UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
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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
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(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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(203) 853-4321
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(Address, zip code, and telephone number, including
area code, of Registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $1.00 par value American Stock Exchange
7 1/2% Convertible Subordinated
Notes due 2006 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
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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.[X]
CONTINUED
<PAGE>
TRANS-LUX CORPORATION
1997 10-K Cover Page Continued
The aggregate market value of the Registrant's Common and Class B Stock (based
upon the closing price on the American Stock Exchange) held by non-affiliates
on March 27, 1998 (based on the last sale price on the American Stock Exchange
as of such date) was $14,021,145. (The value of a share of Common Stock is
used as the value for a share of Class B Stock, as there is no established
market for Class B Stock which is convertible into Common Stock on a
share-for-share basis.)
As of the close of business on March 27, 1998, there were outstanding,
297,286 shares of the Registrant's Common Stock and 992,843 shares of its
Class B Stock.
DOCUMENTS INCORPORATED BY REFERENCE:
The Registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders to be held May 27, 1998 (the "Proxy Statement") is incorporated
by reference in Part III, Items 10-13 of this Form 10-K to the extent stated
herein. Except with respect to information specifically incorporated by
reference in this Form 10-K, the Proxy Statement is not deemed to be filed as
a part hereof.
<PAGE>
TRANS-LUX CORPORATION
1997 Form 10-K Annual Report
Table of Contents
PART I
Page
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ITEM 1. Business 1
ITEM 2. Properties 7
ITEM 3. Legal Proceedings 7
ITEM 4. Submission of Matters to a Vote of Security Holders 7
PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters 7
ITEM 6. Selected Financial Data 8
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
ITEM 8. Financial Statements and Supplementary Data 12
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 24
PART III
ITEM 10. Directors and Executive Officers of the Registrant 24
ITEM 11. Executive Compensation 25
ITEM 12. Security Ownership of Certain Beneficial Owners and Management 25
ITEM 13. Certain Relationships and Related Transactions 25
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 26
Signatures 29
<PAGE>
PART I
ITEM 1. BUSINESS
Unless the context otherwise requires, the term "Company" as used herein
means Trans-Lux Corporation and its subsidiaries. The Company is a
manufacturer, distributor, and servicer of large-scale, real-time electronic
information displays for both indoor and outdoor use. These display systems
utilize LED and light bulb technologies to display real-time information
entered by the user or via a third party information supplier. The Company
provides high quality, reliable display products configured to suit its
customers' needs, and offers extensive on-site service and maintenance
coverage. The Company's display products include data, graphics, and picture
displays for stock and commodity exchanges, financial institutions, airports,
casinos, sports venues, convention centers, corporate, theatres, retail and
numerous other applications. In addition to its core display business, the
Company also operates a chain of motion picture theatres in the southwestern
United States and real estate used for both corporate and income-producing
purposes.
ELECTRONIC INFORMATION DISPLAY PRODUCTS
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The Company's high performance electronic information displays are used
to communicate messages and information in a variety of indoor and outdoor
applications. The Company's product line encompasses a wide range of
state-of-the-art electronic displays in various shape, size and color
configurations. Most of the Company's display products include hardware
components and sophisticated software. In both the indoor and outdoor
markets which the Company serves, the Company adapts basic product types and
technologies for specific use in various niche market applications. The
Company also operates a direct service network throughout the United States
and Canada which performs on-site service and maintenance for its customers.
The Company employs a modular engineering design strategy, allowing basic
"building blocks" of electronic modules to be easily combined and configured
in order to meet the broad application requirements of the markets the Company
serves. This approach ensures maximum product flexibility, reliability, ease
of service and minimum spare parts requirements.
The Company's electronic information display market can be broken down
into two distinct markets: the indoor market and the outdoor market.
Electronic information displays are used by financial institutions, including
brokerage firms, banks, saving and loans, energy companies, insurance
companies and mutual fund companies; by retail outlets; by casinos, race
tracks and other gaming establishments; by sports venues and outdoor
advertising companies; in airports, train stations and bus terminals, and
other transportation facilities; on highways and major thoroughfares; and by
movie theatres, health maintenance organizations, and in various other
applications.
The Indoor Market: The indoor electronic display market is currently
dominated by three categories of users: financial, gaming and corporate. The
financial market segment includes trading floors, exchanges, brokerage firms,
mutual fund companies and energy companies, have long been users of electronic
information displays due to the need for the real-time dissemination of data.
The major stock and commodity exchanges depend on reliable information
displays to post stock and commodity prices, trading volumes, interest rates
and other financial information. Brokerage firms have increasingly installed
electronic ticker displays for both customers and brokers, and have installed
larger displays to post major headline news events in their brokerage offices
to enable their sales force to stay up-to-date on the events affecting general
market conditions and specific stocks. The changing regulatory environment in
the financial marketplace has also resulted in the influx of banks and other
financial institutions into the brokerage business and has resulted in these
<PAGE>
institutions increasingly using information displays to advertise product
offerings to consumers.
The gaming market segment includes casinos and Indian gaming
establishments. These establishments generally use large information
displays to post odds for race and sporting events and to display timely
information such as results, track conditions, jockey weights and scratches.
Casinos also use electronic displays throughout their facilities to advertise
to and attract gaming patrons. This includes using electronic displays in
conjunction with slot machines to attract customer attention to potential
payoffs and thus increase customer play.
The corporate market segement includes applications found in major
corporations, public utilities and government agencies for the display of
real-time, critical data in command/control centers, data centers, help desks,
inbound/outbound telemarketing centers and for employee communications.
Electronic displays have found acceptance in applications for the healthcare
industry such as out-patient pharmacies, military hospitals and HMOs to
automatically post patient names when prescriptions are ready for pick up.
Theatres use electronic displays to post current box office and ticket
information, directional information, promote concession sales and our Rear
Window (TM) system for the hearing-impaired. Information displays are
consistently used in airports, bus terminals and train stations to post
arrival and departure information and gate and baggage claim information,
which helps to guide passengers through these facilities. Equipment orders
generally have a lead time of 30 to 90 days depending on the size and type of
equipment ordered, and material availability.
The Outdoor Market: The outdoor electronic display market is even more
diverse than the indoor market with displays being used by banks and other
financial institutions, gas stations, highway departments, sports stadiums and
outdoor advertisers attempting to capture the attention of passers-by. Over
the past five years, the Company has utilized its strong position in the
indoor market combined with several acquisitions to establish a growing
presence in the outdoor display market. Outdoor displays are installed in
amusement parks, entertainment facilities, high schools, minor league parks,
professional and college sports stadiums, military installations, bridges and
other roadway installations, automobile dealerships, banks and other financial
institutions. The equipment generally has a lead time of 45 to 120 days
depending on the size and type of equipment ordered, and material
availability.
The Company has made four acquisitions over the past six years in
order to establish and enhance its presence in the outdoor market. In August
1992, after first managing the portfolio for approximately 15 months, the
Company acquired a portfolio of outdoor electric and electronic equipment
displays. In August 1993, the Company expanded its presence in the outdoor
display market by acquiring a portfolio of outdoor lease, maintenance and
other contracts. In January 1995, the Company acquired all of the capital
stock of Integrated Systems Engineering, Inc. (ISE), a manufacturer of
outdoor electronic displays. In May 1997, the Company acquired the catalog
and custom scoreboard sign business of Fairtron Corporation (Fairtron), a
manufacturer of scoreboard and related signage.
International: The Company feels it is well positioned for expansion as
the globalization of the world economy continues. It is now active in Europe,
South and Central America, Australia and Asia. International installations
are in geographic locations which include South and Central America, Europe
and Asia. The Company uses a combination of internal sales people and
independent distributors to market its products in Europe, South and Central
America, Asia and Australia. The Company currently has manufacturing
operations, service
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centers and sales offices in New South Wales, Australia and Ontario, Canada.
The Company has existing relationships with approximately 30 independent
distributors worldwide covering Europe, South and Central America, Asia and
Australia. Foreign revenues were less than 10% of consolidated revenues in
1997, 1996 and 1995.
Applications for the display products in the international marketplace
currently include stock and commodity exchanges and trading rooms, private
clubs, banks, transportation facilities and casinos. The equipment generally
has lead times of 45 to 90 days depending on the size and type of equipment
ordered, and material availability.
Sales Order Backlog (excluding leases): The amount of sales order
backlog was approximately $7.3 million and $4.2 million at December 31, 1997
and 1996, respectively. The December 31, 1997 backlog will be recognized in
1998. These amounts do not include leases or renewals of leases presently
in-house.
ENGINEERING AND PRODUCT DEVELOPMENT
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The Company's ability to compete and operate successfully depends upon,
among other factors, its ability to anticipate and respond to the changing
technological and product needs of its customers. As such, the Company
continually examines and tests new display technologies and develops
enhancements to its existing products in order to meet the current and
anticipated future needs of its customers. Product enhancement work continues
in both the indoor and outdoor areas.
Development of new indoor products includes progressive meter and
controller systems for use in the gaming industry; smaller character displays
to post more information in a comparably sized area; higher speed processors
for faster data access and improved update speed; integration of blue LEDs to
provide full color text and graphics displays; a new graphics interface to
display more data in higher resolutions; and tricolor news displays providing
the ability to color-code and identify "hot" stories.
Development of new outdoor products includes the Spectra Lens System (TM)
which enables the Company to capitalize on full color, full matrix indoor
applications, particularly in the sports market and the 16 shades of gray
Spectra Lens System. This product will be targeted to customers who want an
animated display at a lower cost than full color. The Company is also
currently developing full color LED displays which will have application
particularly in the gaming market where entertainment value is important to
marketing properties and in the sports market where enhancing the presentation
of live action is of central importance.
As part of its ongoing development efforts, the Company seeks to package
certain products for specific market segments as well as to continually track
emerging technologies that can enhance its products. Future technologies
under consideration are trending toward full color, live video, and digital
input. The Company is currently focused on certain technologies which
incorporate these features and which are expected to provide a choice of
products for the custom applications its customers demand.
The Company maintains a staff of 56 people who are responsible for
product development and support. The engineering and product enhancement and
development efforts are supplemented by outside independent engineering
consulting organizations where required. Engineering, product enhancement and
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<PAGE>
development amounted to $2,819,000, $2,439,000 and $2,139,000 in 1997, 1996
and 1995, respectively.
MARKETING AND DISTRIBUTION
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The Company markets its indoor and outdoor electronic information display
products primarily through its 44 direct sales representatives and 7
telemarketers. The Company divides its domestic sales and marketing efforts
into two categories, renewal of existing product leases and product upgrades,
and the sale or lease of display products to new customers. In the indoor
market for leased equipment, the Company attempts to maintain ongoing
relationships with its customers to discuss lease renewals. In the outdoor
market, sales personnel contact existing and potential customers to discuss
the customer's usage or requirements for display equipment. The Company also
uses primarily telemarketing personnel to maintain communication with its
installed base of lease equipment customers contacting them prior to the
expiration of existing leases in order to discuss lease renewal.
The Company uses a number of different techniques in order to attract new
customers, including direct marketing efforts by its sales force to known or
potential users of information displays, advertising in industry publications,
and exhibiting at approximately 30 domestic and international trade shows
annually. In the outdoor market, the Company supplements these efforts by
using a network of independent dealers and distributors who market and sell
its products.
Internationally, the Company uses a combination of internal sales people
and independent distributors to market its products in Europe, South and
Central America, Asia and Australia. The Company currently has manufacturing
operations, service centers and sales offices in New South Wales, Australia
and Ontario, Canada. The Company has existing relationships with
approximately 26 independent distributors worldwide covering Europe, South and
Central America, Asia and Australia. International sales have represented
less than 10% of total revenues in the past three years, but the Company
believes that it is positioned to expand its international sales.
Headquartered in Norwalk, Connecticut, the Company has major sales and
service offices in New York; Chicago; Las Vegas; Norcross, Georgia; Torrance,
California; Ontario, Canada; Logan, Utah; Des Moines, Iowa; and New South
Wales, Australia, as well as 70 satellite offices in the United States and
Canada.
The Company's equipment is both leased and sold. A majority of the
electronic information display revenues are from equipment rentals with
current lease terms ranging from 30 days to ten years.
The Company's revenues in 1997, 1996 and 1995 did not include any single
customer that accounted for more than 10% of total revenues.
MANUFACTURING AND OPERATIONS
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The Company's production facilities are located in Norwalk, Connecticut,
Logan, Utah, Des Moines, Iowa, Ontario, Canada and New South Wales, Australia
and consist principally of the manufacturing, assembly and testing of display
units, and related components. The Company performs most subassembly and all
final assembly of its products.
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All product lines are design engineered by the Company, and controlled
throughout the manufacturing process. The Company has the ability to produce
printed circuit board fabrications, very large sheet metal fabrications,
plastic molded parts, cable assemblies, and surface mount and through-hole
designed assemblies. The Company produces more than 100,000 board assemblies
annually which are tested with the latest state of the art automated testing
equipment. Additional board assembly capacity is increased through
outsourcing. The Company's production of many of the subassemblies and all of
the final assemblies gives the Company the control needed for on-time delivery
to its customers.
The Company also has the ability to rapidly modify its product lines.
The Company's displays are designed with versatility in mind, enabling the
Company to customize its displays to meet different application with a minimum
of lead time. The Company's automated planning and purchasing department
further enables it to secure materials in a timely fashion without
maintaining excessive inventories. The Company also partners with large
distributors via volume purchase agreements, giving it the benefit of a third
party stocking its components ready for delivery on demand. The Company
designs certain of its materials to match components furnished by suppliers.
If such suppliers were unable to provide the Company with those components,
the Company would have to contract with other suppliers to obtain replacement
sources. Such replacement might result in engineering design changes, as well
as delays in obtaining such replacement components. The Company believes it
maintains suitable inventory and has contracts providing for delivery of
sufficient quantities of such components to meet its needs. The Company also
believes there presently are other qualified vendors of these components. The
Company does not acquire a material amount of purchases directly from foreign
suppliers, but certain components are manufactured by foreign sources.
In May 1997, the Company received ISO-9001 certification from
Underwriters Laboratories for its Norwalk plant facility. We believe this
distinction in our industry gives us a competitive advantage in the global
marketplace.
