SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [ X ]
For the quarterly period ended: June 30, 2000
---------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [ ]
For the transition period from________________________to________________________
Commission File Number 1-5426.
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THOMAS INDUSTRIES INC.
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(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
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 502/893-4600
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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
July 29, 2000, was 15,439,600 shares.
Page 1 of 11
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In Thousands Except Amounts Per Share)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
2000 1999 2000 1999
---- ---- ---- ----
Net sales $47,968 $47,467 $98,354 $93,768
Cost of products sold 30,139 30,391 62,726 59,884
------- ------- ------- -------
Gross profit 17,829 17,076 35,628 33,884
Selling, general, and
administrative expenses 10,852 10,100 22,011 21,352
Equity income from Lighting 5,895 5,652 11,306 10,637
------- ------- ------- -------
Operating income 12,872 12,628 24,923 23,169
Interest expense 984 1,137 1,971 2,322
Interest income and other 1,297 543 1,872 1,044
------- ------- ------- -------
Income before income taxes 13,185 12,034 24,824 21,891
Income taxes 4,773 4,753 9,254 8,736
------- ------- ------- -------
Net income $ 8,412 $ 7,281 $15,570 $13,155
======= ======= ======= =======
Net income per share
Basic $ .54 $ .46 $ 1.00 $ .83
Diluted $ .53 $ .45 $ .98 $ .81
Dividends declared per share $ .075 $ .075 $ .15 $ .15
Weighted average number of
shares outstanding
Basic 15,515 15,791 15,549 15,775
Diluted 15,859 16,254 15,887 16,188
See notes to condensed consolidated financial statements.
2
<PAGE>
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
June 30 December 31
2000 1999*
---- ----
ASSETS
Current assets
Cash and cash equivalents $ 5,742 $ 16,487
Accounts receivable, less allowance
(2000--$797; 1999--$698) 25,663 20,869
Inventories:
Finished products 4,715 4,965
Raw materials 10,662 10,209
Work in process 4,697 4,577
------- -------
20,074 19,751
Deferred income taxes 2,799 2,634
Other current assets 3,384 3,370
------- -------
Total current assets 57,662 63,111
Investment in GTG 164,870 158,865
Property, plant, and equipment 83,351 78,903
Less accumulated depreciation and amortization 47,111 42,751
------- -------
36,240 36,152
Note receivable from GTG 22,287 22,287
Intangible assets--less accumulated amortization 10,155 10,677
Other assets 2,907 2,884
------- -------
Total assets $294,121 $293,976
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 650 $ -0-
Accounts payable 6,967 7,794
Other current liabilities 18,426 15,289
Current portion of long-term debt 7,784 7,784
------- -------
Total current liabilities 33,827 30,867
Deferred income taxes 5,928 6,027
Long-term debt (less current portion) 32,770 40,513
Other long-term liabilities 6,865 7,087
------- -------
Total liabilities 79,390 84,494
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: 2000--17,622,396
1999--17,567,104 17,622 17,567
Capital surplus 111,681 110,988
Retained earnings 122,926 109,689
Accumulated other comprehensive income (loss) (8,511) (6,385)
Less cost of treasury shares:
(2000--2,154,150; 1999--1,807,650) (28,987) (22,377)
------- -------
Total shareholders' equity 214,731 209,482
------- -------
Total liabilities and shareholders' equity $294,121 $293,976
======= =======
*Derived from the audited December 31, 1999, consolidated balance sheet. See
notes to condensed consolidated financial statements.
