 (pre-tax of
$1,900,000) for LIFO accounting change
(C) Includes after-tax charge of $3,986,000 (pre-tax of $3,604,000 allocated to lighting) restructuring costs
</TABLE>
Exhibit 21.
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Place of Percentage of
Name of Company Incorporation Voting Securities
<S> <C> <C>
ASF Thomas Limited United Kingdom 100%
ASF Thomas Industries Holding Deutschland GmbH Germany 100%
ASF Thomas Industries GmbH, Puchheim Germany 100%
ASF Thomas Industries GmbH, Memmingen Germany 100%
ASF Thomas Industries GmbH & Co. KG, Wuppertal Germany 100%
ASF Thomas, Inc. Georgia 100%
Lighting Center Holdings, Inc. Tennessee 100%
Blue Grass Holdings Inc. Nevada 100%
Capri Lighting, Inc. California 100%
Thomas Industries Holdings Inc. Delaware 100%
Gardco Manufacturing, Inc. California 100%
Lumec, Inc. Province of Quebec, 100%
Canada
Pouliot Designs Corporation Minnesota 100%
T.I. Industries Corporation Delaware 100%
TI Pneumotive, Inc. Delaware 100%
Thomas Group U.K., Inc. Delaware 100%
Thomas Imports, Inc. Nevada 100%
Thomas Industries Corp. Province of Ontario, 100%
Canada
Thomas Industries Export, Inc. U.S. Virgin Islands 100%
Tupelo Holdings Inc. Delaware 100%
Thomas Lighting de Mexico, S.A. de C.V. Mexico 100%
Thomas Technologies, Inc. Delaware 100%
Welch Vacuum Technology, Inc. Delaware 100%
</TABLE>
NON WHOLLY OWNED SUBSIDIARIES
<TABLE>
<CAPTION>
Place of Percentage of
Name of Company Incorporation Voting Securities
<S> <C> <C>
Lumec-Schreder Inc. Province of Quebec, 50%
Canada
Thomas Americas Industria e Commercio, LTDA Brazil 95%
Yamada Day-Brite, Ltd. Japan 50%
</TABLE>
Exhibit 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-3 No. 333-05629) and related Prospectus and in the Registration Statements
(Form S-8 No. 33-16257, No. 33-51653, No. 33-54689 and No. 33-59099) of Thomas
Industries Inc. of our report dated February 5, 1997, with respect to the
consolidated financial statements and schedule of Thomas Industries Inc. and
subsidiaries included in the Annual Report (Form 10-K) for the year ended
December 31, 1996.
/S/ Ernst & Young LLP
Louisville, Kentucky
March 17, 1997
Exhibit 23(b)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Thomas Industries Inc.:
We consent to incorporation by reference in the registration statements (No. 33-
16257), (No. 33-51653), (No. 33-54689), and (No. 33-59099) on Form S-8 and in
the registration statement (No. 333-05629) on Form S-3 of Thomas Industries Inc.
of our report dated February 7, 1996, relating to the consolidated balance sheet
of Thomas Industries Inc. and subsidiaries as of December 31, 1995, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the years in the two-year period ended December 31, 1995, and the
related schedule, which report appears in the December 31, 1996, annual report
on Form 10-K of Thomas Industries Inc.
/S/ KPMG PEAT MARWICK LLP
Louisville, Kentucky
March 17, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-28-1996
<CASH> 18,826
<SECURITIES> 0
<RECEIVABLES> 70,482
<ALLOWANCES> 2,243
<INVENTORY> 69,247
<CURRENT-ASSETS> 170,364
<PP&E> 149,720
<DEPRECIATION> 71,925
<TOTAL-ASSETS> 319,650
<CURRENT-LIABILITIES> 84,526
<BONDS> 62,632
0
0
<COMMON> 11,550
<OTHER-SE> 146,152
<TOTAL-LIABILITY-AND-EQUITY> 319,650
<SALES> 510,111
<TOTAL-REVENUES> 510,111
<CGS> 358,778
<TOTAL-COSTS> 358,778
<OTHER-EXPENSES> 115,861
<LOSS-PROVISION> 451
<INTEREST-EXPENSE> 7,333
<INCOME-PRETAX> 27,688
<INCOME-TAX> 10,272
<INCOME-CONTINUING> 17,416
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,416
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.63
</TABLE>
