SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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Commission File Number 1-5426.
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 (I.R.S. Employer
incorporation or organization) Identification No.)
4360 Brownsboro Road, Louisville, Kentucky 40207
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 502/893-4600
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Not Applicable
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(Former name, former address, and former fiscal year, if changed since last
report.)
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
April 29, 2000, was 15,504,612 shares.
Page 1 of 10
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in Thousands Except Amounts Per Share)
Three Months Ended
March 31
2000 1999
---- ----
Net sales $50,386 $46,301
Cost of products sold 32,587 29,493
------ ------
Gross profit 17,799 16,808
Selling, general, and
administrative expenses 11,159 11,252
Equity income from Lighting 5,411 4,985
------ ------
Operating income 12,051 10,541
Interest expense 987 1,185
Interest income and other 575 501
------ ------
Income before income taxes 11,639 9,857
Income taxes 4,481 3,983
------ ------
Net income $ 7,158 $ 5,874
====== ======
Net income per share
Basic $.46 $.37
Diluted $.45 $.36
Dividends declared per share $0.075 $0.075
Weighted average number of shares outstanding
Basic 15,582 15,758
Diluted 15,950 16,141
See notes to condensed consolidated financial statements.
2
<PAGE>
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
March 31 December 31
ASSETS 2000 1999*
---- ----
Current assets
Cash and cash equivalents $ 4,871 $ 16,487
Accounts receivable, less allowance
(2000--$770; 1999--$698) 25,105 20,869
Inventories:
Finished products 4,682 4,965
Raw materials 10,313 10,209
Work in process 4,721 4,577
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19,716 19,751
Deferred income taxes 2,865 2,634
Other current assets 3,020 3,370
------- -------
Total current assets 55,577 63,111
Investment in GTG 164,231 158,865
Property, plant and equipment 80,054 78,903
Less accumulated depreciation and amortization 44,238 42,751
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35,816 36,152
Note receivable from GTG 22,287 22,287
Intangible assets--less accumulated amortization 10,253 10,677
Other assets 2,984 2,884
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Total assets $291,148 $293,976
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 600 $ --
Accounts payable 8,790 7,794
Other current liabilities 19,112 15,289
Current portion of long-term debt 7,784 7,784
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Total current liabilities 36,286 30,867
Deferred income taxes 5,953 6,027
Long-term debt (less current portion) 32,770 40,513
Other long-term liabilities 6,945 7,087
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Total liabilities 81,954 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 -- 17,588,055;
1999 -- 17,567,104 17,588 17,567
Capital surplus 111,238 110,988
Retained earnings 115,679 109,689
Accumulated other comprehensive income (7,600) (6,385)
Less cost of treasury shares:
(2000--2,088,550; 1999--1,807,650) (27,711) (22,377)
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Total shareholders' equity 209,194 209,482
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Total liabilities and shareholders' equity $291,148 $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)
Three Months Ended
March 31
--------
2000 1999
---- ----
Operating activities:
Net income $ 7,158 $ 5,874
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,189 2,101
Deferred income taxes (280) 53
Equity income from Lighting (5,411) (4,985)
Distributions from Lighting -- 711
Other items 133 28
Changes in operating assets and liabilities:
Accounts receivable (4,640) (4,228)
Inventories (380) (120)
Accounts payable 1,083 1,444
Accrued expenses and other liabilities 3,864 3,082
Other 322 (680)
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Net cash provided by operating activities 4,038 3,280
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Investing activities:
Purchases of property, plant, and equipment (2,002) (2,140)
Sale of property, plant, and equipment 2 --
------ ------
Net cash used in investing activities ( 2,000) (2,140)
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Financing activities:
Proceeds from notes payable to banks, net 600 281
Payments on long-term debt, net (7,743) (7,743)
Treasury stock purchased (5,334) --
Dividends paid (1,187) (1,195)
Other 316 226
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Net cash used in financing activities (13,348) (8,431)
Effect of exchange rate change (306) (256)
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Net decrease in cash and cash equivalents (11,616) (7,547)
Cash and cash equivalents at beginning of period 16,487 18,205
------ ------
Cash and cash equivalents at end of period $ 4,871 $10,658
====== ======
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
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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 three-month period ended March 31, 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
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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
- -----------------------------
For the three months ended March 31, comprehensive income was:
2000 1999
---- ----
Net income $7,158 $5,874
Foreign currency translation (1,215) (1,722)
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Comprehensive income $5,943 $4,152
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5
<PAGE>
Note D - Net Income Per Share
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The computation of the numerator and denominator in computing basic and diluted
net income per share follows:
(In Thousands) 2000 1999
---- ----
Numerator:
Net income $ 7,158 $ 5,874
====== ======
Denominator:
Weighted average shares outstanding 15,582 15,758
Effect of dilutive securities:
Director and employee stock options 334 335
Employee performance shares 34 48
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Dilutive potential common shares 368 383
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Denominator for diluted earnings per share
adjusted weighted average shares and
assumed conversions 15,950 16,141
====== ======
Note E - Genlyte Thomas Group LLC
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The following table contains certain unaudited financial information for the
Joint Venture.
