UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-2257
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TRANS-LUX CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-1394750
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Richards Avenue, Norwalk, CT 06856-5090
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
(203) 853-4321
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(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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.
Yes X No
------- ------
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Date Class Shares Outstanding
- -------- ------------------------------ ------------------
11/13/97 Common Stock - $1.00 Par Value 990,454
11/13/97 Class B Stock - $1.00 Par Value 296,161
(Immediately convertible into a
like number of shares of Common
Stock.)
<PAGE>
TRANS-LUX CORPORATION AND SUBSIDIARIES
Index
Part I - Financial Information Page No.
Consolidated Balance Sheets - September 30, 1997 (unaudited) and 1
December 31, 1996
Consolidated Statements of Stockholders' Equity - September 30,
1997 (unaudited) and December 31, 1996 2
Consolidated Statements of Income - Three and Nine Months Ended
September 30, 1997 and 1996 (unaudited) 3
Consolidated Statements of Cash Flows - Nine Months Ended
September 30, 1997 and 1996 (unaudited) 4
Notes to Consolidated Financial Statements (unaudited) 5
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Part II - Other Information
Item 6. Exhibits and reports on Form 8-K 10
Signatures 11
<PAGE>
Part I - FINANCIAL INFORMATION
-------------------------------
<TABLE>
<CAPTION>
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30 December 31
ASSETS 1997 1996
------ ------------ -----------
<S> <C> <C>
Current assets: (unaudited)
Cash and cash equivalents $ 356,000 $19,274,000
Available-for-sale securities 12,197,000 600,000
Receivables 7,790,000 4,173,000
Unbilled receivables 216,000 2,401,000
Inventories 4,717,000 1,775,000
Prepaids and other current assets 435,000 348,000
---------- ----------
Total current assets 25,711,000 28,571,000
---------- ----------
Rental equipment 60,262,000 52,417,000
Less accumulated depreciation 21,894,000 18,465,000
---------- ----------
38,368,000 33,952,000
---------- ----------
Property, plant and equipment 26,114,000 21,655,000
Less accumulated depreciation and amortization 8,052,000 6,973,000
---------- ----------
18,062,000 14,682,000
Prepaids, intangibles and other 5,578,000 4,772,000
Maintenance contracts, net 1,072,000 1,270,000
Note receivable, joint venture (excludes
$94,000 current portion) 714,000 784,000
---------- ----------
$89,505,000 $84,031,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accruals $ 6,799,000 $ 6,175,000
Income taxes payable 179,000 105,000
Current portion of long-term debt 1,463,000 203,000
---------- ----------
Total current liabilities 8,441,000 6,483,000
---------- ----------
Long-term debt:
9% convertible subordinated debentures due 2005 ---- 4,811,000
9.5% subordinated debentures due 2012 1,057,000 1,057,000
7.5% convertible subordinated notes due 2006 31,625,000 27,500,000
Notes payable 17,991,000 14,744,000
---------- ----------
50,673,000 48,112,000
Deferred revenue, deposits and other 2,748,000 3,029,000
Deferred income taxes 3,769,000 3,745,000
Stockholders' equity 23,874,000 22,662,000
---------- ----------
$89,505,000 $84,031,000
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
September 30 December 31
1997 1996
------------- ------------
(unaudited)
<S> <C> <C>
Capital stock:
Preferred - $1.00 par value
Authorized - 500,000 shares
Issued - none
Common - $1.00 par value
Authorized - 5,500,000 shares
Issued - 2,441,765 shares in 1997 and 2,441,765 in 1996 $ 2,442,000 $ 2,442,000
Class B - $1.00 par value
Authorized - 1,000,000 shares
Issued - 298,640 shares in 1997 and 298,640 in 1996 298,000 298,000
Class A - $1.00 par value
Authorized - 3,000,000 shares
Issued - none
Additional paid-in capital 13,904,000 13,818,000
Retained earnings 18,838,000 17,964,000
Other 31,000 (58,000)
---------- ----------
35,513,000 34,464,000
Less treasury stock - at cost
1,453,821 shares in 1997 and 1,476,552 in 1996
(excludes additional 298,640 shares held in 1997 and 298,640 in
1996 for conversion of Class B stock) 11,639,000 11,802,000
---------- ----------
Total stockholders' equity $23,874,000 $22,662,000
========== ==========
