SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [ X ]
For the quarterly period ended: September 30, 1999
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OR
TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [ ]
For the transition period from to
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Commission File Number 1-5426.
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THOMAS INDUSTRIES INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 61-0505332
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4360 Brownsboro Road, Louisville, Kentucky 40207
- ------------------------------------------ -----
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 502/893-4600
-----------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares outstanding of issuer's Common Stock, $1 par value, as of
October 30, 1999, was 15,822,942 shares.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in Thousands Except Amounts Per Share)
<PAGE>
Three Months Ended Nine Months Ended
September 30 September 30
------------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
Net sales $ 39,856 $ 43,147 $133,624 $137,691
Cost of products sold 25,503 27,302 85,387 86,940
-------- -------- -------- --------
Gross profit 14,353 15,845 48,237 50,751
Selling, general, and
administrative expenses 9,284 9,948 30,636 31,131
Equity income from Lighting 6,351 6,908 16,988 15,230
-------- -------- -------- --------
Operating income 11,420 12,805 34,589 34,850
Interest expense 1,130 1,593 3,452 4,650
Interest income and other 558 78 1,602 336
-------- -------- -------- --------
Income before income taxes 10,848 11,290 32,739 30,536
Income taxes 4,100 4,240 12,836 11,361
-------- -------- -------- --------
Net income $ 6,748 $ 7,050 $ 19,903 $ 19,175
======== ======== ======== ========
Net income per share
Basic $ .43 $ .44 $ 1.26 $ 1.21
Diluted $ .42 $ .43 $ 1.23 $ 1.16
Dividends declared per share $ .075 $ .075 $ .225 $ .225
Weighted average number of
shares outstanding
Basic 15,812 15,881 15,787 15,873
Diluted 16,240 16,461 16,194 16,468
Effective August 30, 1998, Thomas Industries Inc. ("Thomas") and The Genlyte
Group ("Genlyte") formed Genlyte Thomas Group LLC ("GTG"), combining Thomas'
lighting business with 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' prior fiscal year, restating results for the quarters ended
March 31 and June 30, 1998. 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 its revenues,
costs, assets, and liabilities, and changed certain components of cash flow.
See notes to condensed consolidated financial statements.
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
September 30 December 31
1999 1998*
---- -----
ASSETS
Current assets
Cash and cash equivalents $ 14,268 $ 18,205
Accounts receivable, less allowance
(1999--$662; 1998--$656) 20,578 19,205
Inventories:
Finished products 5,534 5,352
Raw materials 8,808 9,196
Work in process 4,963 5,638
--------- ---------
19,305 20,186
Deferred income taxes 3,341 2,997
Other current assets 4,601 3,650
--------- ---------
Total current assets 62,093 64,243
Investment in GTG 157,219 147,386
Property, plant, and equipment 76,376 73,115
Less accumulated depreciation and amortization 43,292 39,114
--------- ---------
33,084 34,001
Note receivable from GTG 22,287 22,287
Intangible assets--less accumulated amortization 7,850 8,248
Other assets 4,875 6,194
--------- ---------
Total assets $ 287,408 $ 282,359
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 95 $ 235
Accounts payable 5,791 5,794
Other current liabilities 17,286 20,592
Current portion of long-term debt 7,782 7,782
--------- ---------
Total current liabilities 30,954 34,403
Deferred income taxes 5,789 5,863
Long-term debt (less current portion) 40,529 48,298
Other long-term liabilities 4,176 3,108
--------- ---------
Total liabilities 81,448 91,672
Shareholders' equity
Preferred Stock, $1 par value,
3,000,000 shares authorized--none issued -- --
Common Stock, $1 par value, shares authorized:
60,000,000; 1999--17,551,429
1998--17,485,909 17,551 17,486
Capital surplus 110,821 110,412
Retained earnings 104,629 88,277
Accumulated other comprehensive income (5,919) (4,351)
Less cost of treasury shares:
(1999--1,743,150; 1998--1,744,400) (21,122) (21,137)
--------- ---------
Total shareholders' equity 205,960 190,687
--------- ---------
Total liabilities and shareholders' equity $ 287,408 $ 282,359
========= =========
*Derived from the audited December 31, 1998, consolidated balance sheet. See
notes to condensed consolidated financial statements.
