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 March 31, 1998
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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
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(Address of principal executive offices) (Zip code)
(203) 853-4321
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 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
- - ------ ------------------------------- ------------------
5/11/98 Common Stock - $1.00 Par Value 993,143
5/11/98 Class B Stock - $1.00 Par Value 297,286
(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 - March 31, 1998 (unaudited)
and December 31, 1997 1
Consolidated Statements of Stockholders' Equity - March
31, 1998 (unaudited) and December 31, 1997 2
Consolidated Statements of Income - Three Months Ended
March 31, 1998 and 1997 (unaudited) 3
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1998 and 1997 (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 9
Signatures 10
<PAGE>
Part I - FINANCIAL INFORMATION
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<TABLE>
<CAPTION>
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31 December 31
In thousands, except share data 1998 1997
-------- -----------
(unaudited)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 638 $ 1,843
Available-for-sale securities 7,468 8,245
Receivables 9,831 6,833
Unbilled receivables 49 620
Inventories 5,513 4,644
Income taxes recoverable --- 426
Prepaids and other current assets 451 405
------ ------
Total current assets 23,950 23,016
------ ------
Rental equipment 64,932 62,910
Less accumulated depreciation 24,363 23,009
------ ------
40,569 39,901
------ ------
Property, plant and equipment 27,897 27,064
Less accumulated depreciation and amortization 8,523 8,070
------ ------
19,374 18,994
Prepaids, intangibles and other 5,801 5,371
Maintenance contracts, net 954 1,006
Note receivable, joint venture (excludes $94 current portion) 667 690
------ ------
$91,315 $88,978
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accruals $ 8,004 $ 6,814
Income taxes payable 50 ---
Current portion of long-term debt 629 258
------ ------
Total current liabilities 8,683 7,072
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Long-term debt:
7 1/2% convertible subordinated notes due 2006 31,625 31,625
9 1/2% subordinated debentures due 2012 1,057 1,057
Notes payable 16,453 16,770
------ ------
49,135 49,452
Deferred revenue, deposits and other 4,498 3,369
Deferred income taxes 4,382 4,753
Stockholders' equity 24,617 24,332
------ ------
$91,315 $88,978
====== ======
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
March 31 December 31
In thousands, except per share data 1998 1997
-------- -----------
(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 - 2,443,119 shares in 1998 and 2,442,765 in 1997 $2,443 $2,443
Class B - $1.00 par value
Authorized - 1,000,000 shares
Issued - 297,286 shares in 1998 and 297,640 in 1997 297 297
Class A - $1.00 par value
Authorized - 3,000,000 shares
Issued - none
Additional paid-in capital 13,902 13,904
Retained earnings 19,598 19,297
Other 6 29
------ ------
36,246 35,970
Less treasury stock - at cost
1,450,307 shares in 1998 and 1,453,722 in 1997
(excludes additional 297,286 shares held in 1998 and 297,640 in
1997 for conversion of Class B stock) 11,629 11,638
------ ------
Total stockholders' equity $24,617 $24,332
====== =======
</TABLE>
<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
------ ------- ---------- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997 $2,443 $297 $13,904 $19,297 $29 ($11,638)
1/1/98 - 3/31/98: (unaudited)
Net income 345
Cash dividends (44)
Exercise of stock options (2) 9
Unrealized holding losses (11)
Foreign currency translation losses (12)
------ ------- ---------- -------- ----- --------
March 31, 1998 $2,443 $297 $13,902 $19,598 $6 ($11,629)
====== ======= ========== ======== ===== ========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
THREE MONTHS ENDED
MARCH 31
In thousands, except per share data 1998 1997
---- ----
<S> <C> <C>
Revenues:
Equipment rentals and maintenance $ 5,762 $ 5,836
Equipment sales 8,614 3,504
Theatre receipts and other 1,580 1,208
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Total revenues 15,956 10,548
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Operating expenses:
Cost of equipment rentals and maintenance 3,158 2,870
Cost of equipment sales 5,654 2,185
Cost of theatre receipts and other 1,282 875
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Total operating expenses 10,094 5,930
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Gross profit from operations 5,862 4,618
General and administrative expenses 4,476 3,352
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1,386 1,266
Interest income 174 368
Interest expense (1,005) (1,181)
Other income 72 22
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Income before income taxes 627 475
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Provision for income taxes:
Current 63 137