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<TABLE>
<CAPTION>
THE CHANGES IN CONSOLIDATED STOCKHOLDERS'
EQUITY ARE AS FOLLOWS:
Additional
Common Class Paid-in Retained Treasury
Stock B Stock Capital Earnings Other Stock
--------- ------- ---------- ---------- ------- ---------
<C> <C> <C> <C> <C> <C> <C>
December 31, 1996 $2,442,000 $298,000 $13,818,000 $17,964,000 ($58,000) ($11,802,000)
1/1/97 - 9/30/97: (unaudited)
Net income 1,006,000
Cash dividends (132,000)
Unrealized holding gain 89,000
9% debentures conversion 89,000 151,000
Exercise of stock options (3,000) 12,000
--------- -------- ---------- ---------- ------ -----------
September 30, 1997 $2,442,000 $298,000 $13,904,000 $18,838,000 $31,000 ($11,639,000)
========= ======= ========== ========== ====== ===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
2
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<TABLE>
<CAPTION>
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
--------------------------- -------------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Equipment rentals and maintenance $ 5,522,000 $ 5,350,000 $17,468,000 $16,273,000
Equipment sales 7,310,000 5,596,000 17,043,000 13,276,000
Theatre receipts and other 1,535,000 1,301,000 4,003,000 3,322,000
---------- ---------- ---------- ----------
Total revenues 14,367,000 12,247,000 38,514,000 32,871,000
---------- ---------- ---------- ----------
Operating expenses:
Cost of equipment rentals and maintenance 2,815,000 2,971,000 9,005,000 8,883,000
Cost of equipment sales 4,949,000 3,721,000 11,043,000 8,753,000
Cost of theatre receipts and other 1,176,000 976,000 3,015,000 2,529,000
---------- ---------- ---------- ----------
Total operating expenses 8,940,000 7,668,000 23,063,000 20,165,000
---------- ---------- ---------- ----------
Gross profit from operations 5,427,000 4,579,000 15,451,000 12,706,000
General and administrative expenses 3,942,000 3,370,000 11,420,000 9,442,000
---------- ---------- ---------- ----------
1,485,000 1,209,000 4,031,000 3,264,000
Interest income 281,000 52,000 958,000 95,000
Interest expense (1,072,000) (638,000) (3,291,000) (1,764,000)
Other income (expense) 51,000 (19,000) 67,000 (97,000)
---------- ---------- ---------- ----------
Income before income taxes 745,000 604,000 1,765,000 1,498,000
---------- ---------- ---------- ----------
Provision for income taxes:
Current 246,000 218,000 593,000 521,000
Deferred 74,000 36,000 166,000 108,000
---------- ---------- ---------- ----------
320,000 254,000 759,000 629,000
---------- ---------- ---------- ----------
Net income $ 425,000 $ 350,000 $ 1,006,000 $ 869,000
========== ========== ========== ==========
Earnings per share:
Primary $ 0.32 $ 0.27 $ 0.77 $ 0.68
Fully diluted $ 0.22 $ 0.25 $ 0.60 $ 0.64
Average common and common equivalent
shares outstanding:
Primary 1,321,000 1,291,000 1,309,000 1,283,000
Fully diluted 3,585,000 1,674,000 3,645,000 1,674,000
Cash dividends per share:
Common stock $ 0.035 $ 0.035 $ 0.105 $ 0.105
Class B stock $ 0.0315 $ 0.0315 $ 0.0945 $ 0.0945
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
3
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<TABLE>
<CAPTION>
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) FOR THE NINE MONTHS
ENDED SEPTEMBER 30
1997 1996
----------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,006,000 $ 869,000
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,272,000 5,277,000
Net (income) loss of joint venture (37,000) 97,000
Deferred income taxes (49,000) 44,000
Changes in operating assets and liabilities:
Receivables (1,532,000) (3,031,000)
Unbilled receivables 2,185,000 (1,632,000)
Inventories (905,000) 122,000
Prepaids and other current assets (66,000) 228,000
Prepaids, intangibles and other (350,000) (239,000)
Accounts payable and accruals (2,442,000) 1,632,000
Income taxes payable 74,000 (81,000)
Deferred revenue, deposits and other (500,000) (1,108,000)
-----------------------------
Net cash provided by operating activities 2,656,000 2,178,000
-----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of rental equipment (7,845,000) (5,531,000)
Purchases of property, plant and equipment (551,000) (882,000)
Payments for acquisitions (net) (2,268,000) ----
Proceeds from (investment in) joint venture 70,000 345,000
Loan to joint venture ---- (941,000)
Purchases of securities (14,846,000) ----
