FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1997
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 9, 1998, 15,865,122 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 9, 1998, was approximately $357,956,815.
Portions of the Proxy Statement for the Annual Meeting of Shareholders on April
16, 1998, are incorporated by reference in Part III of this report.
Portions of the Annual Report to Shareholders for fiscal year ended December 31,
1997, are incorporated by reference in Parts I and II of this report.
Page 1 of 81
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 a variety of other OEM
compressor and vacuum pump markets. Operations of the Compressor & Vacuum
Pump 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
contained in the Company's Annual Report to Shareholders and incorporated
herein by reference.
c. Narrative Description of Business.
The Company operates two core businesses organized as a lighting segment
which includes consumer, commercial, industrial, and outdoor lighting
products; and a Compressor & Vacuum Pump segment which includes
applications for industrial, medical, and laboratory markets. 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, Hong Kong, Japan, and
Taiwan and has joint ventures in the U.S. and Canada with a German company
and a Belgian company. The Company maintains corporate offices in
Louisville, Kentucky.
ITEM 1. (Continued)
Lighting Segment
The Company's consumer lighting products are designed for a broad range
of applications. The Company stresses product development to meet
changing needs and demands. The Company typically targets the more
upscale, single-family market but also has a line for the
do-it-yourself segment. The Company also is strongly involved in the
replacement lighting market, which is a growing component of the overall
lighting industry.
Consumer lighting fixtures are manufactured and sold in the U.S., Canada,
and Mexico under the Thomas, Starlight, Capri, and Do-It-Yourself trade
names; and those trade names are recognized as important to this
Segment's business. 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. These products 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.
The Company is one of the leading manufacturers in North America of
commercial and industrial lighting products, including track, recessed,
fluorescent, high-intensity discharge ("HID"), and flexible wiring
systems. These products are manufactured in the U.S., Canada, and Mexico
under the trade names Thomas, C&M, Capri, Day-Brite, Electro/Connect,
Emco, Gardco, Lumec, Matrix, McPhilben, and Omega trade names; and those
trade names are recognized as important to this Segment's business. The
Commercial and Industrial product line includes a broad range of fixtures
for both indoor and outdoor applications including fluorescent, HID,
track, downlighting, flexible wiring systems, outdoor area flood,
parking, and path lighting, tunnel and street lighting, and micro
processor controls. The Company stresses product development in order to
provide innovative, efficient solutions to lighting needs. The Company's
products are utilized in a variety of applications, including those in
office, education, retail, health care, hospitality, industry, and
municipal market segments.
The Lighting Segment accounted for 68 percent of the Company's sales in
1997, compared to 67 percent in 1996 and 68 percent in 1995.
Compressors and Vacuum Pumps Segment
This Segment includes 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,
ITEM 1. (Continued)
photocopiers, computer tape drives, automotive and transportation
equipment, liquid dispensing applications, gasoline vapor 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, 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 32 percent of the
Company's sales in 1997, compared to 33 percent in 1996 and 32 percent in
1995.
---------------------
No single customer of the Company accounted for 10 percent or more of
consolidated net sales or 10 percent or more of any segment's net sales in
1997, 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 $90 million at December 31, 1997--46
percent Lighting and 54 percent Compressors and Vacuum Pumps--and
$92 million at December 31, 1996--42 percent Lighting and 58 percent
Compressors and Vacuum Pumps. The Company believes substantially all of
ITEM 1. (Continued)
such orders are firm, although some orders are subject to cancellation.
Substantially all of these orders are expected to be filled in 1998.
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 1997, the Company spent $14.9 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 1996, the Company spent $14.3 million on these activities and during
1995, $13.4 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 3,200 people at December 31, 1997.
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 contained in the Company's 1997 Annual Report to
Shareholders, and incorporated herein by reference, for financial
information about foreign and domestic operations. Export sales for the
ITEM 1. (Continued)
years 1997, 1996, and 1995, were $45,900,000, $41,400,000, and $40,900,000
respectively.
e. Executive Officers of the Registrant.
<TABLE>
Year
Office or Position First Elected
Name with Company Age as an Officer
<CAPTION>
<S> <C> <C> <C>
Timothy C. Brown Chairman of the Board, 47 1984
President, Chief Executive
Officer, Chairman of the
Executive Committee, and
Director
Richard J. Crossland Vice President; Lighting 54 1994
(A) Group Manager
Cliff C. Moulton Vice President, 50 1993
(B) Business Development
Phillip J. Stuecker Vice President of Finance, 46 1984
Chief Financial Officer,
and Secretary
Ronald D. Schneider Vice President; General 47 1992
(C) Manager, Commercial &
Industrial Lighting Business
Unit
Gilbert R. Grady, Jr. Vice President, Corporate 61 1981
Human Resources
Bernard R. Berntson Vice President; General 58 1992
(D) Manager, North American
Compressor & Vacuum Pump Group
Peter H. Bissinger Vice President; General 52 1992
(E) Manager, European
Compressor & Vacuum Pump Group
(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
Item 1. (Continued)
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.
(D) Bernard R. Berntson was elected an officer effective December 14, 1992.
Mr. Berntson had held the position of General Manager of the North
American Compressor & Vacuum Pump Group since 1987.
(E) Peter H. Bissinger was elected an officer effective December 14, 1992,
in addition to his position of President of ASF/Thomas GmbH, a wholly
owned subsidiary of the Company. Mr. Bissinger had held the position of
President of ASF GmbH since 1979.
</TABLE>
All other officers listed have been executive officers for the past five
years.
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.
<TABLE>
Number
of Facilities Combined
Segment Owned Leased Square Feet Nature of Facilities
<CAPTION>
<S> <C> <C> <C> <C>
Lighting 8 5 1,706,187 Manufacturing plants
3 3 608,566 Distribution centers
0 3 64,525 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
2 1 279,700 Leased to third parties
2 0 210,200 Property for sale
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
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.
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 "Common Stock Market Prices and Dividends," and "Notes to
Consolidated Financial Statements," which information is contained in the
Company's 1997 Annual Report to Shareholders and 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 1997 Annual Report to Shareholders and
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
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations," which information is contained in the Company's 1997
Annual Report to Shareholders and incorporated herein by reference.
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 1997
Annual Report to Shareholders and incorporated herein by reference. The
ITEM 8. (Continued)
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 1997 Annual
Report to Shareholders and incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None. Reference is made to registrant's Proxy Statement for the Annual
Meeting of Shareholders to be held on April 16, 1998, under the heading
"Auditors."
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 16,
1998, under the headings "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance," which information is
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 16, 1998,
under the headings "Executive Compensation," "Compensation Committee
Interlocks and Insider Participation," and "Board of Directors," which
information is 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 16, 1998,
under the heading "Securities Beneficially Owned by Principal Shareholders and
Management," which information is 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 16, 1998,
under the headings "Board of Directors" and "Compensation Committee Interlocks
and Insider Participation," which information is 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 1997 Annual Report to
Shareholders, are included in Part II, Item 8:
Consolidated Balance Sheets--December 31, 1997 and 1996
Consolidated Statements of Income--Years ended December 31, 1997,
1996, and 1995
Consolidated Statements of Shareholders' Equity--Years ended
December 31, 1997, 1996, and 1995
Consolidated Statements of Cash Flows--Years ended December 31,
1997, 1996, and 1995
Notes to Consolidated Financial Statements--December 31, 1997
(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 December 10, 1997.
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
ITEM 14. (Continued)
Exhibit No. Exhibit
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-K dated December 12, 1997, hereby
incorporated by reference.
10(a) Employment Agreement with Phillip J. Stuecker filed as
Exhibit 3(j) 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, 1995, 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 as
ITEM 14. (Continued)
Exhibit No. Exhibit
Exhibit 10(h) to registrant's report on Form 10-K dated
March 20, 1997, hereby incorporated by reference.
10(i) 1995 Incentive Stock Plan as Amended and Restated as of
December 11, 1996, filed as Exhibit 10(i) to registrant's
report on Form 10-K dated March 20, 1997, hereby
incorporated by reference.
10(j) Employment Agreement with Timothy C. Brown dated January
29, 1997, filed as Exhibit 10(j) to registrant's report
on Form 10-K dated March 20, 1997, hereby incorporated by
reference.
13 Certain portions of the Company's 1997 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.
Reports on Form 8-K
During the fourth quarter of 1997, the Company filed the following reports
on Form 8-K:
Form 8-K dated October 16, 1997.
Item 5. Other Events Three-for-two stock split on all shares of
Common Stock.
Form 8-K dated December 12, 1997.
Item 5. Other Events Shareholder Rights Plan adopted.
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 19, 1998 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; 3/19/98
Timothy C. Brown President; Chief Executive
Officer; Director
(Principal Executive Officer)
/s/ Phillip J. Stuecker Vice President of Finance; 3/19/98
Phillip J. Stuecker Chief Financial Officer;
Secretary
(Principal Financial Officer)
/s/ Ronald D. Wiseman Controller; Assistant 3/19/98
Ronald D. Wiseman Secretary
(Principal Accounting Officer)
/s/ Wallace H. Dunbar Director 3/19/98
Wallace H. Dunbar
/s/ H. Joseph Ferguson Director 3/19/98
H. Joseph Ferguson
/s/ Gene P. Gardner Director 3/19/98
Gene P. Gardner
Signatures (Continued)
Signature Title Date
/s/ Lawrence E. Gloyd Director 3/19/98
Lawrence E. Gloyd
/s/ William M. Jordan Director 3/19/98
William M. Jordan
/s/ Ralph D. Ketchum Director 3/19/98
Ralph D. Ketchum
/s/ Franklin J. Lunding, Jr. Director 3/19/98
Franklin J. Lunding, Jr.