SERVICE AND SUPPORT
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The Company emphasizes the quality and reliability of its products and
the ability of its field service personnel to provide timely and expert
service to the Company's installed base. The Company believes that the
quality and timeliness of its on-site service personnel are important
components in the Company's success. The Company provides turnkey
installation and support for the products it leases and sells in the United
States, Canada and Australia as part of the installation. The Company
provides training to end users and provides ongoing support to users who have
questions regarding operating procedures, equipment problems or other issues.
The Company provides service to customers who lease equipment and offers
installation and service to those who purchase equipment. In the market
segments the Company's distributors cover, the distributors offer support for
the products they sell.
Personnel based in regional and satellite service locations throughout
the United States, Canada and Australia provide high quality and timely
on-site service for the installed equipment base. Purchasers or lessees of
the Company's larger products, such as financial exchanges, casinos and sports
facilities, often retain the Company to provide on-site service through the
deployment of a service technician who is on-site daily or for the scheduled
sporting event. The Company also maintains a National Technical Services
Center in Norcross, Georgia which performs equipment repairs and dispatches
service technicians on a nationwide basis. The Company's field service is
augmented by various outdoor service companies in the United States, Canada
and overseas. From time to time the Company uses various third-party service
agents to install, service and/or assist in the service of outdoor displays
for reasons that include geographic area, size and unusual height of displays.
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COMPETITION
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The Company supplies many of the large-scale electronic display products
to the financial services industry and the race and sports book segment of the
gaming industry in the United States. The Company's offer of short-term
leases to customers and its nationwide sales, service and installation
capabilities are major competitive advantages in the display business. The
Company believes that it is the largest supplier of large-scale stock and
commodity and sports and race book gaming displays in the United States, as
well as one of the largest outdoor electronic signage service organizations in
the country.
The Company competes with a number of competitors, both larger and
smaller than itself, and with products based on different forms of technology.
In addition, there are several companies whose current products utilize
similar technology and who possess the resources necessary to develop
competitive and more sophisticated products in the future.
The Company's motion picture theatres are subject to varying degrees of
competition in the geographic areas in which they operate. In some areas,
theatres operated by national circuits compete with the Company's theatres.
The Company's theatres also face competition from all other forms of
entertainment competing for the public's leisure time and disposable income.
THEATRE OPERATIONS
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The Company currently operates 38 screens in 10 locations in the
southwestern United States, which includes the 1997 acquisitions of the
Gaslight Twin Cinema and the Lake Dillon Cinema fourplex, the additional 3
screens at the newly renovated theatre in Taos, New Mexico, as well as a
twelve-plex theatre in Loveland, Colorado which was built in late 1995 through
a 50% owned joint venture. The Company's theatre revenues are generated from
box office admissions, theatre concessions, theatre rentals and other sales.
Theatre revenues are generally seasonal and coincide with the release dates of
major films during the summer and holiday seasons. The Company is not
currently operating any multimedia entertainment venues, but continues to stay
abreast of innovations in this area of technology and continues to investigate
new opportunities.
INTELLECTUAL PROPERTY
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The Company owns or licenses a number of patents and holds a number of
trademarks for its display equipment and theatrical enterprises and considers
such patents, trademarks and licenses important to its business.
EMPLOYEES
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The Company has approximately 646 employees as of February 28, 1998, of
which 488 employees are related to the Company's electronic display business.
Less than 1% of the employees are unionized. The Company believes its
employee relations are good.
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ITEM 2. PROPERTIES
The Company's headquarters and principal executive offices are located at
110 Richards Avenue, Norwalk, Connecticut. The Company owns the 102,000
square foot facility located at such site, of which approximately 14,000
square feet is currently leased to others. The balance of the building is
occupied by the Company and is also used for engineering, production and
assembly of its indoor displays products.
The Company owns facilities in Ontario, Canada; Torrance, California;
Logan, Utah; and Des Moines, Iowa which it uses for administration, sales and
service. The Ontario, Canada; Logan, Utah; and Des Moines, Iowa sites are
also used as production and assembly facilities. In addition, the Company
owns a facility in Norcross, Georgia which it uses as its National Technical
Services Center from which it dispatches the Company's service technicians on
a nationwide basis. The Company also leases ten premises throughout North
America and in Australia for use as sales, service and/or administrative
operations. Additionally, the Company owns the buildings and land in Santa
Fe, New Mexico; Taos, New Mexico; and Durango, Colorado which house theatre
operations.
The Company leases ten premises for sales, service and/or
administrative operations, leases seven locations with motion picture
operations and an office for its theatre operations. The aggregate rental
expense was $456,000, $296,000 and $238,000 for 1997, 1996 and 1995,
respectively.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to legal proceedings and claims which arise in the
ordinary course of business, certain of which claims are reimburseable to the
Company from the Company's insurance carriers. In the opinion of management,
the amount of ultimate liability with respect to these actions, after
considering the related insurance reimbursements, will not have a material
adverse affect on the consolidated financial statements of 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
STOCKHOLDER MATTERS
(a) The Company's Common Stock is traded on the American Stock Exchange
under the symbol "TLX." Sales prices are set forth in (d) below.
(b) The Company had approximately 809 holders of record of its Common Stock
and approximately 69 holders of record of its Class B Stock as of
March 27, 1998.
(c) The Board of Directors approved four quarterly cash dividends of $0.035
per share for Common Stock and $0.0315 per share for Class B Stock
during 1997. Management and the Board of Directors will continue to
review payment of the quarterly cash dividends.
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(d) The range of Common Stock prices on the American Stock Exchange
are set forth in the following table:
<TABLE>
<CAPTION>
High Low
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<S> <C> <C>
1997
First Quarter $13 $11 1/8
Second Quarter 13 1/4 11 1/2
Third Quarter 15 1/2 12 1/4
Fourth Quarter 15 7/8 13 5/8
1996
First Quarter $ 9 5/8 $ 8 1/8
Second Quarter 16 1/2 8 5/8
Third Quarter 14 7/8 10 1/2
Fourth Quarter 13 3/4 10 7/8
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
(a) The following table sets forth selected consolidated financial data with
respect to the Company for the years ended December 31, 1997, 1996, 1995,
1994 and 1993 which were derived from the audited consolidated financial
statements of the Company and should be read in conjunction with them.
<TABLE>
<CAPTION>
Years Ended 1997 1996 1995 1994 1993
- - ----------- ---- ---- ---- ---- ----
In thousands, except per share data
<S> <C> <C> <C> <C> <C>
Revenues $53,363 $45,285 $37,791 $33,472 $35,799
Net income 1,510 1,250 1,066 1,314(1) 489(2)
Earnings per share:
Basic (3) $ 1.18 $ 0.99 $ 0.85 $ 1.05(1) $ 0.39(2)
Diluted (3) $ 0.80 $ 0.89 $ 0.79 $ 0.92(1) $ 0.38(2)
Cash dividends per share:
Common stock $ 0.14 $ 0.14 $ 0.14 $ 0.14 $ 0.125
Class B stock $ 0.126 $ 0.126 $ 0.126 $ 0.126 $0.1125
Average common shares outstanding (3) 1,281 1,258 1,250 1,248 1,249
Total assets $88,978 $84,031 $57,460 $53,307 $52,138
Long-term debt 49,452 48,112 22,495 19,693 21,156
Stockholders' equity 24,309 22,662 21,499 20,524 19,484
</TABLE>
(1) 1994 reflects the positive impact of a settlement of a 1993 assessment of
income taxes and related interest expense incurred resulting from a 1986 state
income tax audit of approximately $360,000 (see note 2 below).
(2) 1993 reflects the impact of the assessment of income taxes and related
interest expense incurred resulting from a 1986 state income tax audit of
approximately $600,000.
(3) In the fourth quarter of 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS 128). The previously reported earnings per share and share outstanding
information have been restated as required by SFAS 128.
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(b) The following table sets forth quarterly financial data for the years
ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
Quarter Ended (unaudited) March 31 June 30 September 30 December 31 (1)
------------------------- -------- ------- ------------ -----------
<S> <C> <C> <C> <C>
In thousands, except per share data
1997
Revenues $10,548 $13,599 $14,367 $14,849
Gross profit 4,618 5,406 5,427 6,341
Income before income taxes 475 545 745 1,082
Net income 271 310 425 504
Earnings per share:
Basic (2) $ 0.21 $ 0.24 $ 0.33 $ 0.40
Diluted (2) $ 0.18 $ 0.18 $ 0.21 $ 0.24
Cash dividends per share:
Common stock $ 0.035 $ 0.035 $ 0.035 $ 0.035
Class B stock $0.0315 $0.0315 $0.0315 $0.0315
1996
Revenues $10,033 $10,591 $12,247 $12,414
Gross profit 3,969 4,080 4,579 5,152
Income before income taxes 427 467 604 705
Net income 248 271 350 381
Earnings per share:
Basic (2) $ 0.19 $ 0.22 $ 0.28 $ 0.30
Diluted (2) $ 0.19 $ 0.20 $ 0.25 $ 0.26
Cash dividends per share:
Common stock $ 0.035 $ 0.035 $ 0.035 $ 0.035
Class B stock $0.0315 $0.0315 $0.0315 $0.0315
__________________
</TABLE>
(1) Fourth quarter 1996 includes a favorable billing adjustment and a
favorable adjustment to previously accrued expenses.
(2) In the fourth quarter of 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS 128). The previously reported earnings per share have been restated as
required by SFAS 128.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
1997 Compared to 1996
The Company's total revenues for the year ended December 31, 1997 increased
17.8% to $53.4 million from $45.3 million for the year ended December 31,
1996. Revenues from equipment rentals and maintenance increased to $23.5
million in 1997 from $22.2 million in 1996 or 5.9%, primarily due to the
increase in new indoor display rental and maintenance contracts, offset
partially by the expected decline from the outdoor lease and maintenance bases
previously acquired. Revenues from equipment sales increased to $24.4 million
in 1997 from $18.7 million in 1996 or 30.4%, mainly as a result of the
acquisition of the catalog and custom scoreboard sign business of Fairtron
Corporation in May 1997, and increased sales of outdoor products. The
increase was offset partially by a decline in revenues 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 $1.1 million or 24.5% in 1997, primarily
attributable to the acquisitions of the Gaslight Cinema in March 1997 and the
Lake Dillon Cinema in September 1997, and increased concession sales at the
theatres.
Gross profit as a percentage of revenues was 40.8% in 1997 compared to
39.3% in 1996. Cost of equipment rentals and maintenance, which includes
field service expenses, plant repair costs and depreciation, decreased
$259,000 or 2.1%, principally due to a favorable impact resulting from a
change in the estimate of the useful lives of 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 50.7% of related revenues in 1997 compared to 54.9% in 1996. Cost
of equipment sales increased $3.5 million or 29.1%, primarily due to the
Fairtron acquisition and the increase in sales of outdoor products, offset by
a decline in sales of indoor products. During 1997, the gross profit margin
benefited by the allocation of certain fixed overhead costs over larger
production volume. Due to the nature of the outdoor display market, the
Company anticipates the gross profit margin to decline somewhat as it enters
and increases its market share in existing and new industry segments of the
outdoor market. The cost of equipment sales represented 63.3% of related
revenues in 1997 compared to 64.0% in 1996. Cost of theatre receipts and
other, which includes film rental costs, increased $838,000 or 25.0%, mainly
as a result of the Gaslight and Lake Dillon Cinema acquisitions and the
increase in film rental costs resulting from increased box office receipts.
The cost of theatre receipts and other represented 76.7% of related revenues
in 1997 compared to 76.4% in 1996.
General and administrative expenses increased $2.8 million or 21.5%,
primarily due to the Fairtron acquisition, expanded sales and marketing efforts,
increased payroll and benefit costs and the negative impact of the effect of
foreign currency exchange rates, offset partially by a favorable litigation
settlement.
Interest income increased $1.0 million, primarily attributable to
increased investments from the proceeds of the issuance of the 7 1/2%
Convertible Subordinated Notes due 2006 (7 1/2% Notes). Interest expense
increased $1.9 million, 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. Other income in 1997 related to the
operations of the theatre joint venture, MetroLux Theatres, and gains on sales
of securities. Other expense in 1996 related to the operations of MetroLux
Theatres, which included start up costs.
The effective tax rate was 47.0% in 1997 and 43.2% in 1996. The increase
in the effective tax rate for 1997 is largely due to tax losses incurred by
the foreign subsidiaries for which no tax benefit is currently available.
1996 Compared to 1995
The Company's total revenues for the year ended December 31, 1996 increased
19.8% to $45.3 million from $37.8 million for the year ended December 31,
1995. Revenues from equipment rentals and maintenance increased to $22.2
million in 1996 from $21.2 million in 1995 or 4.5%, primarily due to
additional indoor equipment rentals and favorable billing adjustments, offset
by the expected decline from the outdoor lease and maintenance bases
previously acquired. Revenues from equipment sales increased $6.4 million or
51.6% in 1996, mainly due to increased sales of indoor displays, which
included certain significant sales which were being recognized on the
percentage of completion basis, and increased sales of outdoor displays as a
result of the acquisition of Integrated Systems Engineering, Inc. (ISE) in
January 1995. Revenues from theatre receipts and other increased $160,000 or
3.8% in 1996, primarily attributable to increased concession sales at the
theatres.
Gross profit as a percentage of revenues was 39.3% in 1996 compared to
40.7% in 1995. Cost of equipment rentals and maintenance increased $807,000
or 7.1%, mainly due to operating expenses of the indoor displays. The cost of
equipment rentals and maintenance represented 54.9% of related revenues in
1996 compared to 53.6% in 1995. Cost of equipment sales increased $4.1
million or 52.5%, primarily due to certain significant indoor display
equipment sales, which due to the size of the orders had lower gross profit
margins, and increased sales of outdoor displays. During 1996, the gross
profit margin was benefited by the allocation of certain fixed overhead costs
over larger production volume. The cost of equipment sales represented 64.0%
of related revenues in 1996 compared to 63.6% in 1995. Cost of theatre
receipts and other increased $164,000 or 5.1%. The cost of theatre receipts
and other represented 76.4% of related revenues in 1996 compared to 75.4% in
1995.
-10-
<PAGE>
General and administrative expenses increased $1.7 million or 14.7%,
primarily due to expanded sales and marketing efforts and increased payroll
and benefit costs, partially offset by a favorable adjustment of previously
accrued expenses.
Interest income increased $25,000, primarily attributable to increased
investments. Interest expense increased $121,000, mainly due to increased
bank borrowing for general corporate purposes on the revolving credit
facility. Other expense in 1996 related to the operations of the theatre
joint venture, MetroLux Theatres, which included start up costs. Other income
in 1995 was largely due to the sale of a theatre property in New Mexico.