3
<PAGE>
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
Six Months Ended
June 30
2000 1999
---- ----
Operating activities:
Net income $ 15,570 $ 13,155
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,350 4,183
Deferred income taxes (246) 200
Equity income from Lighting (11,306) (10,637)
Distributions from Lighting 4,891 5,390
Other items 168 56
Changes in operating assets and liabilities:
Accounts receivable (5,430) (4,619)
Inventories (918) 847
Accounts payable (714) 1,177
Accrued expenses and other liabilities 3,171 892
Other (427) (80)
-------- --------
Net cash provided by operating activities 9,109 10,564
Investing activities:
Purchases of property, plant, and equipment (4,152) (3,557)
Sale of property, plant, and equipment 2 12
-------- --------
Net cash used in investing activities (4,150) (3,545)
Financing activities:
Proceeds from (payments on) notes payable
to banks, net 650 (218)
Payments on long-term debt, net (7,743) (7,743)
Treasury stock purchased (6,610) --
Dividends paid (2,355) (2,377)
Other 748 309
-------- --------
Net cash used in financing activities (15,310) (10,029)
Effect of exchange rate change (394) (333)
-------- --------
Net decrease in cash and cash equivalents (10,745) (3,343)
Cash and cash equivalents at beginning of period 16,487 18,205
-------- --------
Cash and cash equivalents at end of period $ 5,742 $ 14,862
======== ========
See notes to condensed consolidated financial statements.
4
<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 six-month period ended June 30, 2000, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. 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, 1999.
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
-----------------------------
Reconciliation of net income to total comprehensive income for the periods
indicated follows.
(In Thousands)
For the three months ended June 30: 2000 1999
---- ----
Net income $8,412 $7,281
Minimum pension liability -- 1
Foreign currency translation (911) (699)
----- -----
Comprehensive income $7,501 $6,583
===== =====
For the six months ended June 30:
Net income $15,570 $13,155
Minimum pension liability -- 1
Foreign currency translation (2,126) (2,421)
------ ------
Comprehensive income $13,444 $10,735
====== ======
5
<PAGE>
Note D - Net Income Per Share
-----------------------------
The computation of the numerator and denominator in computing basic and diluted
net income per share follows:
<TABLE>
<CAPTION>
(In Thousands) Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator:
Net income $ 8,412 $ 7,281 $15,570 $13,155
======= ======= ======= =======
Denominator:
Weighted average shares outstanding 15,515 15,791 15,549 15,775
Effect of dilutive securities:
Director and employee stock options 342 418 332 369
Employee performance shares 2 45 6 44
------- ------- ------- -------
Dilutive potential common shares 344 463 338 413
------- ------- ------- -------
Denominator for diluted earnings per
share--adjusted weighted average
shares and assumed conversions 15,859 16,254 15,887 16,188
======= ======= ======= =======
</TABLE>
Note E - 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)
(Unaudited)
June 30 December 31
2000 1999
---- ----
Balance sheet:
Current assets $341,957 $321,788
Long-term assets 229,694 231,643
Current liabilities 159,340 170,478
Long-term liabilities 81,071 73,785
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
----------------- ------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income statement:
Net sales $ 251,336 $ 243,645 $ 495,991 $ 481,121
Gross profit 84,143 79,470 165,489 156,848
Earnings before interest and taxes 22,210 21,237 42,406 40,390
Net income* 20,075 19,315 38,638 36,546
*Amounts recorded by Thomas Industries Inc.:
Equity income from GTG $ 6,424 $ 6,181 $ 12,364 $ 11,695
Amortization of excess investment (529) (529) (1,058) (1,058)
--------- --------- --------- ---------
Equity income reported by Thomas $ 5,895 $ 5,652 $ 11,306 $ 10,637
========= ========= ========= =========
</TABLE>
6
<PAGE>
Note F - Receivables from Affiliate
-----------------------------------
Included in Other Long-Term Assets at June 30, 2000, and December 31, 1999, 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 G - Segment Disclosures
----------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
---------------- ----------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total net sales including
intercompany sales
Compressors & Vacuum Pumps $ 54,092 $ 51,007 $ 109,240 $ 101,301
Intercompany sales
Compressors & Vacuum Pumps $ (6,124) $ (3,540) $ (10,886) $ (7,533)
--------- --------- --------- ---------
Net sales to unaffiliated customers
Compressors & Vacuum Pumps $ 47,968 $ 47,467 $ 98,354 $ 93,768
========= ========= ========= =========
Operating income
Compressors & Vacuum Pumps $ 8,694 $ 8,363 $ 17,168 $ 16,128
Lighting* 5,895 5,652 11,306 10,637
Corporate (1,717) (1,387) (3,551) (3,596)
--------- --------- --------- ---------
$ 12,872 $ 12,628 $ 24,923 $ 23,169
========= ========= ========= =========
*Represents 32% of GTG net income less amortization of excess investment.
