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, 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.
-----------------------------
THOMAS INDUSTRIES INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 61-0505332
------------------------------------------ ----------------------------
(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
November 10, 2000, was 15,078,413 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 Nine Months Ended
September 30 September 30
------------------- -----------------
2000 1999 2000 1999
---- ---- ---- ----
Net sales $ 44,664 $ 39,856 $143,018 $133,624
Cost of products sold 28,119 25,503 90,845 85,387
-------- -------- -------- --------
Gross profit 16,545 14,353 52,173 48,237
Selling, general, and
administrative expenses 10,364 9,284 32,375 30,636
Equity income from Lighting 6,556 6,351 17,862 16,988
-------- -------- -------- --------
Operating income 12,737 11,420 37,660 34,589
Interest expense 968 1,130 2,939 3,452
Interest income and other 538 558 2,410 1,602
-------- -------- -------- --------
Income before income taxes 12,307 10,848 37,131 32,739
Income taxes 4,736 4,100 13,990 12,836
-------- -------- -------- --------
Net income $ 7,571 $ 6,748 $ 23,141 $ 19,903
======== ======== ======== ========
Net income per share
Basic $ .49 $ .43 $ 1.49 $ 1.26
Diluted $ .48 $ .42 $ 1.46 $ 1.23
Dividends declared per share $ .075 $ .075 $ .225 $ .225
Weighted average number of
shares outstanding
Basic 15,399 15,812 15,499 15,787
Diluted 15,750 16,240 15,833 16,194
See notes to condensed consolidated financial statements
2
<PAGE>
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
September 30 December 31
2000 1999*
---- ----
ASSETS
Current assets
Cash and cash equivalents $ 10,493 $ 16,487
Accounts receivable, less allowance
(2000--$821; 1999--$698) 23,680 20,869
Inventories:
Finished products 6,137 4,965
Raw materials 10,149 10,209
Work in process 4,174 4,577
------- -------
20,460 19,751
Deferred income taxes 3,217 2,634
Other current assets 2.219 3,370
------- -------
Total current assets 60,069 63,111
Investment in GTG 168,488 158,865
Property, plant, and equipment 85,517 78,903
Less accumulated depreciation and amortization 47,918 42,751
------- -------
37,599 36,152
Note receivable from GTG 22,287 22,287
Intangible assets--less accumulated amortization 9,603 10,677
Other assets 3,208 2,884
------- -------
Total assets $301,254 $293,976
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 7,401 $ 7,794
Other current liabilities 18,502 15,289
Current portion of long-term debt 7,784 7,784
------- -------
Total current liabilities 33,687 30,867
Deferred income taxes 5,853 6,027
Long-term debt (less current portion) 40,743 40,513
Other long-term liabilities 6,751 7,087
------- -------
Total liabilities 87,034 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--17,660,887
1999--17,567,104 17,661 17,567
Capital surplus 111,912 110,988
Retained earnings 129,339 109,689
Accumulated other comprehensive income (loss) (10,592) (6,385)
Less cost of treasury shares:
(2000--2,409,850; 1999--1,807,650) (34,100) (22,377)
------- -------
Total shareholders' equity 214,220 209,482
------- -------
Total liabilities and shareholders' equity $301,254 $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)
Nine Months Ended
September 30
------------------------
2000 1999
---- ----
Operating activities:
Net income $23,141 $19,903
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,372 6,087
Deferred income taxes (734) (248)
Equity income from Lighting (17,862) (16,988)
Distributions from Lighting 7,597 6,575
Other items 202 86
Changes in operating assets and liabilities:
Accounts receivable (3,837) (1,871)
Inventories (2,048) 54
Accounts payable (159) 134
Accrued expenses and other liabilities 3,185 (1,818)
Other 899 179
------ ------
Net cash provided by operating activities 16,756 12,093
Investing activities:
Purchases of property, plant, and equipment (7,821) (5,459)
Sale of property, plant, and equipment 12 15
------ ------
Net cash used in investing activities (7,809) (5,444)
Financing activities:
Payments on notes payable to banks, net -0- (133)
Payments on long-term debt (7,770) (7,769)
Proceeds from long-term debt 8,000 --
Treasury stock purchased (11,723) --
Dividends paid (3,519) (3,560)
Other 1,018 1,069
------- ------
Net cash used in financing activities (13,994) (10,393)
Effect of exchange rate change (947) (193)
------- -------
Net decrease in cash and cash equivalents (5,994) (3,937)
Cash and cash equivalents at beginning of period 16,487 18,205
------ ------
Cash and cash equivalents at end of period $10,493 $14,268
====== ======
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 nine-month period ended September 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 September 30: 2000 1999
---- ----
Net income $7,571 $6,748
Foreign currency translation (2,081) 852
----- -----
Comprehensive income $5,490 $7,600
===== =====
For the nine months ended September 30:
Net income $23,141 $19,903
Minimum pension liability -- 1
Foreign currency translation (4,207) (1,569)
------ -------
Comprehensive income $18,934 $18,335
====== ======
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:
(In Thousands) Three Months Nine Months
Ended Sept. 30 Ended Sept. 30
-------------- ---------------
2000 1999 2000 1999
---- ---- ---- ----
Numerator:
Net income $ 7,571 $ 6,748 $23,141 $19,903
====== ====== ====== ======
Denominator:
Weighted average shares outstanding 15,399 15,812 15,499 15,787
Effect of dilutive securities:
Director and employee stock options 339 387 318 364
Employee performance shares 12 41 16 43
------ ------ ------ ------
Dilutive potential common shares 351 428 334 407
------ ------ ------ ------
Denominator for diluted earnings per
share--adjusted weighted average
shares and assumed conversions 15,750 16,240 15,833 16,194
====== ====== ====== ======
Note E - Genlyte Thomas Group LLC
---------------------------------
The following table contains certain unaudited financial information for the
Joint Venture.