<PAGE>
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
Nine Months Ended
September 30
------------
1999 1998
Operating activities:
Net income $ 19,903 $ 19,175
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 5,711 5,642
Deferred income taxes (248) 658
Equity income from Lighting (16,988) (15,230)
Distributions from/cash used by Lighting 6,575 (18,128)
Other items 86 317
Changes in operating assets and liabilities:
Accounts receivable (1,871) (3,160)
Inventories 54 572
Accounts payable 134 (2,952)
Accrued expenses and other liabilities (1,818) (1,921)
Other 204 (4,142)
-------- --------
Net cash provided by (used in) operating activities 11,742 (19,169)
Investing activities:
Purchases of property, plant, and equipment (5,108) (4,648)
Sale of property, plant, and equipment 15 60
-------- --------
Net cash used in investing activities (5,093) (4,588)
Financing activities:
(Payments on) proceeds from notes payable
to banks, net (133) 22,265
Payments on long-term debt, net (7,769) (6,517)
Dividends paid (3,560) (3,571)
Other 1,069 179
-------- --------
Net cash provided by (used in) financing activities (10,393) 12,356
Effect of exchange rate change (193) 206
-------- --------
Net decrease in cash and cash equivalents (3,937) (11,195)
Cash and cash equivalents at beginning of period 18,205 17,352
-------- --------
Cash and cash equivalents at end of period $ 14,268 $ 6,157
======== ========
See notes to condensed consolidated financial statements.
<PAGE>
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, 1999,
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. 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, 1998.
Effective August 30, 1998, Thomas and Genlyte formed GTG, combining Thomas'
lighting business with 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' prior fiscal year, restating results for the quarters ended March 31
and June 30, 1998. 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 its revenues, costs,
assets, and liabilities, and changed certain components of cash flow.
(See Note D.)
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.
<PAGE>
Note C - Comprehensive Income
- -----------------------------
Reconciliation of net income to total comprehensive income for the periods
indicated follows.
For the three months ended September 30: 1999 1998
---- ----
Net income $6,748 $7,050
Minimum pension liability -- (287)
Foreign currency translation 852 1,294
----- -----
Comprehensive income $7,600 $8,057
===== =====
For the nine months ended September 30:
Net income $19,903 $19,175
Minimum pension liability 1 (287)
Foreign currency translation (1,569) 492
------ ------
Comprehensive income $18,335 $19,380
====== ======
Note D - Genlyte Thomas Group LLC
- ---------------------------------
The following table contains certain unaudited financial information for the
Joint Venture.
Genlyte Thomas Group LLC
Condensed Financial Information
(Dollars in Thousands)
Balance sheet as of September 30, 1999:
Current assets $329,712
Long-term assets 234,362
Current liabilities 163,837
Long-term liabilities 97,865
Three Months Nine Months
Ended Ended
Sept 30, 1999 Sept 30, 1999
------------- -------------
Income statement:
Net sales $257,811 $738,932
Gross profit 87,808 244,656
Earnings before interest and taxes 25,171 65,561
Net income* 21,503 58,049
*Amounts recorded by Thomas Industries Inc.:
Equity income from GTG $6,881 $18,576
Amortization of excess investment (530) (1,588)
----- ------
Equity income reported by Thomas $6,351 $16,988
===== ======
<PAGE>
Note E - Receivables from Affiliate
- -----------------------------------
Included in Other Long-Term Assets at September 30, 1999, and December 31, 1998,
is $22,287,000 which represents a debt equalization note payable to Thomas by
GTG related to the formation of the Joint Venture. 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.
