FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1999
-------------------
Commission File Number 1-5426
-----------------------------
THOMAS INDUSTRIES INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
DELAWARE 61-0505332
- ----------------------- -----------------------------------------
(State of incorporation) (I.R.S. Employer Identification Number)
4360 BROWNSBORO ROAD, LOUISVILLE, KENTUCKY 40207
- ------------------------------------------ -----------
(Address of principal executive offices) (Zip Code)
502/893-4600
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
SECURITIES EXCHANGE ACT OF 1934:
Title of Each Class Name of Each Exchange on which Registered
- -------------------------------- -----------------------------------------
Common Stock, $1 Par Value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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 12 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. [X]
As of March 16. 2000, 15,571,913 shares of the registrant's Common Stock were
outstanding.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 16, 2000, was approximately $288,080,391.
Portions of the Proxy Statement for the Annual Meeting of Shareholders on April
20, 2000, are incorporated by reference in Part III of this report.
Portions of the Annual Report to Shareholders for fiscal year ended December 31,
1999, are incorporated by reference in Parts I and II of this report.
1
<PAGE>
PART I.
ITEM 1. BUSINESS
a. General Development of Business.
-------------------------------
The company that was eventually to become known as Thomas Industries
("Thomas"or the "Company") was founded in 1928 as the Electric Sprayit
Company. Electric Sprayit manufactured spraying machines, blowers, and
air compressors in Chicago, Illinois. In 1948, Mr. Lee B. Thomas and a
group of investors acquired Moe Brothers Manufacturing of Fort
Atkinson, Wisconsin, a manufacturer of residential lighting products.
In 1953, Moe Lighting and The Electric Sprayit Company merged to become
Thomas Industries Inc.
Although its roots are in lighting products and air compressors, Thomas
began to diversify further in the 1960's and 1970's, acquiring
different types of consumer products along with tools, hardware, and
specialty products. A new strategic focus that began in the 1980's was
finalized in 1994 and led the Company to divest its non-core businesses
and concentrate on Lighting and Compressors & Vacuum Pumps. Significant
additions to these businesses on the Lighting side included the Lumec
and Day-Brite Lighting acquisitions in 1987 and 1989 and Compressors &
Vacuum Pumps acquisitions which included ASF, Pneumotive, Brey, WISA,
Welch and Oberdorfer, made from 1987 through 1999.
On August 30, 1998, Thomas and The Genlyte Group ("Genlyte") formed a
lighting joint venture that combined substantially all of the assets
and liabilities of Genlyte and substantially all of the lighting assets
and related liabilities of Thomas to create Genlyte Thomas Group LLC,
estimated to be the third largest lighting fixture manufacturer in
North America. Thomas owns a 32% interest in the joint venture, and
Genlyte owns a 68% interest.
b. Financial Information about Industry Segments.
---------------------------------------------
The information required by this item is set forth in Exhibit 13 under
the heading "Notes to Consolidated Financial Statements," which
information is contained in the Company's Annual Report to Shareholders
and incorporated herein by reference.
c. Narrative Description of Business.
---------------------------------
Compressor & Vacuum Pump Segment
--------------------------------
With the lighting joint venture in place, Thomas is now focused on its
Compressors & Vacuum Pumps business. Thomas is the leading supplier to
the original equipment manufacturer (OEM) market in such applications
as medical equipment, gasoline vapor and refrigerant recovery,
automotive and transportation applications, printing, tape drives,
laboratory equipment, and many other applications for consumer,
commercial, and industrial uses. The Company designs, manufactures,
markets, and sells these products through operations worldwide. Group
headquarters are as
2
<PAGE>
ITEM 1. (Continued)
follows: North American Group--Sheboygan, Wisconsin; European Group--
Puchheim, Germany; and Asia Pacific Group--Hong Kong, China.
The Company has four manufacturing operations in the United States
which manufacture rotary vane, linear, piston, and diaphragm
compressors and vacuum pumps, and various liquid pump technologies.
These products are distributed worldwide to original equipment
manufacturers, as well as through industrial distributors.
Three German operations manufacture a complementary line of rotary
vane, piston, linear, and diaphragm compressors and vacuum pumps, and
various liquid pump technologies. These products are distributed
worldwide.
The Company also maintains sales offices in England, Italy,
Switzerland, Hong Kong, Japan, and Taiwan. The Corporate Office is in
Louisville, Kentucky.
The Company offers a wide selection of standard air compressors and
vacuum pumps and will modify or design its products to meet exacting
OEM applications. For the OEM market, the Company's compressors and
vacuum pumps products are manufactured under the names Thomas in the
U.S. and ASF Thomas in Europe. Other products are marketed under the
brand names Welch (high vacuum systems for laboratory and chemical
markets), Air-Pac (pnueumatic construction equipment), Vakuumatic
(leakage detection systems), Medi-Pump (respiratory products), and
Oberdorfer (liquid pumps).
The medical equipment market, which includes oxygen concentrators,
nebulizers, aspirators, and other devices, is important to the Company.
Company sales to medical equipment OEM's were approximately $62 million
in 1999, $57 million in 1998, and $55 million in 1997. Oxygen
concentrator OEM's represent over 50 percent of the Company's sales in
the medical equipment market. The Company believes it has the major
share in the oxygen concentrator OEM market worldwide.
No single customer of the Company accounted for 10 percent or more of
the Company's net sales in 1999.
The backlog of unshipped orders was $43 million at December 31, 1999,
and $47 million at December 31, 1998. The reduction in backlog was due
primarily to exchange rate fluctuations regarding our European
operations and a shortening of the cycle time for our larger OEM
customers between when their orders are received and when we ship their
orders. Also, certain OEM customers are ordering smaller quantities
more frequently, instead of placing blanket orders with future delivery
dates. The Company believes substantially all of such orders are firm,
although some orders are subject to cancellation. Substantially all of
these orders are expected to be filled in 2000.
The Company believes that it has adequate sources of materials and
supplies for its business.
3
<PAGE>
ITEM 1. (Continued)
There is no significant seasonal impact on the business of the Company.
Lighting Segment
----------------
On August 30, 1998, Thomas and Genlyte formed a lighting joint venture
that combined substantially all of the assets and liabilities of
Genlyte and substantially all of the lighting assets and related
liabilities of Thomas to create Genlyte Thomas Group LLC ("GTG"),
estimated to be the third largest lighting fixture manufacturer in
North America. Thomas owns a 32% interest in the joint venture, and
Genlyte owns a 68% interest.
GTG designs, manufactures, markets, and sells lighting fixtures for a
wide variety of applications in the commercial, industrial, and
residential markets. The Company operates in these three industry
segments through the following divisions: Lightolier, Controls,
Wide-Lite, Hadco, Diamond F, Supply (Crescent, ExceLine, and Stonco
product lines), Consumer, Indoor, Accent, and Outdoor in the United
States and Mexico; and Canlyte, Thomas Lighting Canada, Lumec, Ledalite
and ZED in Canada.
GTG's products primarily utilize incandescent, fluorescent, and
high-intensity discharge (HID) light sources and are marketed primarily
to distributors who resell the products for use in new residential,
commercial, and industrial construction as well as in remodeling
existing structures. Because GTG does not principally sell directly to
the end user of its products, it cannot determine precisely the
percentage of its revenues derived from the sale of products installed
in each type of building or the percentage of its products sold for new
construction versus remodeling. GTG's sales, like those of the lighting
fixture industry in general, are dependent on the level of activity in
new construction and remodeling.
GTG designs, manufactures, markets, and sells the following types of
products:
Indoor fixtures - Incandescent, fluorescent, and HID lighting
fixtures and lighting controls for commercial, industrial,
institutional, medical, sports, and residential markets, and task
lighting for all markets.
Outdoor fixtures - HID and incandescent lighting fixtures and
accessories for commercial, industrial, institutional, sports, and
residential markets.
GTG's products are marketed by independent sales representatives and
GTG direct sales personnel who sell to distributors, electrical
wholesalers, mass merchandisers, and national accounts. In addition,
GTG's products are promoted through architects, engineers, contractors,
and building owners. The fixtures are principally sold throughout the
United States, Canada, and Mexico.
4
<PAGE>
ITEM 1. (Continued)
d. Other
-----
Working capital is financed principally from operating profits. The
Company maintains adequate lines of credit and financial resources to
meet the anticipated cash requirements in the year ahead.
The Company has various patents and trademarks but does not consider
its business to be materially dependent upon any individual patent or
trademark.
During 1999,the Company spent $9,370,000 on research activities
relating to the development of new products and the improvement of
existing products. Substantially all of this amount was
Company-sponsored activity. During 1998, the Company spent $9,085,000
on these activities and during 1997, $14,873,000. The reduction
subsequent to 1997 is primarily due to the formation of GTG.
Continued compliance with present and reasonably expected federal,
state, and local environmental regulations is not expected to have any
material effect upon capital expenditures, earnings, or the competitive
position of the Company and its subsidiaries.
The Company employed approximately 1,060 people at December 31, 1999.
e. Financial Information about Foreign and Domestic Operations and Export
----------------------------------------------------------------------
Sales.
------
See Notes to Consolidated Financial Statements, as set forth in Exhibit
13, which information is contained in the Company's 1999 Annual Report
to Shareholders, and incorporated herein by reference, for financial
information about foreign and domestic operations. Export sales for the
years 1999, 1998, and 1997, were $29,250,000, $28,500,000, and
$45,900,000, respectively. The reduction in export sales from 1997 to
1998 is primarily due to the formation of GTG.
f. Executive Officers of the Registrant.
------------------------------------
Year
Office or Position First Elected
Name with Company Age as an Officer
---- ------------ --- -------------
Timothy C. Brown Chairman of the Board, 49 1984
(A) President, Chief Executive
Officer, and Director
Cliff C. Moulton Vice President, 52 1993
(B) Business Development
Phillip J. Stuecker Vice President of Finance, 48 1984
(C) Chief Financial Officer,
and Secretary
5
<PAGE>
ITEM 1. (Continued)
Year
Office or Position First Elected
Name with Company Age as an Officer
---- ------------ --- -------------
Bernard R. Berntson Vice President; General 60 1992
(D) Manager, North American
Compressor & Vacuum Pump Group
Peter H. Bissinger Vice President; General 54 1992
(E) Manager, European
Compressor & Vacuum Pump Group
(A) Timothy C. Brown was elected Chairman of the Board on April 20, 1995,
in addition to his other duties of President and Chief Executive
Officer. Prior to this, Mr. Brown held various management positions in
the Company including Chief Operating Officer, Executive Vice
President, and Vice President and Group Manager of the Specialty
Products Group.
(B) Cliff C. Moulton was elected an officer effective March 1, 1993, and
held the position of Vice President; Compressor and Vacuum Pump Group
Manager. Mr. Moulton spent the previous 23 years with Honeywell
Corporation in various management positions, most recently as Vice
President and General Manager of the Skinner Valve Division, since
1987.
(C) Phillip J. Stuecker was elected Vice President of Finance, Chief
Financial Officer, and Secretary on October 23, 1989. Prior to this,
Mr. Stuecker held various management positions in the Company
including Vice President and Treasurer.
(D) Bernard R. Berntson was elected an officer effective December 14,
1992. Mr. Berntson had held the position of General Manager of the
North American Compressor & Vacuum Pump Group since 1987.
(E) Peter H. Bissinger was elected an officer effective December 14, 1992,
in addition to his position of President of ASF Thomas GmbH, a wholly
owned subsidiary of the Company. Mr. Bissinger had held the position
of President of ASF GmbH since 1979.
ITEM 2. PROPERTIES
The Corporate offices of the Company are located in Louisville, Kentucky.
Due to the large number of individual locations and the diverse nature of
the operating facilities, specific description of the properties owned and
leased by the Company is not necessary to an understanding of the Company's
business. All of the buildings are of steel, masonry, and concrete
construction, are in generally good condition, provide adequate and suitable
space for the operations at each location, and are of sufficient capacity
for present and foreseeable future needs.
6
<PAGE>
ITEM 2. (Continued)
The following listing summarizes the Company's properties.
Number
of Facilities Combined
Segment Owned Leased Square Feet Nature of Facilities
------- ----- ------ ----------- --------------------
Compressors
and Vacuum 4 4 707,000 Manufacturing plants
Pumps 1 5 24,000 Distribution centers
Corporate -- 1 5,500 Corporate headquarters
2 -- 160,000 Leased to third parties
ITEM 3. LEGAL PROCEEDINGS
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The information required by this item is set forth in Exhibit 13 under the
headings "Common Stock Market Prices and Dividends," and "Notes to
Consolidated Financial Statements," which information is contained in the
Company's 1999 Annual Report to Shareholders and incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is set forth in Exhibit 13 under the
heading "Five-Year Summary of Operations and Statistics," which information
is contained in the Company's 1999 Annual Report to Shareholders and
incorporated herein by reference.
7
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is set forth in Exhibit 13 under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations," which information is contained in the Company's 1999
Annual Report to Shareholders and incorporated herein by reference.
ITEM 7A. 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 December 31, 1999, there were no 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and notes to consolidated financial
statements of the registrant and its subsidiaries are set forth in Exhibit
13 under the headings "Consolidated Financial Statements" and "Notes to
Consolidated Financial Statements," which information is contained in the
Company's 1999 Annual Report to Shareholders and incorporated herein by
reference. The Report of Independent Auditors is also set forth in Exhibit
13 and hereby incorporated herein by reference. In addition, financial
statements of GTG are included in this Form 10-K on pages F-1 to F-18.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
8
<PAGE>
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
a. Directors of the Company
------------------------
The information required by this item is set forth in registrant's
Proxy Statement for the Annual Meeting of Shareholders to be held on
April 20, 2000, under the headings "Election of Directors" and "Section
16(a), Beneficial Ownership Reporting Compliance," which information is
incorporated herein by reference.
b. Executive Officers of the Company
---------------------------------
Reference is made to "Executive Officers of the Registrant" in Part I,
Item 1.f.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 20,
2000, under the headings "Executive Compensation," "Compensation Committee
Interlocks and Insider Participation," and "Board of Directors," which
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 20,
2000, under the heading "Securities Beneficially Owned by Principal
Shareholders and Management," which information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 20,
2000, under the headings "Board of Directors" and "Compensation Committee
Interlocks and Insider Participation," which information is incorporated
herein by reference.
