SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1998
Commission File Number 1-5426.
THOMAS INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
Delaware 61-0505332
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4360 Brownsboro Road, Louisville, Kentucky 40207
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 502/893-4600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of issuer's Common Stock, $1 par value, as of
November 1, 1998, was 15,889,981 shares.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In Thousands Except Per Share Amounts)
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
---- ---- ---- ----
Net sales $43,146 $141,204 $137,691 $407,549
Cost of products sold 27,301 97,023 86,940 281,571
------ ------- ------- -------
Gross profit 15,845 44,181 50,751 125,978
Selling, general, and
administrative expenses 9,898 32,015 30,698 94,309
Equity income(loss) 6,858 (294) 14,797 (471)
------ ------- ------- -------
Operating income 12,805 11,872 34,850 31,198
Interest expense 1,593 1,500 4,650 4,802
Other income (expense) 78 755 336 1,290
------- ------- ------- -------
Income before income taxes 11,290 11,127 30,536
27,686
Income taxes 4,240 4,102 11,361 10,229
------ ------- ------- -------
Net income $ 7,050 $ 7,025 $ 19,175 $ 17,457
====== ======= ======= =======
Net income per share
-- Basic $.44 $.44 $1.21 $1.10
-- Diluted $.43 $.43 $1.16 $1.07
Dividends declared per share $0.075 $0.067 $0.225 $0.20
Weighted average number of
common shares outstanding
-- Basic 15,881 15,838 15,873 15,831
-- Diluted 16,461 16,338 16,468 16,323
Effective August 30, 1998, Thomas Industries Inc. ("Thomas") and The Genlyte
Group ("Genlyte") formed Genlyte Thomas Group, LLC ("GTG"), combining the Thomas
Lighting business and Genlyte (the "Joint Venture"). Genlyte has a 68% interest
in GTG, and Thomas holds a 32% interest, which is accounted for using the equity
method of accounting. Thomas changed its method of accounting for the Lighting
business contributed to GTG to the equity method effective January 1, 1998, the
beginning of Thomas' current fiscal year, restating results for the quarters
ended March 31 and June 30, 1998. The 1997 third quarter and nine-month period
net sales included $99,476,000 and $277,443,000, respectively, associated with
the Lighting business contributed to GTG. The restatement of results using the
equity method for the 1998 quarterly periods prior to consummation of the Joint
Venture had no effect on net income or common shareholders' equity but did
reduce revenues and costs.
See notes to condensed consolidated financial statements.
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
September 30 December 31
1998 1997*
---- ----
ASSETS
Current assets
Cash and cash equivalents $ 6,157 $ 17,352
Accounts receivable, less allowance
(1998--$848; 1997--$2,046) 20,553 71,385
Inventories:
Finished products 6,126 35,472
Raw materials 9,504 23,620
Work in process 6,206 15,036
------ -------
21,836 74,128
Deferred income taxes 6,285 6,694
Other current assets 40,544 7,052
------- -------
Total current assets 95,375 176,611
Equity investments 146,203 368
Property, plant and equipment 75,159 154,977
Less accumulated depreciation and amortization 41,879 74,780
------- -------
33,280 80,197
Intangible assets--less accumulated amortization 8,351 56,333
Other assets 29,189 14,130
-------- -------
Total assets $312,398 $327,639
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 24,912 $ 2,564
Accounts payable 6,712 31,094
Other current liabilities 22,636 42,835
Current portion of long-term debt 7,780 7,860
------- -------
Total current liabilities 62,040 84,353
Deferred income taxes 8,736 8,802
Long-term debt (less current portion) 48,313 55,006
Minimum pension liability 1,737 2,448
Other long-term liabilities 2,179 3,625
------- -------
Total liabilities 123,005 154,234
Shareholders' equity
Preferred stock, $1 par value,
3,000,000 shares authorized--none issued
Common stock, $1 par value, shares authorized:
60,000,000; shares issued: 1998 -- 17,412,791;
1997 -- 17,394,198 17,413 17,394
Capital surplus 109,898 109,750
Retained earnings 84,137 68,533
Accumulated other comprehensive income (4,855) (5,060)
Less cost of treasury shares
(1998--1,534,400; 1997--1,535,469) (17,200) (17,212)
-------- --------
Total shareholders' equity 189,393 173,405
Total liabilities and shareholders' equity $312,398 $327,639
*Derived from the audited December 31, 1997, consolidated balance sheet.