Note F - Segment Disclosures
- ----------------------------
<TABLE>
Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total net sales including
intercompany sales
Compressors & Vacuum Pumps $ 43,940 $ 47,270 $ 145,241 $ 151,462
Intercompany sales
Compressors & Vacuum Pumps $ (4,084) $ (4,123) $ (11,617) $ (13,771)
--------- --------- --------- ---------
Net sales to unaffiliated customers
Compressors & Vacuum Pumps $ 39,856 $ 43,147 $ 133,624 $ 137,691
========= ========= ========= =========
Operating income
Compressors & Vacuum Pumps $ 6,451 $ 7,273 $ 22,579 $ 24,651
Lighting* 6,351 6,908 16,988 15,230
Corporate (1,382) (1,376) (4,978) (5,031)
--------- --------- --------- ---------
$ 11,420 $ 12,805 $ 34,589 $ 34,850
========= ========= ========= =========
*Represents 32% of GTG net income less amortization of excess investment.
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
- ---------------------
Net sales during the third quarter ended September 30, 1999, were $39.9 million
compared to $43.1 million for the third quarter 1998. Since the Company's
Lighting business was contributed to GTG effective August 30, 1998, the 1998 net
sales reflect the application of the equity method, retroactive to January 1,
1998, and therefore include only net sales for the Compressor & Vacuum Pump
operations. The North American operations and the European operations declined
from the third quarter 1998 sales levels. Several of our major OEM customers
cancelled or pushed out orders due to slack demand in their end markets, which
contributed to this decline. Net sales for the nine-month period ended September
30, 1999, were $133.6 million compared to $137.7 million for the prior year. For
the nine-month period, the North American operations showed a slight improvement
over the prior-year period, while the European operations declined compared to
the prior year.
Operating income for the third quarter ended September 30, 1999, was $11.4
million compared to $12.8 million for the third quarter 1998. For the quarter,
both the North American and European Compressor & Vacuum Pump operations showed
decreases compared to the 1998 third quarter. This resulted primarily from the
reduced sales levels. Our Lighting results reflect the application of the equity
method retroactive to January 1, 1998. Therefore, the prior-year results for
January through August included pretax operating income from the Thomas Lighting
operations. After the GTG joint venture was formed on August 30, 1998, all
subsequent Lighting results also include our 32 percent share of foreign taxes
and interest expense. This makes meaningful comparisons to the prior year's
quarter and year-to-date Lighting results very difficult. Our third quarter 1999
net equity earnings from GTG were $6.4 million, compared to $6.9 million for the
prior-year quarter. As mentioned above, Thomas' share of GTG's quarterly
earnings was lower than the prior year's Lighting results due to the manner in
which foreign taxes and interest expense are accounted for under the equity
method of accounting. After adjusting for these items, the earnings, which
included two months of Thomas' former operations and one month of GTG results,
would be up over prior years' levels. Operating income for the nine-month period
ended September 30, 1999, was $34.6 million compared to $34.9 for the nine-month
period in 1998. The North American operations reflected an improvement over the
prior-year period, while the European operations showed a decrease for the 1998
nine-month period. An increase in the GTG earnings for the nine-month period
helped to offset some of the reduction in the Compressor & Vacuum Pump results.
Net income for the 1999 third quarter of $6.7 million was 4.3% lower than the
$7.1 million for the comparable 1998 period. This reduction was primarily
related to the lower sales levels. Net income for the nine-month period ended
September 30, 1999, was $19.9 million compared to $19.2 million for the
nine-month period in 1998. The first nine months of 1999 were the highest for
any previous first nine-month period in the Company's history.
Interest expense for the 1999 third quarter was $1.1 million, or 29.1% lower
than the prior-year amount of $1.6 million. The decrease was attributed
<PAGE>
Item 2. Management's Discussion and Analysis --Continued
primarily to a significant reduction in short-term debt, which was higher in the
third quarter of 1998 due to the funding of working capital needs of the
Lighting business. Also, long-term debt of $7.7 million was paid down on January
31, 1999, which reduced interest expense over the prior-year amount. Interest
income was $.3 million higher in the 1999 third quarter versus the 1998 third
quarter. The nine-month period for 1999 reflected a $.9 million increase in
interest income over the prior year. These increases are the result of improved
cash flows and interest received from GTG on a $22,287,000 note payable to
Thomas.
