SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [ X ]
For the quarterly period ended: June 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [ ]
For the transition period from________________________to____________
Commission File Number 1-5426.
THOMAS INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
Delaware 61-0505332
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4360 Brownsboro Road, Louisville, Kentucky 40207
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 502/893-4600
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 twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares outstanding of issuer's Common Stock, $1 par value, as of
August 1, 1998, was 15,875,042 shares.
Page 1 of 8
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
<TABLE>
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in Thousands Except Amounts Per Share)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $143,057 $139,989 $284,981 $266,345
Cost of products sold 97,884 96,449 196,140 184,548
Gross profit 45,173 43,540 88,841 81,797
Other (income) expenses:
Selling, general, and
administrative expenses 32,345 31,931 66,117 62,294
Interest expense 1,587 1,677 3,067 3,302
Other 329 (274) 411 (358)
Income before income taxes 10,912 10,206 19,246 16,559
Income tax provision 4,037 3,776 7,121 6,127
Net income $ 6,875 $ 6,430 $ 12,125 $ 10,432
Per share amounts:
Net income per share
Basic $.43 $.41 $.76 $.66
Diluted $.42 $.39 $.74 $.64
Dividends declared per share $.075 $.067 $.150 $.133
Weighted average number of
shares outstanding
Basic 15,873,756 15,835,425 15,869,024 15,826,821
Diluted 16,524,038 16,320,600 16,474,116 16,301,903
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
(Unaudited)
June 30 December 31
1998 1997*
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 9,746 $ 17,352
Accounts receivable, less allowance
(1998--$2,266; 1997--$2,046) 85,826 71,385
Inventories:
Finished products 40,187 35,472
Raw materials 24,835 23,620
Work in process 13,819 15,036
78,841 74,128
Deferred income taxes 6,346 6,694
Other current assets 8,916 7,052
Total current assets 189,675 176,611
Property, plant, and equipment 161,297 154,977
Less accumulated depreciation and amortization 81,905 74,780
79,392 80,197
Intangible assets--less accumulated amortization 55,206 56,333
Other assets 14,644 14,498
Total assets $338,917 $327,639
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 20,426 $ 2,564
Accounts payable 26,108 31,094
Other current liabilities 39,006 42,835
Current portion of long-term debt 7,813 7,860
Total current liabilities 93,353 84,353
Deferred income taxes 8,779 8,802
Long-term debt (less current portion) 48,511 55,006
Minimum pension liability 2,448 2,448
Other long-term liabilities 3,336 3,625
Total liabilities 156,427 154,234
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: 1998 17,407,352;
1997 17,394,198 17,407 17,394
Capital surplus 109,865 109,750
Retained earnings 78,278 68,533
Accumulated other comprehensive income (5,861) (5,060)
Less cost of treasury shares:
(1998 1,534,400; 1997 1,535,469) (17,199) (17,212)
Total shareholders' equity 182,490 173,405
Total liabilities and shareholders' equity $338,917 $327,639
*Derived from the audited December 31, 1997, consolidated balance sheet.
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
<CAPTION>
Six Months Ended
June 30
1998 1997
<S> <C> <C>
Cash flows from operating activities: $ 12,125 $ 10,432
Net income
Reconciliation of net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 9,017 8,561
Deferred income taxes 945 (152)
Provision for losses on accounts receivable 485 197
Gain on asset disposal, net (15) (12)
Changes in operating assets and liabilities,
net of effects of acquisitions and dispositions:
Accounts receivable (15,230) (9,029)
Inventories (4,961) (5,380)
Other current assets (1,891) (177)
Accounts payable (4,891) (239)
Accrued expenses and other liabilities (4,640) (1,055)
Other 59 (2,265)
Net cash provided by (used in)
operating activities (8,997) 881
Cash flows from investing activities:
Purchases of property, plant, and equipment (7,640) (7,476)
Proceeds from sale of property, plant, and equipment 185 45
Net cash used in investing activities (7,455) (7,431)
Cash flows from financing activities:
Proceeds from short-term debt, net 17,888 4,328
Payments on long-term debt (6,535) (7,730)
Dividends paid (2,379) (2,109)
Other 141 185
Net cash provided by (used in) financing activities 9,115 (5,326)
Effect of exchange rate changes on cash (269) 871
Decrease in cash and cash equivalents (7,606) (11,005)
Cash and cash equivalents at beginning of period 17,352 18,826
Cash and cash equivalents at end of period $ 9,746 $ 7,821
See notes to condensed consolidated financial statements.