Redemption of securities 3,411,000 ----
-----------------------------
Net cash (used in) investing activities (22,029,000) (7,009,000)
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 8,075,000 5,700,000
Repayment of long-term debt (2,924,000) (1,352,000)
Redemption of Company's 9% convertible subordinated debentures (4,573,000) ----
Proceeds from exercise of stock options 9,000 4,000
Purchase of treasury stock ---- (1,000)
Cash dividends (132,000) (131,000)
-----------------------------
Net cash provided by financing activities 455,000 4,220,000
-----------------------------
Net decrease in cash and cash equivalents (18,918,000) (611,000)
Cash and cash equivalents at beginning of year 19,274,000 665,000
-----------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 356,000 $ 54,000
=============================
Interest paid $ 2,445,000 $1,452,000
Interest received 707,000 101,000
Income taxes paid 553,000 542,000
-----------------------------
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
4
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TRANS-LUX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(unaudited)
Note 1 - Basis of Presentation
Financial information included herein is unaudited, however, such information
reflects all adjustments which are, in the opinion of management, necessary for
the fair presentation of the consolidated financial statements for the interim
periods. The results for the interim periods are not necessarily indicative of
the results to be expected for the full year. It is suggested that the
September 30, 1997 consolidated financial statements be read in conjunction
with the consolidated financial statements and notes included in the Company's
Annual Report and Form 10-K for the year ended December 31, 1996. Certain
reclassifications of prior years' amounts have been made to conform to the
current year's presentation.
The Company has limited involvement with derivative financial instruments and
does not use them for trading purposes; they are only used to manage
well-defined interest rate risks. From time to time the Company enters into
interest swap agreements to reduce its exposure to interest rate fluctuations.
The net gain or loss from the exchange of interest rate payments is included in
interest expense in the consolidated statements of income and in interest paid
in the consolidated statements of cash flows.
Note 2 - Accounting for Income Taxes
The provision for income tax expense for the three months ended September 30,
1997 was $320,000 of which $246,000 and $74,000 are current and deferred tax
expense, respectively. The provision for income tax expense for the nine
months ended September 30, 1997 was $759,000 of which $593,000 and $166,000 are
current and deferred tax expense, respectively. There was no change in the
valuation allowance during the nine months ended September 30, 1997.
Note 3 - Prepaids, Intangibles and Other
Prepaids, intangibles and other consist of the following:
September 30, December 31,
1997 1996
------------ ------------
Prepaids and other $ 976,000 $ 719,000
Deferred debenture and note costs 1,812,000 1,836,000
Deferred financing costs 291,000 395,000
Acquisition costs 87,000 91,000
Deposits and advances 111,000 76,000
Patents 213,000 259,000
Goodwill and noncompete agreements 1,534,000 890,000
Investment in joint ventures 110,000 73,000
Long-term portion of officers' and
employees' loans 444,000 433,000
--------- ---------
$5,578,000 $4,772,000
========== ==========
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Note 4 - Change in Estimate
The Company reevaluated its previously established estimates of the useful
lives of its indoor and outdoor display rental equipment. Current estimates
based on use and experience indicate that the actual useful lives of the rental
equipment are longer than previously estimated. Accordingly, the Company
increased the depreciable lives of its rental equipment effective January 1,
1997, which had a favorable impact of approximately $250,000 and $750,000 on
income before income taxes for the three and nine months ended September 30,
1997, respectively. There was a favorable impact of $0.11 and $0.33 on primary
earnings per share and $0.04 and $0.12 on fully diluted earnings per share for
the three and nine months ended September 30, 1997, respectively, as a result
of the change in estimate.