/s/ Anthony A. Massaro Director 3/19/98
Anthony A. Massaro
Report of Independent Auditors
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, 1997 and 1996, and the related consolidated
statements of income, shareholders' equity, and cash flows for the years then
ended. Our audits also included the 1997 and 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 audits. The financial statements and schedule of Thomas Industries Inc.
and subsidiaries for the year ended December 31, 1995, were audited by other
auditors whose report dated February 7, 1996, expressed an unqualified opinion
on those statements and schedule.
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 1997 and 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, 1997 and 1996, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles. Also, in our
opinion, the related 1997 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 11, 1998
Independent Auditors' Report
The Board of Directors and Shareholders
Thomas Industries Inc.
We have audited the accompanying consolidated statements of income,
shareholders' equity, and cash flows of Thomas Industries Inc. and subsidiaries
for the year ended December 31, 1995. In connection with our audits of the
aforementioned consolidated financial statements, we also have audited the
financial statement schedule for the year 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 audit.
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 consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and the cash flows
of Thomas Industries Inc. and subsidiaries for the year 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 6, 1998
Exhibit 3(b)
BYLAWS
OF
THOMAS INDUSTRIES INC.
ARTICLE I
Offices
The principal office of the Corporation in the State of Delaware is located
at No. 306 South State Street, City of Dover 19901, County of Kent, State of
Delaware; and the name of the resident agent in charge thereof is the United
States Corporation Company. The Company may also have offices at such other
places, within or without the State of Delaware, as the Board of Directors may
from time to time determine.
ARTICLE II
Shareholders
Section 1. Annual Meeting. An annual meeting of the shareholders of
the Corporation for the election of directors and for the transaction of such
other business as may properly come before the meeting shall be held each year
on such day during the month of April or May, and at such time and place, as may
be fixed from time to time by the Board of Directors of the Corporation.
Section 2. Special Meetings. Special meetings of the shareholders of the
Corporation for any purpose or purposes may be called at any time by the Board
of Directors or by a committee of the Board of Directors which has been duly
designated by the Board of Directors and whose powers and authority, as provided
in a resolution of the Board of Directors or in these Bylaws, include the power
to call such meetings, but such special meetings may not be called by any other
person or persons; provided, however, that if and to the extent that any special
meeting of shareholders may be called by any other person or persons by the
terms of any series of Preferred Stock then outstanding, then such special
meeting may also be called by the person or persons, in the manner, at the
times, and for the purposes so specified. Special meetings shall be held at
such place within or without the State of Delaware as may be specified in the
call thereof. Business transacted at all special meetings shall be confined to
the objects stated in the call.
Section 3. Notice of Meetings. Written notice of the annual meeting of
the shareholders shall be served by the Secretary, either personally or by mail,
upon each shareholder of record entitled to vote at such meeting, at least ten
days before the meeting. Written notice of any special meeting of the
shareholders shall be so served at least five days before the meeting. If
mailed, the notice of a meeting shall be directed to a shareholder at his last
known post office address. The notice of every meeting of the shareholders
shall state the purpose or purposes for which the meeting is called and the time
when and the place where it is to be held. Failure to serve personally or by
mail such notice, or any irregularity therein, shall not affect the validity of
such meeting or any of the proceedings thereat. Such notice may be waived in
writing.
Section 4. Quorum. At all meetings of the shareholders, the presence, in
person or by proxy, of the holders of record of a majority of the shares of
stock issued and outstanding, and entitled to vote thereat, shall be necessary
and sufficient to constitute a quorum for the transaction of business, except as
otherwise provided by law, by the Certificate of Incorporation, or by these
Bylaws. In the absence of a quorum, the holders of record of a majority of the
shares of stock present in person or by proxy, and entitled to vote thereat, or
if no such shareholder is present in person or by proxy, any officer entitled to
preside at, or act as secretary of, such meeting, without notice other than by
announcement at the meeting, may adjourn the meeting from time to time, for a
period of not more than thirty days at any one time until a quorum shall attend.
At any such adjourned meeting at which a quorum shall be present in person or by
proxy, any business may be transacted that might have been transacted at the
meeting as originally called.
Section 5. Voting. At each meeting of the shareholders, except as may
be provided by the Certificate of Incorporation, as amended, or in a certificate
filed by the Corporation pursuant to Section 151(g) of the Delaware General
Corporation Law, each shareholder entitled to vote at such meeting shall be
entitled to one vote for each share of stock standing in his name in the stock
ledger of the Corporation and may vote either in person or by proxy, but no
proxy shall be voted after three years from its date unless such proxy provides
for a longer period. Every proxy must be executed in writing by the shareholder
or by his duly authorized attorney and dated, but need not be sealed, witnessed,
or acknowledged.
At each meeting of the shareholders, if there shall be a quorum, the vote
of the holders of a majority of the shares of stock present in person or by
proxy, and entitled to vote thereat, shall decide all matters brought before
such meeting, except as otherwise provided by law, by the Certificate of
Incorporation, or by these Bylaws.
Upon demand of any shareholder entitled to vote at a meeting of the
shareholders or upon the direction of the presiding officer at such meeting, the
vote upon any matter brought before such meeting shall be by ballot; but
otherwise no such vote need be by ballot except as is provided in Article II,
Section 10, of these Bylaws.
Section 6. Presiding Officer and Secretary. At all meetings of the
shareholders, the Chairman of the Board of Directors, or in his absence the
President of the Corporation, or in his absence a Vice President, or if none be
present, the appointee of the meeting, shall preside. The Secretary of the
Corporation, or in his absence an Assistant Secretary, or if none be present,
the appointee of the presiding officer of the meeting, shall act as secretary
of the meeting.
Section 7. Inspectors of Election. At each meeting of the
shareholders at which any matter brought before the meeting is to be voted upon
by ballot, the presiding officer of such meeting may, and if so required by
Article II, Section 10, of the Bylaws shall, appoint two persons, who need not
be shareholders, to act as Inspectors of Election at such meeting. The
Inspectors so appointed, before entering on the discharge of their duties, shall
take and subscribe an oath or affirmation faithfully to execute the duties of
Inspectors at such meeting with strict impartiality and according to the best of
their ability; and thereupon the Inspectors shall take charge of the polls and
after the balloting shall canvass the votes and determine in accordance with
law, and make a certificate to the Corporation of, the results of the vote
taken. No director or candidate for the office of director shall be appointed
an Inspector.
Section 8. Nomination of Director Candidates and Other Shareholder
Proposals. Nominations of candidates for election to the Board of Directors of
the Corporation or any other matters to be considered at any meeting of the
shareholders called for election of directors or for the consideration of any
other matters (an "Election Meeting") may be made only by or at the direction of
the Board of Directors or by a shareholder entitled to vote at such Election
Meeting. All such nominations, or any other proposals, except those made by or
at the direction of the Board of Directors, shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, any such
notice must be received at the principal executive offices of the Corporation
not less than sixty days prior to the date of the Election Meeting and must set
forth (i) the name, age, business address and residence address, and the
principal occupation or employment of any nominee proposed in such notice, (ii)
the name and address of the shareholder giving the notice as the same appears in
the Corporation's stock ledger, (iii) the number of shares of capital stock of
the Corporation which are beneficially owned by any such nominee and by such
shareholder, (iv) such other information concerning any such nominee as would be
required, under the rules of the Securities and Exchange Commission, in a proxy
statement soliciting proxies for the election of such nominee, and (v) a
description of any other matter proposed to be voted upon at the Election
Meeting. Such notice must also include a signed consent of each such nominee to
serve as a director of the Corporation, if elected.
If the presiding officer of an Election Meeting determines that a director
nomination, or any other proposal, was not made in accordance with the foregoing
procedures, such nomination or other proposal shall be void and shall be
disregarded for all purposes.
Section 9. List of Shareholders. At least ten days prior to every
election of directors, a complete list of the shareholders entitled to vote at
such election, arranged in alphabetical order and indicating the number of
voting shares held by each, shall be prepared and certified by the Secretary or
an Assistant Secretary. Such list shall be filed at the place where the
election is to be held and shall at all times during the usual hours for
business, and during the whole time of said election, be open to the examination
of any shareholder.
Section 10. Determination of Contested Elections. In the event that
there are more candidates for election to the Board of Directors at a meeting of
the shareholders than there are directors to be elected at such meeting (a
"Contested Election"), the vote for election of directors shall be by ballot,
and two Inspectors of Election for such meeting shall be appointed by the
presiding officer of such meeting.
ARTICLE III
Directors
Section 1. Number/Terms of Office. Except as provided by law or by the
Certificate of Incorporation, or by these Bylaws, the powers, business,
property, and affairs of the Corporation shall be exercised and managed by a
Board of nine directors. The number of directors may be altered from time to
time by an amendment of these Bylaws as hereinafter provided, but no reduction
in the number of directors shall affect any director whose term of office shall
not have expired. No director need be a shareholder.
The directors shall be divided into three classes as follows:
Class I -- three members
Class II -- three members
Class III -- three members
The term of office of directors of Class I shall expire at the 1999 annual
meeting of shareholders; the term of office of directors of Class II shall
expire at the 2000 annual meeting of shareholders; and the term of office of
directors of Class III shall expire at the 2001 annual meeting of shareholders.