Deferred 219 67
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282 204
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Net income $ 345 $ 271
====== ======
Earnings per share:
Basic $ 0.27 $ 0.21
Diluted $ 0.19 $ 0.18
Average common shares outstanding:
Basic 1,289 1,271
Diluted 3,581 3,754
Cash dividends per share:
Common stock $ 0.035 $ 0.035
Class B stock $0.0315 $0.0315
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
THREE MONTHS ENDED
MARCH 31
In thousands 1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 345 $ 271
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,997 1,773
Net income of joint venture (49) (22)
Deferred income taxes (354) (139)
Gain on sale of securities (23) ----
Changes in operating assets and liabilities:
Receivables (2,998) (870)
Unbilled receivables 571 1,618
Inventories (869) (73)
Income taxes recoverable 426 ----
Prepaids and other current assets (46) 35
Prepaids, intangibles and other (519) (160)
Accounts payable and accruals 1,188 (121)
Income taxes payable 50 (82)
Deferred revenue, deposits and other 1,129 1,381
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Net cash provided by operating activities 848 3,611
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of rental equipment (2,022) (3,343)
Purchases of property, plant and equipment (833) (624)
Proceeds from joint venture 23 23
Purchases of available-for-sale securities ---- (14,846)
Redemption of available-for-sale securities 762 ----
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Net cash (used in) investing activities (2,070) (18,790)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 1,000 4,125
Repayment of long-term debt (946) (49)
Redemption of Company's 9% convertible subordinated debentures ---- (4,553)
Proceeds from exercise of stock options 7 ----
Cash dividends (44) (43)
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Net cash provided by (used in) financing activities 17 (520)
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Net decrease in cash and cash equivalents (1,205) (15,699)
Cash and cash equivalents at beginning of year 1,843 19,274
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 638 $ 3,575
====================================================================================================================
Interest paid $ 128 $ 444
Interest received 194 126
Income taxes paid 238 415
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<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
TRANS-LUX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(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 period is not necessarily
indicative of the results to be expected for the full year. It is suggested
that the March 31, 1998 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,
1997. Certain reclassifications of prior years' amounts have been made to
conform to the current year's presentation.
Note 2 - Accounting for Income Taxes
The provision for income tax expense for the three months ended March 31, 1998
was $282,000 of which $63,000 and $219,000 are current and deferred tax
expense, respectively. There was no change in the valuation allowance during
the three months ended March 31, 1998.
Note 3 - Prepaids, Intangibles and Other
Prepaids, intangibles and other consist of the following (net of
amortization):
<TABLE>
<CAPTION>
March 31, December 31,
In thousands 1998 1997
- - -----------------------------------------------------------------------------
<S> <C> <C>
Deferred note and debenture costs $1,710 $1,759
Goodwill and noncompete agreements 1,525 1,572
Prepaids and other 1,310 798
Long-term portion of officers' and employees' loans 421 440
Deferred financing costs 311 310
Patents 182 198
Investment in joint ventures 169 120
Deposits and advances 88 88
Acquisition costs 85 86
----- -----
$5,801 $5,371
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</TABLE>
Note 4 - Reporting Comprehensive Income
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" (SFAS 130) during the
first quarter of 1998, as required. SFAS 130 establishes standards for
reporting and displaying comprehensive income and its components in a set of
financial statements. The adoption of this standard had no impact on the
Company's net income.
Comprehensive income is defined as the change in equity of a business
5
<PAGE>
enterprise during a period from transactions and other events and
circumstances from non-owner sources. The components of comprehensive income
for the Company are on foreign currency translation adjustments relating to
the Company's foreign subsidiaries (loss of $7,000 in 1998 net of 45% tax and
gain of $3,000 in 1997 net of 43% tax), and unrealized holding gains or losses
on the Company's available-for-sale securities (loss of $11,000 in 1998 net of
45% tax and $202,000 in 1997 net of 43% tax). Other comprehensive loss is
$18,000 and $199,000 for the three months ended March 31, 1998 and 1997,
respectively. Comprehensive income is $327,000 and $72,000 for the three
months ended March 31, 1998 and 1997, respectively.