Included in Other Long-Term Assets at September 30, 1999,is $22,287,000 which
represents the debt equalization note payable to Thomas by GTG related to the
formation of the Joint Venture. 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.
Working capital of $31.1 million at September 30, 1999, is $1.3 million higher
than the amount at December 31, 1998. Accounts receivable at September 30, 1999,
have increased by 7.1% since December 31, 1998, due to seasonality in our sales
volume. The number of days sales in receivables at September 30, 1999, compared
to December 31, 1998, has decreased to 48.3 days from 49.1. Inventory turnover
at September 30, 1999, of 5.1 times per year improved significantly from the
December 31, 1998, level of 4.5.
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 $64.1 million are not restricted at September 30, 1999.
As of September 30, 1999, the Company had available credit of $7.9 million with
banks under short-term borrowing arrangements which was unused. Due to improved
cash flows, the Company dissolved the $30 million revolving line of credit.
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 investment
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.
<PAGE>
Item 2. Management's Discussion and Analysis --Continued
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 were completed on most systems during 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, and we believe that they have all been remediated. We
believe that all critical software is now compliant.
The Company has performed an assessment of its material non-Information
Technology systems such as CAD systems, PBX systems, Environmental Control
systems, Elevator Control systems, and numeric control devices and, based upon
this assessment, believes that these systems are Year 2000 compliant.
The Company has communicated 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 is being established and will be implemented in an effort
to minimize any impact from Year 2000 related failures.
Through September 30, 1999, approximately $2.4 million in costs, 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 1996-1999 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 $25,000. 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 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.
<PAGE>
Item 2. Management's Discussion and Analysis --Continued
New European Currency
- ---------------------
Eleven European countries (The European Monetary Union) have implemented a
single currency zone as of 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 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 complete the necessary work on a timely basis could
result in material financial risk.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company's long-term debt bears interest at fixed rates; therefore, the
Company's results of operations would only be affected by interest rate changes
to the extent that variable rate, short-term notes payable are outstanding. At
September 30, 1999, short-term notes payable are not significant.
The Company has significant operations consisting of sales and manufacturing
activities in foreign countries. As a result, the Company's financial results
could be significantly affected by factors such as changes in foreign currency
exchange rates or weak economic conditions in the foreign markets in which the
Company manufactures or distributes its products. Currency exposures are
concentrated in Germany but exist to a lesser extent in other parts of Western
Europe and Asia.
PART II. OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10(h) (Corrected) 1995 Incentive Stock Plan as Amended
and Restated as of April 15, 1999.
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THOMAS INDUSTRIES INC.
----------------------
Registrant
/s/ Phillip J. Stuecker
---------------------------------------
Phillip J. Stuecker, Vice President of
Finance, Chief Financial Officer,
and Secretary
Date November 12, 1999
--------------------
THOMAS INDUSTRIES INC.
1995 INCENTIVE STOCK PLAN
(as amended and restated April 15, 1999)
1. Purpose. The Thomas Industries Inc. 1995 Incentive Stock Plan (the
"Plan") is intended to provide incentives which will attract and retain highly
competent persons as officers and key employees of Thomas Industries Inc. (the
"Company") and its subsidiaries, by providing them opportunities to acquire
shares of Common Stock of the Company ("Common Stock") or to receive monetary
payments based on the value of such shares pursuant to the Benefits described
herein.
2. Administration. The Plan will be administered by the Compensation
Committee of the Board of Directors of the Company or another committee (the
"Committee"), appointed by the Board from among its members consisting of two or
more non-employee Directors as set forth in Securities and Exchange Commission
Regulation ss. 240.16b-3 ("Rule 16b-3") or any successor regulation.