At each annual meeting of shareholders, directors of the class whose term then
expires shall be elected for a full term of three years to succeed the directors
of such class so that the term of office of the directors of one class shall
expire in each year, provided that nothing herein shall be construed to prevent
(a) the election of a director to succeed himself, (b) the election of a
director for the remainder of an unexpired term in the class of directors to
which he is elected, and (c) amendment of the Bylaws to increase or decrease the
number of directors.
Notwithstanding any other provision of these Bylaws, each director shall
continue in office until his successor shall have been duly elected and shall
qualify, or until his earlier resignation or removal in the manner provided in
these Bylaws, or death.
Section 2. Election of Directors/Vacancies. The members of each class
of directors shall be elected at the annual meeting of the shareholders at which
the term of office of such class expires, as provided herein. If for any reason
any annual election of directors shall not be held on the day designated by
these Bylaws, the directors shall cause such election to be held as soon
thereafter as conveniently may be.
Newly created directorships resulting from any increase in the authorized
number of directors and vacancies in the Board of Directors from death,
resignation, retirement, disqualification, removal from office, or other cause,
shall be filled by a majority vote of the directors then in office; and
directors so chosen shall hold office for a term expiring at the annual meeting
at which the term of the class to which they shall have been elected expires.
No decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Subject to the rights of the holder of any series of Preferred Stock then
outstanding, (a) any director, or the entire Board of Directors, may be removed
at any time, but only for cause; and (b) the affirmative vote of the holders of
75 percent of the voting power of all of the stock of the Corporation entitled
to vote in the election of directors shall be required to remove a director from
office. The shareholders of the Corporation are expressly prohibited from
cumulating their votes in any election of directors of the Corporation.
Section 3. Resignations. Any director may resign from his office at
any time by delivering his resignation in writing to the Corporation; and the
acceptance of such resignation, unless required by the terms thereof, shall not
be necessary to make such resignation effective.
Section 4. Meetings. The Board of Directors may hold its meetings in
such place or places within or without the State of Delaware as the Board from
time to time by resolution may determine or as shall be specified in the
respective notices or waivers of notice thereof; and the directors may adopt
such rules and regulations for the conduct of their meetings and the management
of the Corporation, not inconsistent with these Bylaws, as they may deem proper.
An annual meeting of the Board for the election of officers shall be held within
three days following the day on which the annual meeting of the shareholders for
the election of directors shall have been held. The Board of Directors, from
time to time by resolution, may fix a time and place (or varying times and
places) for the annual and other regular meetings of the Board provided that,
unless a time and place is so fixed for any annual meeting of the Board, the
same shall be held immediately following the annual meeting of the shareholders
at the same place at which such meeting shall have been held. No notice of the
annual or other regular meetings of the Board need be given. Other meetings of
the Board of Directors shall be held whenever called by the Chairman of the
Board or by any two of the directors for the time being in office; and the
Secretary shall give notice of each such meeting to each director by mailing the
same not later than the third day before the meeting, or personally, or by
telegraphing, cabling, or telephoning, the same not later than two hours before
the meeting. No notice of a meeting need be given if all the directors are
present in person. Any business may be transacted at any meeting of the Board
of Directors, whether or not specified in a notice of the meeting.
Section 5. Quorum. A majority of the total number of directors
constituting the whole Board shall constitute a quorum for the transaction of
business. If there be less than a quorum at any meeting of the Board, a
majority of those present (or if only one be present, then that one) may adjourn
the meeting from time to time; and no further notice thereof need be given other
than announcement at the meeting which shall be so adjourned. The act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by law or by the Certificate of Incorporation or by these
Bylaws.
Section 6. Compensation of Directors. The Board of Directors shall
have the authority to fix the compensation of the directors. A director may
serve the Corporation in other capacities and receive compensation therefor.
Section 7. Indemnification of Directors and Officers.
(a) Each person who was or is a party or is threatened to be made a party
to or is involved in any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (hereinafter a "proceeding"), by reason of the
fact that he, or a person of whom he is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director, officer, employee, or agent of another
corporation or of a partnership, joint venture, trust, or other enterprise,
including service with respect to employee benefit plans, shall be indemnified
and held harmless by the Corporation to the fullest extent permitted by the laws
of Delaware as the same now or may hereafter exist (but, in the case of any
change, only to the extent that such change permits the Corporation to provide
broader indemnification rights than said law permitted the Corporation to
provide prior to such change) against all costs, charges, expenses, liabilities,
and losses (including attorneys' fees, judgments, fines, ERISA excise taxes, or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of his heirs, executors, and
administrators. The right to indemnification conferred in this Section shall be
a contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition upon receipt by the Corporation of an undertaking, by or on behalf
of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that the director or officer is not entitled to be
indemnified under this section or otherwise. The Corporation may, by action of
its Board of Directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing indemnification of
directors and officers.
(b) If a claim under subsection (a) of this Section is not paid in full by
the Corporation within thirty days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall also be entitled to be paid the expense of
prosecuting such claim. It shall be a defense to any action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking
has been tendered to the Corporation) that the claimant has failed to meet a
standard of conduct which makes it permissible under Delaware law for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is permissible in the circumstances
because he has met such standard of conduct, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
shareholders) that the claimant has not met such standard of conduct, nor the
termination of any proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall be a defense to the
action or create a presumption that the claimant has failed to meet the required
standard of conduct.
(c) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Section shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaw, agreement, vote of shareholders or disinterested
directors, or otherwise.
(d) The Corporation may maintain insurance at its expense to protect
itself and any director, officer, employee, or agent of the Corporation or
another corporation, partnership, joint venture, trust, or other enterprise
against any expense, liability, or loss whether or not the Corporation would
have the power to indemnify such person against such expense, liability, or loss
under Delaware law.
(e) To the extent that any director, officer, employee, or agent of the
Corporation is by reason of such position, or a position with another entity at
the request of the Corporation, a witness in any proceeding, he shall be
indemnified against all costs and expenses actually and reasonably incurred by
him or on his behalf in connection therewith.
(f) The Corporation may enter into indemnity agreements with the persons
who are members of its Board of Directors from time to time, and with such
officers, employees, and agents as the Board may designate, indemnity agreements
providing in substance that the Corporation shall indemnify such persons to the
fullest extent permitted by the laws of Delaware.
(g) Any amendment, repeal, or modification of any provision of this
Section by the shareholders or the Directors of the Corporation shall not
adversely affect any right or protection of a director or officer of the
Corporation existing at the time of such amendment, repeal, or modification.
Section 8. Committees. The Board of Directors may, by resolution or
resolutions, passed by a majority of the whole Board, from time to time
designate an Executive Committee and such other committee or committees as it
may determine, each committee to be headed by a chairman who shall be a member
of the Board of Directors and elected by the Board of Directors. The committee
or committees shall exercise only such powers of the Board of Directors as are
specifically provided in said resolution or resolutions. The chairman of the
Executive Committee, if any, shall report to the Board at its meetings upon the
affairs of the Corporation.
ARTICLE IV
Officers and Agents
Section 1. General Provisions. The officers of the Corporation shall
be a President, a Treasurer, and a Secretary, and may include a Chairman of the
Executive Committee, one or more Vice Presidents, any of which may be an
Executive Vice President, one or more Assistant Treasurers, and one or more
Assistant Secretaries. The Chairman of the Board of Directors and the President
shall be chosen from among the directors. Any two offices, except those of
President and Vice President, may be held by the same person; but no officer
shall execute, acknowledge, or verify any instrument in more than one capacity
if such instrument is required by law or by these Bylaws to be executed,
acknowledged, or verified by any two or more officers. Each of such officers
shall serve until the annual meeting of the Board of Directors next succeeding
his appointment and until his successor shall have been chosen and shall have
qualified. The Board of Directors may appoint such other officers, agents, and
employees as it may deem necessary or proper, who shall respectively have such
authority and perform such duties as may from time to time be prescribed by the
Board of Directors. All officers, agents, and employees appointed by the Board
of Directors shall be subject to removal at any time by the affirmative vote of
a majority of the whole Board. Other agents and employees may be removed at any
time by the Board of Directors, by the officer appointing them, or by any other
superior officer upon whom such power of removal may be conferred by the Board
of Directors. The salaries of the officers of the Corporation shall be fixed by
the Board of Directors, but this power may be delegated to any officer.
Section 2. The Chairman of the Board of Directors. The Chairman of the
Board of Directors shall preside at all meetings of the shareholders and of the
Board of Directors of the Corporation. At each annual meeting of the
shareholders, he shall present a statement of the business of the Corporation
for the preceding year and a report of its financial condition.
Section 3. The President. The President shall be the Chief Executive
Officer of the Corporation. He shall have general and active supervision of its
business and affairs, and general charge of its property and employees,
subject, however, to the control of the Board of Directors. He shall see that
all resolutions and orders of the Board of Directors or of any committee thereof
are carried into effect. He shall have power in the name of the Corporation and
on its behalf to execute any and all deeds, mortgages, contracts, agreements,
and other instruments in writing, and shall have such other powers as may be
assigned to him by the Board of Directors. He shall have full power and
authority on behalf of the Corporation to execute any shareholder's consent and
to attend and vote in person or by proxy at any meeting of shareholders of any
corporation in which the Corporation may own stock, and at any such meeting
shall possess and may exercise any and all rights and powers incident to the
ownership of such stock and which, as the owner thereof, the Corporation might
have possessed and exercised if present.