9
<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a. (1) Financial Statements
--------------------
The following consolidated financial statements of Thomas Industries
Inc. and subsidiaries, included in the Company's 1999 Annual Report to
Shareholders, are included in Part II, Item 8:
Consolidated Balance Sheets -- December 31, 1999 and 1998
Consolidated Statements of Income -- Years ended December 31,
1999, 1998, and 1997
Consolidated Statements of Shareholders' Equity -- Years ended
December 31, 1999, 1998, and 1997
Consolidated Statements of Cash Flows -- Years ended December 31,
1999, 1998, and 1997
Notes to Consolidated Financial Statements -- December 31, 1999
(2) Financial Statement Schedule
----------------------------
Schedule II -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and,
therefore, have been omitted.
(3) Listing of Exhibits
-------------------
Exhibit No. Exhibit
---------- -------
3(a) Restated Certificate of Incorporation, as
amended, filed as Exhibit 3(a) to registrant's
report on Form 10-Q dated August 11, 1998,
hereby incorporated by reference.
3(b) Bylaws, as amended April 15, 1999, filed as
Exhibit 3(b) to registrant's report on Form 10-K
dated March 29, 1999, hereby incorporated by
reference.
4(a) Note Agreement dated January 19, 1990, by and
among the Company and Day-Brite Lighting, Inc.,
Allstate Life Insurance Company, and other
investors filed as Exhibit 4 to report on Form
10-K dated March 22, 1990, hereby incorporated
by reference. First Amendment to Note Agreement
dated April 8, 1992, and Second Amendment to
Note Agreement dated July 31, 1992, filed as
Exhibit 4 to Form 10-Q filed August 12, 1992,
herein incorporated by reference. Third
Amendment to Note Agreement dated July 7, 1998,
filed as Exhibit 4 to Form 10-Q filed November
16, 1998, herein incorporated by reference.
10
<PAGE>
ITEM 14. (Continued)
Exhibit No. Exhibit
----------- -------
Copies of debt instruments for which the related
debt is less than 10% of consolidated total
assets will be furnished to the Commission upon
request.
4(b) Rights Agreement filed as Exhibit 1 to
registrant's report on Form 8-K dated December
12, 1997, hereby incorporated by reference.
10(a) Employment Agreements with Timothy C. Brown and
Phillip J. Stuecker filed as Exhibit 3(j) to
registrant's report on Form 10-Q dated November
11, 1988, hereby incorporated by reference.
10(b) Employment Agreement with Cliff C. Moulton filed
as Exhibit 10(b) to registrant's report on Form
10-K dated March 25, 1993, hereby incorporated
by reference.
10(c) Trust Agreement, filed as Exhibit 10(1) to
registrant's report on Form 10-Q dated November
11, 1988, hereby incorporated by reference.
10(d) Form of Indemnity Agreement and Amendment
thereto entered into by the Company and each of
its Executive Officers filed as Exhibits 10 (g)
and (h) to registrant's report on Form 10-K
dated March 23, 1988, hereby incorporated by
reference.
10(e) Severance pay policy of the Company, effective
October 1, 1988, covering all Executive
Officers, filed as Exhibit 10(d) to registrant's
report on Form 10-K dated March 23, 1989, hereby
incorporated by reference.
10(f) Nonemployee Director Stock Option Plan as
Amended and Restated as of February 5, 1997,
filed as Exhibit Exhibit 10(h) to registrant's
report on Form 10-K dated March 20, 1997, hereby
incorporated by reference.
10(g) 1995 Incentive Stock Plan as Amended and
Restated as of April 15, 1999, filed as Exhibit
10(h) to registrant's report on Form 10-Q dated
November 12, 1999, hereby incorporated by
reference.
11
<PAGE>
ITEM 14. (Continued)
Exhibit No. Exhibit
----------- -------
10(h) Employment Agreement with Timothy C. Brown dated
January 29, 1997, filed as Exhibit 10(j) to
registrant's report on Form 10-K dated March 20,
1997, hereby incorporated by reference.
10(i) Master Transaction Agreement by and between
Thomas Industries Inc. and The Genlyte Group
Incorporated dated April 28, 1998, filed as
Exhibit 2.1 to registrant's report on Form 8-K
dated July 24, 1998, hereby incorporated by
reference.
10(j) Limited Liability Company Agreement of GT
Lighting, LLC, dated April 28, 1998, filed as
Exhibit 2.2 to registrant's report on Form 8-K
dated July 24, 1998, hereby incorporated by
reference.
10(k) Capitalization Agreement among GT Lighting, LLC,
and Thomas Industries Inc., Tupelo Holdings
Inc., Thomas Industries Holdings Inc., Gardco
Manufacturing, Inc., Capri Lighting, inc.,
Thomas Imports, Inc., and TI Industries
Corporation dated April 28, 1998, filed as
Exhibit 2.3 to registrant's report on Form 8-K
dated July 24, 1998, hereby incorporated by
reference.
10(l) Capitalization Agreement between GT Lighting,
LLC, and The Genlyte Group Incorporated dated
April 28, 1998, filed as Exhibit 2.4 to
registrant's Form 8-K dated July 24, 1998,
hereby incorporated by reference.
13 Certain portions of the Company's 1999 Annual
Report to Shareholders as specified in Parts I
and II, hereby incorporated by reference in this
Annual Report on Form 10-K.
21 Subsidiaries of the Registrant.
23(a) Consent of Ernst & Young LLP.
23(b) Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
12
<PAGE>
ITEM 14. (Continued)
b. Reports on Form 8-K
-------------------
During the fourth quarter of 1999, the Company filed the following
report on Form 8-K:
Form 8-K dated December 14, 1999; (stock repurchase program
announced)
c. Exhibits
--------
The exhibits filed as part of this Annual Report on Form 10-K are as
specified in Item 14(a)(3) herein.
13
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, there unto duly authorized.
THOMAS INDUSTRIES INC.
Date: March , 2000 By /s/ Timothy C. Brown
Timothy C. Brown, Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Timothy C. Brown Chairman of the Board;
Timothy C. Brown President; Chief Executive
Officer; Director
(Principal Executive Officer)
/s/ Phillip J. Stuecker Vice President of Finance;
Phillip J. Stuecker Chief Financial Officer;
Secretary
(Principal Financial Officer)
/s/ Roger P. Whitton Controller
Roger P. Whitton (Principal Accounting Officer)
/s/ Wallace H. Dunbar Director
Wallace H. Dunbar
/s/ H. Joseph Ferguson Director
H. Joseph Ferguson
/s/ Gene P. Gardner Director
Gene P. Gardner
/s/ Lawrence E. Gloyd Director
Lawrence E. Gloyd
14
<PAGE>
Signatures (Continued)
Signature Title Date
--------- ----- ----
/s/ William M. Jordan Director
William M. Jordan
/s/ Franklin J. Lunding, Jr. Director
Franklin J. Lunding, Jr.
/s/ Anthony A. Massaro Director
Anthony A. Massaro
15
<PAGE>
Report of Independent Auditors
The Board of Directors and Shareholders
Thomas Industries Inc.
We have audited the consolidated balance sheets of Thomas Industries Inc. and
subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1999. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits. The financial statements of Genlyte
Thomas Group LLC (GTG), a partnership formed on August 30, 1998 in which the
Company has a 32% interest, have been audited by other auditors whose report has
been furnished to us; insofar as our opinion on the consolidated financial
statements relates to data included for GTG, it is based solely on their report.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Thomas Industries Inc.
and subsidiaries at December 31, 1999 and 1998, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999,in conformity with generally accepted accounting
principles in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ Ernst & Young LLP
Louisville, Kentucky
February 9, 2000
16
<PAGE>
<TABLE>
Valuation and Qualifying Accounts
Thomas Industries Inc. and Subsidiaries
December 31, 1999
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at Charged to Charged to Balance at
Description Beginning Costs Other Accounts- Deductions- End of
of Period and Expenses Describe Describe Period
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> > <C>
Year ended December 31, 1999
Allowance for doubtful accounts $656,000 $192,000 $150,000 (1) $698,000
Allowance for obsolete and slow moving inventory $1,932,000 $174,000 $245,000 (2) $1,861,000
---------------------------- ------------------------------
$2,588,000 $366,000 $395,000 $2,559,000
============================ ==============================
Year ended December 31, 1998
Allowance for doubtful accounts $2,046,000 $273,000 $1,515,000 (3) $148,000 (1) $656,000
Allowance for obsolete and slow moving inventory $5,518,000 $539,000 $3,841,000 (3) $284,000 (2) $1,932,000
------------------------------------------------------------------------------
$7,564,000 $812,000 $5,356,000 $432,000 $2,588,000
==============================================================================
Year ended December 31, 1997
Allowance for doubtful accounts $2,243,000 $441,000 $638,000 (1) $2,046,000
Allowance for obsolete and slow moving inventory $8,871,000 $1,420,000 $4,773,000 (2) $5,518,000
---------------------------- ------------------------------
$11,114,000 $1,861,000 $5,411,000 $7,564,000
============================ ==============================
(1) Uncollectible accounts written off, less recoveries on accounts previously
written off and effect of translation in accordance with SFAS No. 52.
(2) Disposal of obsolete inventory and effect of translation in accordance with
SFAS No. 52.
(3) Transfer of lighting reserve to GTG joint venture.
</TABLE>
17
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page
13 Certain portions of the Company's 1999 19
Annual Report to Shareholders as
specified in Parts I and II hereof to
be incorporated by reference in this
Annual Report on Form 10-K
21 Subsidiaries of the Registrant 67
23(a) Consent of Ernst & Young LLP 68
23(b) Consent of Arthur Andersen LLP 69
27 Financial Data Schedule 70
18
<PAGE>
On August 30, 1998, Thomas and Genlyte formed a lighting joint venture that
combined substantially all of the assets and liabilities of Genlyte and
substantially all of the lighting assets and related liabilities of Thomas to
create Genlyte Thomas Group LLC ("Genlyte Thomas"), estimated to be the third
largest lighting fixture manufacturer in North America. Thomas owns a 32%
interest in the joint venture, and Genlyte owns a 68% interest.
Following are audited financial statements of Genlyte Thomas for the year ended
December 31, 1999, and for the period from inception, August 30, 1998, through
December 31, 1998.
F-1
<PAGE>
Report of Independent Public Accountants
To the Partners of Genlyte Thomas Group LLC:
We have audited the accompanying consolidated balance sheets of Genlyte
Thomas Group LLC (a Delaware limited liability company) and subsidiaries as
of December 31, 1999 and 1998, and the related consolidated statements of
income, partners' equity and cash flows for the year ended December 31,
1999 and for the period from inception, August 30, 1998, through December
31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Genlyte Thomas Group
LLC and subsidiaries as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for the year ended December 31, 1999
and for the period from inception, August 30, 1998, through December 31,
1998 in conformity with accounting principles generally accepted in the
United States.
/s/ Arthur Andersen LLP
Louisville, Kentucky
February 2, 2000
F-2
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
GENLYTE THOMAS GROUP LLC AND SUBSIDIARIES
FOR THE YEAR ENDED DECEMBER 31, 1999, AND
FOR THE PERIOD FROM INCEPTION, AUGUST 30, THROUGH DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
1999 1998
-------------------------
Net sales $ 978,302 $ 324,111
Cost of sales 648,626 213,305
-------------------------
Gross profit 329,676 110,806
Selling and administrative expenses 241,239 82,029
-------------------------
Operating profit 88,437 28,777
Interest expense, net 4,633 1,252
-------------------------
Income before income taxes 83,804 27,525
Income tax provision 4,841 1,009
-------------------------
Net income $ 78,963 $ 26,516
=========================
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
GENLYTE THOMAS GROUP LLC AND SUBSIDIARIES
AS OF DECEMBER 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS)
<CAPTION>
1999 1998
----------------------------
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 22,705 $ 8,533
Accounts receivable, less allowance for doubtful
accounts of $14,910 and $10,907, respectively 155,428 146,167
Related party receivables - 1,855
Inventories 136,041 137,004
Other current assets 7,614 8,037
----------------------------
Total current assets 321,788 301,596
Plant and equipment, at cost:
Land 6,537 7,290
Buildings and leasehold interests and improvements 87,951 82,856
Machinery and equipment 228,132 218,639
----------------------------
Total plant and equipment 322,620 308,785
Less: Accumulated depreciation and amortization 217,631 203,106
----------------------------
Net plant and equipment 104,989 105,679
Cost in excess of net assets of acquired businesses 111,426 61,549
Other assets 15,228 12,632
----------------------------
TOTAL ASSETS $553,431 $ 481,456
============================
LIABILITIES & PARTNERS' EQUITY:
CURRENT LIABILITIES:
Short-term borrowings and current portion of long-term debt $ 1,647 $ 2,134
Accounts payable 86,664 73,797
Related party payables 8,417 587
Accrued expenses 73,750 58,137
----------------------------
Total current liabilities 170,478 134,655
Long-term debt 53,964 60,852
Accrued pension 13,763 14,908
Deferred income taxes 1,257 597
Other liabilities 4,801 5,916
----------------------------
Total liabilities 244,263 216,928
PARTNERS' EQUITY:
Accumulated other comprehensive income 3,158 (1,075)
Other partners' equity 306,010 265,603
----------------------------
Total partners' equity 309,168 264,528
----------------------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $553,431 $ 481,456
============================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
F-4
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
GENLYTE THOMAS GROUP LLC AND SUBSIDIARIES
FOR THE YEAR ENDED DECEMBER 31, 1999, AND
FOR THE PERIOD FROM INCEPTION, AUGUST 30, THROUGH DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
<CAPTION>
Accumulated
Other Other Total
Comprehensive Partners' Partners'
Income Equity Equity
----------------------------------------------------------
<S> <C> <C> <C>
Contribution by Genlyte, August 30, 1998 $ - $168,379 $168,379
Contribution by Thomas, August 30, 1998 - 79,237 79,237
----------------------------------------------------------
Total contributions - 247,616 247,616
Net income - 26,516 26,516
Increase in minimum pension liability (1,793) - (1,793)
Foreign currency translation adjustments 718 - 718
----------------------------------------------------------
Total comprehensive income (1,075) 26,516 25,441
Distributions to partners - (8,529) (8,529)
-------------------- ----------------- ----------------
Partners' equity, December 31, 1998 $(1,075) $265,603 $264,528
Net income - 78,963 78,963
Decrease in minimum pension liability 1,793 - 1,793
Foreign currency translation adjustments 2,440 - 2,440
----------------------------------------------------------
Total comprehensive income 4,233 78,963 83,196
Adjustment to contribution by Thomas - (1,014) (1,014)
Distributions to partners - (37,542) (37,542)
----------------------------------------------------------
Partners' equity, December 31, 1999 $3 ,158 $306,010 $309,168
==========================================================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
F-5
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
GENLYTE THOMAS GROUP LLC AND SUBSIDIARIES
FOR THE YEAR ENDED DECEMBER 31, 1999, AND
FOR THE PERIOD FROM INCEPTION, AUGUST 30, THROUGH DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
<CAPTION>
1999 1998
----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $78,963 $26,516
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 23,835 7,305
Loss (gain) from disposal of plant and equipment (20) 257
Changes in assets and liabilities, net of effect of acquisitions:
(Increase) decrease in:
Accounts receivable (5,354) 2,435
Related party receivables 1,855 (1,855)
Inventories 3,039 1,344
Other current assets 1,018 (68)
Other assets (28,736) (3,650)
Increase (decrease) in:
Accounts payable and accrued expenses 24,453 20,651
Related party payables 7,830 587
Deferred income taxes 536 188
Accrued pension and other liabilities (2,260) 4,730
Minimum pension liability 1,793 (1,793)
All other, net 2,948 (359)
-----------------------------
Net cash provided by operating activities 109,900 56,288
-----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (30,934) -
Purchases of plant and equipment (20,514) (8,086)
-----------------------------
Net cash used in investing activities (51,448) (8,086)
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in debt, net (9,178) (39,374)
Distributions to partners (37,542) (8,529)
-----------------------------
Net cash used in financing activities (46,720) (47,903)
-----------------------------
Effect of exchange rate changes on cash and cash equivalents 2,440 718
-----------------------------
Net increase in cash and cash equivalents 14,172 1,017
Cash and cash equivalents at beginning of period 8,533 7,516
-----------------------------
Cash and cash equivalents at end of period $22,705 $ 8,533
=============================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
F-6
<PAGE>
Genlyte Thomas Group LLC
Notes to Consolidated Financial Statements
(Dollar Amounts in Thousands)
(1) DESCRIPTION OF BUSINESS
Genlyte Thomas Group LLC ("Genlyte Thomas" or "the Company") is a
Delaware limited liability company. Genlyte Thomas designs,
manufactures, and sells lighting fixtures and controls for a wide
variety of applications in the commercial, residential, and industrial
markets. Genlyte Thomas's products are marketed primarily to
distributors who resell the products for use in commercial,
residential, and industrial construction and remodeling. The Company is
the result of the business combination discussed in Note 3.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial
statements include the accounts of Genlyte Thomas and all
majority-owned subsidiaries, and also include other entities that are
jointly owned by The Genlyte Group Incorporated and Thomas Industries
Inc., all of which entities in total operationally comprise Genlyte
Thomas. Intercompany accounts and transactions have been eliminated.