3. Participants. Participants will consist of such key employees
(including officers) of the Company or its subsidiaries as the Committee in its
sole discretion determines to be significantly responsible for the success and
future growth and profitability of the Company and whom the Committee may
designate from time to time to receive Benefits under the Plan. Designation of a
participant in any year shall not require the Committee to designate such person
to receive a Benefit in any other year or, once designated, to receive the same
type or amount of Benefit as granted to the participant in any year. The
Committee shall consider such factors as it deems pertinent in selecting
participants and in determining the type and amount of their respective
Benefits.
<PAGE>
4. Types of Benefits. Benefits under the Plan may be granted in any one
or a combination of (a) Incentive Stock Options; (b) Non-qualified Stock
Options; (c) Stock Appreciation Rights; (d) Stock Awards and Performance Share
Awards; and (e) Tax-Offset Bonus Rights; all as described below.
5. Shares Reserved under the Plan. There is hereby reserved for
issuance under the Plan an aggregate of 827,302 shares of Common Stock, which
may be authorized but unissued or treasury shares. In addition, any shares of
Common Stock remaining available for Benefits under the Company's 1987 Incentive
Stock Plan, as amended, (the "1987 Plan") on the date of the 1995 annual meeting
of shareholders of the Company and any shares of Common Stock subject to
Benefits under the Company's 1987 Plan on such date which thereafter lapse,
expire or are terminated shall thereafter be available for Benefits hereunder.
All of such shares may, but need not, be issued pursuant to the exercise of
Incentive Stock Options. The maximum
<PAGE>
number of option shares which may be awarded to any participant in any fiscal
year during the term of the Plan is 50,000 shares. No more than 100,000 shares
may be issued as Stock Awards not based on performance goals during the term of
the Plan. Any shares subject to stock options or Stock Appreciation Rights or
issued under such options or rights or as Stock Awards may thereafter be subject
to new options, rights or awards under this Plan if there is a lapse, expiration
or termination of any such options or rights prior to issuance of the shares or
if shares are issued under such options or rights or as such awards, and
thereafter are reacquired by the Company without consideration pursuant to
rights reserved by the Company upon issuance thereof.
6. Stock Options. Incentive Stock Options and Non-qualified Stock
Options will consist of stock options to purchase Common Stock at purchase
prices not less than 100% of the fair market value of the Common Stock on the
date the option is granted. Said purchase price may be paid by check or, in the
discretion of the Committee, by the delivery (or certification of ownership) of
shares of Common Stock of the Company owned by the participant for a period of
at least six months. In the discretion of the Committee, payment may also be
made by delivering a properly executed exercise notice to the Company, together
with a copy of the irrevocable instructions to a broker to deliver promptly to
the Company the amount of sale or loan proceeds to pay the exercise price.
Non-qualified Stock Options shall be exercisable not later than fifteen years
after the date they are granted and Incentive Stock Options shall be exercisable
<PAGE>
not later than ten years after the date they are granted. In the event of
termination of employment, all stock options shall terminate at such times and
upon such conditions or circumstances as the Committee shall in its discretion
set forth in such option at the date of grant. The aggregate fair market value
(determined as of the time the option is granted) of the Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by a
participant during any calendar year (under all option plans of the Company and
its subsidiary corporations) shall not exceed $100,000. The Committee may
provide, either at the time of grant or subsequently, that a stock option
include the right to acquire a replacement stock option upon exercise of the
original stock option (in whole or in part) prior to termination of employment
of the participant and through payment of the exercise price in shares of Common
Stock. The terms and conditions of a replacement option shall be determined by
the Committee in its sole discretion. In no event shall the Committee cancel any
outstanding Stock Option for the purpose of reissuing the option to the
participant at a lower exercise price or reduce the option price of an
outstanding option.
7. Stock Appreciation Rights. The Committee may, in its discretion,
grant Stock Appreciation Rights to the holders of any stock options granted
hereunder. In addition, Stock Appreciation Rights may be granted independently
of and without relation to options. Each Stock Appreciation Right shall be
subject to such terms and conditions consistent with the Plan as the Committee
shall impose from time to time, including the following:
<PAGE>
(a) A Stock Appreciation Right relating to an option may be
made part of such option at the time of its grant or at any time thereafter.