Section 4. Vice Presidents. Each Vice President shall have such powers
and perform such duties as the Board of Directors, Chairman of the Board, or the
President may from time to time prescribe, and shall perform such other duties
as may be prescribed in these Bylaws. In the absence or inability to act of the
Chairman of the Board or the President, the Vice President next in order as
designated by the Board of Directors or, in the absence of such designation,
senior in length of service in such capacity, shall perform all the duties and
may exercise any of the powers of the President, subject to the control of the
Board of Directors. The performance of any duty by a Vice President shall be
conclusive evidence of his power to act.
Section 5. The Treasurer. The Treasurer shall have the care and
custody of all funds and securities of the Corporation which may come into his
hands and shall deposit the same to the credit of the Corporation in such bank
or banks or other depositary or depositaries as the Board of Directors may
designate. He may endorse all commercial documents requiring endorsements for
or on behalf of the Corporation and may sign all receipts and vouchers for
payments made to the Corporation. He shall render an account of his
transactions to the Board of Directors as often as they shall require the same
and shall at all reasonable times exhibit his books and accounts to any
director; shall cause to be entered regularly in books kept for that purpose
full and accurate account of all monies received and paid by him on account of
the Corporation; and shall have such further powers and duties as are incident
to the position of Treasurer, subject to the control of the Board of Directors.
He may be required by the Board of Directors to give a bond for the faithful
discharge of his duties in such sum and with such surety as the Board may
require.
Section 6. The Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors and of the shareholders and shall attend to
the giving and serving of all notices of the Corporation. He shall have custody
of the seal of the Corporation and shall affix the seal to all certificates of
shares of stock of the Corporation and to such other papers or documents as may
be proper and, when the seal is so affixed, he shall attest the same by his
signature whenever required. He shall have charge of the stock certificate
book, transfer book, and stock ledger, and such other books and papers as the
Board of Directors may direct. He shall, in general, perform all the duties of
Secretary, subject to the control of the Board of Directors.
Section 7. Assistant Treasurers. In the absence or inability of the
Treasurer to act, any Assistant Treasurer may perform all the duties and
exercise all of the powers of the Treasurer, subject to the control of the Board
of Directors. The performance of any such duty shall be conclusive evidence of
his power to act. Any Assistant Secretary shall also perform such other duties
as the Secretary or the Board of Directors may from time to time assign to him.
Section 8. Assistant Secretaries. In the absence or inability of the
Secretary to act, any Assistant Secretary may perform all the duties and
exercise all the powers of the Secretary, subject to the control of the Board of
Directors. The performance of any such duty shall be conclusive evidence of his
power to act. Any Assistant Secretary shall also perform such other duties as
the Secretary or the Board of Directors may from time to time assign to him.
Section 9. Other Officers. Other officers shall perform such duties
and have such powers as may from time to time be assigned to them by the Board
of Directors.
Section 10. Delegation of Duties. In case of the absence of any
officer of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may confer, for the time being, the powers or duties, or
any of them, of such officer upon any other officer, or upon any director.
ARTICLE V
Capital Stock
Section 1. Certificates for Shares. Certificates for shares of stock
of the Corporation certifying the number and class of shares owned shall be
issued to each shareholder in such form, not inconsistent with the Certificate
of Incorporation and these Bylaws, as shall be approved by the Board of
Directors. The certificates for the shares of each class shall be numbered and
registered in the order in which they are issued and shall be signed by the
Chairman of the Board of Directors or the President or a Vice President and by
the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer; and the seal of the Corporation shall be affixed thereto. However,
where any such certificate is signed by a transfer agent and by a registrar of
the Corporation, other than the Corporation itself or its employee, the
signature of either the transfer agent or the registrar and of any such
corporate officer or officers and the seal of the Corporation upon such
certificate may be facsimiles, engraved, or printed. All certificates exchanged
or returned to the Corporation shall be cancelled.
Section 2. Transfer of Shares of Stock. Transfers of shares shall be
made only upon the books of the Corporation by the holder, in person or by
attorney lawfully constituted in writing, and on the surrender of the
certificate or certificates for such shares properly assigned. The Board of
Directors shall have the power to make all such rules and regulations, not
inconsistent with the Certificate of Incorporation and these Bylaws, as they may
deem expedient concerning the issue, transfer, and registration of certificates
for shares of stock of the Corporation.
Section 3. Lost, Stolen, or Destroyed Certificates. The Board of
Directors, in their discretion, may require the owner of any certificate of
stock alleged to have been lost, stolen, or destroyed, or his legal
representatives, to give the Corporation a bond in such sum as they may direct,
to indemnify the Corporation against any claim that may be made against it on
account of the alleged loss, theft, or destruction of any such certificate, as a
condition of the issue of a new certificate of stock in the place of any
certificate theretofore issued alleged to have been lost, stolen, or destroyed.
Proper and legal evidence of such loss, theft, or destruction shall be procured
for the Board, if required. The Board of Directors in their discretion may
refuse to issue such new certificate, save upon the order of some court having
jurisdiction in such matters.
Section 4. Record Date. The Board of Directors may fix in advance a
date, not more than sixty days nor less than ten days preceding the date of any
meeting of the shareholders and not more than sixty days preceding the date for
the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, as a record date for the determination of the shareholders entitled to
notice of, and to vote at, any such meeting and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of capital stock; and in such case such shareholders and only such
shareholders as shall be shareholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting and any adjournment
thereof, or to receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record date
fixed as aforesaid.
Section 5. Maintenance and Inspection of Stock Ledger. The original
or a duplicate stock ledger containing a list of the shareholders shall be
maintained at the principal office or place of business of the Corporation and
shall upon written demand under oath stating the purpose thereof, be available
for inspection by any shareholder of record for any proper purpose in person or
by attorney or other agent during the usual hours of business. A proper purpose
shall mean a purpose reasonably related to such person's interest as a
shareholder. In every instance where an attorney or other agent shall be the
person who seeks the right to inspection, the demand under oath shall be
accompanied by a power of attorney or such other writing which authorizes the
attorney or other agent to so act on behalf of the shareholder. The demand
under oath shall be directed to the Corporation at its registered office in
Delaware or at its principal place of business.
Section 6. Record Ownership. The Corporation shall be entitled to
recognize the exclusive right of a person registered as such in the stock ledger
of the Corporation as the owner of shares of the Corporation's stock to receive
dividends and to vote as such owner and shall not be bound to recognize any
equitable or other claim to or interest in such shares on the part of any other
person, whether or not the Corporation shall have express or other notice
thereof, except as otherwise provided by law.
ARTICLE VI
Seal
The seal of the Corporation shall consist of a flat-faced, circular die
with the name of the Corporation, the year of its incorporation, and the words
"Corporate Seal" and "Delaware" inscribed thereon.
ARTICLE VII
Waiver
Whenever any notice whatever is required to be given by statute, or
under the provisions of the Certificate of Incorporation or Bylaws of this
Corporation, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE VIII
Checks, Notes, Drafts, Etc.
Checks, notes, drafts, acceptances, bills of exchange, and other orders
or obligations for the payment of money shall be signed by such officer or
officers or person or persons as the Board of Directors shall from time to time
determine.
ARTICLE IX
Amendments
These Bylaws may be amended or repealed and new Bylaws adopted by the
affirmative vote of a majority of the total number of directors (fixed by the
Bylaws as in effect immediately prior to such vote) or by the affirmative vote
of the holders of 75 percent of the voting power of the Corporation's stock
outstanding and entitled to vote thereon. Such Bylaws may contain any provision
for the regulation and management of the affairs of the Corporation and the
rights or powers of its shareholders, directors, officers, or employees not
inconsistent with the laws of the State of Delaware.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's sales and net income for 1997 achieved record
levels. Net income for 1997 was $22.5 million, an increase of
$5.1 million, or 29.0%, over 1996. Net sales increased 7.4% to
$547.7 million in 1997 compared to $510.1 million in 1996.
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.
The Lighting Segment net sales for 1997 of $374.1 million were
also a record and represent an increase of 10.0% over 1996 net
sales, following an increase of 2.2% in 1996. The increase in
1997 was attributable to the strength of construction markets as
all divisions reported higher sales. The increase in 1996
resulted from improvements in the Consumer Division and
additional shipments in the Canadian market. Operating income for
the Lighting Segment improved to $22.4 million in 1997, up from
$16.3 million in 1996, and $11.4 million in 1995. The 1997
operating income represents a 36.9% improvement over 1996, while
the 1996 level was 43.1% greater than 1995. The improvements were
due to the additional volume, improved manufacturing efficiencies
and continued implementation of cost containment programs.
The Compressor & Vacuum Pump Segment achieved record net sales of
$173.6 million in 1997, an increase of 2.1% over 1996, following
an increase of 7.8% in 1996 over 1995. The increase in 1997 was
due to the continued successful introduction of new products for
new applications which offset pricing pressure in the medical
markets. The increase for 1996 was due to the acquisition of
Welch Vacuum Technology and the introduction of new products. For
1997, operating income increased to a record $30.9 million, or
7.0%, from 1996 due to the increased sales, improved
efficiencies, cost containment in the manufacturing operations
and favorable exchange rate conditions between the U.S. and
Europe. Operating income for the Segment increased 1.4% to $28.9
million in 1996 compared to the 1995 level of $28.4 million due
to the addition of Welch.