Investments in affiliates owned less than 50% are accounted for using
the equity method, under which the Company's share of these affiliates'
earnings is included in income as earned.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
amounts could differ from those estimates.
CASH EQUIVALENTS: The Company considers all highly liquid investments
with a maturity of three months or less to be cash equivalents.
INVENTORIES: Inventories are stated at the lower of cost or market and
include materials, labor, and overhead. Inventories at December 31
consisted of the following:
1999 1998
----------------- --------------
Raw materials and supplies $ 46,717 $ 43,167
Work in process 14,027 14,529
Finished goods 75,297 79,308
----------------- --------------
Total inventories $ 136,041 $ 137,004
================= ==============
Inventories valued using the last-in, first-out ("LIFO") method
represented approximately 83% and 89% of total inventories at December
31, 1999 and 1998, respectively. Inventories not valued at LIFO
(primarily inventories of Canadian operations) are valued using the
first-in, first-out ("FIFO") method. On a FIFO basis, which
approximates current cost, inventories would have been $3,083 and
$2,350 lower than reported at December 31, 1999 and 1998, respectively.
<PAGE>
F-7
ADVERTISING COSTS: The Company expenses advertising costs principally
as incurred. Certain catalog and literature costs are amortized over
their useful lives, generally 2 to 3 years. Advertising expenses were
$13,416 for the year ended December 31, 1999, and $4,323 for the period
from inception, August 30, through December 31, 1998.
PLANT AND EQUIPMENT: The Company provides for depreciation of plant and
equipment, which also includes amortization of assets recorded under
capital leases, principally on a straight-line basis over the estimated
useful lives of the assets. Useful lives vary among the items in each
classification, but fall within the following ranges:
Buildings and leasehold interests and improvements 10 to 40 years
Machinery and equipment 3 to 10 years
When the Company sells or otherwise disposes of plant and equipment,
the asset cost and accumulated depreciation are removed from the
accounts, and any resulting gain or loss is included in the
consolidated statements of income.
Leasehold interests and improvements are amortized over the terms of
the respective leases, or over their estimated useful lives, whichever
is shorter.
Maintenance and repairs are expensed as incurred. Renewals and
betterments are capitalized and depreciated or amortized over the
remaining useful lives of the respective assets.
COST IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES: Cost in excess of
net assets of businesses acquired prior to 1971 is not amortized since,
in the opinion of management, there has been no diminution in value.
For businesses acquired subsequent to 1970, the cost in excess of net
assets, aggregating $132,587 as of December 31, 1999 and $79,071 as of
December 31, 1998, is being amortized on a straight-line basis over
periods ranging from 10 to 40 years. Accumulated amortization was
$26,083 and $22,445 as of December 31, 1999 and 1998, respectively.
The Company periodically evaluates these intangible assets using
discounted cash flows to assess recoverability from future operations.
Impairment would be recognized as expense if a permanent diminution in
value occurred. In the opinion of management, no material diminution in
value has occurred during the periods presented in these consolidated
financial statements.
RESEARCH AND DEVELOPMENT COSTS: Research and development costs are
expensed as incurred. These expenses were $8,086 for the year ended
December 31, 1999, and $3,792 for the period from inception, August 30,
through December 31, 1998.
TRANSLATION OF FOREIGN CURRENCIES: Balance sheet accounts of foreign
subsidiaries are translated into U.S. dollars at the rates of exchange
in effect as of the balance sheet dates. The cumulative effects of such
adjustments were $3,158 and $718 at December 31, 1999 and 1998,
respectively, and have been credited to partners' equity in the
consolidated balance sheets. Income and expenses are translated at the
average exchange rates prevailing during the year. Gains or losses
resulting from foreign currency transactions are included in net
income.
F-8
<PAGE>
FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying amounts of cash
equivalents, short-term borrowings, and long-term debt approximate fair
value.
RECLASSIFICATIONS: Certain prior year amounts have been reclassified to
conform to the current year presentation. These changes had no impact
on previously reported net income or partners' equity.
(3) FORMATION OF GENLYTE THOMAS GROUP LLC
On August 30, 1998, The Genlyte Group Incorporated ("Genlyte") and
Thomas Industries Inc. ("Thomas") completed the combination of the
business of Genlyte with the lighting business of Thomas ("Thomas
Lighting"), in the form of a limited liability company named Genlyte
Thomas Group LLC. Genlyte contributed substantially all of its assets
and liabilities to Genlyte Thomas and received a 68% interest in
Genlyte Thomas. Thomas contributed substantially all of its assets and
certain related liabilities comprising Thomas Lighting and received a
32% interest in Genlyte Thomas. The percentage interests in Genlyte
Thomas issued to Genlyte and Thomas were based on arms-length
negotiations between the parties with the assistance of their financial
advisers.
Under the purchase method of accounting, Genlyte's majority ownership
of Genlyte Thomas requires the assets and liabilities contributed by
Thomas Lighting to Genlyte Thomas to be valued at their fair values, as
of the acquisition date, in the consolidated financial statements of
Genlyte Thomas. The fair values attributed to the Thomas Lighting
assets and liabilities result from management's determination of
purchase accounting adjustments and are based upon available
information and certain assumptions that management considers
reasonable under the circumstances. The resulting cost in excess of the
fair market value of net assets contributed by Thomas Lighting of
$32,412 is being amortized on a straight-line basis over 30 years. The
assets contributed by Genlyte to Genlyte Thomas are reflected at their
historical cost.
To the extent the actual net working capital contributed by Thomas
Lighting exceeded the target net working capital, Genlyte Thomas paid
Thomas the difference of $35,189. Of this amount, $34,175 was paid in
1998 and $1,014 was paid in 1999, based on an adjustment to the Thomas
net working capital. The target net working capital was determined by a
formula that considered Genlyte's adjusted net working capital, Thomas
Lighting's net working capital, and Genlyte's net working capital as a
percentage of net sales as of August 30, 1998.
Subject to the provisions in the Genlyte Thomas Group LLC Agreement
(the "LLC Agreement") regarding mandatory distributions described
below, and the requirement of special approval in certain instances,
distributions to Genlyte and Thomas (the "Partners"), respectively,
will be made at such time and in such amounts as determined by the
Company's Management Board and shall be made in cash or other property
in proportion to the Partners' respective percentage interests.
Notwithstanding anything to the contrary provided in the LLC Agreement,
no distribution under the LLC Agreement shall be permitted to the
extent prohibited by Delaware law.
F-9
<PAGE>
The LLC Agreement requires that Genlyte Thomas make the following
distributions to the Partners:
(i) a distribution to each Partner, based on its percentage
interest, for tax liabilities attributable to its participation
as a Partner of Genlyte Thomas based upon the effective tax rate
of the Partner having the highest tax rate; and
(ii) subject to the provisions of Delaware law and the terms of the
primary Genlyte Thomas credit facility, distributions (exclusive
of the tax distributions set forth above) to each of the
Partners so that Thomas receives at least an aggregate of $3,000
and Genlyte receives at least an aggregate of $6,375 per fiscal
year beginning in fiscal year 1999.
(4) INVESTMENT IN FIBRE LIGHT AND ACQUISITION OF LEDALITE
On May 10, 1999, the Company acquired a 2% interest (with rights to
acquire an additional 6%) in Fibre Light International, based in
Burleigh Heads, Queensland, Australia. Fibre Light International is in
the business of commercializing fiber optic lighting technology. The
two companies then formed a jointly owned limited liability company
named Fibre Light U.S. LLC, ("Fibre Light"), of which Genlyte Thomas
owns 80%. Fibre Light will manufacture, market, and sell fiber optic
lighting systems in the U.S.
On June 30, 1999, the Company acquired the assets and liabilities of
privately held Ledalite Architectural Products Inc. ("Ledalite"),
located in Vancouver, Canada. Ledalite designs, manufactures, and sells
architectural linear lighting systems for offices, schools,
transportation facilities, and other commercial buildings. The purchase
prices of these acquisitions totaled $31,469 (including costs of
acquisition), consisting of approximately $8.5 million in cash payments
and approximately $23 million in borrowings.
The Ledalite acquisition has been accounted for using the purchase
method of accounting. The preliminary determination of the excess of
the purchase price over the fair market value of net assets acquired of
$22,392 is being amortized on a straight-line basis over 30 years. The
determination of these fair market values as reflected in the balance
sheet is subject to change.
The operating results of Fibre Light and Ledalite have been included in
the Company's consolidated financial statements since the dates of
acquisition. On an unaudited pro forma basis, assuming these
acquisitions had occurred at the beginning of 1999 and 1998, the
Company's results would have been:
1999 1998
---------------- ---------------
Net sales $ 990,326 $ 332,872
Net income 78,432 25,869
<PAGE>
F-10
The pro forma results do not purport to state exactly what the
Company's results of operations would have been had the acquisitions in
fact been consummated as of the assumed dates and for the periods
presented, nor are they necessarily indicative of future consolidated
results.
(5) INCOME TAXES
The results of operations are included in the tax returns of the
Partners, and accordingly, no provision has been recognized by the
Company for U.S. federal income taxes. The Company's foreign
subsidiaries are taxable corporations, and current and deferred taxes
are provided on their income. The income tax provision also includes
$360 in state income taxes in 1999. Cash paid for income taxes was
$2,723 for the year ended December 31, 1999 and $469 for the period
from inception, August 30, through December 31, 1998.
(6) LONG-TERM DEBT
Long-term debt at December 31 consisted of the following:
1999 1998
------------------------------
Revolving credit notes $ - $ 28,000
Canadian dollar notes 20,772 -
Industrial revenue bonds 10,500 10,500
Loan payable to Thomas 22,287 22,287
Capital leases and other 2,052 267
------------------------------
55,611 61,054
Less: current maturities 1,647 202
------------------------------
Total long-term debt $ 53,964 $ 60,852
==============================
The Company has a $150,000 revolving credit agreement (the "Facility")
with various banks that matures in 2003. Under the most restrictive
borrowing covenant, which is the fixed charge coverage ratio, the
Company could incur approximately $25,000 in additional fixed charges.
Total borrowings under the Facility as of December 31, 1999 and 1998,
were $0 and $28,000,respectively. Outstanding borrowings bear interest
at the option of the Company based on the bank's base rate or the LIBOR
rate plus a spread as determined by total indebtedness. The borrowings
as of December 31, 1998 were classified as long-term because of the
Company's intention and ability to refinance these obligations on a
long-term basis through its revolving credit agreement. In addition,
the Company has outstanding approximately $39,400 of letters of credit,
which reduce the amount available to borrow under the Facility.
The amount outstanding under the Facility is secured, if requested by
the banking group, by liens on domestic accounts receivable,
inventories, machinery and equipment, as well as the investments in
certain subsidiaries of the Company. The net book value of assets
subject to a lien at December 31, 1999 was $294,770.
F-11
<PAGE>
The Company has CDN$30,000 of borrowings through its Canadian
subsidiary Genlyte Thomas Group Nova Scotia ULC. These borrowings will
be repaid in installments in each of the next five years. Interest
rates on these borrowings can be either the Canadian prime rate or the
Canadian LIBOR rate plus a spread of 50 basis points. These borrowings
are backed by the letters of credit mentioned above.