(b) Each Stock Appreciation Right will entitle the holder to
elect to receive the appreciation in the fair market value of the shares subject
thereto up to the date the right is exercised. In the case of a right issued in
relation to a stock option, such appreciation shall be measured from not less
than the option price and in the case of a right issued independently of any
stock option, such appreciation shall be measured from not less than the fair
market value of the Common Stock on the date the right is granted. Payment of
such appreciation shall be made in cash or in Common Stock, or a combination
thereof, as set forth in the award, but no Stock Appreciation Right shall
entitle the holder to receive, upon exercise thereof, more than the number of
shares of Common Stock (or cash of equal value) with respect to which the right
is granted.
(c) Each Stock Appreciation Right will be exercisable at the
times and to the extent set forth therein, but no Stock Appreciation Right may
be exercisable more than fifteen years after it was granted. Exercise of a Stock
Appreciation Right shall reduce the number of shares issuable under the Plan
(and the related option, if any) by the number of shares with respect to which
the right is exercised.
<PAGE>
8. Stock Awards and Performance Share Awards. Stock Awards will consist
of Common Stock transferred to participants without other payment therefor as
additional compensation for services to the Company and its subsidiaries. Stock
Awards shall be subject to such terms and conditions as the Committee determines
appropriate, including, without limitation, restrictions on the sale or other
disposition of such shares, rights of the Company to reacquire such shares upon
termination of the participant's employment within specified periods and
conditions requiring that the shares be earned in whole or in part upon the
achievement of performance goals established by the Committee over a designated
period of time.
The Committee may award performance shares (which may include
dividend equivalents) to participants subject to such terms and conditions as
the Committee determines appropriate. Performance shares may be earned in whole
or in part if certain goals established by the Committee are achieved over a
period of time designated by the Committee, which may include overlapping
performance periods. The goals established by the Committee may be based on
business criteria selected by the Committee including total shareholder return,
economic value added, net income, return on equity or assets, earnings per
share, cash flow and cost control. The maximum number of performance shares
payable for a performance period to any participant that is intended to satisfy
the requirements for "performance-based compensation" under Section 162(m) of
the Internal Revenue Code of 1954 shall not exceed 20,000.
<PAGE>
9. Tax-Offset Bonus Rights. The Committee, in its sole discretion, may
grant Tax-Offset Bonus Rights with respect to Non-qualified Stock Options. Such
Tax-Offset Bonus Rights may be granted to a participant at the time of the grant
of the related Non-qualified Stock Option or subsequent thereto, but only with
respect to the related Non-qualified Stock Option. A Tax-Offset Bonus Right
shall entitle the participant to receive from the Company or a subsidiary upon
exercise of the related Non-qualified Stock Option an amount in cash equal to
(1) the excess, if any, of the aggregate fair market value of shares acquired by
the exercise of a Non-qualified Stock Option on the date of exercise over the
aggregate purchase price of the shares acquired by such exercise, multiplied by
(2) a fraction, the numerator of which is not more than the maximum marginal
individual income tax rate, and the denominator of which is one minus such rate.
The Committee shall determine all of the terms and provisions of any Tax-Offset
Bonus Right including but not limited to the date of grant, the term, the effect
of employment termination and death. No Tax-Offset Bonus Right shall be
assignable or transferable except to the extent the Committee permits such
Tax-Offset Bonus Right to be assigned by will or through the laws of descent and
distribution.
<PAGE>
10. Adjustment Provisions.
(a) If the Company shall at any time change the number of
issued shares of Common Stock without new consideration to the Company (such as
by stock dividends or stock splits), the total number of shares reserved for
issuance under this Plan and the number of shares covered by each outstanding
Benefit shall be adjusted so that the aggregate consideration payable to the
Company and the value of each such Benefit shall not be changed. The Committee
may also provide for the continuation of Benefits or for other equitable
adjustments after changes in the Common Stock resulting from reorganization,
sale, merger, consolidation or similar occurrence.