See notes to condensed consolidated financial statements.
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
Nine Months Ended
September 30
1998 1997
---- ----
Cash flows from operating activities:
Net income $ 19,175 $ 17,457
Reconciliation of net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 5,642 12,517
Deferred income taxes 658 (64)
Equity income (loss) from affiliates 14,797 (471)
Provision for losses on accounts receivable 354 300
Gain on asset disposal, net (37) (830)
Changes in operating assets and liabilities,
net of effects of acquisitions
and dispositions:
Accounts receivable (3,160) (15,706)
Inventories 572 (5,189)
Other current assets (37,117) 56
Accounts payable (2,952) 817
Accrued expenses and other liabilities (1,921) 2,173
Equity in unconsolidated joint ventures 7,403 --
Note receivable (22,287) --
Other (296) (421)
-------- --------
Net cash provided by (used in) operating activities (19,169) 10,639
Cash flows from investing activities:
Purchases of property, plant, and equipment (4,648) (11,868)
Proceeds from sale of property, plant, and equipment,
and other assets 60 949
-------- --------
Net cash used in investing activities (4,588) (10,919)
Cash flows from financing activities:
Proceeds from short-term debt, net 22,265 4,267
Payments of long-term debt, net (6,517) (7,758)
Dividends paid (3,571) (3,164)
Other 179 285
-------- --------
Net cash provided by (used in)
financing activities 12,356 (6,370)
Effect of exchange rate changes on cash 206 (13)
-------- --------
Decrease in cash and cash equivalents (11,195) (6,663)
Cash and cash equivalents at beginning of period 17,352 18,826
-------- --------
Cash and cash equivalents at end of period $ 6,157 $ 12,163
======== ========
See notes to condensed consolidated financial statements
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and with the instructions to Form 10-Q and Article 10-01 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
The results of operations for the nine-month period ended September 30, 1998,
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. For further
information, refer to the consolidated financial statements and footnotes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997.
Effective August 30, 1998, Thomas Industries and The Genlyte Group formed the
Genlyte Thomas Group (GTG), combining the Thomas Lighting business and Genlyte.
Genlyte has a 68% interest in GTG, and Thomas holds a 32% interest, which is
accounted for using the equity method of accounting. Thomas changed its method
of accounting for the Lighting business contributed to GTG to the equity method
effective January 1, 1998, the beginning of Thomas' current fiscal year. These
changes had no effect on net income or common shareholders' equity but did
reduce revenues and costs. (See Note E.) Reference is made to "Part II. OTHER
INFORMATION - Item 5. Other information" below for additional information.
Note B - Contingencies
In the normal course of business, the Company is a party to legal proceedings
and claims. When costs can be reasonably estimated, appropriate liabilities for
such matters are recorded. While management currently believes the amount of
ultimate liability, if any, with respect to these actions will not materially
affect the financial position, results of operations, or liquidity of the
Company, the ultimate outcome of any litigation is uncertain. Were an
unfavorable outcome to occur, the impact could be material to the Company.
Note C - Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income (SFAS 130). SFAS 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this Statement had no impact on the
Company's net income or shareholders' equity. SFAS 130 requires unrealized gains
or losses on the Company's foreign currency translation and minimum pension
liability adjustments, which, prior to adoption, were reported Note C -
Comprehensive Income - Continued
separately in shareholders' equity, to be included in other comprehensive
income.
For the three months ended September 30: 1998 1997
---- ----
Net income $ 7,050 $ 7,025
Minimum pension liability (287) --
Foreign currency translation 1,293 (342)
------ ------
Comprehensive income $ 8,056 $ 6,683
====== ======
For the nine months ended September 30: 1998 1997
---- ----
Net income $19,175 $17,457
Minimum pension liability (287) --
Foreign currency translation 492 (2,243)
---- ------
Comprehensive income $19,380 $15,214
====== ======
Note D - Stock Split
On October 16, 1997, the Board of Directors authorized a three-for-two stock
split to be effected in the form of a 50 percent stock dividend on all shares of
Common Stock, payable December 1, 1997, for shareholders of record November 14,
1997. All share data included in these condensed consolidated financial
statements have been restated to reflect this stock split.
Note E - Genlyte Thomas Group, LLC
The following table contains certain unaudited financial information for the
Joint Venture. The Joint Venture was formed on August 30, 1998; therefore, only
one month of activity exists.