The effective tax rate was 43.2% in 1996 and 42.0% in 1995.
Accounting Standards
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings per Share" during the fourth quarter of 1997.
The new standard specifies the computation, presentation and disclosure
requirements for earnings per share. As required by the standard, the Company
has restated the previously reported earnings per share data. See Note 17 --
Earnings per Share.
The Company will adopt the provisions of Statement of Financial
Accounting Standards No. 130, "Reporting 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. The Company will
include such statement beginning with the first quarter of 1998.
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 effect this
standard will have on disclosure in the Company's financial statements.
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 7 1/2% Notes. On January 14, 1997, the
Underwriters exercised their overallotment option, bringing the total amount
outstanding to $31.625 million.
The Company believes that cash generated from operations together with
the net proceeds of the issuance of the 7 1/2% Notes will be sufficient to
fund its anticipated near term cash requirements. The net proceeds of the
7 1/2% Notes were used, in part, to pay down certain of the Company's debt,
redemption of the outstanding 9% Convertible Subordinated Debentures and to
finance the Fairtron and theatre acquisitions. The Company extended its $10.0
million revolving credit facility with its bank through June 2000, at which time
it will convert into a five-year term loan. As of December 31, 1997, the
Company had $6.8 million of the revolving credit facility available.
The $17.4 million decrease in cash and cash equivalents in 1997 is
primarily attributable to the net investment of $7.5 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. The increase of $18.6 million in 1996 was due primarily to the
net proceeds of the issuance of the 7 1/2% Notes which had been invested in
investment-grade overnight repurchase agreements. The Company continues to
experience a favorable collection cycle on its trade receivables. Unbilled
receivables primarily relates to contracts being recognized on the percentage
of completion basis.
In August 1995, the Company entered into a Credit Agreement with First
Union National Bank restructuring $15.6 million of indebtedness. The
restructuring extended the term to an average of 11 years at a variable rate
of interest of LIBOR plus 175 basis points. Simultaneously, the Company
entered into interest rate swap agreements for three years at a fixed rate of
7.86% for $15.6 million of notional value to mitigate the risk of the variable
interest rate. The agreement relating to the Company's credit facility
contains certain financial covenants with which the Company must comply,
absent a waiver by the bank, on a continuing basis. The Company is a
guarantor of a $3.0 million term loan to MetroLux Theatres, the theatre joint
venture. The owner of the non-related general partner of the joint venture
has guaranteed their pro rata portion of the indebtedness to the Company.
Impact of the Year 2000 Issue
The Company has evaluated the costs necessary to make its computer systems
Year 2000 compliant. This process involves modifying or replacing certain
hardware and software maintained by the Company. The Company is communicating
with its vendors to ensure that timely updates will be made available to make
the Company's purchased software Year 2000 compliant. The Company will
utilize both internal and external resources to reprogram or replace and test
all of its software for Year 2000 compliance, and the Company expects to
complete the project in early 1999 and believes that its level of preparedness
is appropriate.
The total cost for this project is estimated to be $200,000, of which
$125,000 will be capitalized. The bulk of these costs are expected to be
incurred during 1998 and are not expected to have a material impact on the
Company's cash flows, results of operations or financial condition. This cost
is being funded through operating cash flows. In addition, the Company is
anticipating communicating with others with whom it does significant business
to determine their Year 2000 compliance readiness and the extent to which the
Company is vulnerable to any third-party Year 2000 issues. Failure by the
Company and/or vendors and customers to complete Year 2000 compliance work in
a timely manner could have a material adverse effect on certain of the
Company's operations. The costs of this project and the expected completion
dates are based on management's best estimates.
- - ------------------------------------------------------------------------------
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 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.
-11-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
In thousands, except per share data Years ended December 31 1997 1996 1995
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Equipment rentals and maintenance $23,472 $22,162 $21,205
Equipment sales 24,434 18,741 12,364
Theatre receipts and other 5,457 4,382 4,222
-----------------------------------
Total revenues 53,363 45,285 37,791
-----------------------------------
Operating expenses:
Cost of equipment rentals and maintenance 11,906 12,165 11,358
Cost of equipment sales 15,478 11,991 7,863
Cost of theatre receipts and other 4,187 3,349 3,185
-----------------------------------
Total operating expenses 31,571 27,505 22,406
-----------------------------------
Gross profit from operations 21,792 17,780 15,385
General and administrative expenses 16,023 13,184 11,494
-----------------------------------
5,769 4,596 3,891
Interest income 1,191 172 147
Interest expense (4,353) (2,412) (2,291)
Other income (expense) 240 (153) 92
-----------------------------------
Income before income taxes 2,847 2,203 1,839
-----------------------------------
Provision for income taxes:
Current 164 518 576
Deferred 1,173 435 197
-----------------------------------
1,337 953 773
-----------------------------------
Net income $ 1,510 $ 1,250 $ 1,066
-----------------------------------
Earnings per share:
Basic $ 1.18 $ 0.99 $ 0.85
Diluted $ 0.80 $ 0.89 $ 0.79
------------------------------------
Average common shares outstanding:
Basic 1,281 1,258 1,250
Diluted 3,617 1,704 1,642
----------------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
In thousands, except share data December 31 1997 1996
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,843 $19,274
Available-for-sale securities 8,245 600
Receivables 6,833 4,173
Unbilled receivables 620 2,401
Inventories 4,644 1,775
Income taxes recoverable 426 ---
Prepaids and other current assets 405 348
----------------------
Total current assets 23,016 28,571
----------------------
Rental equipment 62,910 52,417
Less accumulated depreciation 23,009 18,465
----------------------
39,901 33,952
----------------------
Property, plant and equipment 27,064 21,655
Less accumulated depreciation and amortization 8,070 6,973
----------------------
18,994 14,682
Prepaids, intangibles and other 5,371 4,772
Maintenance contracts, net 1,006 1,270
Note receivable, joint venture (excludes $94 current portion) 690 784
----------------------
$88,978 $84,031
---------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accruals $ 6,837 $ 6,175
Income taxes payable --- 105
Current portion of long-term debt 258 203
----------------------
Total current liabilities 7,095 6,483
----------------------
Long-term debt:
7 1/2% convertible subordinated notes due 2006 31,625 27,500
9 1/2% subordinated debentures due 2012 1,057 1,057
9% convertible subordinated debentures due 2005 --- 4,811
Notes payable 16,770 14,744
----------------------
49,452 48,112
Deferred revenue, deposits and other 3,369 3,029
Deferred income taxes 4,753 3,745
----------------------
Stockholders' equity:
Capital stock
Preferred - $1 par value - 500,000 shares authorized
Common - $1 par value - 5,500,000 shares authorized
2,442,765 shares issued in 1997 and 2,441,765 in 1996 2,443 2,442
Class B - $1 par value - 1,000,000 shares authorized
297,640 shares issued in 1997 and 298,640 in 1996 297 298
Class A - $1 par value - 3,000,000 shares authorized
Additional paid-in-capital 13,904 13,818
Retained earnings 19,297 17,964
Other 6 (58)
----------------------
35,947 34,464
Less treasury stock - at cost - 1,453,722 shares in 1997 and 1,476,552 in 1996
(excludes additional 297,640 shares held in 1997 and 298,640 in 1996
for conversion of Class B stock) 11,638 11,802
----------------------
Total stockholders' equity 24,309 22,662
----------------------
$88,978 $84,031
---------------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,510 $ 1,250 $ 1,066
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,076 7,104 6,901
Net (income) loss of joint venture (47) 153 ---
Deferred income taxes 956 134 475
Gain on sales of securities (193) --- ---
Current deferred taxes --- --- 192
Minority interest --- --- (20)
Changes in operating assets and liabilities:
Receivables (579) (1,770) (595)
Unbilled receivables 1,781 (2,401) ---
Inventories (786) 125 (361)
Income taxes recoverable (426) ---- ----
Prepaids and other current assets (35) 212 (309)
Prepaids, intangibles and other (249) (1,526) (78)
Accounts payable and accruals (2,403) 1,370 (1,675)
Income taxes payable (105) (31) (62)
Deferred revenue, deposits and other 121 58 1,071
-----------------------------------
Net cash provided by operating activities 6,621 4,678 6,605
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of rental equipment (10,500) (8,156) (5,932)
Purchases of property, plant and equipment (2,012) (1,102) (1,749)
Payments for acquisitions (net) (2,283) --- (3,178)
Proceeds from acquisition note receivable --- --- 658
Sale of assets --- --- 221
Proceeds from (investment in) joint venture 94 364 (480)
Loan to joint venture --- (941) ---
Purchases of securities (18,343) --- (494)
Redemption of securities 11,007 --- 1,582
-----------------------------------
Net cash (used in) investing activities (22,037) (9,835) (9,372)
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 7,325 27,850 4,379
Repayment of long-term debt (4,600) (3,421) (3,655)
Proceeds from short-term borrowings --- --- 500
Repayment of short-term borrowings --- (500) ---
Redemption of Company's 9% convertible subordinated debentures (4,573) --- ---
Proceeds from exercise of stock options and stock award 10 12 45
Purchase of treasury stock --- (1) (1)
Cash dividends (177) (174) (171)
-----------------------------------
Net cash provided by (used in) financing activities (2,015) 23,766 1,097
-----------------------------------
Net increase (decrease) in cash and cash equivalents (17,431) 18,609 (1,670)
Cash and cash equivalents at beginning of year 19,274 665 2,335
-----------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,843 $19,274 $ 665
--------------------------------------------------------------------------------------------------------------------------
Interest paid $ 4,115 $ 2,171 $ 1,851
Interest received 1,016 180 176
Income taxes paid 694 749 661
--------------------------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
-14-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of consolidation: The consolidated financial statements include
the accounts of Trans-Lux Corporation and its majority-owned subsidiaries (the
Company). Investment in a 50% owned joint venture, MetroLux Theatres, is
reflected under the equity method.
Cash equivalents: The Company considers all highly liquid investments
with a maturity of three months or less, when purchased, to be cash
equivalents.
Available-for-sale securities: Available-for-sale securities consist of
common and preferred stock holdings, and corporate debt securities and are
stated at fair value.
Inventories: Inventories are stated at the lower of cost (first-in,
first-out method) or market value.
Rental equipment and property, plant and equipment: Rental equipment and
property, plant and equipment are stated at cost and are being depreciated
over their respective useful lives using straight line or 150% declining
balance methods. Leaseholds and improvements are amortized over the lesser of
the useful lives or term of the lease. The estimated useful lives are as
follows:
- - ------------------------------------------------------------------------------
Rental equipment 5 to 15 years
Buildings and improvements 10 to 45 years
Machinery, fixtures and equipment 4 to 15 years
Leaseholds and improvements 2 to 17 years
- - ------------------------------------------------------------------------------
When rental equipment and property, plant and equipment are fully depreciated,
retired or otherwise disposed of, the cost and accumulated depreciation are
eliminated from the accounts.
Maintenance contracts: Maintenance contracts are stated at cost and are
being amortized over their economic lives of eight to 15 years using an
accelerated method.
Revenue recognition: Rental revenue from leasing of equipment and revenue
from maintenance contracts are recognized as they accrue during the term of
the respective agreement. The Company recognizes revenues on long-term
equipment sales contracts, which require more than three months to complete,
using the percentage of completion method. The Company records unbilled
receivables representing amounts due under these long-term equipment sales
contracts which have not yet been billed to the customer. Income is
recognized based on the percentage of incurred costs to the estimated total
costs. Revenue on equipment sales, other than long-term equipment sales
contracts, are recognized upon shipment. Theatre receipts and other revenues
are recognized at time service is provided.
Taxes on income: The Company computes income taxes using the asset and
liability method, under which deferred income taxes are provided for the
temporary differences between the financial reporting basis and the tax basis
of the assets and liabilities.
Derivative financial instruments: 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 rate swap agreements to reduce
exposure to interest 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.
Earnings per share: The Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128)
during the fourth quarter of 1997. The new standard specifies the
computation, presentation and disclosure requirements for earnings per share.
As required by the standard, the Company has restated the previously reported
earnings per share data in conformity with SFAS 128.
Reporting comprehensive income: The Company will adopt the provisions of
Statement of Financial Accounting Standards No. 130, "Reporting 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.
The Company will include such statement beginning with the first quarter of
1998.
Disclosure about segments of an enterprise and related information: 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.
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 results could differ from those estimates.
Reclassifications: Certain reclassifications of prior years' amounts have
been made to conform to the current year's presentation.
-15-
<PAGE>
2. Change in Estimate
The Company reevaluated and changed its previously established estimates of
the useful lives of its rental equipment from eight to ten years for the
indoor rental equipment and from ten to 15 years for the outdoor rental
equipment. Current estimates based on use and experience indicate that the
actual 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 $1.0 million, $530,000 net of tax, $0.41 basic earnings per
share and $0.13 diluted earnings per share for the year ended December 31,
1997.
3. Available-for-Sale Securities
Available-for-sale securities are carried at estimated fair values and the
unrealized holding gains and losses are excluded from earnings and are
reported net of income taxes in a separate component of stockholders' equity
until realized. Adjustments of $6,000 and ($58,000) were made to equity to
reflect the net unrealized gains and losses on available-for-sale securities
as of December 31, 1997 and 1996, respectively. The Company realized gains on
the sales of available-for-sale securities of $193,000 in 1997. There were no
sales of available-for-sale securities during 1996.
Available-for-sale securities consist of the following:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------------
Fair Unrealized Fair Unrealized
In thousands Value Gains/(Losses) Value Losses
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity securities $ 660 $(45) $600 $(105)
Corporate debt securities --
maturities of 1 to 5 years 6,330 31 --- ---
Corporate debt securities --
maturities of 5 to 10 years 1,255 25 --- ---
-------------------------------------------------
$8,245 $ 11 $600 $(105)
- - -----------------------------------------------------------------------------------------
</TABLE>
4. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
In thousands 1997 1996
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and spare parts $1,993 $1,074
Work-in-process 553 186
Finished goods 2,098 515
---------------------
$4,644 $1,775
- - -----------------------------------------------------------------------------------------
</TABLE>
5. Property, Plant and Equipment
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
In thousands 1997 1996
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Land, buildings and improvements $16,824 $14,856
Machinery, fixtures and equipment 7,312 5,760
Leaseholds and improvements 2,928 1,039
----------------------
$27,064 $21,655
- - -----------------------------------------------------------------------------------------
</TABLE>
Land, buildings and equipment having a net book value of $13,506,000 and
$12,665,000 at December 31, 1997 and 1996, respectively, were pledged as
collateral under borrowing agreements.