(b) Notwithstanding any other provision of this Plan, and
without affecting the number of shares otherwise reserved or available
hereunder, the Committee may authorize the issuance or assumption of Benefits in
connection with any merger, consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem appropriate.
(c) In the case of any merger, consolidation or combination of
the Company with or into another corporation, other than a merger, consolidation
or combination in which the Company is the continuing corporation and which does
not result in the outstanding Common Stock being converted into or exchanged for
<PAGE>
different securities, cash or other property, or any combination thereof (an
"Acquisition"):
(i) any participant to whom a stock option has been
granted under the Plan shall have the right (subject to the provisions of the
Plan and any limitation applicable to such option) thereafter and during the
term of such option, to receive upon exercise thereof the Acquisition
Consideration (as defined below) receivable upon such Acquisition by a holder of
the number of shares of Common Stock which might have been obtained upon
exercise of such option or portion thereof, as the case may be, immediately
prior to such Acquisition;
(ii) any participant to whom a Stock Appreciation Right
has been granted under the Plan shall have the right (subject to the provisions
of the Plan and any limitation applicable to such right) thereafter and during
the term of such right to receive upon exercise thereof the difference between
the aggregate fair market value on the applicable date (as set forth in such
right) of the Acquisition Consideration receivable upon such Acquisition by a
holder of the number of shares of Common Stock which might have been obtained
upon exercise of the option related thereto or any portion thereof, as the case
may be, immediately prior to such Acquisition and the aggregate option price of
the related option, or the aggregate fair market value on the date of grant of
the right, whichever is applicable.
<PAGE>
The term "Acquisition Consideration" shall mean the kind and amount of
shares of the surviving or new corporation, cash, securities, evidence of
indebtedness, other property or any combination thereof receivable in respect of
one share of Common Stock of the Company upon consummation of an Acquisition.
11. Nontransferability. Each Benefit granted under the Plan to an
employee shall not be transferable by him otherwise than by will or the laws of
descent and distribution, and shall be exercisable, during his lifetime, only by
him. In the event of the death of a participant, each Benefit theretofore
granted to him shall be exercisable within the period after his death
established by the Committee at the time of grant (but not beyond the stated
duration of the Benefit) and then only:
(a) By the executor or administrator of the estate of the
deceased participant or the person or persons to whom the deceased participant's
rights under the Benefit shall pass by will or the laws of descent and
distribution; and
(b) To the extent that the deceased participant was entitled
to do so at the date of his death.
Notwithstanding the foregoing, at the discretion of the Committee, an award of a
Benefit may permit the transferability of the Benefit by the participant solely
to members of the participant's immediate family or trusts or family
<PAGE>
partnerships for the benefit of such persons subject to such terms and
conditions as may be established by the Committee.
12. Other Provisions. The award of any Benefit under the Plan may also
be subject to such other provisions (whether or not applicable to the Benefit
awarded to any other participant) as the Committee determines appropriate,
including without limitation, provisions for the installment purchase of Common
Stock under Stock Options, provisions for the installment exercise of Stock
Appreciation Rights, provisions to assist the participant in financing the
acquisition of Common Stock, restrictions on resale or other disposition,
provisions for the acceleration of exercisability of Benefits in the event of a
change of control of the Company, provisions for the payment of the value of the
Benefits to participants in the event of a change of control of the Company,
provisions to comply with Federal and state securities laws, or understandings
or conditions as to the participant's employment in addition to those
specifically provided for under the Plan.
13. Rules. The Committee may establish such rules and regulations as it
considers desirable for the administration of the Plan.
14. Manner of Action by Committee. A majority of the members of the
Committee qualified to act on a question may act by meeting or by writing signed
<PAGE>
without meeting and may execute, or delegate to one of its members authority to
execute any instrument or document required. The Committee may delegate the
performance of ministerial functions in connection with the Plan to such person
or persons as the Committee may select. The costs of administration of the Plan
will be paid by the Company.