Note 5 - New Accounting Standards
The Company will adopt the provisions of Statement of Financial Accounting
Standards No. 131 "Disclosure about Segments of an Enterprise and Related
Information" in the fourth quarter of 1998. The new standard requires certain
information be reported about operating segments and about products and
services, geographic areas in which a company operates and its major
customers. The Company is in the process of evaluating the impact this
standard will have on disclosure in the Company's financial statements.
Note 6 - Earnings per Share
The following table represents the computation of basic and diluted earnings
per common share as required by Statement of Financial Accounting Standards
No. 128, "Earnings per Share" for the three months ended March 31, 1998 and
1997, respectively:
<TABLE>
<CAPTION>
Three months ended March 31,
In thousands, except per share data 1998 1997
-------------------------------------------------------------------------------------------
<S> <C> <C>
Basic earnings per share computation
Net income $ 345 $ 271
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Weighted average common shares outstanding 1,289 1,271
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Basic earnings per common share $ 0.27 $ 0.21
----- -----
-------------------------------------------------------------------------------------------
Diluted earnings per share computation
Net income $ 345 $ 271
Add: After tax interest expense applicable to convertible debt 352 463
Add: After tax changes to income applicable to assumed
conversion (26) (40)
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Adjusted net income $ 671 $ 694
===== =====
Weighted average common shares outstanding 1,289 1,271
Assumes exercise of options reduced by the number of shares
which could have been purchased with proceeds from
exercise of such options 35 29
Assumes conversion of 9% convertible subordinated
debentures --- 240
Assumes conversion of 7 1/2% convertible subordinated notes 2,257 2,214
----- -----
Total weighted average shares 3,581 3,754
===== =====
Diluted earnings per common share $ 0.19 $ 0.18
----- -----
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</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
The Company's total revenues for the three months ended March 31, 1998
increased 51.3% to $16.0 million from $10.5 million for the same period in the
previous year. Revenues from equipment rentals and maintenance decreased
$74,000 or 1.3% in 1998, primarily due to 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, offset by increased
rental of indoor displays. Revenues from equipment sales increased $5.1
million or 145.8% in 1998, primarily due an increase in the sales of indoor
displays as the result of a certain significant sale which is being recognized
on the percentage of completion basis and the acquisition of the Fairtron
catalog and custom scoreboard sign business in May 1997. Revenues from
theatre receipts and other increased $372,000 or 30.8% in 1998, attributable
to the acquisitions of the Gaslight Cinemas in March 1997 and the Lake Dillon
Cinemas in September 1997.
Gross profit as a percentage of revenues was 36.7% in 1998 compared to 43.8%
in 1997. The decrease in gross profit percentage was expected as the Company
enters and increases its market share in existing and new industry segments of
the outdoor market. Cost of equipment rentals and maintenance, which includes
field service expenses, plant repair and maintenance, and depreciation,
increased by $288,000 or 10.0% in 1998, primarily due to increased field
service costs related to the installation of outdoor sports displays. The
cost of equipment rentals and maintenance represented 54.8% of related
revenues for the three months ended March 31, 1998 compared to 49.2% in 1997.
Cost of equipment sales increased $3.5 million or 158.8% in 1998, primarily
due to a certain significant sale of indoor displays being recognized on the
percentage of completion basis and the Fairtron acquisition. The cost of
equipment sales represented 65.6% of related revenues for the three months
ended March 31, 1998 compared to 62.4% in 1997. Cost of theatre receipts and
other, which includes film rental expenses, increased $407,000 or 46.5% in
1998, primarily due to the acquisition of the Gaslight Cinemas and Lake Dillon
Cinemas. The cost of theatre receipts and other represented 81.1% of related
revenues for the three months ended March 31, 1998 compared to 72.4% in 1997.
General and administrative expenses increased by $1.1 million or 33.5%,
primarily due to the Fairtron acquisition, expanded sales efforts and
increased payroll and benefits costs.