Genlyte Thomas Group, LLC
Condensed Financial Information
(Dollars in Thousands)
Net sales $ 94,646
Gross profit 32,404
Operating income 8,593
Net income 2,902
Current assets 329,081
Long-term assets 170,890
Current liabilities 164,332
Long-term liabilities 81,390
Restated results for Thomas for the quarters ended March 31 and June 30, and
results for the quarter ended September 30, 1998, are shown below:
Note E - Genlyte Thomas Group, LLC - Continued
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands except amounts per share)
Nine Months
Three Months Ended Ended
March 31 June 30 September 30 September 30
1998 1998 1998 1998
---- ---- ---- ----
Net sales $48,209 $46,336 $43,146 $137,691
Cost of products sold 30,581 29,058 27,301 86,940
------ ------ ------ -------
Gross profit 17,628 17,278 15,845 50,751
SG&A expenses 10,855 9,945 9,898 30,698
Equity income (loss) 2,858 5,081 6,858 14,797
------ ------ ------ -------
Operating income 9,631 12,414 12,805 34,850
Interest expense 1,476 1,581 1,593 4,650
Other 179 79 78 336
------ ------ ------ -------
Income before taxes 8,334 10,912 11,290 30,536
Income tax provision 3,084 4,037 4,240 11,361
------ ------ ------ -------
Net income $ 5,250 $ 6,875 $ 7,050 $ 19,175
====== ====== ====== =======
Net income per share
-- Basic $0.33 $0.43 $0.44 $1.21
-- Diluted $0.32 $0.42 $0.43 $1.16
Dividends declared per share $.075 $.075 $.075 $.225
Weighted average number of common shares outstanding:
-- Basic 15,864 15,874 15,881 15,873
-- Diluted 16,405 16,524 16,461 16,468
Note F - Receivables from Affiliate
As negotiated between Thomas and Genlyte, included in Other Current Assets is
$33,271,000 related to a working capital adjustment due from GTG. The working
capital adjustment is based on the net working capital contributed to GTG by
Thomas in excess of a target net working capital. The target net working capital
is intended to represent the net working capital which should be contributed by
Thomas in proportion to the net working capital being contributed to GTG by
Genlyte. The working capital adjustment was paid on November 9, 1998.
Included in Other Long-Term Assets at September 30, 1998,is $22,287,000 which
represents a debt equalization note payable to Thomas by GTG. Such note Note F -
Receivables from Affiliate - Continued
reflects 32/68ths of the long-term portion of indebtedness contributed to GTG by
Genlyte. Interest on the principal amount outstanding under the note accrues at
a variable rate based on LIBOR plus the Offshore Rate Margin and is payable on a
quarterly basis. The principal amount of the note is due on August 29, 2003, and
may be prepaid in whole or in part at any time without premium or penalty.
Item 2. Management's Discussion and Analysis
Results of Operations
Net sales during the third quarter ended September 30, 1998, were $43.1 million
compared to $141.2 million for the third quarter of 1997. The 1998 net sales
reflect the application of the equity method for the Lighting Segment
retroactive to January 1, 1998. The 1997 third quarter net sales included $99.5
million associated with the lighting business contributed to GTG. Net sales for
the nine months ended September 30, 1998, were $137.7 million compared to $407.5
million for the prior year. Included in the prior year nine-month period ended
September 30, 1997, were $277.4 million of net sales associated with the
lighting business contributed to GTG. Excluding the lighting business, net sales
year to date through September 30, 1998, were $7.6 million higher than the prior
year, primarily due to an increased volume of shipments in the North American
Compressor & Vacuum Pump Segment.
Operating income for the third quarter ended September 30, 1998, was $12.8
million, or 7.6% higher than the prior-year amount of $11.9 million.
Year-to-date operating income for the period ended September 30, 1998, of $34.9
million was 11.9% greater than the $31.2 million recorded in the prior year,
primarily due to improved profitability in the European Compressor & Vacuum Pump
Segment. Operating results for the North American Compressor & Vacuum Pump
Segment decreased slightly due to a less favorable product mix, competitive
pricing pressures, and a general weakness in OEM and distributor business.
Net income for the 1998 third quarter of $7.1 million was slightly higher than
the $7.0 million for the comparable 1997 period. Through the first three
quarters of 1998, net income of $19.2 million was 9.7% higher than the first
three quarters of the prior year.