15. Fair Market Value. For purposes hereof, fair market value of Common
Stock shall be the closing sale price for the Company's Common Stock as
reflected in the New York Stock Exchange Composite Transaction Quotations for
the date of calculation (or on the next preceding trading date if Common Stock
was not traded on the date of calculation).
16. Taxes. The Company shall be entitled if necessary or desirable to
pay or withhold the amount of any tax attributable to any amounts payable under
the Plan after giving the person entitled to receive such amount notice as far
in advance as practicable, and the Company may defer making payment as to any
Benefit if any such tax may be pending until indemnified to its satisfaction.
When a person is required to pay to the Company an amount required to be
withheld under applicable tax laws in connection with exercises of Non-qualified
Stock Options or other Benefits under the Plan, the Committee may, in its
discretion and subject to such rules as it may adopt, permit such person to
satisfy the obligation, in whole or in part, by electing to have the Company
withhold shares of Common Stock having a fair market value equal to the amount
required to be withheld.
<PAGE>
17. Tenure. A participant's right, if any, to continue to serve the
Company and its subsidiaries as an officer, employee, or otherwise, shall not be
enlarged or otherwise affected by his designation as a participant under the
Plan.
18. Amendment and Termination. The terms and conditions applicable to
any Benefit granted under the Plan may be amended or modified by mutual
agreement between the Company and the participant or such other persons as may
then have an interest therein. Also, by mutual agreement between the Company and
a participant hereunder, or under any other present or future plan of the
Company, stock options or other Benefits may be granted to such participant in
substitution and exchange for, and in cancellation of, any Benefits previously
granted such participant under this Plan, or any Benefit previously or hereafter
granted to him under any other present or future plan of the Company. The Board
of Directors may amend the Plan from time to time or terminate the Plan at any
time. However, no action authorized by this paragraph shall reduce the amount of
any existing Benefit or change the terms and conditions thereof without the
participant's consent. No amendment of the Plan shall, without approval of the
shareholders of the Company, (i) increase the total number of shares which may
be issued under the Plan or increase the amount or type of Benefits that may be
granted under the Plan; (ii) change the minimum purchase price, if any, of
Common Stock which may be made subject to the Benefits under the Plan; or (iii)
<PAGE>
modify the requirements as to eligibility for Benefits under the Plan. However,
the Board of Directors may amend the Plan in any respect without shareholder
approval if shareholder approval is not then required to comply with Rule 16b-3
or other similar requirements.
19. Shareholder Approval. The Plan was approved by the shareholders of
the Company on April 20, 1995 and amended and restated by the Board of Directors
on April 15, 1999. An amendment to Section 5 of this Plan was approved by the
shareholders on April 15, 1999. This Plan shall continue in effect until
terminated by the Board pursuant to Section 18; provided, however, that no
Incentive Stock Option shall be granted more than ten years after April 15,
1999.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 14,268
<SECURITIES> 0
<RECEIVABLES> 21,240
<ALLOWANCES> 662
<INVENTORY> 19,305
<CURRENT-ASSETS> 62,093
<PP&E> 76,376
<DEPRECIATION> 43,292
<TOTAL-ASSETS> 287,408
<CURRENT-LIABILITIES> 30,954
<BONDS> 40,529
0
0
<COMMON> 17,551
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<TOTAL-LIABILITY-AND-EQUITY> 205,960
<SALES> 133,624
<TOTAL-REVENUES> 133,624
<CGS> 85,387
<TOTAL-COSTS> 85,387
<OTHER-EXPENSES> 11,960
<LOSS-PROVISION> 86
<INTEREST-EXPENSE> 3,452
<INCOME-PRETAX> 32,739
<INCOME-TAX> 12,836
<INCOME-CONTINUING> 19,903
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<NET-INCOME> 19,903
<EPS-BASIC> 1.26
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</TABLE>