6. Prepaids, Intangibles and Other
Prepaids, intangibles and other consist of the following:
<TABLE>
<CAPTION>
In thousands 1997 1996
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Deferred note and debenture costs $1,759 $1,836
Goodwill and noncompete agreements 1,572 890
Prepaids and other 798 719
Long-term portion of officers' and employees' loans 440 433
Deferred financing costs 310 395
Patents 198 259
Investment in joint ventures 120 73
Deposits and advances 88 76
Acquisition costs 86 91
---------------------
$5,371 $4,772
- - -----------------------------------------------------------------------------------------
</TABLE>
Deferred note and debenture costs represent costs attributable to the 7 1/2%
convertible subordinated notes and the 9 1/2% subordinated debentures being
amortized over the respective lives of the issues on a straight line basis,
and are net of accumulated amortization of $211,000 and $692,000 at December
31, 1997 and 1996, respectively. The December 31, 1996 amount included the
costs attributable to the 9% subordinated debentures which were redeemed
during 1997. Goodwill and noncompete agreements are costs primarily
attributable to the purchase costs associated with the acquisitions of ISE in
January 1995 and Fairtron in May 1997. See Note 8 - Acquisition. Goodwill is
being amortized over 20 years on a straight line basis, and is net of
accumulated amortization of $129,000 and $72,000 at December 31, 1997 and
1996, respectively. Noncompete agreements are being amortized over the
respective term of the agreements (five and seven years) on a straight line
basis, and are net of accumulated amortization of $309,000 and $196,000 at
December 31, 1997 and 1996, respectively. Deferred financing costs represent
costs attributable to financing agreements being amortized over the respective
term of the agreements on a straight line basis, and are net of accumulated
amortization of $234,000 and $502,000 at December 31, 1997 and 1996,
respectively. Patents represent costs attributable to engineering and design
costs of outdoor products being amortized over 14 years on a straight line
basis, and are net of accumulated amortization of $190,000 and $128,000 at
December 31, 1997 and 1996, respectively. The investment in joint ventures is
primarily an investment in MetroLux Theatres, a 12-plex theatre located in
Loveland, Colorado. Acquisition costs represent the purchase price
attributable to intangibles being amortized over 30 years on a straight line
basis, and are net of accumulated amortization of $64,000 and $59,000 at
December 31, 1997 and 1996, respectively. The Company evaluates the carrying
value of its long-lived assets and identifiable intangibles, including
goodwill, for possible impairments which, if applicable, are recognized when
events or changes in circumstances indicate that the carrying amount of such
assets may not be recoverable.
-16-
<PAGE>
7. Maintenance Contracts
Maintenance contracts represent the present value of contracts the Company has
with customers to service their outdoor display equipment, which were acquired
during 1993. These contracts are being amortized over their economic lives of
eight to 15 years, on an accelerated method, which contemplates contract
expiration, fall out and non-renewals, and are net of accumulated amortization
of $1,642,000 and $1,378,000 at December 31, 1997 and 1996, respectively.
8. Acquisition
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, noncompete and
consulting fees and assumption of certain debt for an approximate total
purchase price of $7.0 million. Additionally, there is a contingent purchase
price of $250,000, based on future sales. The payments for the acquisition
are shown in the Consolidated Statements of Cash Flows net of $6.8 million of
liabilities assumed. 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.
The acquisition has been accounted for using the purchase method of
accounting. The purchase price has been allocated on the basis of the fair
value of the assets acquired and liabilities assumed. Assets include land,
building, leaseholds, machinery and equipment, accounts receivable, inventory
and intellectual property. The excess of the purchase price over the fair
value of the net assets acquired has been recorded as goodwill.
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
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 data.
The following pro forma data should be read in conjunction with the
Company's consolidated financial statements. The pro forma data 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 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 December 31, 1997.
<TABLE>
<CAPTION>
In thousands, except per share data 1997 1996
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $57,816 $59,856
Net income $ 1,560 $ 793
Earnings per share - basic $ 1.22 $ 0.63
Earnings per share - diluted $ 0.81 $ 0.63
- - -----------------------------------------------------------------------------------------
</TABLE>
9. Taxes on Income
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
In thousands 1997 1996 1995
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ (1) $349 $490
State and local 165 169 86
-------------------------------
164 518 576
Deferred:
Federal 1,094 386 157
State and local 79 49 40
-------------------------------
1,173 435 197
-------------------------------
Total income tax expense $1,337 $953 $773
- - -----------------------------------------------------------------------------------------
</TABLE>
Income taxes provided differed from the expected federal statutory rate of 34%
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal benefit 5.7 6.5 4.5
Foreign losses 6.0 - -
Other 1.3 2.7 3.5
------------------------------
Effective income tax rate 47.0% 43.2% 42.0%
- - -----------------------------------------------------------------------------------------
</TABLE>
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
In thousands 1997 1996
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Long-term liability
Deferred tax asset:
Operating loss carryforwards $ 150 $ 120
Depreciation and amortization 463 442
Acquisition costs 84 84
Net pension cost 126 161
Supplemental retirement plan costs 111 86
Tax credit carryforwards 1,085 477
Unrealized holding losses --- 47
Bad debt expense 98 33
Installment sale 7 ---
State income taxes 25 ---
Valuation allowance (246) (224)
---------------------
1,903 1,226
- - -----------------------------------------------------------------------------------------
-17-
<PAGE>
In thousands 1997 1996
- - -----------------------------------------------------------------------------------------
Deferred tax liability:
Depreciation $5,659 $3,888
Gain on purchase of Company's 9% debentures 439 439
Net pension benefit 373 373
Foreign exchange gain 27 33
Bad debt expense 84 ---
Unrealized holding gains 5 ---
Joint venture tax loss 66 ---
Acquisition costs 3 ---
State income taxes --- 238
---------------------
6,656 4,971
---------------------
Net deferred tax liability $4,753 $3,745
- - -----------------------------------------------------------------------------------------
</TABLE>
The valuation allowance changed by $22,000 and $8,000 for the years ended
December 31, 1997 and 1996, respectively. The valuation allowance has been
established for the amount of deferred tax assets which management estimates
will more likely than not expire unused.
10. Accounts Payable and Accruals
Accounts payable and accruals consist of the following:
<TABLE>
<CAPTION>
In thousands 1997 1996
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Accounts payable $2,627 $2,317
Interest payable 275 603
Taxes payable 656 596
Accruals 3,279 2,659
---------------------
$6,837 $6,175
- - -----------------------------------------------------------------------------------------
</TABLE>
11. Long-Term Debt
Long-term debt consist of the following:
<TABLE>
<CAPTION>
In thousands 1997 1996
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
7 1/2% convertible subordinated notes due 2006 $31,625 $27,500
9% convertible subordinated debentures due 2005 --- 4,811
9 1/2% subordinated debentures due 2012 1,057 1,057
Term loans - bank, secured, due in
quarterly installments through 2002 10,328 11,944
Revolving credit facility - bank, secured 3,200 ---
Real estate mortgages - secured, due in monthly
and quarterly installments through 2005 3,095 2,502
Loan payable - CDA, due in monthly
installments through 2002 at 5.0% 375 448
Capital lease obligation - secured, due in
monthly installments through 1999 at 9 1/2% 30 53
----------------------
49,710 48,315
Less portion due within one year 258 203
----------------------
$49,452 $48,112
- - -----------------------------------------------------------------------------------------
</TABLE>
Payments of long-term debt due for the next five years are:
<TABLE>
<CAPTION>
In thousands 1998 1999 2000 2001 2002
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 258 $1,875 $2,786 $1,818 $5,649
- - -----------------------------------------------------------------------------------------
</TABLE>
The Company issued $27.5 million of 7 1/2% convertible subordinated notes due
2006 (the Notes) on December 19, 1996. Interest is payable semiannually on
June 1 and December 1 of each year. The Notes are convertible into Common
Stock of the Company at any time prior to maturity, at a conversion price of
$14.013 per share. The Notes are redeemable, in whole or in part, at the
option of the Company, at any time on or after December 1, 2001 at declining
premiums. The Indenture agreement relating to the Notes contains certain
financial covenants with which the Company must comply on a continuing basis,
which among others includes a limitation on the incurrence of indebtedness of
five times EBITDA plus $5.0 million. On January 14, 1997, the Underwriter
exercised their overallotment option, bringing the total amount outstanding to
$31.625 million.
During 1985, the Company issued $15.0 million of 9% convertible
subordinated debentures due 2005, convertible into shares of the Company's
Common Stock at a conversion price of $12.70 per share. The debentures were
redeemable at the option of the Company at par. On February 27, 1997, the
Company called all the outstanding debentures for redemption and recorded a
charge of $113,000, $66,000 net of tax, associated with the early retirement
of the subordinated debentures.
During 1994, the Company issued $1.1 million of 9 1/2% subordinated
debentures due 2012. Interest is payable semiannually on June 1 and December
1 of each year. The debentures are redeemable, in whole or in part, at the
option of the Company at any time on or after December 1, 1999 at declining
premiums. An annual sinking fund requirement of $105,700 is to commence
December 1, 2009.
The Company entered into a Credit Agreement with First Union National
Bank in August 1995 restructuring $15.6 million of indebtedness. The
restructuring extended the term to an average of 11 years at a variable rate
of interest of LIBOR plus 175 basis points (7.469% at December 31, 1997).
Simultaneously, the Company entered into interest rate swap agreements to
reduce the impact of changes in interest rates on its floating rate long-term
debt. The agreement relating to the Company's credit facility contains
certain financial covenants with which the Company must comply, absent a
waiver by the bank, on a continuing basis, which among others includes a fixed
charge coverage ratio of 1.05 to 1.0, and cash dividends may not exceed
$750,000 in any year. At December 31, 1997, the Company had outstanding two
interest rate swap agreements with a commercial bank, having a notional value
of $10.3 million. The resulting gain or loss on the swaps is included in
interest expense. The agreements effectively change the Company's interest
rate exposure on its $6.3 million floating rate installment note due quarterly
through August 2002 to a fixed rate of 7.86% and its $4.0 million floating
rate installment note due quarterly through July 2002 to a fixed rate of
7.86%. The notional value of the interest rate swap agreements are reduced
quarterly with the installment payments on the notes and mature July 1, 1998.
-18-
<PAGE>
The aggregate cost to terminate the interest rate swap agreements at December
31, 1997 was $55,000. The Company is subject to credit loss in the event of
nonperformance by other parties to the interest rate swap agreements.
However, the Company does not anticipate nonperformance by the counterparties.
The Company has a $10.0 million revolving credit facility with its bank
at a variable rate of interest of LIBOR plus 200 basis points (7.719% at
December 31, 1997) which is available until June 1998. At December 31, 1997,
the Company had $6.8 million available under such agreement. Subsequent to
year end, the revolving credit facility has been extended until June 2000 and
additional financial covenants have been added.
The Company has a first mortgage on a fourplex theatre in Taos, New
Mexico at an interest rate of prime plus 1% (9.5% at December 31, 1997) with a
balloon payment of $837,000 in 1998. Subsequent to year end, the Company
increased this mortgage by $1.0 million and refinanced at an interest rate of
prime, payable monthly through February 2018. The Company also has a first
mortgage on a fiveplex theatre in Durango, Colorado at an interest rate of
prime plus 1%, with a ceiling of 9% (9% at December 31, 1997) and a balloon
payment of $920,000 in 2000.
The Company has a first mortgage on the technical services center
facility in Norcross, Georgia currently at an interest rate of 8.65% payable
monthly through May 2005 with a balloon payment of $302,000 in 2005. The
interest rate will adjust in June 2000 to the five year US Treasury Securities
rate plus 250 basis points. The Company also has a first mortgage on the
office and production facility in Des Moines, Iowa at an interest rate of
8.25%, payable monthly through February 2004, with a balloon payment of
$390,000 in 2004.
The fair value of the 7 1/2% convertible subordinated notes and the 9 1/2%
subordinated debentures are $36,685,000 and $959,000, respectively, at
December 31, 1997. The fair value of the remaining long-term debt
approximates the carrying value.
The theatrical joint venture, MetroLux Theatres, has a $3.0 million first
mortgage on the 12-plex theatre located in Loveland, Colorado. The Company is
the guarantor of the entire indebtedness, however, the owner of the
non-related general partner of the joint venture has guaranteed their pro rata
portion of the indebtedness to the Company.
12. Stockholders' Equity
Changes in capital stock, additional paid-in capital, treasury stock and
retained earnings and other for the three years ended December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
Common Stock Class B Additional Retained
--------------------- ------------------- Paid-in Treasury Earnings
In thousands, except share data Shares Amount Shares Amount Capital Stock and Other
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1994 2,435,046 $2,435 305,359 $305 $13,809 $(11,911) $15,886
Net income -- -- -- -- -- -- 1,066
Cash dividends -- -- -- -- -- -- (171)
Unrealized holding gain -- -- -- -- -- -- 36
Exercise of stock options -- -- -- -- (4) 40 --
Common stock acquired (56 shares) -- -- -- -- -- (1) --
Common stock award (1,000 shares) -- -- -- -- 1 8 --
Class B conversion to common stock 1,222 1 (1,222) (1) -- -- --
----------------------------------------------------------------------------------------
Balance December 31, 1995 2,436,268 2,436 304,137 304 13,806 (11,864) 16,817
Net income -- -- -- -- -- -- 1,250
Cash dividends -- -- -- -- -- -- (174)
Unrealized holding gain -- -- -- -- -- -- 13
9% debentures conversion -- -- -- -- 23 40 --
Exercise of stock options -- -- -- -- (11) 23 --
Common stock acquired (81 shares) -- -- -- -- -- (1) --
Class B conversion to common stock 5,497 6 (5,497) (6) -- -- --
----------------------------------------------------------------------------------------
Balance December 31, 1996 2,441,765 2,442 298,640 298 13,818 (11,802) 17,906
Net income -- -- -- -- -- -- 1,510
Cash dividends -- -- -- -- -- -- (177)
Unrealized holding gain -- -- -- -- -- -- 64
9% debentures conversion -- -- -- -- 89 151 --
Exercise of stock options -- -- -- -- (3) 13 --
Class B conversion to common stock 1,000 1 (1,000) (1) -- -- --
----------------------------------------------------------------------------------------
Balance at December 31, 1997 2,442,765 $2,443 297,640 $297 $13,904 $(11,638) $19,303
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
-19-
<PAGE>
During 1997, the Board of Directors declared four quarterly cash dividends of
$0.035 per share on the Company's Common Stock and $0.0315 per share on the
Company's Class B Stock, which were paid in April, July and October 1997 and
January 1998. Each share of Class B Stock is convertible at any time into one
share of Common Stock and has ten votes per share, as compared to Common Stock
which has one vote per share but receives a higher dividend.