Interest expense for the 1998 third quarter was $1.6 million, or 6.7% higher
than the prior-year amount of $1.5 million. The increase was attributed
primarily to an increase in short-term debt.
As negotiated between Thomas and Genlyte, included in Other Current Assets is
$33,271,000 related to the working capital adjustment due from GTG. The working
capital adjustment is based on the net working capital contributed to GTG by
Thomas in excess of a target net working capital. The target net working capital
is intended to represent the net working capital which should be contributed by
Thomas in proportion to the net working capital being contributed to GTG by
Genlyte. The working capital adjustment will be paid on November 9, 1998. Item
2. Management's Discussion and Analysis - Continued
Included in Other Long-Term Assets at September 30, 1998,is $22,287,000 which
represents the debt equalization note payable to Thomas by GTG. Such note
reflects 32/68ths of the long-term portion of indebtedness contributed to GTG by
Genlyte. Interest on the principal amount outstanding under the note accrues at
a variable rate based on LIBOR plus the Offshore Rate Margin and is payable on a
quarterly basis. The principal amount of the note is due on August 29, 2003, and
may be prepaid in whole or in part at any time without premium or penalty.
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 $53.9 million are not restricted at September 30, 1998.
As of September 30, 1998, the Company had available credit of $13 million with
banks under short-term borrowing arrangements which was unused, and a $30
million revolving line of credit that expires in 2002, $9.1 million of which was
unused. Anticipated funds from operations, along with available short-term
credit, are expected to be sufficient to meet cash requirements in the year
ahead. Cash in excess of operating requirements will continue to be invested in
high grade, short-term securities.
Year 2000 Issue
In the third quarter of 1996, the Company recognized the need to ensure that its
operations would not be adversely affected by Year 2000 computer hardware and
software failures. Certain systems would fail, unless modified, to properly
handle date-sensitive calculations for dates that crossed the century. Such
systems could fail because the systems use only two digits rather than four to
define a specific year. These failures would pose known risks to the future
integrity of the Company's financial reports and to virtually all aspects of the
Company's operations, including the Company's ability to process sales
transactions, fulfill customer orders, and receive and manage inventories and
other assets.
Plans for achieving internal Year 2000 compliance were finalized during 1996 and
included a goal to be complete by the end of the third quarter 1998.
Accordingly, the Company completed a high level analysis of the scope of the
issues to be addressed, created a team of IT resources, and contracted with a
major software consulting firm to assist in the Year 2000 remediation efforts.
The discovery phase of the problems and the plan for remediation were completed
in 1997. Remediation and testing have been completed on most systems during the
first nine months of 1998. The objective of these efforts is to achieve Year
2000 compliance with a minimal effect on customer service or other disruption
to, or loss of integrity in, business or financial operations. At this date,
sources of potential failure have been identified, with most of them having been
remediated. We are currently awaiting some third-party software providers to
provide compliant versions of their software, including in particular two
payroll software vendors. We believe that all critical software will be
compliant before our known failure dates.
Item 2. Management's Discussion and Analysis - Continued
The Company has performed a preliminary assessment of its material
non-Information Technology systems such as CAD systems, PBX systems,
Environmental Control systems, Elevator Control systems, and NC devices and,
based upon this preliminary assessment, believes that these systems are Year
2000 compliant.
The Company has initiated communications with its major suppliers and customers
to determine their Year 2000 compliant status and to identify any issues or
problems with respect to their Year 2000 preparedness that might adversely
affect their companies. The Company is continuing its efforts to obtain such
assurances from all critical suppliers. Failure of these third parties could
have a material impact on operations and/or the Company's ability to deliver
products. Contingency planning will be established and implemented in an effort
to minimize any impact from Year 2000 related failures.
Through September 1998, approximately $2.3 million, which includes Compressors &
Vacuum Pumps and Lighting costs, has been incurred in the Company's efforts to
achieve Year 2000 compliant systems. These costs have been incurred over the
1996-1998 time frame and have not been, nor are expected to be, a material
incremental cost having an impact on the Company's operations, financial
condition, or liquidity and include the costs for both its Vacuum Pump &
Compressor business and the Company's former Lighting business. These costs
consist primarily of outsourced consulting and remediation efforts. Any
remaining costs for the Company are expected to be less than $100,000. There
have been no major system projects cancelled or delayed as a result of the
Company's Year 2000 costs.