Cost of products sold for 1997 was $378.7 million, an increase of
5.6%, due primarily to increased sales volume. In 1996, cost of
products sold was $358.8 million, compared to $352.6 million in
1995, an increase of 1.8%. Cost of products sold as a percentage
of net sales was 69.2% in 1997, compared to 70.3% and 71.9% in
1996 and 1995, respectively. Gross profit margins have improved
as a result of the Company's ongoing commitment to cost reduction
efforts and productivity improvement programs.
Selling, general and administrative (SG&A) expenses were $127.5
million, $117.2 million, and $108.3 million in 1997, 1996 and
1995, respectively. As a percentage of net sales, SG&A expenses
were 23.3% in 1997, compared to 23.0% and 22.1% in 1996 and 1995,
respectively. The increase in SG&A expenses as a percentage of
net sales is primarily due to additional information technology
costs, including costs associated with Year 2000 software
conversion requirements.
Interest expense for 1997 declined $.9 million, or 11.6%, from
1996; while the 1996 interest expense declined $.9 million, or
11.0%, from 1995. The interest expense reductions in both years
were due principally to the lower levels of long-term debt.
Income taxes were $13.2 million, $10.3 million and $8.3 million
in 1997, 1996 and 1995, respectively. The effective income tax
rate was 37.0% in 1997, compared to 37.1% in 1996 and 39.3% in
1995.
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 undiscounted
liabilities for such matters.
During 1997, the Company employed an average of 3,300 people,
compared to 3,150 in 1996. The increase was due to the additional
sales volume.
LIQUIDITY AND SOURCES OF CAPITAL
Cash and cash equivalents decreased to $17.4 million at December
31, 1997, compared to $18.8 million and $18.3 million at December
31, 1996 and 1995, respectively. Cash flows from operations were
$32.3 million in 1997 compared to $30.1 million in 1996 and $39.4
million in 1995. These funds have been utilized in funding of
capital expenditures and dividends over the three-year period,
along with the net reductions of long-term and short-term debt
during 1997, 1996 and 1995 totaling $34.7 million.
Dividends declared in 1997 were $4.4 million, compared with $4.2
million in 1996 and $4.0 million in 1995. In October 1997, the
Board of Directors authorized a three-for-two stock split on all
shares of common stock payable December 1, 1997. Also in October
1997, the Board of Directors declared a cash dividend of 7.5
cents per post-split share which, giving effect to the stock
split, creates a 12.5 percent increase in the cash dividend.
Working capital increased $6.4 million during 1997 from the
December 31, 1996 level which had increased $5.0 million from
December 31, 1995. From 1996 to 1997, accounts receivable
increased $3.1 million and inventory increased $4.9 million due
to the higher sales volume.
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995
<S> <C> <C> <C>
Working capital $ 92,258 $ 85,838 $ 80,837
Current ratio 2.09 2.02 1.96
Long-term debt, less current portion $ 55,006 $ 62,632 $ 70,791
Long-term debt to total capital 24.1% 28.4% 33.1%
</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 $41.4
million are not restricted at December 31, 1997.
As of December 31, 1997, the Company had available credit of
$11.9 million with banks under short-term borrowing arrangements,
$11.0 million of which was unused, and a $30.0 million revolving
line of credit that expires in 2002, 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.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board (FASB)
issued Statement No. 130, "Reporting Comprehensive Income", and
Statement No. 131, "Disclosures about Segments of an Enterprise
and Related Information". For a discussion of these statements
and their impact on the Company, please refer to Note 2 of the
Notes to the Consolidated Financial Statements on page 26.
YEAR 2000 ISSUE
Some of the Company's computer programs were written using two
digits rather than four to define the applicable year. As a
result, those computer programs have time-sensitive software that
recognize a date using "00" as the year 1900 rather than the year
2000. This could cause disruptions of operations including, among
other things, a temporary inability to process transactions, send
invoices or engage in similar normal business activities. In
1996, the Company initiated a program to address this issue so
that computer systems will function properly with respect to
dates in the year 2000 and thereafter. To date, the Company has
incurred and expensed approximately $2 million for assessment and
modification of software under this program. The program is
estimated to be completed not later than December 31, 1998, which
is prior to any anticipated impact on operating systems. Future
expenditures to complete the project are not expected to have a
material effect on financial position or results of operations.
There can be no guarantee regarding costs or completion date, and
actual results could differ materially from those anticipated.
Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct
all relevant computer codes, and similar uncertainties.
The Company has initiated formal communications with all
significant suppliers and large customers to determine the extent
to which the Company's interface systems are vulnerable to those
third parties' failure to remediate their own Year 2000 issues.
There is no guarantee that the systems of other companies on
which the Company relies will be timely converted and would not
have an adverse effect on the Company.
FORWARD-LOOKING STATEMENTS
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:
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.
The Lighting 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 affect the Lighting Segment.
FORWARD-LOOKING STATEMENTS (CONTINUED)
The Compressor & Vacuum Pump Segment operates in a market
where technological 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.
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, economies, or legal
systems; or intergovernmental disputes. These currency, economic
and political uncertainties may affect the Company's results.
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.
COMMON STOCK MARKET PRICES AND DIVIDENDS
The Company's common stock is traded on the New York Stock
Exchange (ticker symbol TII). On February 11, 1998, there were
2,041 security holders of record. High and low stock prices and
dividends for the last two years were: (Data have been restated
to reflect a three-for-two stock split effective December 1,
1997.)
<TABLE>
<CAPTION>
1997 1996
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 $ 17.33 $ 13.67 $ .067 $ 15.92 $ 13.58 $ .067
June 30 19.33 14.33 .067 14.50 12.75 .067
September 30 20.42 18.50 .067 13.42 11.00 .067
December 31 22.33 19.38 .075 14.25 12.50 .067
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Years ended December 31
(In thousands, except share data) 1997 1996 1995
<S> <C> <C> <C>
Net sales $ 547,702 $ 510,111 $ 490,573
Cost of products sold 378,746 358,778 352,551
Gross profit 168,956 151,333 138,022
Selling, general and administrative expenses 127,500 117,175 108,284
Interest expense 6,480 7,333 8,242
Interest income and other (668) (863) 443
133,312 123,645 116,969
Income before income taxes 35,644 27,688 21,053
Income taxes 13,174 10,272 8,278
Net income $ 22,470 $ 17,416 $ 12,775
Net income per share - Basic $ 1.42 $ 1.11 $ 0.84
Net income per share - Diluted 1.38 1.09 0.83
See accompanying notes.
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31
(In thousands, except share data) 1997 1996
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 17,352 $ 18,826
Accounts receivable, net 71,385 68,239
Inventories, net 74,128 69,247
Deferred income taxes 6,694 7,167
Other current assets 7,052 6,885
Total current assets 176,611 170,364
Property, plant and equipment, net 80,197 77,795
Intangible assets, net 56,333 58,687
Other assets 14,498 12,804
Total assets $ 327,639 $ 319,650
Liabilities and shareholders' equity
Current liabilities:
Notes payable to banks $ 2,564 $ 6,986
Accounts payable 31,094 27,377
Accrued expenses and other current liabilities 41,646 41,352
Dividends payable 1,189 1,053
Current portion of long-term debt 7,860 7,758
Total current liabilities 84,353 84,526
Deferred income taxes 8,802 8,603
Long-term debt, less current portion 55,006 62,632
Other long-term liabilities 6,073 6,187
Total liabilities 154,234 161,948
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: 1997 - 17,394,198;
1996 - 17,324,910 17,394 17,325
Capital surplus 109,750 109,431
Retained earnings 68,533 50,420
Foreign currency translation (4,587) (1,482)
Minimum pension liability (473) (780)
Less cost of treasury shares: 1,535,469 shares (17,212) (17,212)
Total shareholders' equity 173,405 157,702
Total liabilities and shareholders' equity $ 327,639 $ 319,650
See accompanying notes.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Years ended December 31
(In thousands) 1997 1996 1995
<S> <C> <C> <C>
Common stock:
Beginning of year $ 17,325 $ 17,229 $ 17,172
Stock options exercised 69 96 57
End of year 17,394 17,325 17,229
Capital surplus:
Beginning of year 109,431 112,231 111,833
Treasury stock retired - (3,866) -
Welch pooling of interests - 347 -
Stock options exercised 319 719 398
End of year 109,750 109,431 112,231
Retained earnings:
Beginning of year 50,420 40,003 31,264
Welch pooling of interests - (928) -
Net income 22,470 17,416 12,775
Treasury stock retired - (1,902) -
Cash dividends (4,357) (4,169) (4,036)
End of year 68,533 50,420 40,003
Foreign currency translation:
Beginning of year (1,482) (616) (2,478)
Adjustment (3,105) (866) 1,862
End of year (4,587) (1,482) (616)
Minimum pension liability:
Beginning of year (780) (2,690) (1,045)
Adjustment 307 1,910 (1,645)
End of year (473) (780) (2,690)
Treasury stock:
Beginning of year (17,212) (22,980) (22,980)
Treasury stock retired - 5,768 -
End of year (17,212) (17,212) (22,980)
Total shareholders' equity $ 173,405 $ 157,702$ 143,177
See accompanying notes.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years ended December 31
(In thousands) 1997 1996 1995
<S> <C> <C> <C>
Operating activities
Net income $ 22,470 $ 17,416 $ 12,775
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 16,049 15,682 14,803
Deferred income taxes 1,410 198 75
Provision for losses on accounts receivable 441 451 519
Loss (gain) on asset disposals, net (838) 99 123
Changes in operating assets and liabilities
net of effect of acquisitions:
Accounts receivable (3,492) (5,434) (1,037)
Inventories (6,048) 766 4,312
Other current assets (271) 998 1,282
Accounts payable 3,687 (174) 1,779
Accrued expenses and other liabilities 100 (366) 4,366
Other (1,243) 479 404
Net cash provided by operating activities 32,265 30,115 39,401
Investing activities
Purchases of property, plant and equipment (17,696) (15,071) (12,288)
Proceeds from sales of property, plant and equipment 1,117 159 1,458
Purchase of companies (net of cash acquired) (1,371) - -
Net cash used in investing activities (17,950) (14,912) (10,830)
Financing activities
Payments on notes payable to banks, net (3,721) (704) (1,231)
Payments on long-term debt (7,638) (12,458) (8,914)
Dividends paid (4,221) (4,127) (4,033)
Other 388 925 287
Net cash used in financing activities (15,192) (16,364) (13,891)
Effect of exchange rate changes (597) 1,682 (1,425)
Net (decrease) increase in cash and cash equivalents (1,474) 521 13,255
Cash and cash equivalents at beginning of year 18,826 18,305 5,050
Cash and cash equivalents at end of year $17,352 $18,826 $ 18,305
See accompanying notes.