During 1995, the stockholders approved 3 million shares of a new class of
capital stock designated Class A Stock, $1.00 par value. The stock has no
voting rights except as required by law and will receive a 10% higher dividend
than the Common Stock. A Certificate of Amendment authorizing the Class A
shares and adjusting the authorized shares of Common Stock to 5.5 million and
Class B Stock to 1 million was filed during 1996.
Shares of Common Stock reserved for future issuance in connection with
convertible securities and stock option plans amounted to 2,364,000 and
2,824,000 at December 31, 1997 and 1996, respectively.
13. Leases
The Company occupies theatre and other premises under operating leases
expiring at varying dates through 2014. Certain of the leases provide for the
payment of real estate taxes and other occupancy costs.
The following is a summary of future minimum lease payments due under
operating leases at December 31, 1997:
<TABLE>
<CAPTION>
In thousands
- - -----------------------------------------------------------------------------------------
<S> <C>
1998 $ 513
1999 393
2000 326
2001 276
2002 251
Thereafter 2,199
-----
Total future minimum lease payments $3,958
- - -----------------------------------------------------------------------------------------
</TABLE>
Total rent expense for all operating leases amounted to $456,000, $296,000,
and $238,000 in 1997, 1996 and 1995, respectively.
14. Engineering Development
Engineering development expense was $322,000, $204,000 and $172,000 for 1997,
1996 and 1995, respectively.
15. Pension Plan
All eligible salaried employees of Trans-Lux Corporation and certain of its
subsidiaries are covered by a non-contributory pension plan. Pension benefits
vest after five years of service and are based on years of service and final
average salary. The Company's funding policy is to contribute annually an
amount that can be deducted for Federal income tax purposes.
The funded status of the plan at December 31, 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
In thousands 1997 1996
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Fair value of plan assets $ 4,612 $4,389
----------------------
Actuarial present value of benefits
for service rendered to date:
Accumulated benefits based on salaries to date,
including vested benefits of $3,899 and
$3,377 for 1997 and 1996, respectively 4,135 3,482
Additional benefits based on
estimated future salary levels 1,605 1,396
----------------------
Projected benefit obligation (PBO) 5,740 4,878
----------------------
Plan assets less than PBO (1,128) (489)
Unrecognized prior service cost 18 20
Unrecognized net loss from past
experience different from that assumed 1,472 1,033
Unrecognized net asset on January 1,
1985 recognized over 13 years (12) (52)
----------------------
Prepaid pension cost $ 350 $ 512
- - -----------------------------------------------------------------------------------------
</TABLE>
The following items are components of the net pension cost for 1997:
<TABLE>
<CAPTION>
In thousands
- - -----------------------------------------------------------------------------------------
<S> <C>
Present value of benefits earned during the period $371
Interest cost on projected benefit obligation 365
Actual return on plan assets (325)
Net amortization and deferral (106)
----
Net pension cost $305
- - -----------------------------------------------------------------------------------------
</TABLE>
Plan assets are invested in insurance company funds, mutual funds and $99,000
in the Company's 9 1/2% subordinated debentures. The weighted average
discount rate used in determining the actuarial present value of the PBO was
7.0% in 1997 and 7.5% in 1996. The rate of increase in future compensation
levels used in determining the actuarial present value of the PBO was 4.0% in
1997 and 1996. The expected long-term rate of return on assets was 9.5 % for
1997 and 1996.
The Company provides supplemental retirement benefits for the Chief
Executive Officer. During 1997, the Company accrued $62,000 for such
benefits. At December 31, 1997 and 1996, respectively, the total liability
accrued was $278,000 and $216,000.
The Company's pension and supplemental pension costs amounted to
$368,000, $353,000 and $183,000 in 1997, 1996 and 1995, respectively.
The Company does not offer any postretirement benefits other than the
pension and the supplemental retirement benefits described herein. The
Company provides some postemployment benefits, but did not accrue any
additional liability for such benefits during 1997.
-20-
<PAGE>
16. Stock Option Plans
The Company has five stock option plans. The 1995 Stock Option Plan and the
1992 Stock Option Plan reserved 100,000 and 50,000 shares of Common Stock,
respectively, for issue to key employees. Stock Option Plan II terminated,
and accordingly, additional shares cannot be granted under such plan, which
originally reserved 50,000 shares of Common Stock. The Non-Employee Director
Stock Option Plan reserved 30,000 shares of Common Stock for grant. The
Non-Statutory Stock Option Plan Agreement reserved 12,500 shares of Common
Stock for grant to the Chairman of the Board.
Changes in the stock option plans are as follows:
<TABLE>
<CAPTION>
Weighted
Number of Shares Average
---------------------------------- Exercise
Authorized Granted Available Price
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance December 31, 1994 98,400 89,500 8,900 $ 7.62
Additional authorized shares 50,000 -- 50,000 --
Terminated (19,700) (25,200) 5,500 7.54
Granted -- 28,200 (28,200) 8.14
Exercised (5,000) (5,000) -- 7.23
-----------------------------------------
Balance December 31, 1995 123,700 87,500 36,200 7.83
Additional authorized shares 65,000 -- 65,000 --
Terminated -- (500) 500 8.56
Granted -- 7,000 (7,000) 12.63
Exercised (8,406) (8,406) -- 6.71
-----------------------------------------
Balance December 31, 1996 180,294 85,594 94,700 8.33
Granted -- 27,600 (27,600) 11.26
Exercised (6,644) (6,644) -- 7.33
-----------------------------------------
Balance December 31, 1997 173,650 106,550 67,100 $ 9.14
- - -----------------------------------------------------------------------------------------
</TABLE>
Under the 1995 and 1992 Stock Option Plans, option prices must be at least
100% of the market value of the Common Stock at time of grant. No option may
be exercised prior to one year after date of grant. Exercise periods are for
ten years from date of grant (five years if the optionee owns more than 10% of
the voting power) and terminate at a stipulated period of time after an
employee's termination of employment. At December 31, 1997, under the 1995
Plan, options for 49,550 shares (granted in 1997 and 1995) with exercise
prices ranging from $8.125 to $15.1875 per share were outstanding, 22,450
shares of which were exercisable. During 1997, options for 27,100 shares were
granted at exercise prices ranging from $11.0625 to $15.1875 per share, and
options for 1,350 shares (granted in 1995) with an exercise price of $8.125
per share were exercised. During 1996, 50,000 additional shares were
authorized under the 1995 Stock Option Plan. No options were exercised during
1996 and 1995. At December 31, 1997, under the 1992 Plan, options for 35,500
shares (granted in 1995, 1994, 1993 and 1992) with exercise prices ranging
from $6.3125 to $9.6875 per share were outstanding, all of which were
exercisable. During 1997, options for 5,294 shares (granted in 1993 and 1992)
with exercise prices ranging from $6.3125 to $7.5625 per share were exercised.
During 1996, options for 7,406 shares (granted in 1992) with an exercise price
of $6.3125 per share were exercised, and options for 500 shares expired.
During 1995, options for 3,400 shares were granted at an exercise price of
$8.125 per share, options for 1,300 shares (granted in 1992) with an exercise
price of $6.3125 per share were exercised, and options for 1,000 shares
expired.
Under the Non-Employee Director Stock Option Plan, option prices must be
at least 100% of the market value of the Common Stock at time of grant. No
option may be exercised prior to one year after date of grant and the optionee
must be a director of the Company at time of exercise, except in certain cases
as permitted by the Compensation Committee. Exercise periods are for six
years from date of grant and terminate at a stipulated period of time after an
optionee ceases to be a director. At December 31, 1997, options for 9,000
shares (granted in 1997, 1996, 1995 and 1994) with exercise prices ranging
from $8.625 to $12.625 per share were outstanding, 8,500 shares of which were
exercisable. During 1997, options for 500 shares were granted at an exercise
price of $12.00 per share, and no options were exercised. During 1996, 15,000
additional shares were authorized, options for 7,000 shares were granted at an
exercise price of $12.625 per share, and options for 1,000 shares (granted in
1994) with an exercise price of $9.6875 per share were exercised. During
1995, options for 1,000 shares were granted at an exercise price of $8.625 per
share, options for 1,500 shares (granted in 1989) with an exercise price of
$7.4375 per share were exercised, and options for 4,500 shares expired.
Under the Non-Statutory Stock Option Agreement, option prices must be at
least 100% of the market value of the Common Stock at time of grant. The
exercise period is for ten years from date of grant. At December 31, 1997,
options for 12,500 shares (granted in 1993) with an exercise price of $7.50
per share were outstanding, all of which were exercisable. No options were
exercised during 1997, 1996 and 1995.
Under Stock Option Plan II, option prices must be at least 100% of the
market value of the Common Stock at time of grant. The exercise period was
for six years from date of grant (five years if the optionee owned more than
10% of the voting power) and terminated at a stipulated period of time after
an employee's termination of employment. At December 31, 1997, no options
were outstanding. During 1995, options for 2,200 shares (granted in 1989)
with an exercise price of $7.625 per share were exercised, and options for
19,700 shares expired.
The following tables summarize information about stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Weighted Average
Range of Number Remaining Weighted Average
Exercise Prices Outstanding Contractual Life Exercise Price
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 6.31 -- $ 7.56 25,700 2.9 $ 7.18
7.57 -- 8.63 36,850 7.3 8.14
8.64 -- 9.69 9,400 6.1 9.60
9.70 -- 12.63 33,500 8.1 11.41
12.64 -- 15.19 1,100 9.8 15.19
----------------------------------------------------------
106,550 6.4 $ 9.14
- - ----------------------------------------------------------------------------------------
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
Range of Number Weighted Average
Exercise Prices Exercisable Exercise Price
- - ----------------------------------------------------------------------------------------
<S> <C> <C>
$ 6.31 -- $ 7.56 25,700 $ 7.18
7.57 -- 8.63 36,850 8.14
8.64 -- 9.69 9,400 9.60
9.70 -- 12.63 7,000 12.63
12.64 -- 15.19 -- --
-------------------------------------------
78,950 $ 8.40
- - ----------------------------------------------------------------------------------------
</TABLE>
The estimated fair value of options granted during 1997, 1996 and 1995 was
$3.64, $4.15 and $2.67 per share, respectively. The Company applies
Accounting Principles Board Opinion No. 25 and related Interpretations in
accounting for its stock option plans. Accordingly, no compensation cost has
been recognized for its stock option plans. Had compensation cost for the
Company's stock option plans been determined based on the fair value at option
grant dates for awards in accordance with the accounting provisions of
Statement of Financial Accounting Standards No. 123 (SFAS 123), the Company's
net income and earnings per share for the years ended December 31, 1997, 1996
and 1995 would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
In thousands, except per share data 1997 1996 1995
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income applicable to common shareholders
Basic:
As reported $1,510 $1,250 $1,066
Pro forma 1,447 1,223 1,047
- - -----------------------------------------------------------------------------------------
Net income per common and common equivalent share
Basic:
As reported $ 1.18 $ 0.99 $ 0.85
Pro forma 1.13 0.97 0.84
Diluted:
As reported 0.80 0.89 0.79
Pro forma 0.78 0.87 0.78
- - -----------------------------------------------------------------------------------------
</TABLE>
The fair value of options granted under the Company's stock option plans
during 1997, 1996 and 1995 was estimated on dates of grant using the binomial
options-pricing model with the following weighted-average assumptions used:
dividend yield of approximately 1.05% in 1997 and 1.22% in 1996 and 1995,
expected volatility of approximately 33% in 1997 and 35% in 1996 and 1995,
risk free interest rate of approximately 6% and expected lives of option
grants of approximately four years in 1997, 1996 and 1995. The effects of
applying SFAS 123 in this pro forma disclosure are not indicative of future
pro forma effects, and additional awards in future years are anticipated.
17. Earnings per Share
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (SFAS 128), during the fourth quarter
of 1997. The new standard specifies the computation, presentation and
disclosure requirements for earnings per share. The following table
represents the computation of basic and diluted earnings per common share as
required by SFAS 128 for the three years ended December 31, 1997:
<TABLE>
<CAPTION>
In thousands, except per share data 1997 1996 1995
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic earnings per share computation
Net income $1,510 $1,250 $1,066
--------------------------------
Weighted average common
shares outstanding 1,281 1,258 1,250
--------------------------------
Basic earnings per common share $ 1.18 $ 0.99 $ 0.85
- - -----------------------------------------------------------------------------------------
Diluted earnings per share computation
Net income $1,510 $1,250 $1,066
Add: After tax interest expense
applicable to convertible debt 1,447 276 262
Add: After tax changes to income
applicable to assumed conversion (78) (16) (27)
--------------------------------
Adjusted net income $2,879 $1,510 $1,301
--------------------------------
Weighted average common
shares outstanding 1,281 1,258 1,250
Assumes exercise of options reduced
by the number of shares which could
have been purchased with the
proceeds from exercise of such options 30 33 8
Assumes conversion of 9% convertible
subordinated debentures 59 381 384
Assumes conversion of 7 1/2%
convertible subordinated notes 2,247 32 --
--------------------------------
Total weighted average shares 3,617 1,704 1,642
--------------------------------
Diluted earnings per common share $ 0.80 $ 0.89 $ 0.79
- - -----------------------------------------------------------------------------------------
</TABLE>
18. Commitments and Contingencies
The Company has employment agreements with certain executive officers which
expire at various dates through December 2002. At December 31, 1997, the
aggregate commitment for future salaries, excluding bonuses, was approximately
$3,726,000.
During 1996, the Company received a $350,000 grant from the State of
Connecticut Department of Economic Development. This grant will be forgiven
under certain circumstances, which includes attainment of predetermined
employment levels within the state and maintaining business operations within
the state for a specified period of time.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business, certain of which claims are reimbursable to
the Company from the Company's insurance carriers. In the opinion of
management, the amount of ultimate liability with respect to these actions,
after considering the related insurance reimbursements, will not have a
material adverse affect on the consolidated financial statements of the
Company.