The Company has $10,500 of variable rate demand Industrial Revenue
Bonds that mature during 2009 to 2010. The average borrowing rate on
these bonds was 3.3% in 1999 and 3.5% in 1998. These bonds are backed
by the letters of credit mentioned above.
The loan payable to Thomas accrues interest quarterly based on the 90
day LIBOR rate plus a spread as determined by the Facility. This loan
can be prepaid in whole or in part without penalty, ultimately maturing
in 2003.
The annual maturities of long-term debt are summarized as follows:
Year ending December 31
2000 $1,647
2001 2,624
2002 3,402
2003 26,584
2004 10,541
Thereafter 10,813
--------------
Total long-term debt $ 55,611
==============
Cash paid for interest on debt was $4,566 for the year ended December
31, 1999 and $1,693 for the period from inception, August 30, through
December 31, 1998.
(7) RETIREMENT PLANS
The Company has defined benefit plans which cover the majority of its
full-time U.S. employees. The Company's policy for funded plans is to
make contributions equal to or greater than the requirements prescribed
by the Employee Retirement Income Security Act. The plans' assets
consist primarily of stocks and bonds. Pension costs for all Company
defined benefit plans are actuarially computed. The Company also has
other defined contribution plans, including those covering certain
former Genlyte and Thomas employees
The amounts included in the accompanying consolidated balance sheets
based on the funded status of the defined benefit plans at September 30
follow:
<TABLE>
1999 1998
---------------- ----------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATIONS
Benefit obligations, beginning $ 81,097 $ -
Service cost 2,310 773
Interest cost 5,358 1,803
Benefits paid (4,101) (663)
Obligations assumed by Genlyte Thomas - 80,679
Other - primarily actuarial (gain) (10,737) (1,495)
---------------- ----------------
Benefit obligations, ending $ 73,927 $ 81,097
================ ================
F-12
<PAGE>
CHANGE IN PLAN ASSETS 1999 1998
---- ----
Plan assets at fair value, beginning $ 68,902 $ -
Actual return on plan assets 6,965 4,709
Employer contributions 1,611 425
Benefits paid (4,101) (663)
Assets assumed by Genlyte Thomas - 64,431
---------------- ----------------
Plan assets at fair value, ending $ 73,377 $ 68,902
================ ================
FUNDED STATUS OF THE PLANS
Plan assets (less than) benefit obligations $ (550) $(12,195)
Unrecognized transition obligation at adoption 200 487
Unrecognized actuarial (gain) (11,563) (1,143)
Unrecognized prior service cost 2,024 4,017
Contributions subsequent to measurement date 946 -
---------------- ----------------
Accrued pension liability $ (8,943) $ (8,834)
================ ================
BALANCE SHEET ASSET (LIABILITY)
Accrued pension liability $(13,763) $(14,908)
Prepaid pension cost 4,468 1,603
Intangible assets 339 2,961
Accumulated other comprehensive income 13 1,510
---------------- -----------------
Net (liability) recognized $ (8,943) $ (8,834)
================ =================
WEIGHTED AVERAGE ASSUMPTIONS
Discount rate 7.75% 6.75%
Rate of compensation increase 4.00% 5.00%
Expected return on plan assets 8.50% 8.50%
COMPONENTS OF NET PERIODIC BENEFIT COSTS
Service cost $ 2,310 $ 773
Interest cost 5,358 1,803
Expected return on plan assets (5,536) (1,724)
Amortization of transition amounts 181 18
Amortization of prior service cost 293 154
Recognized actuarial loss 60 104
---------------- -----------------
Net pension expense of defined benefit plans 2,666 1,128
---------------- -----------------
Defined contribution plans 671 720
Multi-employer plans 294 116
---------------- -----------------
Total benefit costs $ 3,631 $ 1,964
================ =================
</TABLE>
A summary of the plans in which benefit obligations and accumulated
benefit obligations exceed fair value of assets follows:
Benefit obligation $ 6,830 $ 59,669
Accumulated benefit obligation $ 6,569 $ 52,010
Plan assets at fair value $ 3,470 $ 45,091
Effective January 1, 2000, the Company has frozen the salaried pension
plan of U.S. employees. These employees will be eligible for Company
matching on their 401(k) contributions as well as being a participant
in the Genlyte Thomas Retirement Savings and Investment Plan. This will
result in a curtailment credit of $603, which will be a reduction of
net pension expense in 2000.
F-13
<PAGE>
The Company also maintains defined benefit plans covering substantially
all the employees of a Canadian subsidiary. The amounts included in the
accompanying consolidated balance sheets, based on the funded status of
these defined benefit plans at September 30, 1999 and December 31,
1998, follow:
<TABLE>
1999 1998
--------------- -----------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATIONS
Benefit obligations, beginning $ 4,562 $ -
Service cost 252 70
Interest cost 339 102
Benefits paid (221) (72)
Amendments 38 -
Obligations assumed by Genlyte Thomas - 4,418
Member contributions - 44
Other - primarily actuarial (gain) (440) -
--------------- -----------------
Benefit obligations, ending $ 4,530 $ 4,562
=============== =================
CHANGE IN PLAN ASSETS
Plan assets at fair value, beginning $ 5,030 $ -
Actual return on plan assets 80 468
Employer contributions 123 60
Member contributions 148 45
Benefits paid (221) (72)
Assets assumed by Genlyte Thomas - 4,629
Other 336 (100)
--------------- -----------------
Plan assets at fair value, ending $ 5,496 $ 5,030
=============== =================
FUNDED STATUS OF THE PLANS
Plan assets in excess of benefit obligations $ 966 $ 468
Unrecognized transition obligation at adoption (33) (36)
Unrecognized actuarial (gain) (718) (52)
Unrecognized prior service cost 110 78
Contributions subsequent to measurement date 259 -
--------------- -----------------
Prepaid pension asset $ 584 $ 458
=============== =================
BALANCE SHEET ASSET (LIABILITY)
Accrued pension liability $ - $ (12)
Prepaid pension cost 584 470
Intangible assets - -
Accumulated other comprehensive income - -
--------------- -----------------
Net asset recognized $ 584 $ 458
=============== =================
WEIGHTED AVERAGE ASSUMPTIONS
Discount rate 7.75% 6.50%
Rate of compensation increase 4.00% 4.00%
Expected return on plan assets 7.75% 6.50%
COMPONENTS OF NET PERIODIC BENEFIT COSTS
Service cost $ 252 $ 70
Interest cost 339 102
Expected return on plan assets (368) (103)
Amortization of transition amounts (6) (1)
Amortization of prior service cost 5 2
Recognized actuarial (gain) (1) -
--------------- -----------------
Net benefit costs $ 221 $ 70
=============== =================
</TABLE>
F-14
<PAGE>
(8) POST-RETIREMENT BENEFIT PLANS
The Company provides post-retirement medical and life insurance
benefits for certain retirees and employees, and accrues the cost of
such benefits during the service lives of such employees.
The amounts included in the accompanying consolidated balance sheets
for the post-retirement benefit plans based on the funded status at
September 30, 1999 and December 31, 1998, follow:
<TABLE>
1999 1998
--------------- -----------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATIONS
Benefit obligations, beginning $ 3,657 $ -
Service cost 39 8
Interest cost 294 83
Benefits paid (413) (166)
Obligations assumed by Genlyte Thomas - 3,638
Other - primarily actuarial loss 574 94
--------------- -----------------
Benefit obligations, ending $ 4,151 $ 3,657
=============== =================
FUNDED STATUS OF THE PLANS
Plan assets (less than) benefit obligations $(4,151) $ (3,657)
Unrecognized net obligation at adoption - 3,008
Unrecognized actuarial (gain) loss 574 (973)
--------------- -----------------
Accrued liability $(3,577) $ (1,622)
=============== =================
Employer contributions $ 413 $ 166
Benefits paid (413) (166)
COMPONENTS OF NET PERIODIC BENEFIT COSTS
Service cost $ 39 $ 8
Interest cost 294 83
Recognized actuarial loss - 69
--------------- -----------------
Net expense of post-retirement plans $ 333 $ 160
=============== =================
</TABLE>
The assumed discount rates used in measuring the obligations as of
September 30, 1999, and December 31, 1998 were 7.75% and 6.75%,
respectively. The assumed health care cost trend rate for 2000 was 7%,
declining to 4.5% in 2006. A one-percentage-point increase or decrease
in the assumed health care cost trend rate for each year would increase
or decrease the obligation at September 30, 1999 by approximately $300,
and the 1999 post-retirement benefit expense by approximately $27.
(9) ACCRUED EXPENSES
Accrued expenses at December 31 consisted of the following:
1999 1998
--------------- ------------
Employee related costs and benefits $ 30,267 $ 30,201
Advertising and sales promotion 8,331 8,168
Income and other taxes payable 4,311 4,227
Other accrued expenses 30,841 15,541
--------------- ------------
Total accrued expenses $ 73,750 $ 58,137
=============== ============
F-15
<PAGE>
(10) LEASE COMMITMENTS
The Company rents office space, equipment, and computers under
non-cancelable operating leases. Rental expense for operating leases
during 1999 and for the period from inception, August 30, through
December 31, 1998, amounted to $6,184 and $1,398, respectively. One
division of the Company also rents manufacturing and computer equipment
and software under agreements that are classified as capital leases.
Future required minimum lease payments as of December 31, 1999, were as
follows:
<TABLE>
Operating Capital
Leases Leases
-------------------------
<S> <C> <C>
2000 $ 5,872 $ 746
2001 4,652 582
2002 2,896 448
2003 1,811 232
2004 1,697 300
Thereafter 1,499 -
-------------------------------
Total minimum lease payments $ 18,427 2,308
========
Less amount representing interest 344
-------
Present value of net minimum lease payments $ 1,964
=======
</TABLE>
(11) 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 or reserves 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 condition, 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.
Additionally, the Company is a defendant and/or potentially responsible
party, with other companies, in actions and proceedings under state and
Federal environmental laws, including the Federal Comprehensive
Environmental Response Compensation and Liability Act, as amended.
Management does not believe that the disposition of the lawsuits and/or
proceedings will have a material effect on the Company's financial
condition, results of operations, or liquidity.
(12) SEGMENT REPORTING
In 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" (SFAS No. 131). Operating segments are defined as
components of an enterprise about which separate financial information
is available that is evaluated regularly by the chief operating
decision maker, or decision making group, in deciding how to allocate
resources and in assessing performance. The Company's reportable
operating segments include the Commercial Segment, the Residential
F-16
<PAGE>
Segment,and the Industrial and Other Segment. Intersegment sales are
eliminated in consolidation and therefore not presented in the table
below.
OPERATING SEGMENTS:
<TABLE>
Industrial
1999 Commercial Residential and Other Total
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 689,167 $ 145,040 $ 144,095 $ 978,302
Operating profit 67,134 8,042 13,261 88,437
Assets 376,343 92,291 84,797 553,431
Depreciation and amortization 16,595 3,532 3,708 23,835
Expenditures for plant and
equipment 14,399 3,023 3,092 20,514
Industrial
1998 Commercial Residential and Other Total
--------------------------------------------------------------------------------------------------------------
Net sales $ 226,357 $51,081 $46,673 $ 324,111
Operating profit 22,067 2,433 4,277 28,777
Assets 336,246 75,879 69,331 481,456
Depreciation and amortization 5,102 1,151 1,052 7,305
Expenditures for
plant and equipment 5,648 1,274 1,164 8,086
</TABLE>
(13) GEOGRAPHICAL INFORMATION
The Company has operations throughout North America. Information about
the Company's operations by geographical area for the year ended
December 31, 1999, and for the period from inception, August 30,
through December 31, 1998, follows. Foreign balances represent
primarily Canada and some Mexico.
<TABLE>
1999 United States Foreign Total
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 855,199 $ 123,103 $ 978,302
Operating profit 75,295 13,142 88,437
Assets 418,729 134,702 553,431
Depreciation and amortization 19,178 4,657 23,835
Expenditures for plant and equipment 16,506 4,008 20,514
1998 United States Foreign Total
--------------------------------------------------------------------------------------------------------------
Net sales $ 283,052 $ 41,059 $ 324,111
Operating profit 25,393 3,384 28,777
Assets 421,159 60,297 481,456
Depreciation and amortization 6,185 1,120 7,305
Expenditures for plant and equipment 6,357 1,729 8,086
</TABLE>
F-17
<PAGE>
(14) Related-Party Transactions
The Company in the normal course of business has transactions with
Genlyte and Thomas. These transactions consist primarily of interest
payments to Thomas under the loan discussed in Note 6 and reimbursement
for shared corporate expenses such as rent, office services,
professional services, and shared personnel.
Related party receivables and payables as of December 31, 1999 and 1998
were comprised of the following:
1999 1998
---------------- -----------
Receivable from Genlyte $ - $ 1,855
Payable to Genlyte 8,110 -
Payable to Thomas 307 587
---------------- -----------
Total related party payables $ 8,417 $ 587
================ ===========
For the year ended December 31, 1999, and for the period from inception
August 30, through December 31, 1998, the Company had the following
related party transactions:
1999 1998
------------- -----------
Payments to Thomas for:
Interest under the loan agreement $ 1,281 $ 461
Reimbursement of corporate expenses 412 170
Payments from Genlyte for:
Reimbursement of corporate expenses 36 31
(15) Subsequent Event
On February 8, 2000, the Company announced that it has reached a
tentative agreement to acquire Translite Systems, Inc., a San Carlos,
California based manufacturer and marketer of low-voltage cable and
track lighting systems. Translite Systems, Inc. is one of the leading
designers and manufacturers of accent track systems for commercial,
retail, and residential applications.
F-18
COMMON STOCK MARKET PRICES AND DIVIDENDS
The Company's common stock is traded on the New York Stock Exchange (ticker
symbol TII). On February 9, 2000, there were 2,260 security holders of record.