</TABLE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS
Thomas Industries Inc. and subsidiaries (the Company) operates
two core businesses organized as a lighting segment and a
compressor and vacuum pump segment. The Company designs,
manufactures, markets and sells products within these segments.
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
consumer, commercial, industrial and outdoor 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 2 - 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.
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.
INVENTORIES
Inventories are valued at the lower of cost or market.
Inventories valued using the last-in, first-out (LIFO) method
represented approximately 79% and 78% of consolidated inventories
at December 31, 1997 and 1996, respectively. Inventories not on
LIFO are valued using the first-in, first-out (FIFO) method.
Inventories at December 31, consisted of the following:
(In thousands) 1997 1996
Finished goods $ 35,472 $ 33,072
Raw materials 23,620 21,622
Work in process 15,036 14,553
Total inventories $ 74,128 $ 69,247
On a current cost basis, inventories would have been $11,007,000
and $11,505,000 higher than reported at December 31, 1997 and
1996, respectively.
PROPERTY, PLANT AND EQUIPMENT
The cost of property, plant and equipment is depreciated
principally by the straight-line method over their estimated
useful lives. Property, plant and equipment at December 31
consisted of the following:
(In thousands) 1997 1996
Land $ 6,195 $ 6,331
Buildings 31,564 31,470
Leasehold improvements 11,241 11,627
Machinery and equipment 105,977 100,292
154,977 149,720
Accumulated depreciation and amortization (74,780) (71,925)
Total property, plant and equipment, net $ 80,197 $ 77,795
NOTE 2 - ACCOUNTING POLICIES (CONTINUED)
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 $19,916,000 and $18,368,000 at
December 31, 1997 and 1996, respectively. The excess is being
amortized over 40 years by the straight-line method.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs, which include costs of product
improvements and design, are expensed as incurred ($14,873,000 in
1997, $14,338,000 in 1996 and $13,405,000 in 1995).
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 amount because they are highly liquid investments with a
maturity of less than three months when purchased. The fair value
of notes payable to banks approximates its carrying amount. 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.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, The Financial Accounting Standards Board (FASB)
issued Statement No. 130, "Reporting Comprehensive Income" (SFAS
130), which requires disclosure of all items that are recognized
under accounting standards as components of comprehensive income.
SFAS 130 requires companies to classify items of other
comprehensive income by their nature in a financial statement and
to display the accumulated balance of other comprehensive income
separately from retained earnings and capital surplus in the
shareholders' equity section of the balance sheet.
Also in June 1997, The FASB issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131), which supersedes FASB Statement No. 14,
"Financial Reporting for Segments of a Business Enterprise." SFAS
131 requires public companies to disclose financial and
descriptive information about operating segments, which are
defined as revenue-producing components for which separate
financial information is produced internally that is subject to
evaluation by the chief operation decision maker in deciding how
to allocate resources to segments.
The Company will adopt both Statements in 1998, neither of which
is anticipated to significantly impact the financial statements
or disclosures therein.
OTHER
Accounts receivable at December 31, 1997 and 1996 was net of an
allowance for doubtful accounts of $2,046,000 and $2,243,000,
respectively.
Certain prior year amounts have been reclassified to conform to
the current year presentation.
NOTE 3 - NET INCOME PER SHARE
In 1997, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" (SFAS 128). SFAS 128
replaced the calculation of primary and fully diluted earnings
per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities.
Net income per share amounts for all periods presented have been
restated to conform to the SFAS 128 requirements.
The computation of the numerator and denominator in computing
basic and diluted net income per share follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
<S> <C> <C> <C>
Numerator:
Net income $ 22,470 $ 17,416 $ 12,775
Denominator:
Weighted average shares outstanding 15,837 15,756 15,136
Effect of dilutive securities:
Director and employee stock options 422 265 213
Employee performance shares 13 - -
Dilutive potential common shares 435 265 213
Denominator for diluted earnings
per share -- adjusted weighted-average
shares and assumed conversions 16,272 16,021 15,349
</TABLE>
NOTE 4 - ACQUISITION
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 514,574 shares of common stock of the Company in a
transaction accounted for as a pooling of interests. Due to
immateriality, prior year financial statements were not restated.
NOTE 5 - INCOME TAXES
A summary of the provision for income taxes follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
<C> <C> <C> <C>
Current:
Federal $ 7,977 $ 6,946 $ 5,138
State 780 630 300
Foreign 3,007 2,498 2,765
11,764 10,074 8,203
Deferred:
Federal and state 1,594 128 211
Foreign (184) 70 (136)
1,410 198 75
Total provision for income taxes $ 13,174 $ 10,272 $ 8,278
The U.S. and foreign components of income before income taxes follow:
(In thousands) 1997 1996 1995
<S> <C> <C> <C>
United States $ 27,360 $ 20,731 $ 14,973
Foreign 8,284 6,957 6,080
Income before income taxes $ 35,644 $ 27,688 $ 21,053
A reconciliation of the normal statutory federal income tax rate to the Company's effective income tax rate
follows:
1997 1996 1995
<S> <C> <C> <C>
U.S. statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefits 1.4 1.5 .9
Nondeductible amortization of intangible assets 1.6 2.0 2.6
Foreign loss carryforwards (.9) (1.4) (1.1)
Foreign tax rates 1.0 1.8 2.3
Other (1.1) (1.8) (.4)
Effective income tax rate 37.0% 37.1% 39.3%
</TABLE>
NOTE 5 - INCOME TAXES (CONTINUED)
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 at December 31
follow:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 1,856 $ 3,060
Allowance for doubtful accounts receivable 644 680
Inventory reserves 1,658 2,786
Accrued compensation expenses 2,853 2,731
Other 3,093 2,740
10,104 11,997
Less valuation allowance 1,856 3,060
Net deferred tax asset 8,248 8,937
Deferred tax liabilities:
Accelerated depreciation 7,030 6,705
Inventory valuation 1,844 1,858
Pension expense 1,318 1,140
Other 597 881
10,789 10,584
Net deferred tax liability $ 2,541 $ 1,647
Classification:
Current asset $ 6,694 $ 7,167
Long-term asset 1,554 1,770
Current liability 1,987 1,981
Long-term liability 8,802 8,603
Net deferred tax liability $ 2,541 $ 1,647
</TABLE>
Deferred tax assets and liabilities are classified according to
the related asset and liability classification on the
consolidated balance sheet.
The realization of deferred tax assets is dependent upon the
Company generating future taxable income when temporary
differences become deductible. Based upon historical and
projected levels of taxable income, management believes it is
more likely than not the Company will realize the benefits of the
deductible differences, net of a $1,856,000 valuation allowance,
provided for income tax loss carryforwards in U.S. and foreign
jurisdictions, the realization of which is not assured within the
carryforward periods.
The net future tax benefit and date of expiration of such loss
carryforwards are as follows: $64,000, January 1, 1999; $6,000,
January 1, 2000; $7,000, January 1, 2001; $269,000, January 1,
2005; $108,000, January 1, 2006; and $1,402,000 between January
1, 2007 and January 1, 2010.
The Company's foreign subsidiaries have accumulated undistributed
earnings ($31,921,000 at December 31, 1997) 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.
The Company made federal, state and foreign income tax payments
of $13,911,000 in 1997, $13,179,000 in 1996 and $7,200,000 in
1995.
NOTE 6 - LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consists principally of 9.36% senior notes with
annual maturities through 2005 ($54,080,000 and $61,810,000 at
December 31, 1997 and 1996, respectively).
The fair value of the Company's long-term debt at December 31,
1997 and 1996 was $60,000,000 and $66,700,000, respectively.
Maturities of long-term debt for the next five years are as
follow: 1998 - $7,860,000; 1999 - $7,887,000; 2000 - $7,784,000;
2001 - $7,857,000; and 2002 - $7,789,000.
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
$41,400,000 were not restricted at December 31, 1997.
As of December 31, 1997, the Company had available credit of
$11,900,000 with banks under short-term borrowing arrangements,
$11,000,000 of which was unused, and a $30,000,000 revolving line
of credit that expires in 2002, which was unused.