<TABLE>
Genlyte Thomas Group LLC
Condensed Financial Information
(Dollars in Thousands)
<CAPTION>
(Unaudited)
September 30 December 31
2000 1999
---- ----
<S> <C> <C>
Balance sheet:
Current assets $360,374 $321,788
Long-term assets 233,503 231,643
Current liabilities 164,977 170,478
Long-term liabilities 84,701 73,785
Three Months Nine Months
Ended Sept. 30 Ended Sept. 30
----------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income statement:
Net sales $257,308 $257,811 $753,299 $738,932
Gross profit 87,166 87,808 252,655 244,656
Earnings before interest and taxes 24,611 25,171 67,017 65,561
Net income* 22,214 21,503 60,852 58,049
*Amounts recorded by Thomas Industries Inc.:
Equity income from GTG $ 7,109 $ 6,880 $ 19,473 $ 18,575
Stock option expense (24) -- (24) --
Amortization of excess investment (529) (529) (1,587) (1,587)
------- ------- ------- -------
Equity income reported by Thomas $ 6,556 $ 6,351 $ 17,862 $ 16,988
======== ======= ======== ========
</TABLE>
6
<PAGE>
Note F - Receivables from Affiliate
-----------------------------------
Our note receivable from GTG at September 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>
Three Months Ended Nine Months Ended
September 30 September 30
------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total net sales including
intercompany sales
Pump & Compressor $51,385 $43,940 $160,625 $145,241
Intercompany sales
Pump & Compressor (6,721) (4,084) (17,607) (11,617)
------ ------- -------- --------
Net sales to unaffiliated customers
Pump & Compressor $44,664 $39,856 $143,018 $133,624
====== ====== ======= =======
Operating income
Pump & Compressor $ 7,659 $ 6,451 $ 24,827 $ 22,579
Lighting* 6,556 6,351 17,862 16,988
Corporate (1,478) (1,382) (5,029) (4,978)
------ ------ ------- -------
$12,737 $11,420 $ 37,660 $ 34,589
====== ====== ======= =======
*Represents 32% of GTG net income less amortization of excess investment and
stock option expense.
</TABLE>
Note H - Accounting Pronouncement
---------------------------------
In December 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 clarifies existing accounting principles related to revenue
recognition in financial statements. The Company is required to comply with the
provisions of SAB 101 by the fourth quarter of 2000. Management does not believe
that the implementation of SAB 101 will have a material impact on the Company's
results of operations.
7
<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, 2000, were $44.7 million
compared to $39.9 million for the third quarter of 1999. This represents a 12.1
percent increase, and the $44.7 million is a record for any third quarter for
our Pump & Compressor business. Our North American and Asia Pacific operations
had very strong results, especially in the medical market where orders
previously had been pushed out during the second quarter. The 2.8 percent sales
growth in our European operations was negatively affected by an unfavorable Euro
exchange rate. When measured at a constant Euro exchange rate, our Pump &
Compressor net sales would have increased an additional 3.7 percent. Net sales
for the nine-month period ended September 30, 2000, were $143.0 million compared
to $133.6 million for the prior year. This 7 percent increase is due primarily
to the growth in our Asia Pacific operation and to the October 1999 acquisition
of Oberdorfer Pumps. When measuring our nine-month period results at a constant
Euro exchange rate, the Pump & Compressor net sales would have increased an
additional 3.1 percent.