-22-
<PAGE>
19. Business Segment Data
The Company's operations have been classified into two business segments. The
Display Division designs, produces, leases, sells and services large-scale,
multi-color, real-time electronic information displays for both indoor and
outdoor use. The Entertainment and Real Estate Division owns a chain of
motion picture theatres in the southwestern United States and owns real estate
used for both corporate and income-producing purposes in the United States and
Canada.
Information about the Company's operations in its two business segments
for the three years ended December 31, 1997 is as follows:
<TABLE>
<CAPTION>
In thousands 1997 1996 1995
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Display $47,906 $40,903 $33,569
Entertainment and real estate 5,457 4,382 4,222
---------------------------------
$53,363 $45,285 $37,791
---------------------------------
Operating income:
Display $12,733 $10,125 $ 9,500
Entertainment and real estate 711 335 548
---------------------------------
13,444 10,460 10,048
Other income 193 -- 92
General and administrative expenses (7,628) (6,017) (6,157)
Interest expense - net (3,162) (2,240) (2,144)
---------------------------------
Income before taxes $ 2,847 $ 2,203 $ 1,839
---------------------------------
Assets:
Display $69,922 $58,096 $49,565
Entertainment and real estate 8,968 6,061 6,654
---------------------------------
Total identifiable assets 78,890 64,157 56,219
Cash and available-for-sale securities 10,088 19,874 1,241
---------------------------------
$88,978 $84,031 $57,460
---------------------------------
Depreciation and amortization:
Display $ 6,264 $ 6,620 $ 6,403
Entertainment and real estate 380 327 301
General corporate 432 157 197
---------------------------------
$ 7,076 $ 7,104 $ 6,901
---------------------------------
Capital expenditures:
Display $11,473 $ 9,157 $ 7,461
Entertainment and real estate 1,039 101 220
---------------------------------
$12,512 $ 9,258 $ 7,681
- - -----------------------------------------------------------------------------------------
</TABLE>
General and administrative expenses consist of general corporate expenses not
deemed to be operating expenses and have therefore not been allocated. No
single customer accounted for 10% or more of total revenues in 1997, 1996 and
1995. Foreign revenues were less than 10% of total revenues in 1997, 1996 and
1995.
INDEPENDENT AUDITORS' REPORT
Deloitte &
Touche LLP
- - -----------
To the Board of Directors and Stockholders of
Trans-Lux Corporation:
We have audited the accompanying consolidated balance sheets of Trans-Lux
Corporation and subsidiaries as of December 31, 1997 and 1996 and the related
consolidated statements of income and cash flows for each of the three years
in the period ended December 31, 1997. These consolidated 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 generally accepted auditing
standards. 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company and its
subsidiaries at December 31, 1997 and 1996 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Stamford, Connecticut
February 26, 1998
-23-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) The information required by this Item with respect to directors, is
incorporated herein by reference to the Section entitled "Election of
Directors" in the Company's Proxy Statement.
(b) The following executive officers were elected by the Board of Directors
for the ensuing year and until their respective successors are elected.
Name Office Age
--------------- --------------------- ---
Richard Brandt Chairman of the Board 70
Victor Liss Vice Chairman of the Board, 61
President and Chief Executive
Officer
Michael R. Mulcahy Executive Vice President 49
Matthew Brandt Senior Vice President 34
Thomas Brandt Senior Vice President 34
Frank N. Daniels Senior Vice President 60
Karl P. Hirschauer Senior Vice President 52
Thomas F. Mahoney Senior Vice President 50
Al L. Miller Senior Vice President 52
Angela D. Toppi Senior Vice President, Treasurer, 42
Secretary and Chief Financial
Officer
Messrs. R. Brandt, Liss and Daniels have been associated in an
executive capacity with the Company for more than five years.
Mr. Mulcahy was elected Executive Vice President in charge of sales,
marketing and engineering operations on May 18, 1995 and has been employed by
the Company since 1967. Mr. Mulcahy served as Senior Vice President in
-24-
<PAGE>
charge of sales between December 8, 1993 and May 18, 1995 and as Vice
President of sales between 1989 and December 8, 1993.
Messrs. M. and T. Brandt were elected Senior Vice Presidents in charge
of theatre operations on September 27, 1997 and have been employed since 1985.
They served as Vice Presidents in charge of theatre operations between May 22,
1991 and September 27, 1997.
Mr. Hirschauer was elected Senior Vice President in charge of
engineering and product development on December 8, 1993 and has been employed
by the Company since 1980. Mr. Hirschauer served as Vice President in charge
of engineering between 1984 and December 8, 1993.
Mr. Mahoney was elected Senior Vice President in charge of sales on July
1, 1996 and has been employed by the Company since 1967. Mr. Mahoney served
as Assistant Vice President of sales between December 1, 1994 and July 1,
1996.
Mr. Miller was elected Senior Vice President in charge of manufacturing
and materials on September 27, 1997 and has been employed by the Company since
1995. Mr. Miller served as Vice President in charge of manufacturing and
materials between March 13, 1995 and September 27,1997. Mr. Miller was
self-employed as a consultant between 1993 and 1995.
Ms. Toppi was elected Senior Vice President in charge of finance on
September 29, 1995 and has been employed by the Company since 1986. Ms.
Toppi has served as Secretary of the Company since July 23, 1992, Chief
Financial Officer since March 19, 1992 and Treasurer since 1988.
(c) The information required by Item 405 of Regulation S-K is incorporated
herein by reference to the Section entitled "Compliance with Section 16(a) of
the Securities Exchange Act of 1934" in the Company's Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference
to the Section entitled "Executive Compensation and Transactions with
Management" in the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is incorporated herein by reference
to the Section entitled "Security Ownership of Certain Beneficial Owners,
Directors and Executive Officers" in the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference to
the Section entitled "Executive Compensation and Transactions with Management"
in the Company's Proxy Statement.
-25-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements:
Consolidated Statements of Income for the Years Ended December 31,
1997, 1996 and 1995.
Consolidated Balance Sheets as of December 31, 1997 and 1996.
Consolidated Statements of Cash Flows for the Years Ended December
31, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
Independent Auditors' Report
Individual financial statements for two 50% owned entities accounted for
by the equity method, have been omitted because they do not constitute
significant subsidiaries.
(2) Schedules: None
(3) Exhibits included herein:
3(a) Form of Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 of
Registration No. 333-15481).
(b) By-Laws of the Registrant (incorporated by reference
Exhibit 3.2 of Registration No. 333-15481).
4(a) Indenture dated as of December 1, 1994 (form of said
indenture is incorporated by reference to Exhibit 6 of
Schedule 13E-4 Amendment No. 2 dated December 23, 1994).
(b) Indenture dated as of December 1, 1996 (form of said
indenture is incorporated by reference to Exhibit 4.2 of
Registration No. 333-15481).
10.1 Form of Indemnity Agreement -- Directors (form of said
agreement is incorporated by reference to Exhibit 10.1 of
Registration No. 333-15481).
10.2 Form of Indemnity Agreement -- Officers (form of said
agreement is incorporated by reference to Exhibit 10.2 of
Registration No. 333-15481).
10.3 Amended and Restated Pension Plan dated August 14, 1996
(incorporated by reference to Exhibit 10.3 of Form 10-K for
the year ended December 31, 1996).
-26-
<PAGE>
10.4(a) 1989 Non-Employee Director Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.2 of Form 10-Q for
the quarter ended September 30, 1996).
(b) 1992 Stock Option Plan (incorporated by reference to Proxy
Statement dated April 3, 1992).
(c) Richard Brandt Stock Option Agreement dated January 1, 1993
(incorporated by reference to Exhibit 10(d) of Form 10-K
for the year ended December 31, 1992).
(d) 1995 Stock Option Plan, as amended (incorporated by
reference to Proxy Statement dated April 22, 1996).
10.5 Credit Agreement with First Fidelity Bank dated as of
August 28, 1995 (incorporated by reference to Exhibit 10 of
Form 10-Q for the quarter ended September 30, 1995.) Fourth
Amendment Agreement dated December 19, 1997, included
herewith. Fifth Amendment Agreement dated March 24, 1998,
included herewith.
10.6 Employment Agreement with Richard Brandt dated August 16,
1996 (incorporated by reference to Exhibit 10.3 in
Registration No. 333-15481).
10.7 Employment Agreement with Victor Liss dated as of January
1, 1997 (incorporated by reference to Exhibit 10.7 of Form
10-K for the year ended December 31, 1996).
10.8 Employment Agreement with Michael R. Mulcahy dated as of
June 1, 1994 (incorporated by reference to Exhibit 28(d) of
Form 10-Q for the quarter ended September 30, 1994).
Amendment No. One to Employment Agreement dated June 1,
1995 (incorporated by reference to Exhibit 28(a) of Form
10-Q for the quarter ended June 30, 1995).
10.9 Employment Agreement with Frank Daniels dated as of January
1, 1997 (incorporated by reference to Exhibit 10.9 of
Form 10-K for the year ended December 31, 1996).
10.10 Employment Agreement with Karl Hirschauer dated as of
January 1, 1997 (incorporated by reference to Exhibit
10.10 of Form 10-K for the year ended December 31, 1996).
10.11 Employment Agreement with Thomas F. Mahoney dated as of
June 1, 1996 (incorporated by reference to Exhibit 28(a) of
Form 10-Q for the quarter ended June 30, 1996).
-27-
<PAGE>
10.12 Employment Agreement with Angela Toppi dated as of January
1, 1997 (incorporated by reference to Exhibit 10.12 of Form
10-K for the year ended December 31, 1996).
10.13 Asset Purchase Agreement between Trans-Lux Consulting
Corporation and American Electronic Displays, L.P. dated
July 9, 1992 (incorporated by reference to Form 8-K filed
July 13, 1992). Amendment to Asset Purchase Agreement dated
as of August 21, 1992 (incorporated by reference to Form 8-K
filed August 28, 1992). Bankruptcy Court order approving
sale (incorporated by reference to Form 8-K filed August 28,
1992).
10.14 Agreement between Trans-Lux ISE Corporation and the
Stockholders of Integrated Systems Engineering, Inc. dated
as of January 17, 1995 (incorporated by reference to Exhibit
28(a) of Form 8-K filed January 23, 1995).
10.15 Agreement with Nottingham Partners, Deerfield Partners,
Jonathan P. Schwartz and Nathaniel B. Guild dated April 4,
1991 (incorporated by reference to Exhibit 28(a) of Form 8-K
filed April 9, 1991).
10.16 Agreement with Baupost Group, Inc. and Baupost Partners
dated April 4, 1991 (incorporated by reference to Exhibit
28(b) of Form 8-K filed April 9, 1991).
10.17 Agreement between Trans-Lux Midwest Corporation and
Fairtron
Corporation dated as of April 30, 1997 (incorporated by
reference to Exhibit 10(a) of Form 8-K filed May 15, 1997).
21 List of Subsidiaries filed herewith.
27 Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information
only and not filed.
(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
-28-
<PAGE>
SIGNATURES
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, thereunto duly authorized:
TRANS-LUX CORPORATION
by /s/ Angela D. 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
Dated: March 30, 1998
-29-
<PAGE>
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 date indicated:
/s/ Richard Brandt
- - ------------------------------------- March 30, 1998
Richard Brandt, Chairman of the Board
/s/ Victor Liss
- - ------------------------------------- March 30, 1998
Victor Liss, Vice Chairman of the
Board, President and Chief Executive
Officer
/s/ Steven Baruch
- - ------------------------------------- March 30, 1998
Steven Baruch, Director
/s/ Howard Brenner
- - ------------------------------------- March 30, 1998
Howard Brenner, Director
/s/ Jean Firstenberg
- - ------------------------------------- March 30, 1998
Jean Firstenberg, Director
/s/ Allan Fromme
- - ------------------------------------- March 30, 1998
Allan Fromme, PhD, Director
- - ------------------------------------- March 30, 1998
Robert Greenes, Director
/s/ Eugene F. Jankowski
- - ------------------------------------- March 30, 1998
Eugene F. Jankowski, Director
/s/ Howard S. Modlin
- - ------------------------------------- March 30, 1998
Howard S. Modlin, Director
EXHIBIT 10.5
FOURTH AMENDMENT AGREEMENT
--------------------------
AGREEMENT, dated as of December 19, 1997 among TRANS-LUX CORPORATION,
a Delaware corporation, TRANS-LUX CONSULTING CORPORATION, a Delaware corpo-
ration, TRANS-LUX SIGN CORPORATION, a Delaware corporation, TRANS-LUX MONTEZUMA
CORPORATION, a New Mexico corporation, INTEGRATED SYSTEMS ENGINEERING, INC., a
Utah corporation, the GUARANTORS, and FIRST UNION NATIONAL BANK a national
banking association (formerly known as First Union Bank of Connecticut).
Background
----------
A. Capitalized terms not otherwise defined shall have the meanings ascribed
to them in the Credit Agreement dated as of August 28, 1995, between Trans-Lux
Corporation, Trans-Lux Consulting Corporation, Trans-Lux Sign Corporation,
Trans-Lux Montezuma Corporation, Integrated Systems Engineering, Inc., and First
Fidelity Bank of Connecticut (now known as First Union National Bank) (as
amended, modified or supplemented from time to time, the "Credit Agreement").
B. Borrowers have requested that Lender, among other things, (i) increase
from $5,000,000 to $10,000,000, the amount of Lender's commitment under Loan C
and (ii) modify the interest rate with respect to the Loans.
C. Lender has agreed to Borrowers' requests subject to the terms and
conditions of this Agreement.
Agreement
---------
In consideration of the Background, which is incorporated by reference,
the parties, intending to be legally bound, agree as follows:
1. Modifications. All the terms and provisions of the Credit Agreement
-------------
and the other Loan Documents shall remain in full force and effect except as
follows:
(a) The definition of "Fixed Charge Coverage Ratio" set forth in
Annex A to the Credit Agreement is deleted and the following is substituted
therefor:
"Fixed Charge Coverage Ratio" shall mean, with respect to any Person,
---------------------------
on a consolidated basis, at any date, the ratio of EBITDA less dividends
paid by TLX to the sum of (i) Interest Expense, (ii) Current Maturities
<PAGE>
(excluding "balloon" payments but including Capital Lease Obligations),
and (iii) forty percent (40%) of Capital Expenditures for Rental
Equipment.