Cash paid for interest was $6,805,000 in 1997, $7,591,000 in 1996
and $8,533,000 in 1995. The weighted average interest rates on
notes payable to banks at December 31, 1997 and 1996 were 4.30%
and 4.04%, respectively.
NOTE 7 - SHAREHOLDERS' EQUITY
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.
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
900,000 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 Non-Employee 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 3,000
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 on the date granted. This Plan provides
for options to be awarded at each annual meeting through 2004 or
until 375,000 options have been granted. At December 31, 1997,
there were nine non-employee directors in office, and 102,000
options had been awarded under this Plan.
NOTE 7 - SHAREHOLDERS' EQUITY (CONTINUED)
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 equals the market price of the underlying
stock on the date of grant, no compensation expense is
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:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Risk-free interest rate 5.5% 6.5% 6.5%
Expected life, in years 6.5 8.0 8.0
Expected volatility 0.264 0.273 0.273
Expected dividend yield 1.8% 2.0% 2.0%
</TABLE>
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 share data) 1997 1996 1995
<S> <C> <C> <C>
Net income As reported $ 22,470 $ 17,416 $ 12,775
Pro forma 21,882 17,024 12,669
Net income per
share - Basic As reported 1.42 1.11 .84
Pro forma 1.38 1.08 .83
Net income per
share - Diluted As reported 1.38 1.09 .83
Pro forma 1.34 1.06 .83
</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.
NOTE 7 - SHAREHOLDERS' EQUITY (CONTINUED)
A summary of stock option activity for all plans follows:
<TABLE>
<CAPTION>
(Options in thousands) 1997 1996 1995
Weighted Weighted Weighted
Options Average Price Options Average Price Options Average Price
<S> <C> <C> <C> <C> <C> <C>
Beginning of year 1,174 $11.02 1,026 $10.01 837 $ 8.59
Granted 269 21.31 269 13.98 269 14.13
Exercised (95) 8.92 (98) 8.59 (66) 10.26
Forfeited or expired (2) 12.49 (23) 11.20 (14) 8.58
End of year 1,346 $13.22 1,174 $11.02 1,026 $ 10.01
Exercisable at end
of year 559 $ 9.69 506 $ 8.74 473 $ 8.46
</TABLE>
The weighted average fair value of options granted was $6.67 in
1997, $5.05 in 1996 and $5.15 in 1995 using a Black-Scholes
option pricing model. Options outstanding at December 31, 1997
had option prices ranging from $6.58 to $21.75 and expire at
various dates between April 20, 1999 and December 9, 2007 (with a
weighted-average remaining contractual life of 7.6 years). There
are 545,421 shares reserved for future grant, of which 270,775
shares are reserved for the Non-Employee Director Stock Option
Plan.
In addition to the options listed above, 13,215 performance share
awards were granted in December 1997 and December 1996. Awards
may be earned based on the total shareholder return of the
Company during the three-year periods commencing January 1
following the grant date.
SHAREHOLDER RIGHTS PLAN
On December 10, 1997, the Board of Directors of the Company
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 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 8 - RETIREMENT PLANS
The Company has noncontributory defined benefit pension plans and
contributory defined contribution plans covering its hourly union
employees. The defined benefit 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
covering substantially 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) 1997 1996 1995
<S> <C> <C> <C>
Defined benefit plans:
Service cost-benefits earned during the period $ 482 $ 502 $ 362
Interest cost on projected benefit obligation 1,994 1,806 1,598
Actual return on plan assets (5,598) (3,130) (4,368)
Net amortization and deferral 3,551 1,283 3,264
Net pension cost of defined benefit plans 429 461 856
Defined contribution plans 3,307 3,206 2,685
Multi-employer plans for certain union employees and other 160 154 217
Total pension expense $ 3,896 $ 3,821 $ 3,758
The assumptions used in the accounting for the funded status of defined benefit plans follow:
1997 1996 1995
<S> <C> <C> <C>
Weighted average discount rates 7.15% 8.00% 7.15%
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) 1997 1996
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 $ 16,304 $ 11,678 $ 16,775 $ 8,067
Accumulated benefit obligation 16,882 12,378 17,245 8,266
Plan assets at fair value 19,060 11,440 19,012 7,062
Accumulated benefit obligation less
than (in excess of) plan assets 2,178 (938) 1,767 (1,204)
Unrecognized net (gain) loss (469) 727 (172) 780
Unrecognized net obligation,
net of amortization 547 1,685 716 1,374
Additional minimum liability - (2,412) - (2,154)
Prepaid pension asset (liability) $ 2,256 $ (938) $ 2,311 $ (1,204)
</TABLE>
The defined benefit plans' assets at December 31, 1997 consisted
primarily of listed stocks and bonds, including 65,500 shares of
Company common stock having a market value of $1,294,000 at that
date.
NOTE 9 - 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.
Net periodic postretirement benefit cost includes the following
components:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
<S> <C> <C> <C>
Service cost on benefits earned $ 38 $ 50 $ 42
Interest cost on benefits obligation 359 356 439
Net amortization and deferral 216 233 344
Net periodic postretirement benefit cost $ 613 $ 639 $ 825
</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) 1997 1996
<S> <C> <C>
Retiree participants $ 4,042 $ 3,834
Fully eligible active participants 181 239
Other active participants 675 701
Accumulated postretirement benefit obligation 4,898 4,774
Unrecognized prior service cost (36) (38)
Unrecognized net gain 548 725
Unrecognized transition obligation (3,468) (3,699)
Accrued postretirement benefit liability $ 1,942 $ 1,762
</TABLE>
Assumptions used to measure expected health care costs follow:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Discount rate 7.15% 8.00% 7.15%
Initial health care cost trend rate 8.00% 9.00% 9.00%
Ultimate health care cost trend rate 4.50% 5.00% 5.50%
Year ultimate trend rate is achieved 2006 2004 2004
</TABLE>
The health care cost trend rate assumption has a significant
effect on the amounts reported. For example, increasing the
assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit
obligation as of December 31, 1997 by $445,000 and the aggregate
of the service and interest cost components of net periodic
postretirement benefit cost for the year ended December 31, 1997
by $36,000.
NOTE 10 - LEASES, COMMITMENTS AND CONTINGENCIES
Total rental expense was $4,888,000 in 1997; $4,664,000 in 1996
and $4,554,000 in 1995. Future minimum rentals under non-
cancelable operating leases are as follows: 1998 - $3,195,000;
1999 - $2,802,000; 2000 - $2,155,000; 2001 - $1,709,000; 2002 -
$1,299,000 and thereafter - $5,300,000.
The Company had letters of credit outstanding in the amount of
$5,176,000 at December 31, 1997.
The Company, like other 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 undiscounted
liabilities for such matters.
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 11 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
A summary of accrued expenses and other current liabilities at
December 31 follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
<S> <C> <C>
Accrued wages, taxes and withholdings $ 12,702 $ 10,173
Accrued insurance 5,056 4,952
Accrued sales expense 5,913 5,447
Income taxes payable 1,463 3,565
Other current liabilities 16,512 17,215
Total accrued expenses and other
current liabilities $ 41,646 $ 41,352
</TABLE>
NOTE 12 - SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Unaudited quarterly results of operations follow (in thousands,
except share data):
<TABLE>
<CAPTION>
Net Sales Gross Profit Net Income
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
1st Qtr. $ 126,356 $ 123,524 $ 38,257 $ 35,119 $ 4,002 $ 2,625
2nd Qtr. 139,989 127,868 43,540 37,209 6,430 4,448
3rd Qtr. 141,204 129,611 44,181 39,188 7,025 5,902
4th Qtr. 140,153 129,108 42,978 39,817 5,013 4,441
$ 547,702 $ 510,111 $ 168,956 $151,333 $ 22,470 $ 17,416
</TABLE>
<TABLE>
<CAPTION>
Basic Net Income Diluted Net Income
Per Share Per share
1997 1996 1997 1996
<S> <C> <C> <C> <C>
1st Qtr. $ 0.25 $ 0.17 $ 0.25 $ 0.16
2nd Qtr. 0.41 0.28 0.39 0.28
3rd Qtr. 0.44 0.38 0.43 0.37
4th Qtr. 0.32 0.28 0.31 0.28
$ 1.42 $ 1.11 $ 1.38 $ 1.09
</TABLE>
The 1996 and first three quarters of 1997 net income per share
amounts have been restated to comply with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share."
NOTE 13 - INDUSTRY SEGMENT INFORMATION
Industry segment information follows:
<TABLE>
<CAPTION>
Compressors &
(In thousands) Lighting Vacuum Pumps Corporate Consolidated
<S> <C> <C> <C> <C>
1997
Net sales $ 374,065 $ 173,637 $ - $ 547,702
Operating income 22,378 30,879 - 53,257
General corporate expenses - - 11,801 11,801
Identifiable assets 222,449 85,878 19,312 327,639
Depreciation and
amortization expense 9,345 6,530 174 16,049
Capital expenditures 9,006 8,441 249 17,696
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
</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.