Note 5 - Earnings per Share
The Company will adopt the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings per Share" in the fourth quarter of 1997. The
standard specifies the computation, presentation and disclosure requirements
for earnings per share. As required by the standard, the Company will restate
all prior period earnings per share data presented. The pro forma earnings per
share for the three and nine months ended September 30, 1997 are as follows:
For the Three Months For the Nine Months
Ended September 30, 1997 Ended September 30, 1997
------------------------ ------------------------
Basic $0.33 $0.78
Diluted $0.21 $0.58
Note 6 - Acquisitions
On May 1, 1997, the Company, through its subsidiary Trans-Lux Midwest
Corporation, acquired the catalog and custom scoreboard sign business segment
of Fairtron Corporation ("Fairtron"), an Iowa corporation located in Des
Moines, Iowa, for a cash purchase price of approximately $104,000 (after
adjustments), noncompete and consulting fees and assumption of certain debt for
an approximate total purchase price of $7.0 million. Additionally, there is a
contingent additional purchase price of $250,000, based on future sales. The
Company retired approximately $2.8 million of the assumed debt of Fairtron.
The purchase was financed by working capital and assumption of certain debt.
Fairtron was a manufacturer of custom and catalog scoreboards and related
signs. Trans-Lux Midwest Corporation plans to continue the catalog scoreboard
activities and certain of the custom scoreboard business. The acquisition has
been accounted for using the purchase method of accounting. The $7.0 million
total purchase price included current assets, net of cash received, of
approximately $4.1 million net book value of accounts receivable and
inventories; fixed assets of land, building, leasehold, machinery and
equipment; and intellectual property. The excess of the purchase price over
the fair value of the net assets acquired has been recorded as goodwill, which
is being amortized over 20 years on a straight line basis. The purchase price
allocation used in the preliminary pro forma information is based on estimated
fair values and may be subject to change as additional information becomes
known for the fair value of the property, plant and equipment.
The historical financial results of Fairtron included both the catalog and
custom scoreboard sign businesses. The historical financial results of
Fairtron also included certain expenses which are not expected to continue.
Just prior to the acquisition, Fairtron reduced head count by approximately
33%. The Company, accordingly, is operating at a substantial reduction in
personnel compared to Fairtron's historical operations. The Company has also
6
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taken actions which it believes will reduce operating expenses through the
consolidation of facilities and other cost saving measures. In addition, the
Company's operation of the custom scoreboard business portion is anticipated to
be at a lower level of activity because the Company does not expect to continue
to manufacture certain scoreboards that produce lower profit margins. The
effects of such actions are not included in the pro forma financial statements.
The Company's pro forma financial results are presented to provide information
on the impact of the acquisition of Fairtron to the results of operations of
the Company for the nine months ended September 30, 1997 and 1996. The
historical results of Fairtron included both the catalog and custom scoreboard
businesses. The historical results of Fairtron for the nine months ended
September 30, 1996 were for the nine months ended December 31, 1996 which
represented the first three quarters of their fiscal year. The pro forma
financial information reflects the Company's preliminary pro forma results of
operations as if the acquisition had occurred as of January 1, 1996 for the
nine months ended September 30, 1996 and as of January 1, 1997 for the nine
months ended September 30, 1997.
The following pro forma financial information should be read in conjunction
with the Company's consolidated financial statements. The preliminary pro
forma information does not purport to represent what the Company's results of
operations or financial position would have been if the acquisition, in fact,
had occurred on January 1, 1996 and January 1, 1997 or to project the Company's
results of operations or financial position for any future period or at any
future date. The results of operations have been included in the Company's
consolidated financial statements since May 1, 1997, the date of acquisition.
The pro forma consolidated balance sheet is not presented as the transaction is
already reflected in the Company's consolidated balance sheet at September 30,
1997.