(b) The definition of "Loan C" set forth in Annex A to the Credit
Agreement is deleted and the following is substituted therefor:
"Loan C" shall mean the revolving loan facility extended by Lender
------
to TLX in the original principal amount of $10,000,000, evidenced by
Note C.
(c) The following definition of "LIBOR Market Index Rate" is added
to the Credit Agreement following the definition of "Lender":
"LIBOR Market Index Rate" means that the rate for a Reset Date
------------------------
will be the rate for one (1) month U.S. dollar deposits as reported
on Telerate Page 3750 as of 11:00 a.m., London time, for such day,
provided if such day is not a London business day or if not so reported,
then as determined by the Lender from another recognized source or
interbank quotation.
(d) The figure "$5,000,000" contained in subparagraph (a)(iii) of
Schedule 1.1 to the Credit Agreement is deleted and the figure "$10,000,000" is
- - ------------
substituted therefor.
(e) The phrase "USD-LIBOR-BBA" contained in subparagraph (c)(ii) of
Schedule 1.2 to the Credit Agreement is deleted and the phrase "LIBOR Market
- - ------------
Index Rate" is substituted therefor.
(f) The phrase "USD-LIBOR-BBA" contained in subparagraph (f) of Schedule
--------
1.2 to the Credit Agreement is deleted and the phrase "LIBOR Market Index Rate"
- - ---
is substituted therefor.
(g) Schedule 3.9 to the Credit Agreement is deleted and the attached
------------
Schedule 3.9 is substituted therefor.
(h) Subparagraph 1(b) of Schedule 6.11 to the Credit Agreement is deleted
-------------
and the following is substituted therefor:
(b) TLX, on a consolidated basis, shall not expend in excess of
$15,000,000 for Capital Expenditures (including Rental Equipment but
excluding expenditures related to movie theatres) in any Fiscal year, which
amount shall be noncumulative from year to year.
<PAGE>
2. Conditions to Effectiveness. This Agreement shall not be effective
-----------------------------
until such date as Lender shall have received the following, all in form, scope
and content acceptable to Lender in its sole discretion:
(a) Amendment Agreement. This Agreement duly executed by the
-------------------
parties hereto;
(b) Allonge. The Third Allonge to Revolving Promissory Note duly
-------
drawn to the order of Lender;
(c) Amendment Fee. Payment to the Lender of the Amendment Fee in
-------------
the amount of $22,500 in consideration of the Lender's execution, delivery
and performance of this Agreement; and
(d) Other. Such other agreements as Lender shall reasonably
-----
require.
3. Reaffirmation By Borrowers. Borrowers acknowledge and agree, and
--------------------------
reaffirm, that each is legally, validly and enforceably indebted to Lender under
the Notes without defense, counterclaim or offset, and that each is legally,
validly and enforceably liable to Lender for all costs and expenses of
collection and reasonable attorneys' fees as and to the extent provided in this
Agreement, the Credit Agreement, the Notes and the other Loan Documents.
Borrowers hereby restate and agree to be bound by all covenants contained in
the Credit Agreement and the other Loan Documents and hereby reaffirm that all
of the representations and warranties contained in the Credit Agreement and the
other Loan Documents remain true and correct in all material respects with the
exception that the financial statements described therein are deemed true as
of the date made. Borrowers represent that except as set forth in the Credit
Agreement and the other Loan Documents, there are not pending, or to each
Borrower's knowledge threatened, legal proceedings to which Borrowers or any
of Guarantors is a party, which materially or adversely affect the transactions
contemplated by this Agreement or the ability of Borrowers or any of Guarantors
to conduct its business on a consolidated basis. Borrowers and Guarantors
acknowledge and represent that the resolutions of each dated July 27, 1995
(except for the resolutions of Trans-Lux Midwest Corporation which are dated
February 13, 1997), remain in full force and effect and have not been amended,
modified, rescinded or otherwise abrogated.
4. Reaffirmation by Guarantors. Guarantors acknowledge that each is
---------------------------
legally and validly indebted to Lender under the Guaranty of each without
defense, counterclaim or offset. Guarantors affirm that the Guaranty of each
remains in full force and effect and acknowledges that the Guaranty of each
encompasses the indebtedness of each of the Loans including, without limitation,
Loan C, as modified herein.
<PAGE>
5. Reaffirmation re: Collateral. Borrowers and Guarantors reaffirm the
----------------------------
liens, security interests and pledges granted pursuant to the Loan Documents to
secure the obligations of each thereunder.
6. Other Representations By Borrowers and Guarantors. Borrowers and
-------------------------------------------------
Guarantors each represent and confirm that (a) no Default or Event of Default
has occurred and is continuing and Lender has not given its consent to or waived
any Default or Event of Default and (b) the Credit Agreement and the other Loan
Documents are in full force and effect and enforceable against Borrowers and
Guarantors in accordance with the terms thereof. Borrowers and Guarantors each
represent and confirm that as of the date hereof, each has no claim or defense
(and Borrowers and Guarantors each hereby waive every claim and defense as of
the date hereof) against Lender arising out of or relating to the Credit
Agreement and the other Loan Documents or the making, administration or
enforcement of the Loans and the remedies provided for under the Loan Documents.
7. No Waiver By Lender. Borrowers and Guarantors each acknowledge that
-------------------
(a) by the execution by each of this Agreement, the Lender is not waiving any
Default, whether now existing or hereafter occurring, disclosed or undisclosed,
by Borrowers or Guarantors under the Loan Documents and (b) Lender reserves all
rights and remedies available to it under the Loan Documents and otherwise.
8. Miscellaneous.
-------------
(a) This Agreement may be executed by one or more of the parties to
this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
(b) This Agreement and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with, the laws
of the State of Connecticut.
(c) This Agreement shall be deemed a Loan Document under the Credit
Agreement for all purposes.
<PAGE>
The parties have executed this Agreement on the date first written
above.
BORROWERS:
TRANS-LUX CORPORATION
By /s/ Victor Liss
--------------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
---------------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
TRANS-LUX CONSULTING
CORPORATION
By /s/ Victor Liss
--------------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
---------------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
TRANS-LUX SIGN CORPORATION
By /s/ Victor Liss
--------------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
---------------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
<PAGE>
TRANS-LUX MONTEZUMA
CORPORATION
By /s/ Victor Liss
--------------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
---------------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
INTEGRATED SYSTEMS
ENGINEERING, INC.
By /s/ Victor Liss
--------------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
---------------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
GUARANTORS:
TRANS-LUX SIGN CORPORATION
TRANS-LUX CONSULTING CORPORATION
SAUNDERS REALTY CORPORATION
TRANS-LUX CANADA, LTD.
TRANS-LUX COCTEAU CORPORATION
TRANS-LUX COLORADO CORPORATION
TRANS-LUX CREDIT TERMINAL
CORPORATION
TRANS-LUX DURANGO CORPORATION
TRANS-LUX EXPERIENCE CORPORATION
TRANS-LUX HIGH FIVE CORPORATION
<PAGE>
TRANS-LUX INVESTMENT CORPORATION
TRANS-LUX LOMA CORPORATION
TRANS-LUX MIDWEST CORPORATION
TRANS-LUX MONTEZUMA CORPORATION
TRANS-LUX MULTIMEDIA CORPORATION
TRANS-LUX PENNSYLVANIA
CORPORATION
TRANS-LUX SEAPORT CORPORATION
TRANS-LUX SERVICE CORPORATION
TRANS-LUX SOUTHWEST CORPORATION
TRANS-LUX STORYTELLER CORPORATION
TRANS-LUX SYNDICATED PROGRAMS
CORPORATION
TRANS-LUX TAOS CORPORATION
TRANS-LUX THEATRES CORPORATION
TRANS-LUX LOVELAND CORPORATION
INTEGRATED SYSTEMS ENGINEERING,
INC.
TRANS-LUX PTY, LTD
By /s/ Victor Liss
--------------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
---------------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
LENDER:
FIRST UNION NATIONAL BANK
By /s/ Anne S. Wilson
---------------------------------------
Anne S. Wilson
Title: Vice President
<PAGE>
THIRD ALLONGE TO REVOLVING PROMISSORY NOTE
------------------------------------------
1. THIS THIRD ALLONGE TO REVOLVING PROMISSORY NOTE (this "Allonge") is
-------
dated October __,1997 to be attached to, modify, and be a part of the Revolving
Promissory Note dated as of August 28, 1995, in the original principal amount
of $4,000,000 (as renewed, reissued, exchanged, consolidated, amended, modified,
replaced or supplemented from time to time, the "Note"), of TRANS-LUX
----
CORPORATION, a Delaware corporation (the "Maker"), in favor of FIRST FIDELITY
-----
BANK (now known as First Union National Bank), a national banking association.
2. The Maker agrees that all of the terms of the Note remain in full force
and effect except as follows:
(a) The figure "$5,000,000" contained in the upper left corner of the
Note is deleted and the figure "$10,000,000" is substituted therefor; and
(b) The phrase "FIVE MILLION DOLLARS ($5,000,000)" contained in the
fifth line of Section 1 of the Note is deleted and the phrase "TEN MILLION
DOLLARS ($10,000,000)" is substituted therefor.
3. The Maker has executed and delivered this Allonge on the date first
written above.
TRANS-LUX CORPORATION
By /s/ Victor Liss
------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
<PAGE>
SCHEDULE 3.9
to
CREDIT AGREEMENT
Dated as of August 28, 1995
VENTURES, SUBSIDIARIES AND AFFILIATES;
--------------------------------------
OUTSTANDING STOCK
-----------------
1. Subsidiaries, Joint Ventures, Partnerships and Affiliates:
- - -------------------------------------------------------------
MATERIAL
--------
Saunders Realty Corporation No
Trans-Lux Canada Ltd Yes
Trans-Lux Cocteau Corporation No
Trans-Lux Colorado Corporation No
Trans-Lux Consulting Corporation Yes
Trans-Lux Credit Terminal Corporation * No
Trans-Lux Durango Corporation Yes
Trans-Lux Experience Corporation Yes
Trans-Lux High Five Corporation No
Trans-Lux Investment Corporation Yes
Trans-Lux Loma Corporation No
Trans-Lux Loveland Corporation Yes
Trans-Lux Midwest Corporation Yes
Trans-Lux Montezuma Corporation Yes
Trans-Lux Multimedia Corporation No
Trans-Lux Pennsylvania Corporation No
Trans-Lux Pty, Ltd Yes
Trans-Lux Seaport Corporation ** No
Trans-Lux Service Corporation No
Trans-Lux Sign Corporation Yes
Trans-Lux Southwest Corporation Yes
Trans-Lux Storyteller Corporation No
Trans-Lux Syndicated Programs Corporation *** No
Trans-Lux Taos Corporation Yes
Trans-Lux Theatres Corporation Yes
Trans-Lux Yucca Corporation * No
Mossgood Theatre-Saunders Realty **** No
MetroLux Theatres **** Yes
*In process of dissolution
**To be merged into Trans-Lux Multimedia Corporation
***Dormant entity whose charter may be dissolved by proclamation
****50% joint venture
<PAGE>
FIFTH AMENDMENT AGREEMENT
-------------------------
AGREEMENT, made as of March 24, 1998, among TRANS-LUX CORPORATION, a
Delaware corporation, TRANS-LUX CONSULTING CORPORATION, a Delaware
corporation, TRANS-LUX SIGN CORPORATION, a Delaware corporation, TRANS-LUX
MONTEZUMA CORPORATION, a New Mexico corporation, INTEGRATED SYSTEMS
ENGINEERING, INC., a Utah corporation, and FIRST UNION NATIONAL BANK, a
national banking association.
Background
----------
A. Capitalized terms not otherwise defined shall have the meanings
ascribed to them in the Credit Agreement dated as of August 28, 1995, among
Trans-Lux Corporation, Trans-Lux Consulting Corporation, Trans-Lux Sign
Corporation, Trans-Lux Montezuma Corporation, Integrated Systems Engineering,
Inc., and First Fidelity Bank of Connecticut (predecessor in interest to First
Union National Bank) (as amended, modified or supplemented from time to time,
the "Credit Agreement").
B. The Lender has extended the Loans to the Borrowers as more fully
described in the terms and conditions of the Credit Agreement.
C. The Borrowers have requested, among other things, that the Lender
(i) extend from June 30, 1998 to June 30, 2000, the Loan C Commitment
Termination Date and revise the amortization schedule with respect to Loan C,
(ii) extend the Loan C Maturity Date to June 30, 2005, (iii) modify certain of
the financial covenants contained in the Credit Agreement, and (iv) permit
Trans-Lux Corporation and its subsidiary, Trans-Lux Midwest Corporation, to
incur up to $850,000 of additional Indebtedness.
E. The Lender has agreed to the requests of the Borrowers subject to
the terms and conditions of this Agreement.
Agreement
---------
In consideration of the foregoing Background, which is incorporated by
reference, the parties, intending to be legally bound, agree as follows:
1. Modifications to Credit Agreement. All of the terms and provisions
---------------------------------
of the Credit Agreement and the other Loan Documents shall remain in full
force and effect except as follows:
(a) Section 6.03 of the Credit Agreement is deleted and the following is
substituted therefor:
6.03 Indebtedness. Borrowers shall not (and shall not permit any of
------------
their Subsidiaries to) create, incur, assume or permit to exist any
<PAGE>
Indebtedness, except (i) the Obligations, (ii) deferred Taxes, (iii)
Capital Lease Obligations permitted under clause (iv) of Section 6.07 and
------------
Indebtedness secured by purchase money Liens permitted under clause (v) of
Section 6.07 in a maximum aggregate amount outstanding not to exceed
------------
$250,000, (vi) Indebtedness in connection with Permitted Acquisitions,
(vii) Subordinated Indebtedness, including the Debentures, (viii)
Indebtedness owed other than to the Lender, the sole purpose of which shall
be to finance the purchase, construction or lease of movie theatres and
multimedia productions upon reasonable notice to Lender, (ix) other
Indebtedness set forth on Schedule 6.3, (x) Guaranteed Indebtedness
------------
permitted under Section 6.06, and (xi) Indebtedness consisting of Iowa
------------
Economic Development Loans in an aggregate principal amount up to $850,000.
(b) Paragraphs 1, 2, 3 and 4 of Schedule 6.11 of the Credit Agreement are
-------------
deleted and the following are substituted therefor:
1. Debt Service Coverage Ratio. TLX, on a consolidated basis, shall
---------------------------
maintain at the end of each Fiscal Year a Debt Service Coverage Ratio of
not less than 1.75 to 1.00. For purposes of calculation, the amount of
Current Maturities shall not include any amount outstanding under Loan C
prior to June 30, 2000, but shall include the aggregate of Capital Lease
Obligations.