NOTE 13 - INDUSTRY SEGMENT INFORMATION (CONTINUED)
Information by geographic area follows:
<TABLE>
<CAPTION>
United
(In thousands) States Canada Europe Eliminations Consolidated
1997
<S> <C> <C> <C> <C> <C>
Net sales to unaffiliated
customers $ 455,727 $ 42,971 $ 49,004 $ - $ 547,702
Intercompany sales 14,257 489 9,139 (23,885) -
Total net sales 469,984 43,460 58,143 (23,885) 547,702
Operating income 44,323 1,355 7,579 - 53,257
Identifiable assets 266,409 33,219 28,011 - 327,639
1996
Net sales to unaffiliated
customers $ 421,758 $38,704 $49,649 $ - $510,111
Intercompany 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
Intercompany 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
</TABLE>
REPORTS OF MANAGEMENT AND INDEPENDENT AUDITORS
RESPONSIBILITY FOR FINANCIAL REPORTING THE BOARD OF DIRECTORS AND
SHAREHOLDERS THOMAS INDUSTRIES INC.
The financial statements herein have been prepared under
management direction from accounting records which management
believes present fairly the transactions and financial position
of the Company. They were developed in accordance with generally
accepted accounting principles appropriate in the circumstances.
Management has established internal control systems and
procedures, including an internal audit function, to provide
reasonable assurance that assets are maintained and accounted for
in accordance with its authorizations and that transactions are
recorded in a manner to ensure reliable financial information.
The Company has a formally stated and communicated policy
demanding of employees high ethical standards in their conduct of
its business.
The Audit Committee of the Board of Directors is composed of
outside directors who meet
regularly with management, internal auditors and independent
auditors to review audit plans and fees, independence of
auditors, internal controls, financial reports and related
matters. The Committee has unrestricted access to the independent
and internal auditors with or without management attendance.
Timothy C. Brown
Chairman of the Board
President
Chief Executive Officer
Phillip J. Stuecker
Vice President of Finance
Chief Financial Officer
Secretary
Louisville, Kentucky
February 11, 1998
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
THOMAS INDUSTRIES INC.
We have audited the consolidated balance sheets of Thomas
Industries Inc. and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of income,
shareholders' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits. The financial
statements of Thomas Industries Inc. and subsidiaries for the
year ended December 31, 1995, were audited by other auditors
whose report dated February 7, 1996, expressed an unqualified
opinion on those statements.
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
audit provides a reasonable basis for our opinion.
In our opinion, the 1997 and 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, 1997 and 1996, and the consolidated
results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting
principles.
Louisville, Kentucky
February 11, 1998
FIVE YEAR SUMMARY OF OPERATIONS AND STATISTICS
<TABLE>
<CAPTION>
Years ended December 31
(Dollars in thousands,
except share data) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Earnings Statistics
Net sales $547,702 $510,111 $490,573 $456,565 $450,149
Cost of products sold 378,746 358,778 352,551 329,338 326,396
Selling, general and
administrative expenses 127,500 117,175 108,284 104,091 102,440
Interest expense 6,480 7,333 8,242 9,225 10,279
Income before income taxes 35,644 27,688 21,053 18,198 7,820
As a percentage of net sales 6.5% 5.4% 4.3% 4.0% 1.7%
Income taxes 13,174 10,272 8,278 7,656 4,015
Effective tax rate 37.0% 37.1% 39.3% 42.1% 51.3%
Net income 22,470 17,416 12,775 10,542(A) 3,805(B)
Financial Position
Working capital $ 92,258 $ 85,838 $ 80,837 $ 77,558 $ 78,466
Current ratio 2.1 to 1 2.0 to 1 2.0 to 1 2.0 to 1 2.1 to 1
Property, plant and
equipment, net 80,197 77,795 75,710 75,962 76,587
Total assets 327,639 319,650 313,533 305,071 302,760
Return on ending assets 6.9% 5.4% 4.1% 3.5% 1.3%
Long-term debt 55,006 62,632 70,791 79,693 87,509
Long-term debt to
total capital 24.1% 28.4% 33.1% 37.3% 41.2%
Shareholders' equity 173,405 157,702 143,177 133,766 125,049
Return on beginning
shareholders' equity 14.2% 12.2% 9.6% 8.4% 2.9%
Data Per Common Share (C)
Net income $ 1.38 $ 1.09 $ 0.83 $ 0.70 $ 0.25
Cash dividends declared 0.28 0.27 0.27 0.27 0.27
Shareholders' equity 10.59 9.99 9.43 8.85 8.30
Share price - High 22.33 15.92 16.08 10.92 9.33
Low 13.67 11.00 9.08 8.50 6.08
Close 19.75 13.92 15.67 9.58 8.75
Price/earnings ratio 14.3 12.8 18.9 13.7 35.0
Other Data
Cash dividends declared $ 4,357 $ 4,169 $ 4,036 $ 4,024 $ 4,014
Expenditures for property,
plant & equipment 17,696 15,071 12,288 16,301 13,908
Depreciation and amortization 16,049 15,682 14,803 15,524 16,517
Average number of employees 3,300 3,150 3,100 3,190 3,390
Sales per average number
of employees 166.0 161.9 158.2 143.1 132.8
Number of shareholders
of record 2,057 2,232 2,407 2,677 2,903
Average number common
shares outstanding (C) 16,271,678 16,021,026 15,348,828 15,090,654 15,052,758
Segment Information
Net sales
Lighting $374,065 $340,047 $332,842 $304,047 $298,432
Compressors & Vacuum Pumps 173,637 170,064 157,731 146,323 127,896
Other - - - 6,195 23,821
Total net sales $547,702 $510,111 $490,573 $456,565 $450,149
Operating income
Lighting $ 22,378 $ 16,348 $ 11,425 $ 4,856 $ 120(B)
Compressors & Vacuum Pumps 30,879 28,857 28,446 29,252 26,183
Other - - - (263) 710
Total operating income $ 53,257 $ 45,205 $ 39,871 $ 33,845 $ 27,013
</TABLE>
Note: See accompanying Notes to 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 1993 after-tax charge of $2,040,000 (pre-tax of
$3,500,000) for restructuring costs and credit of $1,148,000
(pre-tax of $1,900,000) for LIFO accounting change.
(C) Adjusted for 1997 stock split.
Exhibit 21.
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
Place of Percentage of
Name of Company Incorporation Voting Securities
<CAPTION>
<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%
Blue Grass Holdings Inc. Nevada 100%
Capri Lighting, Inc. California 100%
Eclairage ZED Inc. Province of Quebec,
Canada 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 Asia Pacific, Inc. Delaware 100%
Thomas Industries Asia Pacific, Ltd. Hong Kong 100%
Thomas Industries Corp. Province of Ontario, 100%
Canada
Thomas Industries Export, Inc. U.S. Virgin Islands 100%
Thomas Industries Holdings Inc. Delaware 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%
NON WHOLLY OWNED SUBSIDIARIES
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)
Report of Independent Auditors
The Board of Directors and Shareholders
Thomas Industries Inc.
We have audited the consolidated balance sheets of Thomas Industries Inc. and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, shareholders' equity, and cash flows for the years then
ended. Our audits also included the 1997 and 1996 financial statement schedules
listed in the Index at Item 14(a). These financial statements and schedules are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and schedules based on our
audits. The financial statements and schedule of Thomas Industries Inc. and
subsidiaries for the year ended December 31, 1995 were audited by other auditors
whose report dated February 7, 1996 expressed an unqualified opinion on those
statements and schedule.
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 provides a reasonable basis for our opinion.
In our opinion, the 1997 and 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, 1997 and 1996, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Louisville, Kentucky
February 11,1998
Exhibit 23(b)
Independent Auditors' Report
The Board of Directors and Shareholders
Thomas Industries Inc.:
We have audited the accompanying consolidated statements of income,
shareholders' equity, and cash flows of Thomas Industries, Inc. and subsidiaries
for the year ended December 31, 1995. In connection with our audit of the
aforementioned consolidated financial statements, we also have audited the
financial statement schedule for the year 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 audit.
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 consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and the cash flows
of Thomas Industries, Inc. and subsidiaries for the year 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
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<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996<F1> DEC-31-1995<F1>
<PERIOD-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 17,352 18,826 18,305
<SECURITIES> 0 0 0
<RECEIVABLES> 73,431 70,482 63,989
<ALLOWANCES> 2,046 2,243 2,014
<INVENTORY> 74,128 69,247 68,065
<CURRENT-ASSETS> 176,611 170,364 164,739
<PP&E> 154,977 149,720 146,903
<DEPRECIATION> 74,780 71,925 71,193
<TOTAL-ASSETS> 327,639 319,650 313,533
<CURRENT-LIABILITIES> 84,353 84,526 83,902
<BONDS> 55,006 62,632 70,791
0 0 11,486
0 0 0
<COMMON> 17,394 11,550 0
<OTHER-SE> 156,011 146,152 131,691
<TOTAL-LIABILITY-AND-EQUITY> 327,639 319,650 313,533
<SALES> 547,702 510,111 490,573
<TOTAL-REVENUES> 547,702 510,111 490,573
<CGS> 378,746 358,778 352,551
<TOTAL-COSTS> 378,746 358,778 352,551
<OTHER-EXPENSES> 126,391 115,861 108,208
<LOSS-PROVISION> 441 451 519
<INTEREST-EXPENSE> 6,480 7,333 8,242
<INCOME-PRETAX> 35,644 27,688 21,053
<INCOME-TAX> 13,174 10,272 8,278
<INCOME-CONTINUING> 22,470 17,416 12,775
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
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<NET-INCOME> 22,470 17,416 12,775
<EPS-PRIMARY> 1.42 1.11 .84
<EPS-DILUTED> 1.38 1.09 .83
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<F1>Restated.
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