The above expectations are subject to uncertainties. For example, if the Company
is unsuccessful in identifying or fixing all Year 2000 problems in our critical
operations, or if we are affected by the inability of our suppliers or major
customers to continue operations due to such problems, our results of operations
or financial condition could be materially affected.
The Company has a minority interest in Genlyte Thomas Group, LLC ("GTG") which
has advised the Company that it is currently in the process of identifying and
remediating its Year 2000 issues as well as conducting a review to gain
reasonable assurances that its business partners are addressing Year 2000
issues. If GTG is unsuccessful in identifying or remediating all Year 2000
problems in its critical operations, or if it is affected by the inability of
its suppliers or major customers to continue operations due to such problems,
this could have an impact on the Company's financial results and condition.
New European Currency
Eleven European countries (The European Monetary Union) will implement a single
currency zone on January 1, 1999. The new currency (Euro) will eventually
replace the existing currencies of the participating countries. It is expected
that this transition from the various currencies to the Euro will occur over a
three-year period. Since the Company's European Operations may have to
accommodate dual currencies during this period, modifications to our
Item 2. Management's Discussion and Analysis - Continued
third-party software at our European locations may be necessary. A team has been
formed to monitor EMU developments, evaluate the requirements, develop and
execute action plans and work with our third party software providers to address
this issue.
While management currently believes the Company will be able to accommodate any
required changes in its operations without significant costs, there can be no
assurance that the Company, its customers, suppliers and service providers or
government agencies will all meet the Euro currency requirements in a timely
manner. Such failure to timely complete the necessary work could result in
material financial risk.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
a. A Special Meeting of Shareholders was held on August 27, 1998.
b. The voting at the Special Meeting of Shareholders was as follows:
Proposal No. 1 - To approve the transfer of substantially all of
the assets and related liabilities of the lighting business of
Thomas Industries Inc. to the joint venture combining the lighting
business of Thomas with the business of The Genlyte Group
Incorporated.
For Against Abstain
--- ------- -------
Shares voted 12,957,614 62,799 43,720
Item 5. Other Information
On August 30, 1998, the Company contributed substantially all of its
lighting assets and related liabilities to a joint venture with The
Genlyte Group Incorporated. The Company filed a Joint Proxy Statement
dated July 23, 1998 (the "Proxy Statement"), with the Securities and
Exchange Commission with respect to the Special Meeting of Shareholders
of the Company held on August 27, 1998, at which the transaction was
approved. For additional information concerning the transaction,
reference is made to the Proxy Statement which is incorporated herein
by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(4) 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, as
filed as Exhibit 4 to Form 10-K filed March 22, 1990,
herein incorporated by reference. First Amendment to Note
Agreement dated April 8, 1992, and Second Amendment to Note
Agreement dated July 31, 1992, as filed as Exhibit 4 to
Form 10-Q filed August 12, 1992, herein incorporated by
reference. Third Amendment to Note Agreement is filed as an
exhibit herewith.
(27) Financial Data Schedule
(b) A Form 8-K was filed on July 23, 1998, which contained unaudited
summary financial data for the second quarter of 1998.
A Form 8-K was filed on July 24, 1998, which contained the
Master Transaction Agreement, the Limited Liability Company
Agreement of GT Lighting, and the Capitalization Agreement by
and between Thomas Industries Inc. and The Genlyte Group
Incorporated.
A Form 8-K was filed on September 14, 1998, announcing that the
Company contributed substantially all of its lighting assets and
related liabilities to a joint venture with The Genlyte Group
Incorporated.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THOMAS INDUSTRIES INC.
----------------------
Registrant
/S/ Phillip J. Stuecker
------------------------------
Phillip J. tuecker, Vice President
and Chief Financial Officer
Date: November 16, 1998
THIRD AMENDMENT TO NOTE AGREEMENT
Reference is hereby made to the Note Agreement dated as of January 19
1990, as amended pursuant to a First Amendment to Note Agreement dated as of
April 8, 1992 and as further amended pursuant to a Second Amendment to Note
Agreement dated as of July 31, 1992 (together, the "Original Agreement"), and as
amended hereby (the "Agreement"), among Thomas Industries Inc. (the "Company"),
Thomas Industries Holdings Inc., formerly Day-Brite Lighting, Inc. ("Holdings"),
and the Purchasers listed on Schedule I hereto (collectively, the "Purchasers"
and with the Company and Holdings, the "Parties"). This Third Amendment to the
Original Agreement is hereinafter referred to as the "Third Amendment."