</TABLE>
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note A Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and with the instructions to Form 10-Q and Article 10-01 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
The results of operations for the six-month period ended June 30, 1998, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. For further information,
refer to the consolidated financial statements and footnotes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
On April 28, 1998, the Company entered into a definitive agreement pursuant to
which the Company will contribute substantially all of its lighting assets and
related liabilities to a joint venture with The Genlyte Group Incorporated.
Reference is made to "Part II. Other Information Item 5. Other Information"
below for additional information.
Note B Contingencies
In the normal course of business, the Company is a party to legal proceedings
and claims. When costs can be reasonably estimated, appropriate liabilities for
such matters are recorded. While management currently believes the amount of
ultimate liability, if any, with respect to these actions will not materially
affect the financial position, results of operations, or liquidity of the
Company, the ultimate outcome of any litigation is uncertain. Were an
unfavorable outcome to occur, the impact could be material to the Company.
Note C Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income (SFAS 130). SFAS 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this Statement had no impact on the
Company's net income or shareholders' equity. SFAS 130 requires unrealized
gains or losses on the Company's foreign currency translation and minimum
pension liability adjustments, which, prior to adoption, were reported
separately in shareholders' equity to be included in other comprehensive income.
During the second quarter of 1998 and 1997, total comprehensive income was
$6,275,000 and $5,929,000, respectively.
Note C Comprehensive Income - continued
Disclosure of accumulated balances of other comprehensive income:
<TABLE>
Minimum Foreign Accumulated Other
Pension Currency Comprehensive
Liability Translation Income
<CAPTION>
<S> <C> <C> <C>
Beginning balance $(473,000) $(4,587,000) $(5,060,000)
Current-quarter other
comprehensive income -- (801,000) (801,000)
Ending balance $(473,000) $(5,388,000) $(5,861,000)
</TABLE>
Note D Stock Split
On October 16, 1997, the Board of Directors authorized a three-for-two stock
split to be effected in the form of a 50 percent stock dividend on all shares of
Common Stock, payable December 1, 1997, for shareholders of record November 14,
1997. All share data included in these consolidated financial statements and
related footnotes have been restated to reflect this stock split.
Item 2. Management's Discussion and Analysis
Net sales during the second quarter ended June 30, 1998, increased 2% over the
second quarter 1997 to $143.1 million. For the six months ended June 30, 1998,
net sales were 7% higher than the first half of 1997. Net sales for the second
quarter and six-month periods in 1998 are the highest for any comparable periods
in the Company's history. Lighting Segment sales increased 2% for the second
quarter over 1997, primarily in the Outdoor market. Compressor & Vacuum Pump
Segment sales were up 3% for the second quarter over 1997, due to increases in
the European market.
Net income for the second quarter and first half of 1998 of $6.9 million and
$12.1 million, respectively, is 7% and 16% higher than the comparable 1997
periods. The Lighting Segment operating income in the second quarter and first
half of 1998 improved 12% and 27%, respectively, compared to last year,
primarily due to improvements in the Outdoor market. Operating income for the
Compressor and Vacuum Pump Segment for the 1998 second quarter and first half
improved 1% and 7% over 1997, primarily due to increases in the European market.
Cost of products sold as a percent of sales was reduced to 68.4% and 68.8% for
the 1998 second quarter and six months, respectively, versus 68.9% and 69.3% for
the comparable 1997 periods. Gross margins for the first six months of 1998 in
the Lighting Segment improved slightly over the 1997 period, while the
Compressor & Vacuum Pump Segment gross margin in 1998 decreased slightly in 1998
from the comparable 1997 period. Lighting Segment gross margins have improved
due to cost reduction efforts primarily in the form of price reductions on
purchased components, improved manufacturing efficiencies from increased
production volume, and productivity improvements in direct labor costs.
Compressor & Vacuum Pump Segment margins have decreased slightly, primarily due
to a less favorable product mix.
Selling, general, and administrative costs as a percent of sales of 22.6 % and
23.2 % in the second quarter and first half of 1998, respectively, were lower
than the 22.8% and 23.4% figures for the comparable 1997 periods. The decrease
is primarily due to lower administrative costs incurred as a percent to sales.
Item 2. Management's Discussion and Analysis - continued
Interest expense for the 1998 second quarter and first six months was less than
comparable 1997 amounts by 5% and 7%, respectively. The reductions are
attributed primarily to a decrease in long-term debt.
Cash and cash equivalents increased to $9.7 million at June 30, 1998, compared
to $7.8 million at June 30, 1997. Cash provided by operating activities
decreased by $9.0 million in the six months ended June 30, 1998, primarily due
to an increase in accounts receivable caused by extending additional dating
terms to customers in an effort to increase sales and a decrease in accounts
payable in order to take advantage of vendor discounts.