</TABLE>
Note H - Accounting Pronouncement
---------------------------------
In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin No. 101, "Revenue Recognition" ("SAB 101"). SAB 101 provides
interpretive guidance on the recognition, presentation, and disclosure of
revenue in financial statements. The accounting impact of SAB 101 is required to
be determined no later than the Company's fourth quarter of 2000. If the Company
determines that its revenue recognition policies must change to be in compliance
with SAB 101, the implementation of SAB 101 will require the Company to report
the impact of this change as a cumulative effect of a change in accounting
principle as if SAB 101 had been implemented on January 1, 2000. The Company is
currently evaluating the impact of SAB 101 to determine what effect, if any, it
may have on the Company's consolidated financial position and results of
operation.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
---------------------
Net sales of $48.0 million during the second quarter ended June 30, 2000, were a
record for any second quarter for the Compressor & Vacuum Pump business. This
represented a 1.1 percent increase over the $47.5 million for the second quarter
of 1999. This increase was less than anticipated since it followed an 8.8
percent sales increase when comparing our first quarter of 2000 with 1999.
During the second quarter of this year, our North American operations had
several large medical market accounts push out orders. Also, our European
operations' sales were negatively affected by an unfavorable Euro exchange rate.
When measured at a constant Euro exchange rate, our Compressor & Vacuum Pump net
sales would have increased an additional 2.8 percent. Net sales for the
six-month period ended June 30, 2000, were $98.4 million compared to $93.8
million for the prior year. The increase was attributable to strong results
achieved in our North American and Asia Pacific operations during the first
quarter of this year. When measuring our six-month period results at a constant
Euro exchange rate, our Compressor & Vacuum Pump net sales would have increased
an additional 2.9 percent.
Operating income for the second quarter ended June 30, 2000, was $12.9 million
compared to $12.6 million for the second quarter 1999. Our Compressor & Vacuum
Pump Segment posted a 4.0 percent increase in operating income over the 1999
second quarter. This was principally due to increased sales volume and mix. Our
Lighting Segment results increased to $5.9 million in the second quarter of 2000
compared to $5.7 million in the same period last year. Operating income for the
six-month period ended June 30, 2000, was $24.9 million compared to $23.2
million in 1999. This increase was attributable to Compressor & Vacuum Pump
sales volume increases and improved margins due to sales mix and cost reduction
programs, as well as the strength of the Lighting Segment's earnings.
Net income for the 2000 second quarter of $8.4 million was 15.5 percent higher
than the $7.3 million for the comparable 1999 period. Excluding a one-time gain
of $.8 million recorded in the second quarter of 2000, related to the proceeds
of a life insurance policy, net income would have been $7.6 million. This would
still represent a record net income for any quarter. Net income for the
six-month period ended June 30, 2000, was $15.6 million compared to $13.2
million for the six-month period in 1999. The quarter and six-month increases
over 1999 were due primarily to the increases in our Compressor & Vacuum Pump
Segment's and Lighting Segment's earnings, the one-time gain from a life
insurance policy, and lower interest expense as noted below.
Interest expense for the 2000 second quarter was $1.0 million or 13.5 percent
lower than the prior-year amount of $1.1 million. This reduction in interest
expense was primarily related to the $7.7 million debt payment on January 31,
2000. This has been partially offset by interest on short-term borrowings, which
are higher due to the funding of our stock repurchase program noted below.
Interest expense for the six-month period ended June 30, 2000, was $2.0 million
compared to $2.3 million in 1999.