High and low stock prices and dividends for the last two years were:
1999 1998
-------------------------------------------------------
Cash Cash
Market Price Dividend Market Price Dividends
Quarter Ended High Low Declared High Low Declared
- -------------------------------------------------------------------------------
March 31 $19.69 $16.13 $.075 $23.75 $18.88 $.075
June 30 22.31 18.75 .075 26.38 22.19 .075
September 30 22.25 18.63 .075 26.63 18.56 .075
December 31 20.44 16.13 .075 21.19 17.06 .075
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Basis of Presentation
Effective August 30, 1998, Thomas Industries and The Genlyte Group formed the
Genlyte Thomas Group (GTG), combining the Thomas Lighting business and Genlyte.
Genlyte has a 68% interest in GTG, and Thomas holds a 32% interest that 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' fiscal year. This change had
no effect on Thomas' net income or common shareholders' equity but did reduce
its revenues, costs, assets, and liabilities, and changed certain components of
cash flow (See Note 2). Financial statements for years prior to 1998 were not
restated; therefore, Thomas' financial statements for 1999 and 1998 are not
comparable to 1997.
Results of Operations
The Company achieved record net income in 1999 of $26.2 million, which
represents an increase of $1.6 million, or 6.7%, over 1998. Net income for 1998
was $24.5 million, an increase of $2.0 million, or 9.1%, over 1997.
Compressors and Vacuum Pumps
Net sales in 1999 for the Compressors and Vacuum Pumps Segment were $176.4
million, which was slightly lower than the 1998 record net sales level of $177.2
million. The decrease in net sales in 1999 was due primarily to softness in our
European operations where several of our major OEM customers reduced orders due
to slack demand in their end markets. We also experienced competitive pressures
in selling our European product lines in North America. To help bolster these
sales, late in the fourth quarter we consolidated the U.S. sales and marketing
function for our European products with the North American sales and marketing
arm. The 1999 net sales also included sales related to our Oberdorfer Pump
acquisition (see Note 12) as of October 25, 1999, which served to partially
offset the decreases noted above. The 1998 net sales of $177.2 million were 2.1%
higher than the $173.6 million in 1997. The 1998 increase was due to the
continued successful introduction of new products for new applications that
offset pricing pressure in the medical markets.
The 1999 operating income for the Segment decreased to $29.6 million, or 3.9%
below 1998. Operating income for 1999 included a charge in the fourth quarter of
$.2 million related to the consolidation of sales and marketing organizations as
noted in the previous paragraph. The decrease in operating income was also due
to continued pricing pressures in our major markets and volume decreases in our
European business. Operating income in 1998 decreased slightly to $30.7 million
from the record $30.9 million achieved in 1997, primarily due to pricing
pressures in the medical markets and the general weakness in OEM and distributor
business.
<PAGE>
Lighting Segment
The Lighting Segment's operating income was $23.1 million in 1999 compared to
$20.3 million in 1998. Results for 1998 include the operating income of the
former Thomas Lighting Group for the period ended August 29 prior to the
formation of GTG, Thomas' 32% interest in GTG for the four months ended December
31, 1998, and amortization of Thomas' excess investment in GTG. The 1999
increase was due to volume increases, improved efficiencies, and synergies
realized due to the formation of the joint venture. Operating income was $20.3
million in 1998 compared to $22.4 million in 1997. The decrease in operating
income of $2.1 million in 1998 was offset by a $5.7 million reduction of
Corporate expenses formerly needed to support the Lighting operations.
Corporate
Interest expense for 1999 declined $1.6 million, or 25.8%, from 1998, due
primarily to the lower levels of long-term debt and significantly lower levels
of short-term borrowings in 1999 compared to 1998. Interest expense for 1998
declined $.3 million, or 4.3%, from 1997, due principally to the lower levels of
long-term debt, offset partially by higher levels of short-term borrowings in
the first half of 1998.
Income tax provisions were $16.1 million, $14.9 million, and $13.2 million in
1999, 1998, and 1997, respectively. The effective income tax rate was 38.1% in
1999, compared to 37.8% in 1998 and 37.0% in 1997.
The Company, like other manufacturers, is subject to environmental rules and
regulations regarding the use, disposal, and cleanup of substances regulated
under environmental protection laws. It is the Company's policy to comply with
these rules and regulations, and the Company believes that its practices and
procedures are designed to meet this compliance. The Company is involved in
remedial efforts at certain of its present and former locations; and when costs
can be reasonably estimated, the Company records appropriate liabilities for
such matters. The Company does not believe that the ultimate resolution of
environmental matters will have a material adverse effect on its financial
position, results of operations, or liquidity.
At December 31, 1999, the Company employed approximately 1,060 people.
<PAGE>
Liquidity and Sources of Capital
Cash and cash equivalents decreased by $1.7 million to $16.5 million at December
31, 1999, compared to $18.2 million and $17.4 million at December 31, 1998 and
1997, respectively. Cash flows from operations were $26.7 million in 1999
compared to $24.9 million in 1998 and $32.3 million in 1997. The reduction in
cash flows from operations after 1997 reflects changes resulting from the
formation of GTG. Our 32% interest in GTG is accounted for on the equity method;
and, as a result, Thomas' share of GTG's investing and financing cash flows are
inherently reflected in the Company's cash flows from operations.
Cash flows from operations have exceeded Thomas' capital requirements for net
property additions and dividends for the last three years, providing additional
funds for the 1999 acquisition of Oberdorfer Pumps, Inc., the net reductions of
long-term and short-term debt during 1999, 1998, and 1997, totaling $28.2
million, and treasury stock purchases in 1999 and 1998.
Dividends paid in 1999 were $4.7 million compared with $4.8 million in 1998 and
$4.2 million in 1997. In October 1997, the Board of Directors declared a cash
dividend of 7.5 cents per share, a 12.5% increase in the cash dividend.
The Company announced in December 1999 that it plans to repurchase, from time to
time depending on market conditions and other factors, up to 15 percent, or
2,373,000 shares, of its outstanding Common Stock in the open market or through
privately negotiated transactions at the prevailing market prices. At December
31, 1999, the Company had purchased 64,500 shares for approximately $1.3
million. The Company plans to fund the purchase of Company stock through a
combination of cash flows generated from operating activities and short-term
borrowing arrangements.
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
December 31, 1999, there were no short-term notes payable outstanding.
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.
<PAGE>
Liquidity and Sources of Capital (Continued)
Working capital decreased slightly from $31.6 million at December 31, 1998, to
$29.7 million at December 31, 1999. Working capital decreased to $31.6 million
at December 31, 1998, from $92.3 million at December 31, 1997, principally due
to the transfer of working capital to GTG.
Dollars in Thousands 1999 1998 1997
- --------------------------------------------------------------------------------
Working capital $29,738 $31,564 $92,258
Current ratio 1.89 1.97 2.09
Long-term debt, less current portion $40,513 $48,298 $55,006
Long-term debt to total capital 16.2% 20.2% 24.1%
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 $66.4 million are not restricted at December 31, 1999.
As of December 31, 1999, the Company had available credit of $6.0 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 high 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.
Through 1999, 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.
<PAGE>
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, 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.
Forward-Looking Statements
The Company makes forward-looking statements from time to time and desires to
take advantage of the "safe harbor" which is afforded such statements under the
Private Securities Litigation Reform Act of 1995 when they are accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those in the forward-looking
statements.
The statements contained in the foregoing "Management's Discussion and Analysis
of Financial Condition and Results of Operations," as well as other statements
contained in this Annual Report and statements contained in future filings with
the Securities and Exchange Commission and publicly disseminated press releases,
and statements which may be made from time to time in the future by management
of the Company in presentations to shareholders, prospective investors, and
others interested in the business and financial affairs of the Company, which
are not historical facts, are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those
set forth in the forward-looking statements. Any projections of financial
performances or statements concerning expectations as to future developments
should not be construed in any manner as a guarantee that such results or
developments will, in fact, occur. There can be no assurance that any
forward-looking statement will be realized or that actual results will not be
significantly different from that set forth in such forward-looking statement.
In addition to the risks and uncertainties of ordinary business operations, the
forward-looking statements of the Company referred to above are also subject to
the following risks and uncertainties:
<PAGE>
Forward-Looking Statements (Continued)
o The Company operates in a highly competitive business environment, and its
sales could be negatively affected by its inability to maintain or increase
prices, changes in geographic or product mix, or the decision of its
customers to purchase competitive products instead of the Company's
products. Sales could also be affected by pricing, purchasing, financing,
operational, advertising, or promotional decisions made by purchasers of
the Company's products.
o The Compressors & Vacuum Pumps Segment operates in a market where
technology improvements and the introduction of products for new
applications are necessary for future growth. The Company could experience
difficulties or delays in the development, production, testing, and
marketing of new products. As an original equipment supplier, the Company's
results of operations are directly affected by the success of customer
products.
o GTG, of which Thomas Industries owns 32% and comprises the Company's
Lighting Segment, participates in a highly competitive market that is
dependent on the level of residential, commercial, and industrial
construction activity. Changes in interest rates, consumer preferences and
acceptance of new products affect the Lighting Segment.
o As the Company's business continues to expand outside the United States,
the Company could experience changes in its ability to obtain or hedge
against foreign currency rates and fluctuations in those rates. The Company
could also be affected by nationalizations; unstable governments,
economies, or legal systems; or inter-governmental disputes. These
currency, economic, and political uncertainties may affect the Company's
results.
The forward-looking statements made by the Company are based on estimates that
the Company believes are reasonable. This means that the Company's actual
results could differ materially from such estimates as a result of being
negatively affected as described above or otherwise positively affected.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31
-----------------------
(In thousands, except share data) 1999 1998 1997
- --------------------------------------------------------------------------------
Net sales $176,382 $177,220 $547,702
Cost of products sold 112,332 112,318 378,746
- --------------------------------------------------------------------------------
Gross profit 64,050 64,902 168,956
Selling, general and administrative expenses 41,914 40,805 127,969
Equity income from Lighting 23,147 20,323 --
- --------------------------------------------------------------------------------
Operating income 45,283 44,420 40,987
Interest expense 4,601 6,199 6,480
Interest income and other 1,527 1,185 1,137
- --------------------------------------------------------------------------------
Income before income taxes 42,209 39,406 35,644
Income taxes 16,059 14,896 13,174
- --------------------------------------------------------------------------------
Net income $ 26,150 $ 24,510 $ 22,470
- --------------------------------------------------------------------------------
Net income per share - Basic $ 1.66 $ 1.54 $ 1.42
- Diluted 1.62 1.50 1.38
See accompanying notes.
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31
----------------------
(In thousands) 1999 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 16,487 $ 18,205
Accounts receivable, net 20,869 19,205
Inventories, net 19,751 20,186
Deferred income taxes 2,634 2,997
Other current assets 3,370 3,650
- ------------------------------------------------------------------------------------------
Total current assets 63,111 64,243
Property, plant and equipment, net 36,152 35,257
Investment in GTG 158,865 147,386
Note receivable from GTG 22,287 22,287
Intangible assets, net 10,677 8,248
Other assets 2,884 4,938
- ------------------------------------------------------------------------------------------
Total assets $293,976 $282,359
- ------------------------------------------------------------------------------------------
Liabilities and shareholders' equity Current liabilities:
Accounts payable $ 7,794 $ 5,794
Accrued expenses and other current liabilities 16,608 17,908
Dividends payable 1,187 1,195
Current portion of long-term debt 7,784 7,782
- ------------------------------------------------------------------------------------------
Total current liabilities 33,373 32,679
Deferred income taxes 6,027 5,863
Long-term debt, less current portion 40,513 48,298
Other long-term liabilities 4,581 4,832
- ------------------------------------------------------------------------------------------
Total liabilities 84,494 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; shares issued: 1999 - 17,567,104;
1998 - 17,485,909 17,567 17,486
Capital surplus 110,988 110,412
Retained earnings 109,689 88,277
Accumulated other comprehensive income (loss) (6,385) (4,351)
Less cost of treasury shares: 1,807,650 shares in 1999;
1,744,400 shares in 1998 (22,377) (21,137)
- ------------------------------------------------------------------------------------------
Total shareholders' equity 209,482 190,687
- ------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $293,976 $282,359
- ------------------------------------------------------------------------------------------
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
<CAPTION>
Years ended December 31
-----------------------------------
(In thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common stock:
Beginning of year $ 17,486 $ 17,394 $ 17,325
Stock options exercised 81 92 69
- ----------------------------------------------------------------------------------------
End of year 17,567 17,486 17,394
Capital surplus:
Beginning of year 110,412 109,750 109,431
Stock options exercised 569 650 319
Other 7 12 --
- ----------------------------------------------------------------------------------------
End of year 110,988 110,412 109,750
Retained earnings:
Beginning of year 88,277 68,533 50,420
Net income 26,150 24,510 22,470
Cash dividends declared (4,738) (4,766) (4,357)
- ----------------------------------------------------------------------------------------
End of year 109,689 88,277 68,533
Accumulated other comprehensive income (loss):
Beginning of year (4,351) (5,060) (2,262)
Other comprehensive income (loss) (1) (2,034) 709 (2,798)
- ----------------------------------------------------------------------------------------
End of year (6,385) (4,351) (5,060)
Treasury stock:
Beginning of year (21,137) (17,212) (17,212)
Treasury stock purchased (1,255) (3,938) --
Treasury stock retired and other 15 13 --
- ----------------------------------------------------------------------------------------
End of year (22,377) (21,137) (17,212)
- ----------------------------------------------------------------------------------------
Total shareholders' equity $ 209,482 $ 190,687 $ 173,405
- ----------------------------------------------------------------------------------------
(1) A reconciliation of net income to total comprehensive income follows
</TABLE>
Years ended December 31
-----------------------------------
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Net income $ 26,150 $ 24,510 $ 22,470
Other comprehensive income (loss):
Minimum pension liability 706 57 495
Related tax expense (268) (22) (188)
Foreign currency translation (2,472) 674 (3,105)
- --------------------------------------------------------------------------------
Total comprehensive income $ 24,116 $ 25,219 $ 19,672
- --------------------------------------------------------------------------------
At December 31, 1999, accumulated other comprehensive income was a loss of
$6,385,000, comprised entirely of foreign currency translation losses.