WHEREAS, the Company plans to exchange its lighting division assets for
a minority interest in a joint venture, as further described in Exhibit A hereto
(the "Restructuring"); and
WHEREAS, in connection with the Restructuring, the Company and the
Purchasers have negotiated certain amendments to, and waivers under the Original
Agreement, as hereinafter set forth, including the following: (i) amending
Section 7.4 (Debt) of the Original Agreement to limit the Debt which can be
incurred by the Company and its Restricted Subsidiaries by reference to
prescribed thresholds for operating cash flow, (ii) waiving compliance with
Sections 7.7 (Merger or Sale of Substantially All Assets) and 7.8 (Sale of
Assets) of the Original Agreement in connection with the transfer of the
lighting business of the Company pursuant to the Restructuring and (iii) making
certain other changes to the Original Agreement.
IT IS THEREFORE AGREED THAT:
1. Definitions.
(a) All defined terms used herein shall have the meanings assigned
to such terms in the Original Agreement except as noted
herein.
(b) The following definition of Priority Debt is added to the Original
Agreement:
"Priority Debt - has the meaning set forth in Section 7.4(b)."
(c) The following definition of EBITDA is added to the Original
Agreement.
"EBITDA - means, for any period, Adjusted Net Earnings plus
(to the extent deducted from, or not included in, Adjusted Net
Earnings for the relevant period) depreciation, amortization,
interest expense, taxes and cash distributions from minority
investments."
(d) The definition of Consolidated Earnings Before Fixed Charges
is amended by deleting from the phrase beginning with (i) the
words "Section 7.6 Net Earnings" and inserting in lieu thereof
"Adjusted Net Earnings."
(e) The definition of Consolidated Fixed Charges is amended by
deleting from its last sentence the words "Section 7.6 Net
Earnings" and inserting in lieu thereof "Adjusted Net
Earnings."
(f) The definition of Restricted Subsidiary is amended by deleting
from the last sentence the phrase "and immediately thereafter
the Company could incur additional Funded Debt pursuant to
Section 7.4(c) after giving effect to said designation" and
inserting in lieu thereof the following:
"and immediately thereafter the Company is in compliance with
Section 7.4(a) after giving effect to such designation."
(g) The following sentence is added at the end of the definition
of Restricted Subsidiary in the Original Agreement:
"At no time shall the entity resulting from the Restructuring
(as defined in the Third Amendment, dated July 7, 1998, to
this Agreement) be a Restricted Subsidiary."
(h) The definition of Unrestricted Subsidiary in the Original
Agreement is amended by deleting therefrom the phrase
beginning with (ii) and inserting in lieu thereof the
following:
"(ii) immediately thereafter, the Company is in compliance
with Section 7.4(a)."
(i) The definition of Section 7.6 Net Earnings is amended by
changing the name of such definition from "Section 7.6 Net
Earnings" to "Adjusted Net Earnings."
2. Amendments.
(a) The Original Agreement is amended by deleting from
subparagraph (g) of Section 7.3 the last words, which are
"Section 7.4(d)" and inserting in lieu thereof "Section
7.4(b)."
(b) The Original Agreement is amended by deleting therefrom
Section 7.4 in its entirety and inserting in lieu thereof the
following:
"7.4 Debt.
(a) The Company will not permit at any time the ratio of
Funded Debt of the Company and its Restricted Subsidiaries to
EBITDA to exceed (i) 3.5 to 1.0 for the period commencing the
date hereof through September 30, 1999, and (ii) 3.0 to 1.0
subsequent to September 30, 1999. For purposes of this Section
7.4(a), Current Debt of the Company and its Restricted
Subsidiaries shall be deemed to constitute Funded Debt of the
Company and its Restricted Subsidiaries unless, for a period
of forty-five (45) consecutive days (which period shall be
determined by the Company) during each fiscal year, there
shall have been outstanding no Current Debt of the Company and
its Restricted Subsidiaries. For purposes of calculating the
amount of Current Debt which will be deemed to constitute
Funded Debt pursuant to the previous sentence, the amount of
such Funded Debt will equal the average amount of Current Debt
outstanding during each forty-five (45) day period of
determination.