8
<PAGE>
Item 2. Management's Discussion and Analysis --Continued
Included in Other Long-Term Assets at June 30, 2000,and December 31, 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 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 $23.8 million at June 30, 2000, is $8.4 million lower than
the amount at December 31, 1999, primarily resulting from the $7.7 million
long-term debt payment on January 31, 2000, and from the $6.6 million spent in
the first half of 2000 on the stock repurchase program. Since December 31, 1999,
the Company has purchased an additional 346,500 shares for the stock repurchase
program that was announced in December 1999. To date, the Company has purchased,
on a cumulative basis, 442,000 shares at a cost of $8,424,508. Accounts
receivable at June 30, 2000, have increased by 23.0% since December 31, 1999,
due to higher sales volume and a larger concentration of accounts receivable
with international customers, which typically have longer terms. The number of
days sales in receivables at June 30, 2000, compared to December 31, 1999, has
increased to 50.6 days from 48.0. Annualized inventory turnover at June 30,
2000, of 5.4 improved from the December 31, 1999, level of 5.0.
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 $69.1 million are not restricted at June 30, 2000.
As of June 30, 2000, the Company had available credit of $5.6 million with banks
under short-term borrowing arrangements, 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 investment grade,
short-term securities.
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 two-year period. The software used by our European operations has been
modified to accommodate the dual currencies during the transition period. A team
is in place to monitor any changing EMU requirements and to establish the final
conversion timetable for the single EMU currency.
While management currently believes the Company has accommodated any required
changes in its operations, there can be no assurance that its customers,
suppliers, 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.
9
<PAGE>
Item 2. Management's Discussion and Analysis --Continued
Staff Accounting Bulletin No. 101
---------------------------------
In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin No. 101, "Revenue Recognition" ("SAB 101"). SAB 101 provides
interpretive guidance on the recognition, presentation, and disclosure of
revenue in financial statements. The accounting impact of SAB 101 is required to
be determined no later than the Company's fourth quarter of 2000. If the Company
determines that its revenue recognition policies must change to be in compliance
with SAB 101, the implementation of SAB 101 will require the Company to report
the impact of this change as a cumulative effect of a change in accounting
principle as if SAB 101 had been implemented on January 1, 2000. The Company is
currently evaluating the impact of SAB 101 to determine what effect, if any, it
may have on the Company's consolidated financial position and results of
operation.
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 and cash flows would only be affected by
interest rate changes to the extent that variable rate, short-term notes payable
are outstanding. At June 30, 2000, there was $.7 million in short-term notes
payable outstanding.
The fair value of the Company's long-term debt is estimated based on current
interest rates offered to the Company for similar instruments. The Company
believes that the effect, if any, of reasonably possible near-term changes in
interest rates on the Company's consolidated financial position would not be
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 Europe
and Asia.
10
<PAGE>
PART II. OTHER INFORMATION
------- -----------------
Item 4. Submission of Matters to a Vote of Security Holders
(a) A regular Annual Meeting of Shareholders was held on
April 20, 2000.
(b) Class II Directors elected at the Annual Meeting of
Shareholders were Timothy C. Brown, Wallace H. Dunbar,
and Franklin J. Lunding, Jr. Directors whose term of
office as a director continued after the meeting were
H. Joseph Ferguson, Gene P. Gardner, Lawrence E.
Gloyd, William M. Jordan, and Anthony A. Massaro.
(c) The voting at the Annual Meeting of Shareholders was
as follows:
Proposal No. 1 - Election of Directors
For Withheld
--- --------
Timothy C. Brown 13,151,962 798,395
Wallace H. Dunbar 13,862,914 87,443
Franklin J. Lunding, Jr. 13,868,602 81,755
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(4b) Amended and Restated Rights Agreement
(27) Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THOMAS INDUSTRIES INC.
---------------------------------------
Registrant
/s/ Phillip J. Stuecker
---------------------------------------
Phillip J. Stuecker, Vice President and
Chief Financial Officer
Date August 14, 2000
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11