See accompanying notes.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years ended December 31
--------------------------------
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 26,150 $ 24,510 $ 22,470
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,671 7,619 16,049
Deferred income taxes 503 74 1,410
Equity income from Lighting (23,147) (20,323) --
Distributions from Lighting 12,013 19,053 --
Other items 801 182 (397)
Changes in operating assets and
liabilities net of effect of acquisitions:
Accounts receivable (1,849) (1,700) (3,492)
Inventories 671 2,249 (6,048)
Accounts payable 1,917 (4,032) 3,687
Accrued expenses and other liabilities (862) (1,232) 100
Other 2,816 (1,494) (1,514)
- ---------------------------------------------------------------------------------------------
Net cash provided by operating activities 26,684 24,906 32,265
Investing activities
Purchases of property, plant and equipment (7,953) (7,687) (17,696)
Sales of property, plant and equipment 46 367 1,117
Purchase of companies (net of cash acquired) (6,466) -- (1,371)
- ---------------------------------------------------------------------------------------------
Net cash used in investing activities (14,373) (7,320) (17,950)
Financing activities
Payments on notes payable to banks, net (138) (2,408) (3,721)
Payments on long-term debt, net (7,782) (6,530) (7,638)
Treasury stock purchased (1,255) (3,938) --
Dividends paid (4,747) (4,760) (4,221)
Other 327 767 388
- ---------------------------------------------------------------------------------------------
Net cash used in financing activities (13,595) (16,869) (15,192)
Effect of exchange rate change (434) 136 (597)
- ---------------------------------------------------------------------------------------------
Net (decrease) increase in cash
and cash equivalents (1,718) 853 (1,474)
Cash and cash equivalents at beginning of year 18,205 17,352 18,826
- ---------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 16,487 $ 18,205 $ 17,352
- ---------------------------------------------------------------------------------------------
See accompanying notes.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Thomas Industries Inc. and subsidiaries (the Company or Thomas) and af filiates
operate in two business segments: the compressors and vacuum pumps segment and
the lighting segment. The Company designs, manufactures and sells compressors
and vacuum pumps for use in global original equipment manufacturing applications
as well as construction equipment, leakage detection systems and laboratory
equipment. Manufacturing facilities are located in North America and Europe,
with additional sales and distribution operations located in Asia. The Company
operates in the lighting segment through its 32% interest in the Genlyte Thomas
Group LLC (GTG). GTG, which was formed during 1998 as discussed below, designs,
manufactures, markets and sells lighting products principally in North America
for consumer, commercial and industrial applications.
2. Accounting Policies
Basis of Presentation
Effective August 30, 1998, the Company and The Genlyte Group (Genlyte) formed
GTG, combining Thomas' and Genlyte's lighting businesses. 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 its
lighting business to the equity method effective January 1, 1998. This change
had no effect on Thomas' net income or common shareholders' equity but did
reduce its revenues, costs, assets and liabilities. Financial statements for
years prior to 1998 were not restated; therefore, Thomas' financial statements
for 1999 and 1998 are not comparable to 1997.
At December 31, 1999, Thomas' investment in GTG exceeded its underlying equity
in net assets by $59,931,000. For the years ended December 31, 1999 and 1998,
equity income was reduced by $2,116,000 and $733,000, respectively, for
straight-line amortization of the excess investment.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company.
Affiliates not required to be consolidated are accounted for using the equity
method, under which the Company's share of earnings of these affiliates is
included in income as earned. Intercompany accounts and transactions are
eliminated.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from these estimates.
Inventories
Inventories are valued at the lower of cost or market. Inventories valued using
the last-in, first-out (LIFO) method represented approximately 41% and 46% of
consolidated inventories at December 31, 1999 and 1998, respectively.
Inventories not on LIFO are valued using the first-in, first-out (FIFO) method.
Inventories at December 31 consist of the following:
<PAGE>
2. Accounting Policies (continued)
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Finished goods $ 4,965 $ 5,352
Raw materials 10,209 9,196
Work in process 4,577 5,638
- --------------------------------------------------------------------------------
Total inventories $19,751 $20,186
- --------------------------------------------------------------------------------
On a current cost basis, inventories would have been $4,466,000 and $4,341,000
higher than reported at December 31, 1999 and 1998, respectively.
Property, Plant, and Equipment
The cost of property, plant and equipment is depreciated principally by the
straight-line method over their estimated useful lives. Property, plant and
equipment consisted of the following:
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Land $ 817 $ 722
Buildings 14,056 13,466
Leasehold improvements 3,194 3,581
Machinery and equipment 60,836 58,224
- --------------------------------------------------------------------------------
78,903 75,993
Accumulated depreciation and amortization (42,751) (40,736)
- --------------------------------------------------------------------------------
Total property, plant and equipment, net $36,152 $35,257
- --------------------------------------------------------------------------------
Long-lived and Intangible Assets
Intangible assets represent the excess of cost over the fair value of net assets
of companies acquired and are stated net of accumulated amortization of
$4,146,000 and $4,187,000 at December 31, 1999 and 1998, respectively. Excess of
cost over the fair value of net assets acquired (or goodwill) generally is
amortized on a straight-line basis over 30 to 40 years.
Long-lived and intangible assets are periodically reviewed for recoverability
when impairment indicators are present. If this review indicates that long-lived
assets would not be recoverable, as determined based on the estimated
undiscounted cash flows of the asset over the remaining amortization period, the
carrying amount of long-lived assets would be written down to current fair
value, which is generally determined from estimated discounted future net cash
flows (assets held for use) or net realizable value (assets held for sale). In
the opinion of management, no significant impairment indicators were present
during the periods presented in these consolidated financial statements.
Research and Development Costs
Research and development costs, which include costs of product improvements and
design, are expensed as incurred ($9,370,000 in 1999, $9,085,000 in 1998 and
$14,873,000 in 1997). The reduction subsequent to 1997 is primarily due to the
formation of GTG.
<PAGE>
2. Accounting Policies (continued)
Financial Instruments
Various methods and assumptions are used by the Company in estimating its fair
value disclosures for significant financial instruments. Fair values of cash
equivalents approximate their carrying amount because they are highly liquid
investments with a maturity of less than three months when purchased. The fair
value of long-term debt is based on the present value of the underlying cash
flows discounted at the current estimated borrowing rates available to the
Company.
Foreign Currency Translation
The local currency is the functional currency for the Company's foreign
subsidiaries. Results are translated into U.S. dollars using monthly average
exchange rates, while balance sheet accounts are translated using year-end
exchange rates. The resulting translation adjustments are included as a
component of accumulated other comprehensive income (loss) in shareholders'
equity.
Other
Accounts receivable at December 31, 1999 and 1998 was net of an allowance for
doubtful accounts of $698,000 and $656,000, respectively.
Revenue is recognized upon shipment of goods to customers.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
3. Net Income Per Share
The computation of the numerator and denominator in computing basic and diluted
net income per share follows:
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Numerator:
Net income $26,150 $24,510 $22,470
- --------------------------------------------------------------------------------
Denominator:
Weighted average shares outstanding 15,796 15,877 15,837
Effect of dilutive securities:
Director and employee stock options 344 474 422
Employee performance shares 42 32 13
- --------------------------------------------------------------------------------
Dilutive potential common shares 386 506 435
- --------------------------------------------------------------------------------
Denominator for diluted earnings per share--
adjusted weighted average shares
and assumed conversions 16,182 16,383 16,272
- --------------------------------------------------------------------------------
4. Equity Investment
Genlyte Thomas Group LLC (GTG) is an affiliated company accounted for on the
equity method. See Notes 1 and 2 for a description of GTG, as well as a
discussion of the adoption of the equity method of accounting. Summarized
financial information reported by the affiliate and a summary of the amounts
recorded in Thomas' consolidated financial statements follow. GTG is organized
as
<PAGE>
4. Equity Investment (Continued)
a limited liability corporation (LLC) that has elected to be taxed as a
partnership for U.S. income tax purposes. Therefore, Thomas and Genlyte are
responsible for income taxes applicable to their share of GTG's taxable income.
The net income reflected below for GTG does not include any provision for U.S.
income taxes which will be incurred by Thomas and Genlyte; however, amounts have
been provided for certain foreign income taxes and U.S. franchise taxes. At
December 31, 1999, Thomas' retained earnings include $11,684,000 of after-tax
undistributed earnings from GTG accounted for on the equity method.
December 31
---------------------------------
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
GTG Balance Sheets
Cash and cash equivalents $ 22,705 $ 8,533
Accounts receivable, net 155,428 146,167
Inventory, net 136,041 137,004
Other current assets 7,614 9,892
- --------------------------------------------------------------------------------
Total current assets 321,788 301,596
Property, plant and equipment, net 104,989 105,679
Goodwill, net 111,426 61,549
Other assets 15,228 12,632
- --------------------------------------------------------------------------------
Total assets $553,431 $481,456
- --------------------------------------------------------------------------------
Total current liabilities $170,478 $134,655
Other liabilities 19,821 21,421
Note payable to Thomas 22,287 22,287
Long-term debt 31,677 38,565
Shareholders' equity 309,168 264,528
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $553,431 $481,456
- --------------------------------------------------------------------------------
December 31
---------------------------------
1999 1998
- --------------------------------------------------------------------------------
GTG Income Statements
Net sales $978,302 $324,111
Cost of sales 648,626 213,305
- --------------------------------------------------------------------------------
Gross profit 329,676 110,806
SG&A expense 241,239 82,029
- --------------------------------------------------------------------------------
Operating profit 88,437 28,777
Interest expense,net 4,633 1,252
- --------------------------------------------------------------------------------
Income before taxes 83,804 27,525
Income taxes(2) 4,841 1,009
- --------------------------------------------------------------------------------
Net income $ 78,963 $ 26,516
- --------------------------------------------------------------------------------
Amounts recorded by Thomas:
Investment(3) $158,865 $147,386
Note receivable(4) 22,287 22,287
Equity income 23,147(5) 20,323(6)
Distributions received 12,013 19,053(7)
(1) Amounts represent results of operations for GTG for the four months ended
December 31, 1998 (since inception).
(2) GTG is organized as a limited liability corporation (LLC) that has elected
to be taxed as a partnership for U.S. income tax purposes. GTG is subject
to certain foreign income taxes and U.S. franchise taxes.
(3) Thomas' investment in GTG exceeded its underlying equity in net assets by
$59,931,000 at December 31, 1999 and $62,737,000 at December 31, 1998. For
the year ended December 31, 1999 and the four months ended December 31,
<PAGE>
4. Equity Investment (Continued)
1998, equity income was reduced by $2,116,000 and $733,000, respectively,
representing straight-line amortization of the excess investment.
(4) The note receivable from GTG represents a debt equalization note issued to
Thomas at the formation of GTG. 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.
(5) Consists of $25,268,000 of equity income from GTG less $2,116,000 of
amortization of Thomas' excess investment and $5,000 of other expense.
(6) Consists of $12,571,000 of income from Thomas' former lighting operations
for the eight months ended August 30, 1998 (which were restated to the
equity method) and $8,485,000 of equity income from GTG for the four months
ended December 31, 1998 less $733,000 of amortization of Thomas' excess
investment.
(7) Consists of $16,324,000 of cash flows from Thomas' former lighting
operations and distributions of $2,729,000 received from GTG.
The Company in the normal course of business has transactions with GTG. These
transactions consist primarily of interest received from GTG under the note
receivable discussed above and reimbursement for other shared corporate
expenses.
Related party receivables with GTG as of December 31, 1999 and 1998 were
$307,000 and $587,000, respectively.
For year ended December 31, 1999 and for the period from inception (August 30,
1998) through December 31, 1998, the Company had the following related party
transactions:
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Receipts from GTG for:
Interest on the note receivable $ 1,281 $ 461
Reimbursement of corporate expenses $ 412 $ 170
5. Income Taxes
A summary of the provision for income taxes follows:
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Current:
Federal $10,746 $ 9,937 $ 7,977
State 1,961 1,508 780
Foreign 2,849 3,377 3,007
- --------------------------------------------------------------------------------
15,556 14,822 11,764
Deferred:
Federal and state 663 61 1,594
Foreign (160) 13 (184)
- --------------------------------------------------------------------------------
503 74 1,410
- --------------------------------------------------------------------------------
Total provision for income taxes $16,059 $14,896 $13,174
- --------------------------------------------------------------------------------
The U.S. and foreign components of income before income taxes follow:
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
United States $35,392 $29,687 $27,360
Foreign 6,817 9,719 8,284
- --------------------------------------------------------------------------------
Income before income taxes $42,209 $39,406 $35,644
- --------------------------------------------------------------------------------
<PAGE>
5. Income Taxes (continued)
A reconciliation of the normal statutory federal income tax rate to the
Company's effective income tax rate follows:
1999 1998 1997
------------------------------
U.S. statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefits 3.0 2.5 1.4
Nondeductible amortization of intangible assets 1.3 1.4 1.6
Benefits of foreign loss carry over - (.4) (.9)
Effect of foreign tax rates 1.2 .9 1.0
GTG foreign equity earnings recorded net of tax (2.0) (.6) -
Other (.4) (1.0) (1.1)
- --------------------------------------------------------------------------------
Effective income tax rate 38.1% 37.8% 37.0%
- --------------------------------------------------------------------------------
Deferred income taxes are provided for significant income and expense items
recognized in different years for tax and financial reporting purposes.
Temporary differences which gave rise to significant deferred tax assets and
liabilities follow:
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Deferred tax assets:
Net operating loss carryforwards $ 889 $ 939
Allowance for doubtful accounts receivable 177 119
Inventory reserves 640 535
Accrued compensation expense 1,342 1,201
Other 1,645 1,869
- --------------------------------------------------------------------------------
4,693 4,663
Less valuation allowance (889) (939)
- --------------------------------------------------------------------------------
Net deferred tax asset 3,804 3,724
Deferred tax liabilities:
Accelerated depreciation 3,821 3,701
Inventory valuation 422 453
Pension expense 299 315
Investment in unconsolidated affiliates 1,734 1,504
Other 159 343
- --------------------------------------------------------------------------------
6,435 6,316
- --------------------------------------------------------------------------------
Net deferred tax liability $ 2,631 $ 2,592
- --------------------------------------------------------------------------------
Classification:
Current asset $ 2,634 $ 2,997
Long-term asset 1,170 727
Current liability 408 453
Long-term liability 6,027 5,863
- --------------------------------------------------------------------------------
Net deferred tax liability $ 2,631 $ 2,592
- --------------------------------------------------------------------------------
Deferred tax assets and liabilities are classified according to the related
asset and liability classification on the consolidated balance sheet.