(b) The Company will not permit at any time Debt of its
Restricted Subsidiaries (other than Debt owed to the Company
or another Restricted Subsidiary) and Secured Debt (together,
"Priority Debt") to be incurred, unless after giving effect
thereto, (i) such Priority Debt would be permitted to be
outstanding under paragraph (a) of this Section 7.4, and (ii)
the aggregate amount of such Priority Debt at any time
outstanding would not exceed the sum of $10,000,000 plus 15%
of Consolidated Net Tangible Assets. If the Company or a
Restricted Subsidiary purchases or acquires 75% or more of the
assets or capital stock of a Person that has outstanding
Funded Debt and such acquired Person is thereupon designated a
Restricted Subsidiary, then, notwithstanding clause (ii) of
this paragraph (b), such Funded Debt of such acquired Person
may remain outstanding if after giving effect thereto, the
Company could incur additional Funded Debt pursuant to
paragraph (a) of this Section 7.4."
(c) The Original Agreement is amended by deleting from Section
7.7(b) the phrase beginning with (iii) and inserting in lieu
thereof the following:
"(iii) after giving effect to such merger, consolidation,
sale, lease or conveyance of assets the surviving, corporation
would be in compliance with Section 7.4(a)."
(d) The Original Agreement is amended by deleting from Section
7.10 the phrase beginning with (iii) and inserting in lieu
thereof the following:
"(iii) after giving effect thereto, the Company would be in
compliance with Section 7.4(a)."
3. Agreement.
The Purchasers hereby agree that the Company's transfer of its lighting
assets and related liabilities to a joint venture, as contemplated by the
Restructuring, shall not:
(a) constitute a sale or conveyance of substantially all of the
Company's assets to another Person under Section 7.7 of the
Original Agreement; and
(b) constitute a Disposition under Section 7.8 of the Original
Agreement, provided, however, that such transfer of the
Company's lighting, assets and related liabilities, as
contemplated by the Restructuring, does not exceed the sum of
(i) the book value of $140,000,000, plus (ii) an aggregate
amount of working capital not to exceed $30,000,000.
4. Representations and Warranties.
(a) Each of the Company and Holdings confirms that (i) except as
otherwise set forth in the Schedules attached hereto, each of
the representations and warranties set forth in the Original
Agreement and the information set forth in Exhibit A is true
and correct in all material respects as of the date hereof,
except that to the extent any such representation, warranty
or information is stated to relate solely to an earlier date,
each of the Company and Holdings confirms that such
representation, warranty or information was true and correct
in all material respects as of such earlier date and (ii) no
Default or Event of Default (which has not been cured
pursuant to amendments made hereunder) has occurred and is
continuing.
(b) Each of the Company and Holdings represents and warrants that
it has the requisite corporate power and authority to enter
into this Third Amendment and to otherwise carry out the
transactions contemplated by this Third Amendment.
(c) Each of the Company and Holdings represents and warrants that
this Third Amendment has been duly authorized by all
necessary corporate action on the part of the Company and
Holdings and that this Third Amendment has been executed and
delivered by the Company and Holdings and constitutes the
legal, valid and binding obligation of each of the Company
and Holdings, enforceable against each of them in accordance
with its terms, except to the extent that enforcement hereof
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws of general
application relating to or affecting the enforcement of the
rights of creditors or by equitable principles regardless of
whether enforcement is sought in equity or at law.
(d) No written statement or document furnished by or on behalf of
the Company or Holdings in connection with this Third
Amendment contains any untrue statement of a material fact or
omits a material fact necessary to make the statements
contained therein, in light of the circumstances under which
made, not misleading.
(e) The execution, delivery and performance by the Company and
Holdings of this Third Amendment will not violate any
provision of any law, rule, regulation or ordinance or any
order, judgment, decree or ruling of any court, arbitrator,
governmental authority or agency applicable to the Company or
Holdings and will not result in any breach of any of the
provisions of, or constitute a default under, or result in
the creation of any Lien on any property of the Company or
Holdings under the provisions of, any charter document,
by-law, loan, agreement or any other material agreement or
material instrument to which it is a party or by which it or
its property may be bound or affected.
5. Covenants.
The Company and Holdings hereby agree that, within 45 days of the date
hereof, each shall deliver to the Purchasers copies of the resolutions adopted
by their respective Board of Directors authorizing the execution and delivery of
this Third Amendment.