Genlyte Thomas Group LLC
Condensed Financial Information
(Dollars in Thousands)
(Unaudited)
March 31 December 31
2000 1999
---- ----
Balance sheet:
Current assets $328,569 $321,788
Long-term assets 229,564 231,643
Current liabilities 155,640 170,478
Long-term liabilities 74,901 73,785
Three Months Ended
March 31
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2000 1999
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Income statement:
Net sales $244,655 $237,476
Gross profit 81,346 77,378
Earnings before interest and taxes 20,196 19,153
Net income* 18,563 17,231
*Amounts recorded by Thomas Industries Inc.:
Equity income from GTG $ 5,940 $ 5,514
Amortization of excess investment (529) (529)
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Equity income reported by Thomas $ 5,411 $ 4,985
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6
<PAGE>
Note F - Receivables from Affiliate
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Included in Other Long-Term Assets at March 31, 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
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Three Months Ended
March 31
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2000 1999
---- ----
Revenues
Total net sales including intercompany sales
Compressors & Vacuum Pumps $55,148 $50,294
Intercompany sales
Compressors & Vacuum Pumps (4,762) (3,993)
----- -----
Net sales to unaffiliated customers
Compressors & Vacuum Pumps $50,386 $46,301
====== ======
Operating Income
Compressors & Vacuum Pumps $ 8,474 $ 7,765
Lighting* 5,411 4,985
Corporate (1,834) (2,209)
------ -----
$12,051 $10,541
====== ======
*Represents 32% of GTG net income less amortization of excess investment.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
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Net sales during the first quarter ended March 31, 2000, were $50.4 million
compared to $46.3 million for the first quarter of 1999. The 8.8% net sales
increase was generated by very strong results achieved in our North American and
Asia Pacific operations. The medical market was the largest contributor to the
sales increase. In U.S. dollars, our European operations posted a 1.9% decrease
in net sales, but this was primarily due to an unfavorable Euro exchange rate.
When measured at a constant exchange rate, our European operations posted an
8.3% increase in net sales.
7
<PAGE>
Item 2. Management's Discussion and Analysis - Continued
Operating income for the first quarter ended March 31, 2000, was $12.1 million,
or 14.3% higher than the prior-year amount of $10.5 million. Our Compressors &
Vacuum Pumps Segment posted a 9.1% increase in operating income over the 1999
first quarter. This was principally due to increased sales volume. Our Lighting
Segment results increased to $5.4 million in the first quarter of 2000, compared
to $5.0 million in the same period last year. We had lower corporate expenses in
the first quarter of 2000 compared to 1999, which also contributed to the
improvement in operating income.
Net income for the 2000 first quarter of $7.2 million was 21.9% higher than the
$5.9 million for the comparable 1999 period. It was a record for any first
quarter in the Company's history. The increase over 1999 was due primarily to
increased sales volume, the increase in GTG's earnings, lower corporate
expenses, and lower interest expense as noted below.
Interest expense for the 2000 first quarter was $1.0 million, or 16.7% lower
than the prior-year amount of $1.2 million. Long-term debt of $7.7 was paid down
on January 31, 2000, which reduced interest expense over the prior-year amount.
Included in Other Long-Term Assets at March 31, 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 $19.3 million at March 31, 2000, is $13.0 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 $5.3 million spent in
the first quarter of 2000 on the stock repurchase program. Since December 31,
1999, we have purchased an additional 280,900 shares for the stock repurchase
program that was announced in December 1999. To date, we have purchased, on a
cumulative basis, 345,400 shares at a cost of $6,667,447. Accounts receivable at
March 31, 2000, have increased by 20.3% since December 31, 1999, due to higher
sales volume. The number of days sales in receivables at March 31, 2000,
compared to December 31, 1999, has decreased to 43.9 days from 48.0. Annualized
inventory turnover at March 31, 2000, of 5.5 improved significantly 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 $65.1 million are not restricted at March 31, 2000.
8
<PAGE>
Item 2. Management's Discussion and Analysis - Continued
As of March 31, 2000, the Company had available credit of $5.7 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.
Year 2000 Issue
- ---------------
During 1999, the Company completed the process of preparing for the Year 2000
date change. To date, the Company has had no material Year 2000 issues.
Although considered unlikely, unanticipated problems could still occur. The
Company will continue to monitor all business processes, including third
parties, throughout 2000 to address any issues and to ensure that all processes
continue to function properly.
The cost for the Year 2000 project was approximately $2.4 million, which was
incurred over the 1996-1999 time frame. We anticipate no material costs to be
incurred in 2000 and beyond that are related to the Year 2000 project.
The Company has a minority interest in GTG, which has advised the Company that
it had no material Year 2000 issues. Although we believe it is unlikely, if GTG
has future problems related to the Year 2000 project, this could have an impact
on the Company's financial results and condition.
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.
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 March 31, 2000, there was $.6 million in short-term notes
payable outstanding.
9
<PAGE>
Item 2. Management's Discussion and Analysis - Continued
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.
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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 May 12, 2000
------------------------
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