Management believes it is more likely than not the Company will realize the
benefits of its deferred tax assets, net of the valuation allowance of $889,000.
The valuation allowance is provided for income tax loss carryforward benefits
for federal and state income tax purposes which expire over a
<PAGE>
5. Income Taxes (continued)
five-year period beginning in 2006, the realization of which is not assured
within the carryforward periods.
The Company's foreign subsidiaries have accumulated undistributed earnings
($28,819,000 at December 31, 1999) on which U.S. taxes have not been provided.
Under current tax regulations and with the availability of certain tax credits,
it is management's belief that the likelihood of the Company incurring
significant taxes on any distribution of such accumulated earnings is remote.
Dividends, if any, would be paid principally from current earnings.
The Company made federal, state, and foreign income tax payments of $15,964,000
in 1999, $14,476,000 in 1998 and $13,911,000 in 1997.
6. Long-Term Debt Including the Current Portion and Credit Arrangements
Long-term debt, including the current portion, consists principally of 9.36%
senior notes ($46,350,000 and $54,080,000 at December 31, 1999 and 1998,
respectively) with annual maturities through 2005.
The fair value of the Company's long-term debt at December 31, 1999 and 1998 was
$50,380,000 and $61,530,000, respectively.
Maturities of long-term debt for the next five years are as follows:
2000-$7,784,000; 2001-$7,787,000; 2002-$7,789,000; 2003-$7,791,000 and
2004-$7,794,000.
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 $66,400,000 were not restricted at December 31, 1999.
As of December 31, 1999, the Company had available credit of $6,000,000 with
banks under short-term borrowing arrangements which was unused.
Cash paid for interest was $4,867,000 in 1999, $6,426,000 in 1998 and $6,805,000
in 1997.
7. Shareholders' Equity
Stock Repurchase Program
Thomas' Board of Directors in 1999 authorized the purchase of up to 2,373,000
shares of Thomas common stock in the open market. Through December 31, 1999,
Thomas had repurchased 64,500 shares at a cost of approximately $1,255,000.
Stock Incentive Plans
At the April 20, 1995 Annual Meeting, the Company's shareholders approved the
Company's 1995 Incentive Stock Plan. An aggregate of 900,000 shares of common
stock, plus all shares remaining under the Company's 1987 Incentive Stock Plan,
were reserved for issuance under this Plan. At the April 15, 1999 Annual
Meeting, the Company's shareholders approved a 750,000 share increase in the
number of shares reserved for issuance under the 1995 Incentive Stock Plan.
Under this Plan, options may be granted to employees at not less than market
value at date of grant. All options granted have 10 year terms and vest and
become fully exercisable at the end of five years of continued employment. The
Company's 1987 Incentive Stock Plan has been terminated, except with respect to
outstanding options which may be exercised through 2005.
<PAGE>
7. Shareholders' Equity (Continued)
At the April 21, 1994 Annual Meeting, the Company's shareholders approved the
Non-Employee Director Stock Option Plan. Under this Plan, each continuing
non-employee director in office on the date of each annual meeting is awarded
options to purchase 3,000 shares of common stock at not less than market value
at date of grant. All options granted have 10-year terms, and vest and become
fully exercisable six months from the date granted. This Plan provides for
options to be awarded at each annual meeting through 2004 or until 375,000
options have been granted. At December 31, 1999, there were seven non-employee
directors in office, and 147,000 options had been awarded under this Plan.
The Company has adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123). In accordance with SFAS
123, the Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations, in accounting for its stock-based compensation because, as
discussed below, the alternative fair value accounting provided for under SFAS
123 requires use of option valuation models that were not developed for use in
valuing stock options. Under APB 25, because the exercise price of the Company's
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is required by
SFAS 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair value method of SFAS 123. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions:
1999 1998 1997
----------------------------------------
Risk-free interest rate 6.6% 4.8% 5.5%
Expected life, in years 6.5 6.5 6.5
Expected volatility 0.284 0.280 0.264
Expected dividend yield 1.6% 1.7% 1.8%
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restriction and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of its stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows:
(In thousands, except share data) 1999 1998 1997
- --------------------------------------------------------------------------------
Net income As reported $26,150 $24,510 $22,470
Pro forma 25,269 23,668 21,882
Net income per share As reported 1.66 1.54 1.42
Basic Pro forma 1.60 1.49 1.38
Net income per share As reported 1.62 1.50 1.38
Diluted Pro forma 1.56 1.44 1.34
Because SFAS 123 is applicable only to options granted subsequent to December
31, 1994, its pro forma effect is not fully reflected prior to 1999.
<PAGE>
7. Shareholders' Equity (continued)
A summary of stock option activity for all plans follows:
<TABLE>
1999 1998 1997
--------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Options Price Options Price Options Price
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year 1,497,583 $ 14.49 1,345,400 $ 13.22 1,174,110 $ 11.02
Granted 207,450 18.30 263,500 19.04 269,000 21.31
Exercised (106,442) 10.88 (108,867) 9.70 (95,211) 8.92
Forfeited or expired (99,895) 16.85 (2,450) 18.19 (2,499) 12.49
- ---------------------------------------------------------------------------------------------------------------
End of year 1,498,696 $ 15.12 1,497,583 $ 14.49 1,345,400 $ 13.22
- ---------------------------------------------------------------------------------------------------------------
Exercisable at end of year 778,439 $ 12.26 654,576 $ 10.95 559,481 $ 9.69
</TABLE>
The weighted average fair value of options granted was $5.90 in 1999, $5.98 in
1998 and $6.67 in 1997 using a Black-Scholes option pricing model. Options
outstanding at December 31, 1999 had option prices ranging from $6.58 to $23.63
and expire at various dates between October 18, 2000 and December 12, 2009 (with
a weighted-average remaining contractual life of 6.9 years). There are 941,295
shares reserved for future grant, of which 217,618 shares are reserved for the
Non-Employee Director Stock Option Plan.
In addition to the options listed above, 11,800 performance share awards were
granted in December 1999 and 1998, and 13,215 performance share awards were
granted in December 1997. Awards may be earned based on the total shareholder
return of the Company during the three-year periods commencing January 1
following the grant date. A total of 13,841 shares were earned in 1999 from
awards granted in December 1996.
Shareholder Rights Plan
On December 10, 1997, the Board of Directors of the Company adopted a
shareholder rights plan (the Rights Plan) pursuant to which preferred stock
purchase rights (the Rights) were declared and distributed to the holders of the
Company's common stock. The Rights Plan provides that the Rights separate from
the common stock and become exercisable if a person or group of persons working
together acquires at least 20% of the common stock (a 20% Acquisition) or
announces a tender offer which would result in ownership by that person or group
of at least 20% of the common stock (a 20% Tender Offer). Upon a 20%
Acquisition, the holders of Rights may purchase the common stock at half-price.
If, following the separation of the Rights from the common stock, the Company is
acquired in a merger or sale of assets, holders of Rights may purchase the
acquiring company's stock at half-price.
Notwithstanding the foregoing discussion, under the Rights Plan, the Board of
Directors has flexibility in certain events. In order to provide maximum
flexibility, the Board of Directors may delay the date upon which the Rights
become exercisable in the event of a 20% Tender Offer. In addition, the Board of
Directors has the option to exchange one share of common stock for each
outstanding Right at any time after a 20% Acquisition, but before the acquirer
has purchased 50% of the outstanding common stock. The Rights may also be
redeemed at two cents per Right at any time prior to a 20% Acquisition or a 20%
Tender Offer.
<PAGE>
8. Employee Benefit Plans
The Company has noncontributory defined benefit pension plans and contributory
defined contribution plans covering its hourly union employees. The defined
benefit plans primarily provide flat benefits of stated amounts for each year of
service. The Company's policy is to fund pension costs deductible for income tax
purposes.
The Company also sponsors defined contribution pension plans covering
substantially all U.S. employees whose compensation is not determined by
collective bargaining. Annual contributions are determined by the Board of
Directors.
<TABLE>
Pension benefits Other postretirement benefits
-------------------------------------------------------
(In thousands) 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligations
Benefit obligations at beginning of year $ 10,312 $ 29,260 $ 733 $ 4,898
Service cost 208 193 22 22
Interest cost 685 669 47 47
Plan amendments 81 -- -- --
Benefits paid (2,337) (610) (8) (417)
Purchase of annuity (2,510) -- -- --
Obligations assumed by GTG -- (19,563) -- (4,211)
Actuarial (gain) loss (457) 363 (117) 394
- ------------------------------------------------------------------------------------------------------
Benefit obligations at end of year $ 5,982 $ 10,312 $ 677 $ 733
- ------------------------------------------------------------------------------------------------------
Change in plan assets
Value of plan assets at beginning of year $ 11,203 $ 30,500 $ -- $
Actual return on plan assets 868 1,934 -- --
Employer contributions 115 115 8 417
Benefits paid (2,337) (610) (8) (417)
Purchase of annuity (2,510) -- -- --
Assets transferred to GTG -- (20,736) -- --
- ------------------------------------------------------------------------------------------------------
Value of plan assets at end of year $ 7,339 $ 11,203 $ -- $ --
- ------------------------------------------------------------------------------------------------------
The defined benefit plans' assets at December 31, 1999 consisted primarily of
listed stocks and bonds, including 14,430 shares of Company common stock having
a market value of $295,000 at that date.
The purchase of annuity of $2,510,000 relates to the termination in 1999 of
Thomas' Pension Floor Plan.
Funded status of the plans
Assets less accumulated obligations $ 1,357 $ 891 $ (677) $ (733)
Unrecognized actuarial (gain) loss (1,026) (302) (90) 66
Unrecognized transition gain 7 4 -- --
Unrecognized prior service cost 448 496 243 262
- ------------------------------------------------------------------------------------------------------
Net asset (liability) recognized at end of year $ 786 $ 1,089 $ (524) $ (405)
- ------------------------------------------------------------------------------------------------------
Plan assets exceeded accumulated benefit obligations for all plans as of
December 31, 1999. The accumulated benefit obligations and plan assets for
pension plans with accumulated benefit obligations in excess of plan assets were
$3,251,000 and $2,993,000, respectively, as of December 31, 1998.
Balance sheet assets (liabilities)
Prepaid benefit costs $ 786 $ 788 $ -- $ --
Accrued benefit liabilities -- (258) (524) (405)
Intangible assets -- 427 -- --
Accumulated other comprehensive income -- 132 -- --
- ------------------------------------------------------------------------------------------------------
Net asset (liability) recognized at end of year $ 786 $ 1,089 $(524) $ (405)
- ------------------------------------------------------------------------------------------------------
<PAGE>
8. Employee Benefit Plans (continued)
Pension benefits Other postretirement benefits
- ------------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------
Assumptions as of December 31
Discount rate 8.00% 6.75% 8.00% 6.75%
Expected return on plan assets 9.00% 9.00% -- --
Initial health care cost trend rate -- -- 8.00% 8.00%
Ultimate health care cost trend rate -- -- 4.50% 4.50%
Year ultimate rate is achieved -- -- 2006 2006
A one-percentage-point change in the assumed health care cost trend rate would
not have a significant effect on the other postretirement benefits amounts
reported above.
</TABLE>
The following table details the components of pension and other postretirement
benefit costs.
<TABLE>
Pension benefits Other postretirement benefits
----------------------------------------------------------------------
(In thousands) 1999 1998 1997 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 208 $ 193 $ 482 $ 22 $22 $ 38
Interest cost 685 669 1,994 47 47 359
Expected return on plan assets (981) (853) (2,275) -- -- --
Curtailment loss recognized 462 -- -- -- -- --
Other amortization and deferral 44 46 228 19 (14) 216
- ---------------------------------------------------------------------------------------------------------
$ 418 $ 55 $ 429 $ 88 $ 55 $ 613
- ---------------------------------------------------------------------------------------------------------
The curtailment loss of $462,000 relates to the termination in 1999 of Thomas'
Pension Floor Plan.
</TABLE>
Thomas sponsors various defined contribution plans to assist eligible employees
in providing for retirement or other future needs. Company contributions to
these plans amounted to $1,143,000 in 1999, $1,169,000 in 1998 and $3,307,000 in
1997. These contributions decreased after 1997 as a result of the formation of
GTG.
9. Leases, Commitments and Contingencies
Rental expense was $2,514,000 in 1999, $2,431,000 in 1998 and $4,888,000 in
1997. Future minimum rentals under non-cancelable operating leases are as
follows: 2000-$1,765,000; 2001-$1,675,000; 2002-$1,554,000; 2003-$1,072,000;
2004-$699,000 and thereafter-$3,511,000. The reduction in rental expense after
1997 is primarily due to the formation of GTG.
The Company had letters of credit outstanding in the amount of $6,250,000 at
December 31, 1999.
The Company, like other similar manufacturers, is subject to environmental rules
and regulations regarding the use, disposal and cleanup of substances regulated
under environmental protection laws. It is the Company's policy to comply with
these rules and regulations, and the Company believes that its practices and
procedures are designed to meet this compliance. The Company is involved in
remedial efforts at certain of its present and former locations; and when costs
can be reasonably estimated, the Company records appropriate liabilities for
such matters. Estimated liabilities are not discounted to present value. The
Company does not believe that the ultimate resolution of environmental matters
will have a material adverse effect on its financial position, results of
operations or liquidity.
<PAGE>
9. Leases, Commitments and Contingencies (Continued)
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.