Operating income for the third quarter ended September 30, 2000, was $12.7
million, or 11.5 percent higher than the 1999 third quarter amount of $11.4
million. Our Pump & Compressor segment posted an 18.7 percent increase in
operating income over the 1999 third quarter. This was due principally to
increased sales volume, sales mix, and cost reduction programs. Our Lighting
segment results increased 3.2 percent to $6.6 million in the third quarter of
2000, compared to $6.4 million in the same period last year. We had slightly
higher corporate expenses in the third quarter of 2000 compared to 1999 due
primarily to employee wage and benefit accruals. Operating income for the
nine-month period ended September 30, 2000, was $37.7 million compared to $34.6
million in 1999. This increase was attributable to Pump & Compressor sales
volume increases, favorable sales mix, and cost reduction programs, as well as
the strength of the Lighting segment's earnings that grew at 5.1 percent.
Net income for the 2000 third quarter of $7.6 million was 12.2 percent higher
than the $6.7 million for the comparable 1999 period and was a record for any
third quarter period. This increase was due primarily to the increase in
operating income and lower interest expense. Net income for the nine-month
period ended September 30, 2000, was $23.1 million compared to $19.9 million for
the nine-month period in 1999. 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 $22.3 million for the nine-month period ended
September 30, 2000. This is a record for any nine-month period in the Company's
history. The nine-month period increase over 1999 was due primarily to an
increase in our operating income, the one-time gain from a life insurance
policy, and lower interest expense.
Interest expense for the 2000 third quarter was $1.0 million, or 14.3 percent
lower than the prior-year amount of $1.1 million. The 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 nine-month period ended September 30, 2000,
8
<PAGE>
Item 2. Management's Discussion and Analysis --Continued
was $2.9 million compared to $3.5 million in 1999. As a result of our stock
repurchase program, on September 29, 2000, we borrowed $8.0 million for an
eighteen-month period at a variable interest rate based on LIBOR. This
additional long-term borrowing had no material impact on interest expense for
the third quarter or nine-month period in 2000.
Our note receivable from GTG at September 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 $26.4 million at September 30, 2000, is $5.9 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 the $11.7 million spent in the
first nine months of 2000 on the stock repurchase program, and offset by the
$8.0 of proceeds from the September 29, 2000, additional borrowing. For the
period December 31, 1999, through September 30, 2000, the Company purchased an
additional 602,200 shares for the stock repurchase program that was announced in
December 1999. Since September 30, 2000, the Company has purchased another 9,000
shares in the open market and 159,389 shares in private transactions. Through
November 10, 2000, the Company has purchased, on a cumulative basis, 843,189
shares at a cost of $16.6 million. Accounts receivable at September 30, 2000,
have increased by 13.5 percent 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 September 30, 2000, compared to December 31, 1999, has increased
to 49.7 days from 48.0. Annualized inventory turnover at September 30, 2000, of
5.2 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 $68.5 million are not restricted at September 30, 2000.
As of September 30, 2000, the Company had available credit of $15.2 million with
banks under borrowing arrangements, of which $7.2 million 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
9
<PAGE>
Item 2. Management's Discussion and Analysis --Continued
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.
Staff Accounting Bulletin No. 101
---------------------------------
In December 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 clarifies existing accounting principles related to revenue
recognition in financial statements. The Company is required to comply with the
provisions of SAB 101 by the fourth quarter of 2000. Management does not believe
that the implementation of SAB 101 will have a material impact on the Company's
results of operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company's long-term debt bears interest at fixed rates, with the exception
of the $8 million eighteen-month note that accrues interest at a variable rate
and is paid on a monthly basis. Any short-term borrowings would typically be
priced at variable interest rates. The Company's results of operations and cash
flows, therefore, would only be affected by interest rate changes to the extent
of variable rate debt. At September 30, 2000, there were no short-term notes
payable outstanding; but the $8 million long-term note was outstanding.
Therefore, a 100 basis point movement in the interest rate on the $8 million
note would result in an approximate $80,000 annualized increase or decrease in
interest expense and cash flows.
The Company also has a long-term note receivable from GTG of $22,287,000 that
bears interest at a variable rate. Therefore, a 100 basis point movement in the
interest rate on the $22,287,000 note would result in an approximate $222,870
annualized increase or decrease in interest income and cash flows.
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 for our
Pumps & Compressors segment are concentrated in Germany but exist to a lesser
extent in other parts of Europe and Asia. Our Lighting segment currency exposure
is primarily in Canada.
10
<PAGE>
PART II. OTHER INFORMATION
------- -----------------
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 of
Finance, Chief Financial Officer,
and Secretary
Date November 13, 2000
-------------------------