Nine months ended Nine months ended
September 30, 1997 September 30, 1996
------------------ ------------------
Revenues $42,967,000 $44,007,000
=========== ===========
Net income $1,026,000 $371,000
========== ========
Earnings per share - primary $0.78 $0.29
===== =====
Earnings per share - fully diluted $0.61 *
===== =====
* Not dilutive
On September 12, 1997, the Company, through its subsidiary Trans-Lux Castle
Rock Corporation, acquired the Lake Dillon Cinemas, a four-plex theatre located
in Summit County, Colorado for a cash purchase price of approximately $1.5
million. The purchase was financed by working capital.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
The Company's total revenues for the nine months ended September 30, 1997
increased 17.2% to $38.5 million from $32.9 million for the same period in the
previous year. Revenues from equipment rentals and maintenance increased
$1,195,000 or 7.3% in 1997, primarily due to the increase in new indoor display
rentals and maintenance contracts, offset by the expected decline in revenues
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from the outdoor lease and maintenance bases previously acquired, although the
decline is at a slower rate than originally anticipated. Revenues from
equipment sales increased $3,767,000 or 28.4% in 1997, primarily due to the
acquisition of the Fairtron catalog and custom scoreboard sign business in May
1997, and increased revenue from the sales of outdoor products. This increase
was offset by a decline in revenue from the sales of indoor products. In 1996
the Company recognized certain significant sales on the percentage of
completion basis which did not recur in 1997. Revenues from theatre receipts
and other increased $681,000 or 20.5% in 1997, primarily attributable to the
acquisitions of the Gaslight Cinemas in March 1997 and the Lake Dillon Cinemas
in September 1997 and increased attendance at the theatres.
Cost of equipment rentals and maintenance, which includes field service
expenses, plant repair and maintenance, and depreciation, increased by $122,000
or 1.4% in 1997, primarily due to increased field service costs related to the
installation of indoor displays, offset by the favorable impact of $750,000 as
a result of a change in the estimate of the useful lives of the rental
equipment from eight to ten years for the indoor rental equipment and from ten
to 15 years for the outdoor rental equipment. The cost of equipment rentals
and maintenance represented 51.6% of related revenues for the nine months ended
September 30, 1997 compared to 54.6% in 1996. Cost of equipment sales
increased $2,290,000 or 26.2% in 1997, primarily due to the Fairtron
acquisition and the increase in sales of outdoor products, offset by the
decline in sales of indoor products. The cost of equipment sales represented
64.8% of related revenues for the nine months ended September 30, 1997 compared
to 65.9% in 1996. Cost of theatre receipts and other, which includes film
rental expenses, increased $486,000 or 19.2% in 1997, primarily due to the
Gaslight Cinemas and Lake Dillon Cinemas acquisitions and the increase in film
rental costs resulting from increased box office receipts. The cost of theatre
receipts and other represented 75.3% of related revenues for the nine months
ended September 30, 1997 compared to 76.1% in 1996.
General and administrative expenses increased by $1,978,000 or 20.9%, primarily
due to the Fairtron acquisition, expanded sales efforts, increased payroll and
benefits costs and the negative impact of the effect of foreign currency
exchange rates.
Interest income increased by $863,000, primarily attributable to additional
investments as a result of the issuance of the 7 1/2% Convertible Subordinated
Notes due 2006 ("7 1/2% Notes"). Interest expense increased by $1,527,000,
primarily due to the issuance of the 7 1/2% Notes and a special one-time charge
of approximately $113,000 for the unamortized portion of the financing costs
pertaining to the redemption of the 9% Convertible Subordinated Debentures in
the first quarter of 1997. Other income/expense relates to the operations of
the theatre joint venture, MetroLux Theatres and gain on sale of securities.
The effective tax rate at September 30, 1997 and 1996 was 43.0% and 42.0%,
respectively
Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996
The Company's total revenues for the three months ended September 30, 1997
increased 17.3% to $14.4 million from $12.2 million for the same period in the
previous year. Revenues from equipment rentals and maintenance increased
$172,000 or 3.2% in 1997, primarily due to the increase in new indoor display
rentals and maintenance contracts, offset by the expected decline in revenues
from the outdoor lease and maintenance bases previously acquired, although the
decline is at a slower rate than originally anticipated. Revenues from
equipment sales increased $1,714,000 or 30.6% in 1997, primarily due to the
Fairtron acquisition in May 1997 and increased revenue from the sales of
outdoor products. This increase was offset by a decline in revenue from the
sales of indoor products. In 1996 the Company recognized certain significant
sales on the percentage of completion basis which did not recur in 1997.
Revenues from theatre receipts and other increased $234,000 or 18.0% in 1997,
primarily attributable to the Gaslight Cinemas and Lake Dillon Cinemas
acquisitions in March 1997 and September 1997, respectively, and the increase
in attendance at the theatres.