Working capital of $96.3 million at June 30, 1998, is $4.1 million more than the
amount at December 31, 1997. Accounts receivable at June 30, 1998, have
increased by 20% since December 31, 1997, due to the higher sales volume and the
expansion of the use of dating terms in order to increase sales. The number of
days sales in receivables at June 30, 1998, compared to December 31, 1997, has
increased to 53.9 days from 48.3. Inventory turnover at June 30, 1998, of 4.5
times per year is unchanged from the December 31, 1997, level. The current
ratio at June 30, 1998, was 2.03 compared to 2.09 at December 31, 1997. 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 $48.5 million are not restricted at June 30, 1998.
As of June 30, 1998, the Company had available credit of $11.8 million with
banks under short-term borrowing arrangements, $10.9 million of which was
unused, and a $30 million revolving line of credit that expires in 2002, $16
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. Cash in excess of operating requirements will
continue to be invested in high grade, short-term securities.
On April 28, 1998, the Company entered into a definitive agreement pursuant to
which the Company will contribute substantially all of its lighting assets and
related liabilities to a joint venture with The Genlyte Group Incorporated.
Reference is made to "Part II. Other Information Item 5. Other Information"
below for additional information.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
A regular Annual Meeting of Shareholders was held on April 16, 1998.
Class III Directors elected at the Annual Meeting of Shareholders were H.
Joseph Ferguson, Ralph D. Ketchum, and Anthony A. Massaro. Directors
whose term of office as a director continued after the meeting were
Timothy C. Brown, Wallace H. Dunbar, Gene P. Gardner, Lawrence E.
Gloyd, William M. Jordan, and Franklin J. Lunding, Jr.
Item 4. Submission of Matters to a Vote of Security Holders - continued
The voting at the Annual Meeting of Shareholders was as follows:
Proposal No. 1 -- Election of Directors
For Withheld
H. Joseph Ferguson 14,178,270 121,366
Ralph D. Ketchum 14,166,275 133,361
Anthony A. Massaro 14,143,205 156,431
Item 5. Other Information
On April 28, 1998, the Company entered into a definitive agreement pursuant to
which the Company will contribute substantially all of its lighting assets and
related liabilities to a joint venture with The Genlyte Group Incorporated. The
Company has filed a Joint Proxy Statement dated July 23, 1998 (the "Proxy
Statement"), with the Securities and Exchange Commission with respect to the
Special Meeting of Shareholders of the Company to be held on August 27, 1998, to
approve the transaction. For additional information concerning the transaction,
reference is made to the Proxy Statement which is incorporated by reference
herein.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Financial Data Schedule
(99) The Company's Joint Proxy Statement dated July 23, 1998,
as filed with the Commission is hereby incorporated
by reference herein.
(b) A Form 8-K was filed on April 29, 1998, announcing that the
Board of Directors of the Company unanimously approved a
definitive agreement whereby the Company would contribute
substantially all of its lighting assets and related
liabilities to a joint venture with The Genlyte Group
Incorporated.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THOMAS INDUSTRIES INC.
Registrant
/s/ Phillip J. Stuecker
_____________________________________
Phillip J. Stuecker, Vice President
and Chief Financial Officer
Date August 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997<F1>
<CASH> 9,746 7,821
<SECURITIES> 0 0
<RECEIVABLES> 88,092 78,812
<ALLOWANCES> 2,266 2,281
<INVENTORY> 78,841 73,617
<CURRENT-ASSETS> 189,675 172,175
<PP&E> 161,297 154,896
<DEPRECIATION> 81,905 77,901
<TOTAL-ASSETS> 338,917 319,567
<CURRENT-LIABILITIES> 93,353 86,379
<BONDS> 48,511 54,902
0 0
0 0
<COMMON> 17,407 17,372
<OTHER-SE> 165,083 0
<TOTAL-LIABILITY-AND-EQUITY> 338,917 147,035
<SALES> 284,981 319,567
<TOTAL-REVENUES> 284,981 266,345
<CGS> 196,140 184,548
<TOTAL-COSTS> 196,140 184,548
<OTHER-EXPENSES> 66,043 61,739
<LOSS-PROVISION> 485 197
<INTEREST-EXPENSE> 3,067 3,302
<INCOME-PRETAX> 19,246 16,559
<INCOME-TAX> 7,121 6,127
<INCOME-CONTINUING> 12,125 10,432
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 12,125 10,432
<EPS-PRIMARY> .76 .66
<EPS-DILUTED> .74 .64
<FN>
<F1>Restated
</FN>
</TABLE>