Interest income decreased by $194,000, primarily attributable to a reduction
of investments as a result of use of funds for acquisitions and investment in
rental equipment. Interest expense decreased by $176,000, primarily due to a
special one-time charge in the first quarter of 1997 of approximately $113,000
for the unamortized portion of the financing costs associated with the early
retirement of the 9% Convertible Subordinated Debentures due 2005. Other
income relates to the operations of the theatre joint venture, MetroLux
Theatres and gain on sale of securities.
The effective tax rate at March 31, 1998 and 1997 was 45.0% and 43.0%,
respectively
Accounting Standards
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting
7
<PAGE>
Comprehensive Income" in the first quarter of 1998. The new 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. See Note 4.
The Company will adopt the provisions of Statement of Financial Accounting
Standards No. 131 "Disclosure about Segments of an Enterprise and Related
Information" in the fourth quarter of 1998. The new standard requires certain
information be reported about operating segments and about products and
services, geographic areas in which a company operates and their major
customers. The Company is in the process of evaluating the impact this
standard will have on disclosure in the Company's financial statements.
Liquidity and Capital Resources
The regular quarterly cash dividend for the first quarter of 1998 of $0.035
per share on the Company's Common Stock and $0.0315 per share on the Company's
Class B Stock was declared by the Board of Directors on March 27, 1998 payable
to stockholders of record as of April 6, 1998 and was paid April 14, 1998.
The Company has a $10.0 million revolving credit facility accessible through
June 2000, at which time it will convert into a five-year term loan. At March
31, 1998 the Company had $7.7 million available under such facility. The
Company believes that cash generated from operations together with the cash
and cash equivalents on hand and the availability under the revolving credit
facility will be sufficient to meet its anticipated near term cash
requirements.
The $1.2 million decrease in cash and cash equivalents for the three months
ended March 31, 1998 is primarily attributable to an increase in receivables
which is primarily related to a certain significant contract being recorded on
the percentage of completion basis and cash utilized for investment in rental
equipment. The $15.7 million decrease for the three months ended March 31,
1997 was primarily attributable to the investment of $14.8 million of the net
proceeds of the 7 1/2% Convertible Subordinated Notes due 2006 in
available-for-sale securities and cash utilized for investment in rental
equipment.
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. The Company entered into two interest rate
swap agreements having a notional value of $10.3 million during the first
quarter of 1998 to reduce exposure to interest fluctuations.
Impact of the Year 2000 Issue
The Company is presently implementing changes required for its information
systems relative to the new millenium "year 2000". There have been no
material developments or changes relative to this on-going implementation
program during the quarter.
- - ------------------------------------------------------------------------------
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.
- - ------------------------------------------------------------------------------
8
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
- - ------- --------------------------------
(a) Exhibits
27 Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information
only and not deemed filed.
(b) No reports on Form 8-K were filed during the quarter covered
by this report.
9
<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: May 12, 1998
by /s/ Angela Toppi
--------------------------
Angela D. Toppi
Senior Vice President and
Chief Financial Officer
by /s/ Robert A. Carroll
--------------------------
Robert A. Carroll
Assistant Vice President and
Chief Accounting Officer
10
<PAGE>
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 638
<SECURITIES> 7,468
<RECEIVABLES> 9,880
<ALLOWANCES> 0
<INVENTORY> 5,513
<CURRENT-ASSETS> 23,950
<PP&E> 92,829
<DEPRECIATION> 32,886
<TOTAL-ASSETS> 91,315
<CURRENT-LIABILITIES> 8,683
<BONDS> 32,682
<COMMON> 2,740
0
0
<OTHER-SE> 21,877
<TOTAL-LIABILITY-AND-EQUITY> 91,315
<SALES> 8,614
<TOTAL-REVENUES> 15,956
<CGS> 5,654
<TOTAL-COSTS> 10,094
<OTHER-EXPENSES> 4,476
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,005
<INCOME-PRETAX> 627
<INCOME-TAX> 282
<INCOME-CONTINUING> 345
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 345
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.19
</TABLE>