10. Accrued Expenses and Other Current Liabilities
A summary of accrued expenses and other current liabilities follows:
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Accrued wages, taxes and withholdings $ 4,210 $ 4,347
Accrued insurance 1,699 1,732
Accrued interest 1,954 2,220
Income taxes payable 3,440 3,865
Other current liabilities 5,305 5,744
- --------------------------------------------------------------------------------
Total accrued expenses and other current liabilities $ 16,608 $17,908
- --------------------------------------------------------------------------------
11. Summary of Quarterly Results of Operations (Unaudited)
Unaudited quarterly results of operations follow:
<TABLE>
Net Sales Gross Profit Net Income
(In thousands -----------------------------------------------------------------------
except share data) 1999 1998 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st Qtr $ 46,301 $ 48,209 $ 16,808 $ 17,628 $ 5,874 $ 5,250
2nd Qtr 47,467 46,336 17,076 17,278 7,281 6,875
3rd Qtr 39,856 43,146 14,353 15,845 6,748 7,050
4th Qtr 42,758 39,529 15,813 14,151 6,247 5,335
$176,382 $177,220 $ 64,050 $ 64,902 $ 26,150 $ 24,510
</TABLE>
Basic Net Income Diluted Net Income
Per Share Per Share
-------------------------------------------------
1999 1998 1999 1998
1st Qtr. $ 0.37 $ 0.33 $ 0.36 $ 0.32
2nd Qtr. 0.46 0.43 0.45 0.42
3rd Qtr. 0.43 0.44 0.42 0.43
4th Qtr. 0.40 0.34 0.39 0.33
- --------------------------------------------------------------------------------
$ 1.66 $ 1.54 $ 1.62 $ 1.50
- --------------------------------------------------------------------------------
12. Acquisition
During October 1999, the Company acquired Oberdorfer Pumps, Inc., a manufacturer
of centrifugal, rotary gear and rubber impeller liquid pumps located in
Syracuse, New York at a cost of approximately $6,400,000. The Company recorded
approximately $3,200,000 of goodwill related to this acquisition which is being
amortized over 30 years.
<PAGE>
13. Industry Segment Information
<TABLE>
Industry segment information follows:
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Sales and operating revenues
Compressors & Vacuum Pumps $ 176,382 $ 177,220 $ 173,637
Lighting -- -- 374,065
- --------------------------------------------------------------------------------------
$ 176,382 $ 177,220 $ 547,702
- --------------------------------------------------------------------------------------
Operating income (loss)
Compressors & Vacuum Pumps $ 29,556 $ 30,743 $ 30,879
Lighting 23,147 20,323 22,423
Corporate (7,420) (6,646) (12,315)
- --------------------------------------------------------------------------------------
$ 45,283 $ 44,420 $ 40,987
- --------------------------------------------------------------------------------------
Assets
Compressors & Vacuum Pumps $ 95,416 $ 89,736 $ 85,878
Lighting 158,865 147,386 222,449
Corporate 39,695 45,237 19,312
- --------------------------------------------------------------------------------------
$ 293,976 $ 282,359 $ 327,639
- --------------------------------------------------------------------------------------
Investment in equity affiliates
Lighting $ 158,865 $ 147,386 $ --
Expenses not affecting cash
Depreciation and amortization
Compressors & Vacuum Pumps $ 7,452 $ 7,380 $ 6,530
Lighting -- -- 9,345
Corporate 219 239 174
- --------------------------------------------------------------------------------------
$ 7,671 $ 7,619 $ 16,049
- --------------------------------------------------------------------------------------
Additions to property, plant and equipment
Compressors & Vacuum Pumps $ 7,555 $ 7,374 $ 8,441
Lighting -- -- 9,006
Corporate 398 313 249
- --------------------------------------------------------------------------------------
$ 7,953 $ 7,687 $ 17,696
- --------------------------------------------------------------------------------------
Intersegment and interlocation sales are not significant and have been
eliminated from the above tabulation. Operating income by segment is gross
profit less operating expenses, excluding interest, general corporate expenses,
other income and income taxes.
</TABLE>
<PAGE>
13. Industry Segment Information (continued)
Information by geographic area follows:
<TABLE>
(In thousands) 1999 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Total net sales including intercompany sales
United States $ 131,615 $ 131,253 $ 469,984
Canada -- -- 43,460
Europe 55,501 58,877 58,143
- -----------------------------------------------------------------------------------------
$ 187,116 $ 190,130 $ 571,587
- -----------------------------------------------------------------------------------------
Intercompany sales
United States $ (4,981) $ (5,698) $ (14,257)
Canada -- -- (489)
Europe (5,753) (7,212) (9,139)
- -----------------------------------------------------------------------------------------
$ (10,734) $ (12,910) $ (23,885)
- -----------------------------------------------------------------------------------------
Net sales to unaffiliated customers
United States $ 126,634 $ 125,555 $ 455,727
Canada -- -- 42,971
Europe 49,748 51,665 49,004
- -----------------------------------------------------------------------------------------
$ 176,382 $ 177,220 $ 547,702
- -----------------------------------------------------------------------------------------
Long-lived assets
United States $ 29,406 $ 27,473 $ 69,879
Canada -- -- 6,666
Europe 6,746 7,784 7,057
- -----------------------------------------------------------------------------------------
$ 36,152 $ 35,257 $ 83,602
- -----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
REPORTS OF MANAGEMENT
AND INDEPENDENT AUDITORS
Responsibility for Financial Reporting
Board of Directors and Shareholders
Thomas Industries Inc.
The financial statements herein have been prepared under management direction
from accounting records which management believes presents fairly the
transactions and financial position of the Company. They were developed in
accordance with generally accepted accounting principles appropriate in the
circumstances.
Management has established internal control systems and procedures to provide
reasonable assurance that assets are maintained and accounted for in accordance
with its authorizations and that transactions are recorded in a manner to ensure
reliable financial information. The Company has a formally stated and
communicated policy demanding of employees high ethical standards in their
conduct of its business.
The Audit Committee of the Board of Directors is composed of outside directors
who meet regularly with management, and independent auditors to review audit
plans and fees, independence of auditors, internal controls, financial reports
and related matters. The Committee has unrestricted access to the independent
auditors with or without management attendance.
Timothy C. Brown
Chairman of the Board
President
Chief Executive Officer
Phillip J. Stuecker
Vice President of Finance
Chief Financial Officer
Secretary
Louisville, Kentucky
February 9, 2000
Report of Independent Auditors
Board of Directors and Shareholders
Thomas Industries Inc.
We have audited the consolidated balance sheets of Thomas Industries Inc. and
subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The financial
statements of Genlyte Thomas Group LLC (GTG), a partnership formed on August 30,
1998, in which the Company has a 32% interest, have been audited by other
auditors whose report has been furnished to us; insofar as our opinion on the
consolidated financial statements relates to data included for GTG, it is based
solely on their report.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Thomas Industries
Inc.and subsidiaries at December 31, 1999 and 1998, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with generally accepted accounting
principles in the United States.
Louisville, Kentucky
February 9, 2000
<PAGE>
<TABLE>
FIVE YEAR SUMMARY OF OPERATIONS AND STATISTICS
<CAPTION>
Years ended December 31
------------------------------------------------------------------------------
(Dollars in thousands except share data) 1999(A) 1998(A) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings Statistics
Net sales $ 176,382 $ 177,220 $ 547,702 $ 510,111 $ 490,573
Cost of products sold 112,332 112,318 378,746 358,778 352,551
Selling, general, and administrative expenses 41,914 40,805 127,969 117,659 108,284
Equity income from lighting 23,147 20,323 -- -- --
Interest expense 4,601 6,199 6,480 7,333 8,242
Income before income taxes 42,209 39,406 35,644 27,688 21,053
As a percentage of net sales 23.9% 22.2% 6.5% 5.4% 4.3%
Income taxes 16,059 14,896 13,174 10,272 8,278
Effective tax rate 38.1% 37.8% 37.0% 37.1% 39.3%
Net income 26,150 24,510 22,470 17,416 12,775
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Position
Working capital $ 29,738 $ 31,564 $ 92,258 $ 85,838 $ 80,837
Current ratio 1.9 to 1 .0 to 1 22.1 to1 2.0 to 1 2.0 to 1
Property, plant and equipment - net 36,152 5,257 380,197 77,795 75,710
Total assets 293,976 282,359 327,639 319,650 313,533
Return on ending assets 8.9% .7% 86.9% 5.4% 4.1%
Long-term debt, less current portion 40,513 8,298 455,006 62,632 70,791
Long-term debt to capital 16.2% 0.2% 224.1% 28.4% 33.1%
Shareholders' equity 209,482 90,687 1173,405 157,702 143,177
Return on beginning shareholders' equity 13.7% 4.1% 114.2% 12.2% 9.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Data Per Common Share (B)
Net income $ 1.62 $ 1.50 $ 1.38 $ 1.09 $ 0.83
Cash dividends declared 0.30 0.30 0.28 0.27 0.27
Shareholders' equity 12.97 11.73 10.59 9.99 9.43
Price range - high 22.31 26.63 22.33 15.92 16.08
low 16.13 17.06 13.67 11.00 9.08
Closing price 20.44 19.625 19.75 13.92 15.67
Price / earnings ratio 12.6 13.1 14.3 12.8 18.8
- ------------------------------------------------------------------------------------------------------------------------------------
Other Data
Cash dividends declared $ 4,738 $ 4,766 $ 4,357 $ 4,169 $ 4,036
Expenditures for property, plant and equipment 7,953 7,687 17,696 15,071 12,288
Depreciation and amortization 7,671 7,619 16,049 15,682 14,803
Average number of employees 1,030 1,050 3,300 3,150 3,100
Average sales per employee 171.2 168.8 166.0 161.9 158.2
Number of shareholders of record 2,248 1,950 2,057 2,232 2,407
Average number common shares outstanding (B) 16,181,507 16,382,928 16,271,678 16,021,026 15,348,828
- ------------------------------------------------------------------------------------------------------------------------------------
Segment Information
Net Sales
Compressors & Vacuum Pumps $ 176,382 $ 177,220 $ 173,637 $ 170,064 $ 157,731
Lighting -- -- 374,065 340,047 332,842
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Sales $ 176,382 $ 177,220 $ 547,702 $ 510,111 $ 490,573
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Income
Compressors & Vacuum Pumps $ 29,556 $ 30,743 $ 30,879 $ 28,857 $ 28,446
Lighting 23,147 20,323 22,423 16,832 11,193
Corporate expenses (7,420) (6,646) (12,315) (11,047) (10,133)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Operating Income $ 45,283 $ 44,420 $ 40,987 $ 34,642 $ 29,506
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE: See accompanying Notes to Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(A) Thomas Industries changed its method of accounting for its lighting
business (contributed to GTG) to the equity method, effective January 1,
1998, the beginning of Thomas' fiscal year. This change had no effect on
Thomas' net income or common shareholders' equity but did reduce its
revenues, costs, assets, liabilities, and number of employees. Financial
statements for years prior to 1998 were not restated; therefore, some
information in Thomas' financial statements and highlights for 1999 and
1998 is not comparable to prior years.
(B) Adjusted for 1997 stock splits.
</TABLE>
Exhibit 21.
-----------
<TABLE>
SUBSIDIARIES OF THE REGISTRANT
<CAPTION>
Place of Percentage of
Name of Company Incorporation Voting Securities
--------------- ------------- -----------------
<S> <C> <C>
ASF Thomas Limited United Kingdom 100%
ASF Thomas Industries Holding Deutschland GmbH Germany 100%
ASF Thomas Industries GmbH, Puchheim Germany 100%
ASF Thomas Industries GmbH, Memmingen Germany 100%
ASF Thomas Industries GmbH & Co. KG, Wuppertal Germany 100%
ASF Thomas, Inc. Georgia 100%
Blue Grass Holdings Inc. Nevada 100%
T.I. Industries Corporation Delaware 100%
TI Pneumotive, Inc. Delaware 100%
Thomas Group U.K., Inc. Delaware 100%
Thomas Imports, Inc. Nevada 100%
Thomas Industries Asia Pacific, Inc. Delaware 100%
Thomas Industries Asia Pacific, Ltd. Hong Kong 100%
Thomas Industries Export, Inc. U.S. Virgin Islands 100%
Thomas Industries Holdings Inc. Delaware 100%
Thomas-Oberdorfer Pumps, Inc. Delaware 100%
Tupelo Holdings Inc. Delaware 100%
Welch Vacuum Technology, Inc. Delaware 100%
</TABLE>
<TABLE>
NON WHOLLY OWNED SUBSIDIARIES
<CAPTION>
Place of Percentage of
Name of Company Incorporation Voting Securities
--------------- ------------- -----------------
<S> <C> <C>
Thomas Americas Industria e Commercio, LTDA Brazil 95%
</TABLE>
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 333-30306, No. 333-92757, No. 333-83707, No. 333-34175, No.
33-59099, No. 33-54689, and No. 33-51653) of Thomas Industries Inc. of our
report dated February 9, 2000, with respect to the consolidated financial
statements and schedule of Thomas Industries Inc. and subsidiaries included in
the Annual Report (Form 10-K) for the year ended December 31, 1999.
/s/ Ernst & Young LLP
Louisville, Kentucky
March 22, 2000
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in the previously filed Registration Statements (Forms S-8 No.
333-30306, No. 333-92757, No. 333-83707, No. 333-34175, No. 33-59099, No.
33-54689 and No. 33-51653) of Thomas Industries Inc. of our report dated
February 2, 2000, with respect to the consolidated financial statements of
Genlyte Thomas Group LLC and subsidiaries included in the Form 10-K for the year
ended December 31, 1999.
/s/ ARTHUR ANDERSEN LLP
Louisville, Kentucky
March 24, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998<F1>
<CASH> 16,487 18,205
<SECURITIES> 0 0
<RECEIVABLES> 21,567 19,861
<ALLOWANCES> 698 656
<INVENTORY> 19,751 10,186
<CURRENT-ASSETS> 63,111 64,243
<PP&E> 78,902 73,115
<DEPRECIATION> 42,751 39,114
<TOTAL-ASSETS> 293,976 282,359
<CURRENT-LIABILITIES> 33,373 34,403
<BONDS> 40,513 48,298
0 0
0 0
<COMMON> 17,567 17,486
<OTHER-SE> 191,915 173,201
<TOTAL-LIABILITY-AND-EQUITY> 293,976 282,359
<SALES> 176,382 177,220
<TOTAL-REVENUES> 176,382 177,220
<CGS> 112,332 112,318
<TOTAL-COSTS> 112,332 112,318
<OTHER-EXPENSES> 17,048 19,068
<LOSS-PROVISION> 192 229
<INTEREST-EXPENSE> 4,601 6,199
<INCOME-PRETAX> 42,209 39,406
<INCOME-TAX> 16,059 14,896
<INCOME-CONTINUING> 26,150 24,510
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 26,150 24,510
<EPS-BASIC> 1.66 1.54
<EPS-DILUTED> 1.62 1.50
</TABLE>