6. Counterparts.
This Third Amendment may be executed by the parties hereto
individually, or in any combination of the parties hereto in several
counterparts, all of which taken together shall constitute one and the same
Third Amendment.
7. Conditions to Effectiveness.
The effectiveness of the Purchasers' agreement to this Third Amendment
is subject to the satisfaction on or prior to the date hereof of each of the
following conditions:
(a) Delivery to the Purchasers of copies of this Third Amendment
executed by the Company.
(b) Payment of fees and expenses of counsel to the Purchasers.
(c) Delivery by the Company of evidence satisfactory to the
Purchasers that the Restructuring has been consummated.
8. Ratification and Acknowledgment.
All of the representations, warranties, provisions, covenants, terms
and conditions of the Original Agreement not amended herein shall remain
unaltered and in full force and effect. The Original Agreement, as amended
hereby, is in all respects agreed to, ratified and confirmed by the Company.
Each of the Company and Holdings acknowledges and agrees that the amendments and
agreements contained herein shall not be construed as establishing a course of
conduct on the part of the Purchasers upon which the Company and Holdings may
rely at any time in the future.
9. Reference to and Effect on the Agreement.
Upon the effectiveness of this Third Amendment, each reference in the
Original Agreement and in other documents describing or referencing the Original
Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of like
import referring to the Original Agreement, shall mean and be a reference to the
Original Agreement, as amended hereby.
Dated as of this 7th day of July, 1998.
THOMAS INDUSTRIES HOLDINGS INC. THOMAS INDUSTRIES INC.
By: By:
Its: Its:
ALLSTATE LIFE INSURANCE COMPANY AID ASSOCIATION FOR LUTHERANS
By: By:
Its:
By:
Authorized Signature
THE MINNESOTA MUTUAL LIFE WOODMEN ACCIDENT AND LIFE
INSURANCE COMPANY COMPANY
By: By:
Its: Its:
AMERICAN FAMILY LIFE GUARANTEE LIFE INSURANCE
INSURANCE COMPANY COMPANY
By: By:
Its: Its:
NATIONAL LIFE INSURANCE AMERICAN UNITED LIFE INSURANCE
COMPANY COMPANY
By: By:
Its: Its:
GENERAL AMERICAN LIFE
INSURANCE COMPANY
By:
Its:
THE AMERICAN FRANKLIN LIFE
INSURANCE COMPANY
By:
Its:
MODERN WOODMEN OF AMERICA
By:
Its:
PAN-AMERICAN LIFE INSURANCE
COMPANY
By:
Its:
FIRST COLONY LIFE INSURANCE
COMPANY
By:
Its:
SCHEDULE I
Allstate Life Insurance Company
Aid Association for Lutherans
The Minnesota Mutual Life Insurance Company American Family Life Insurance
Company National Life Insurance Company American United Life Insurance Company
General American Life Insurance Company The American Franklin Life Insurance
Company Guarantee Life Insurance Company Modern Woodmen of America Woodmen
Accident and Life Company Pan-American Life Insurance Company GE Financial
Assurance First Colony Life Insurance Company
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997<F1>
<CASH> 6,157 12,163
<SECURITIES> 0 0
<RECEIVABLES> 21,401 85,170
<ALLOWANCES> 848 2,220
<INVENTORY> 21,836 73,175
<CURRENT-ASSETS> 95,375 182,297
<PP&E> 75,159 158,617
<DEPRECIATION> 41,879 80,915
<TOTAL-ASSETS> 312,398 329,851
<CURRENT-LIABILITIES> 62,040 91,009
<BONDS> 48,313 54,874
17,413 17,375
0 0
<COMMON> 0 0
<OTHER-SE> 171,980 152,672
<TOTAL-LIABILITY-AND-EQUITY> 312,398 329,851
<SALES> 137,691 407,549
<TOTAL-REVENUES> 137,691 407,549
<CGS> 86,940 281,571
<TOTAL-COSTS> 86,940 281,571
<OTHER-EXPENSES> 15,211 93,190
<LOSS-PROVISION> 354 300
<INTEREST-EXPENSE> 4,650 4,802
<INCOME-PRETAX> 30,536 27,686
<INCOME-TAX> 11,361 10,229
<INCOME-CONTINUING> 19,175 17,457
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 19,175 17,457
<EPS-PRIMARY> 1.21 1.10
<EPS-DILUTED> 1.16 1.07
<FN>
<F1> Restated
</FN>
</TABLE>