8
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Cost of equipment rentals and maintenance decreased by $156,000 or 5.3% in
1997, primarily due to the favorable impact of $250,000 as a result of a change
in the estimate of the useful lives of the rental equipment. The cost of
equipment rentals and maintenance represented 51.0% of related revenues for the
three months ended September 30, 1997 compared to 55.5% in 1996. Cost of
equipment sales increased $1,228,000 or 33.0% in 1997, primarily due to the
Fairtron acquisition and the increase in sales of outdoor products, offset by
the decline in sales of indoor products. In 1996 the Company recognized
certain significant sales on the percentage of completion basis which did not
recur in 1997. The cost of equipment sales represented 67.7% of related
revenues for the three months ended September 30, 1997 compared to 66.5% in
1996. Cost of theatre receipts and other increased $200,000 or 20.5% in 1997,
primarily due to the Gaslight Cinemas and Lake Dillon Cinemas acquisitions and
the increase in film rental costs resulting from increased box office receipts.
The cost of theatre receipts and other represented 76.6% of related revenues
for the three months ended September 30, 1997 compared to 75.0% in 1996.
General and administrative expenses increased by $572,000 or 17.0%, primarily
due to the Fairtron acquisition, expanded sales efforts and increased payroll
and benefits costs.
Interest income increased by $229,000, primarily attributable to additional
investments as a result of the issuance of the 7 1/2% Notes. Interest expense
increased by $434,000, primarily due to the issuance of the 7 1/2% Notes.
Other income/expense relates to the operations of the theatre joint venture,
MetroLux Theatres and gain on sale of securities.
Accounting Standards
The Company will adopt the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings per Share" in the fourth quarter of 1997. The
standard specifies the computation, presentation and disclosure requirements
for earnings per share. As required by the standard, the Company will restate
all prior period earnings per share data presented. The adoption of the new
standard is not expected to have a material effect on the computation of
earnings per share.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income". The
standard requires that all items that meet the definition of components of
comprehensive income be reported in a financial statement for the period in
which they are recognized. The standard is effective for fiscal years
beginning after December 15, 1997.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosure about Segments of an
Enterprise and Related Information". The standard requires certain information
be reported about operating segments, products and services, the geographic
areas in which they operate and major customers. The standard is effective for
fiscal years beginning after December 15, 1997
Liquidity and Capital Resources
Historically, the Company's primary sources of liquidity and capital resources
have been cash flow from operations and bank borrowings. During late 1996, the
Company issued $27.5 million of the 7 1/2% Notes. On January 14, 1997 the
Underwriter exercised its over-allotment option, bringing the total amount
outstanding to $31.6 million.
The Company believes that cash generated from operations together with the
proceeds from the issuance of the 7 1/2% Notes will be sufficient to fund its
anticipated further cash requirements. The Company also has a $5.0 million
revolving credit facility accessible through June 1998, at which time will
convert into a five-year term loan. As of September 30, 1997, $1.1 million of
the revolving credit facility is available. The revolving credit facility was
reduced to $5.0 million from $7.0 million at January 31, 1997 at the Company's
request. The Company is currently negotiating an increase, to which
9
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the bank has agreed, to the revolving credit facility to $10.0 million. The
net proceeds of the 7 1/2% Notes were used, in part, to pay down certain of the
Company's debt, which included prepayment of the 1997 principal amounts due
under the credit facility, payment of the balance outstanding under the
revolving credit facility at that time and to call and retire the 9%
Convertible Subordinated Debentures.
The $18.9 million decrease in cash and cash equivalents for the nine months
ended September 30, 1997 is primarily attributable to the net investment of
$11.4 million of the net proceeds of the 7 1/2% Notes in available-for-sale
securities, cash utilized for investment in rental equipment and cash utilized
in connection with the acquisitions during the nine months ended September 30,
1997. The $611,000 decrease for the nine months ended September 30, 1996 was
primarily attributable to cash utilized for investment in rental equipment, an
increase in accounts receivable which was attributable to the timing of large
equipment sales, unbilled receivables and a decrease in deferred revenue and
deposits which was primarily due to the timing of recording the revenues versus
billings, and the loan to the theatre joint venture, MetroLux Theatres. The
increase in receivables and inventories at September 30, 1997 compared to
December 31, 1996 is primarily attributable to the Fairtron acquisition.
The regular quarterly cash dividend for the third quarter of 1997 of $0.035 per
share on the Company's Common Stock and $0.315 per share on the Company's Class
B Stock was declared by the Board of Directors on September 27, 1997 payable to
stockholders of record as of October 10, 1997 and was paid October 24, 1997.
- -------------------------------------------------------------------------------
The Company may, from time to time, provide estimates as to future performance.
These forward looking statements will be estimates, and may or may not be
realized by the Company. The Company undertakes no duty to update such forward
looking statements. Many factors could cause actual results to differ from
these forward looking statements, including loss of market share through
competition, introduction of competing products by others, pressure on prices
from competition or purchasers of the Company's products, interest rate and
foreign exchange fluctuations.
- -------------------------------------------------------------------------------
Part II - Other Information
---------------------------
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
11 Computation of Earnings Per Share.
27 Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information
only and not deemed filed.
(b) A report on Form 8-K/A dated July 15, 1997 was filed reporting
the acquisition of the catalog and custom scoreboard sign
business segment of Fairtron Corporation.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRANS-LUX CORPORATION
---------------------
(Registrant)
Date: November 14, 1997
by /s/ Angela D. Toppi
----------------------
Angela D. Toppi
Senior Vice President and
Chief Financial Officer
by /s/ Robert A. Carroll
----------------------
Robert A. Carroll
Chief Accounting Officer
11
<TABLE>
<CAPTION>
TRANS-LUX CORPORATION AND SUBSIDIARIES EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
-------------------------- --------------------------
1997 1996 1997 1996
---- ---- ---- ----
Primary:
--------
<S> <C> <C> <C> <C>
Net income $425,000 $350,000 $1,006,000 $869,000
========= ========= ========= =========
Average common shares outstanding 1,284,000 1,260,000 1,279,000 1,256,000
Assumes exercise of options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options 37,000 31,000 30,000 27,000
--------- --------- --------- ---------
Average common and common equivalent
shares outstanding 1,321,000 1,291,000 1,309,000 1,283,000
========= ========= ========= =========
Primary earnings per share $0.32 $0.27 $0.77 $0.68
========= ========= ========= =========
Fully diluted:
--------------
Net income $425,000 $350,000 $1,006,000 $869,000
Add after tax interest expense applicable
to 9% convertible subordinated debentures ---- 64,000 102,000 195,000
Add after tax interest expense applicable to
7 1/2% convertible subordinated notes 364,000 ---- 1,086,000 ----
--------- --------- --------- ---------
Adjusted net income $789,000 $414,000 $2,194,000 $1,064,000
========= ========= ========= =========
Average common shares outstanding 1,284,000 1,260,000 1,279,000 1,256,000
Assumes exercise of options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options 44,000 35,000 44,000 36,000
Assumes conversion of 9% convertible
subordinated debentures ---- 379,000 79,000 382,000
Assumes conversion of 7 1/2% convertible
subordinated notes 2,257,000 ---- 2,243,000 ----
--------- --------- --------- ---------
Average common and common equivalent 3,585,000 1,674,000 3,645,000 1,674,000
shares outstanding ========= ========= ========= =========
Fully diluted earnings per share $0.22 $0.25 $0.60 $0.64
========= ========= ========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 356
<SECURITIES> 12,197
<RECEIVABLES> 8,006
<ALLOWANCES> 0
<INVENTORY> 4,717
<CURRENT-ASSETS> 25,711
<PP&E> 86,376
<DEPRECIATION> 29,946
<TOTAL-ASSETS> 89,505
<CURRENT-LIABILITIES> 8,441
<BONDS> 32,682
<COMMON> 2,740
0
0
<OTHER-SE> 21,134
<TOTAL-LIABILITY-AND-EQUITY> 89,505
<SALES> 17,043
<TOTAL-REVENUES> 38,514
<CGS> 11,043
<TOTAL-COSTS> 23,063
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,291
<INCOME-PRETAX> 1,765
<INCOME-TAX> 759
<INCOME-CONTINUING> 1,006
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,006
<EPS-PRIMARY> 0.77
<EPS-DILUTED> 0.60
</TABLE>