2. Total Funded Debt to Cash Flow Ratio. TLX, on a consolidated
------------------------------------
basis, shall maintain at the end of each Fiscal Quarter, a Total Funded
Debt to Cash Flow Ratio for the most recent 12-month period, of not
greater than 4.50 to 1.00.
3. Senior Funded Debt to Cash Flow Ratio. TLX, on a consolidated
-------------------------------------
basis, shall maintain at the end of each Fiscal Quarter a Senior Funded
Debt to Cash Flow Ratio for the most recent 12-month period, of not
greater than 2.50 to 1.00 commencing with the Fiscal Quarter ending March
31, 1998.
4. Consolidated Tangible Net Worth. TLX, on a consolidated basis,
-------------------------------
shall maintain at the end of each Fiscal Quarter, a Consolidated Tangible
Net Worth of not less than $19,000,000.
(c) The following is added as Paragraph 6 to Schedule 6.11 of the Credit
-------------
Agreement:
6. Liquidity Ratio. TLX, on a consolidated basis, shall maintain at
---------------
the end of each Fiscal Quarter, a Liquidity Ratio for the most recent
12-month period, of not less than 2.50 to 1.00
(d) The following is added to Annex "A" of the Credit Agreement following
---------
the definition of "Debentures":
2
<PAGE>
"Debt Service Coverage Ratio" shall mean, with respect to any
---------------------------
Person, on a consolidated basis, on any date, the ratio of (i) EBITDA
to (ii) the sum of (x) Interest Expense plus (y) Current Maturities.
(e) The following is added to Annex "A" of the Credit Agreement following
---------
the definition of "Investment":
"Iowa Economic Development Loans" shall mean loans made by certain
-------------------------------
governmental entities acting by or through the State of Iowa Community
Economic Account, consisting of "forgivable loans" or "zero interest loans"
or a combination thereof.
(f) The following is added to Annex "A" of the Credit Agreement following
---------
the definition of "Lien":
"Liquidity Ratio" shall mean, with respect to any Person, on a
---------------
consolidated basis, on any date, the ratio of (i) the sum of (x)
current assets, less prepaid and deferred assets, and (y) Net Rental
Equipment, to (ii) the sum of (w) Indebtedness under Loan C, (x)
Current Maturities other than Indebtedness in respect of Loan C, (y)
Accounts owed to trade creditors, and (z) all expenses payable in the
succeeding 12 months, including, without limitation, accrued operating
expenses, accrued Interest Expense, income taxes payable and
extraordinary items charged to earnings but not yet paid.
(g) The definition of "Loan C Commitment Termination Date" contained in
Annex "A" of the Credit Agreement is deleted and the following is substituted
- - ---------
therefor:
"Loan C Commitment Termination Date" shall mean the earliest of (i)
----------------------------------
June 30, 2000, (ii) the date of the termination of Loan C pursuant to
Section 8.2, and (iii) the date of the termination of Loan C in
-----------
accordance with the provisions of Section (a)(iii)(E) of Schedule 1.1.
------------
(h) The definition of "Loan C Maturity Date" contained in Annex "A" of the
---------
Credit Agreement is deleted and the following is substituted therefor:
"Loan C Maturity Date" shall mean June 30, 2005.
--------------------
(i) The following is added to Annex "A" of the Credit Agreement following
---------
the definition of "Security Agreement":
"Senior Funded Debt to Cash Flow Ratio" shall mean, with respect to
-------------------------------------
any Person, on a consolidated basis, on any date, the ratio of (i)
Indebtedness less Subordinated Indebtedness to (ii) EBITDA.
(j) The following is added to Annex "A" of the Credit Agreement following
---------
the definition of "Multiemployer Plan":
3
<PAGE>
"Net Rental Equipment" shall mean the amount set forth under the
--------------------
line item entry "Rental Equipment" on the balance sheet of a Person
from time to time less accumulated depreciation with respect to such
Rental Equipment.
(k) The following is added to Annex "A" of the Credit Agreement following
---------
the definition of "TLX":
"Total Funded Debt to Cash Flow Ratio" shall mean, with respect to
------------------------------------
any Person, on a consolidated basis, on any date, the ratio of (i)
Indebtedness to (ii) EBITDA.
(l) Subparagraph (c)(iii) of Schedule 1.2 of the Credit Agreement is
------------
deleted and the following is substituted therefor:
(iii) On June 30, 2000, the then outstanding indebtedness under
Note C shall be payable in nineteen (19) equal payments each in the
amount of one-twentieth (1/20) of the amount then outstanding under
Note C, payable on October 1, 2000, and continuing on the first day of
each successive Fiscal Quarter and a final payment on June 30, 2005 of
all amounts then outstanding under Note C.
(m) The first sentence of Section 4(a)(i) of each Security Agreement is
deleted and the following is substituted therefor:
The Borrower will not change the location of its chief executive
office or chief place of business unless it shall have given the Lender
30 days prior notice thereof.
(n) The following information shall be deemed inserted on Schedule "B" to
each Security Agreement other than the Security Agreement between TLX and
Lender:
See Schedule 3.16 to the Credit Agreement
2. Conditions Precedent. The obligation of the Lender under this
--------------------
Agreement is subject to the receipt and review, to the satisfaction of the
Lender, of the following:
(a) this Agreement duly executed by the parties hereto;
(b) the unaudited consolidated financial statements of TLX as at December
31, 1997, including the consolidated balance sheet and statements of
income and cash flows, prepared in accordance with GAAP, consistently
4
<PAGE>
applied, and certified as true and correct in all material respects by
the chief financial officer of TLX;
(c) a certificate of the chief financial officer of TLX demonstrating
compliance with in detail the following as at December 31, 1997:
(i) Consolidated Tangible Net Worth of not less than $19,000,000;
(ii) Debt Service Coverage Ratio of not less than 1.75 to 1.00;
(iii) Total Funded Debt to Cash Flow Ratio of not greater than 4.50 to
1.00;
(iv) Senior Funded Debt to Cash Ratio of not greater than 2.50 to
1.00; and
(v) Liquidity Ratio of not less than 2.50 to 1.00.
(d) such other agreements and instruments as the Lender deems necessary.
3. Condition Subsequent. The obligation of the Lender under this
--------------------
Agreement is subject to the receipt and review, to the satisfaction f the
Lender, on or before July 31, 1998, or sooner at the request of the Lender, of
Mortgage Modification Agreements with respect to Mortgages or Deeds of Trust
encumbering each Subject Property previously delivered to the Lender to secure
the Obligations.
4. Reaffirmation by the Borrowers. The Borrowers acknowledge that
------------------------------
each is legally, validly and enforceably jointly and severally indebted to the
Lender under the Notes, without defense, counterclaim or offset, and that each
is legally, validly and enforceably liable to the Lender for all costs and
expenses of collection and reasonable attorneys' fees related to or in any way
arising out of this Agreement, the Notes, the Credit Agreement and the other
Loan Documents. The Borrowers hereby restate and agree to be bound by all
covenants contained in the Credit Agreement and the other Loan Documents and
reaffirm that all of the representations and warranties contained in the
Credit Agreement and the other Loan Documents remain true and correct in all
material respects with the exception that the financial statements described
therein are deemed true as of the date made. The Borrowers represent that
except as set forth in the Credit Agreement and the other Loan Documents,
there are no pending, or to each Borrower's knowledge threatened, legal
proceedings to which any of the Borrowers or any of the Guarantors is a party
which materially and adversely affect the transactions contemplated by this
Agreement or the ability of the Borrowers or any of the Guarantors to conduct
its business on a consolidated business. The Borrowers and Guarantors
acknowledge and represent that the resolutions of each dated July 27, 1995
(except for resolutions of Trans-Lux Midwest Corporation which are dated
February 13, 1997), remain in full force and effect and have not been
modified, amended, rescinded or otherwise abrogated.
4. Reaffirmation by the Guarantors. The Guarantors acknowledge that
-------------------------------
each is legally and validly indebted to the Lender under the Guaranty of each
5
<PAGE>
without defense, counterclaim or offset, and affirms that each Guaranty
remains in full force and effect and includes, without limitation, the
indebtedness, liabilities and obligations arising under or in any way
connected with the Loans, this Agreement and the other Loan Documents, whether
now existing or hereafter arising.
5. Reaffirmation re: Collateral. The Borrowers and the Guarantors
-----------------------------
reaffirm the liens, security interests and pledges granted to the Lender
pursuant to the Loan Documents to secure the obligations of each thereunder.
6. Other Representations by Borrower and Guarantors. Each of The
------------------------------------------------
Borrowers and the Guarantors represents and confirms that (a) no Event of
Default has occurred and is continuing and that the Lender has not given its
consent to or waived any Default or Event of Default and (b) the Credit
Agreement and the other Loan Documents are in full force and effect and
enforceable against the Borrowers and the Guarantors in accordance with the
terms thereof. Each of the Borrowers and Guarantors represents and confirms
that as of the date hereof, each has no claim or defense (and each of the
Borrowers and the Guarantors hereby waives every claim and defense as of the
date hereof) against the Lender arising out of or relating to the Credit
Agreement, this Agreement and the other Loan Documents or the making,
administration or enforcement of the Loans and the remedies provided for under
the Loan Documents.
7. No Waiver by Lender. Each of the Borrowers and the Guarantors
-------------------
acknowledges that (a) by execution of this Agreement, the Lender is not
waiving any Default, whether now existing or hereafter occurring, disclosed or
undisclosed, by the Borrower or the Guarantors under the Loan Documents and
(b) the Lender reserves all rights and remedies available to it under the Loan
Documents and otherwise.
8. Prejudgment Remedy Waiver; Waivers. EACH OF THE BORROWER AND THE
----------------------------------
GUARANTOR ACKNOWLEDGES THAT THE LOANS AND THE TRANSACTIONS EVIDENCED BY THE
NOTES, THE CREDIT AGREEMENT, THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE
COMMERCIAL TRANSACTIONS AND EACH WAIVES ITS RIGHTS TO NOTICE AND HEARING PRIOR
TO THE ISSUANCE OF ANY PREJUDGMENT REMEDY, OR AS OTHERWISE ALLOWED BY ANY
STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE LENDER
MAY DESIRE TO USE, AND FURTHER WAIVES DILIGENCE, DEMAND, PRESENTMENT FOR
PAYMENT, NOTICE OF NONPAYMENT, PROTEST AND NOTICE OF ANY RENEWALS OR
EXTENSIONS. EACH OF THE BORROWERS AND THE GUARANTORS ACKNOWLEDGES THAT IT
MAKES THIS WAIVER KNOWINGLY, WILLINGLY, VOLUNTARILY AND WITHOUT DURESS, AND
ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS
ATTORNEYS.
9. Jury Trial Waiver. EACH OF THE BORROWERS AND THE GUARANTORS WAIVES
-----------------
TRIAL BY JURY IN ANY COURT IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER
ARISING IN CONNECTION WITH, OR IN ANY WAY RELATED TO, THE FINANCING
6
<PAGE>
TRANSACTIONS OF WHICH THE NOTES, THE CREDIT AGREEMENT, THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS IS A PART OR THE ENFORCEMENT OF ANY OF THE LENDER'S
RIGHTS. EACH OF THE BORROWERS AND THE GUARANTORS ACKNOWLEDGES THAT IT MAKES
THIS WAIVER KNOWINGLY, WILLINGLY, VOLUNTARILY AND WITHOUT DURESS, AND ONLY
AFTER CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
10. Miscellaneous.
-------------
(a) This Agreement may be executed by one or more of the parties to
this Agreement on any number of separate counterparts (including by facsimile
transmission), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
(b) This Agreement and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with, the law of
the State of Connecticut.
(c) This Agreement shall be deemed a Loan Document under the Credit
Agreement for all purposes.
7
<PAGE>
The parties have executed this Agreement on the date first written
above.
BORROWERS:
---------
TRANS-LUX CORPORATION
By s/s Victor Liss
--------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
--------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
TRANS-LUX CONSULTING CORPORATION
By /s/ Victor Liss
--------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
--------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
TRANS-LUX SIGN CORPORATION
By /s/ Victor Liss
--------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
--------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
8
<PAGE>
TRANS-LUX MONTEZUMA CORPORATION
By /s/ Victor Liss
--------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
--------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
INTEGRATED SYSTEMS ENGINEERING, INC.
By /s/ Victor Liss
--------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
--------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
GUARANTORS:
----------
TRANS-LUX SIGN CORPORATION
TRANS-LUX CONSULTING CORPORATION
SAUNDERS REALTY CORPORATION
TRANS-LUX CANADA, LTD.
TRANS-LUX COCTEAU CORPORATION
TRANS-LUX COLORADO CORPORATION
TRANS-LUX DURANGO CORPORATION
TRANS-LUX EXPERIENCE CORPORATION
TRANS-LUX HIGH FIVE CORPORATION
TRANS-LUX INVESTMENT CORPORATION'
TRANS-LUX LOMA CORPORATION
TRANS-LUX MIDWEST CORPORATION
TRANS-LUX MONTEZUMA CORPORATION
TRANS-LUX MULTIMEDIA CORPORATION
TRANS-LUX PENNSYLVANIA CORPORATION
TRANS-LUX SEAPORT CORPORATION
TRANS-LUX SERVICE CORPORATION
TRANS-LUX SOUTHWEST CORPORATION
TRANS-LUX STORYTELLER CORPORATION
9
<PAGE>
TRANS-LUX SYNDICATED PROGRAMS
CORPORATION
TRANS-LUX TAOS CORPORATION
TRANS-LUX THEATRES CORPORATION
TRANS-LUX LOVELAND CORPORATION
INTEGRATED SYSTEMS ENGINEERING, INC.
TRANS-LUX PTY, LTD
By /s/ Victor Liss
--------------------------------
Victor Liss
Title: President
By /s/ Angela Toppi
--------------------------------
Angela Toppi
Title: Senior Vice President and
Chief Financial Officer
LENDER:
------
FIRST UNION NATIONAL BANK, as
successor in interest to First Union
bank of Connecticut
By /s/ Anne S. Wilson
--------------------------------
Anne S. Wilson
Title: Vice President
10
SUBSIDIARIES EXHIBIT 21
as of December 31, 1997
A. Subsidiaries and joint ventures more than 50% owned (included in
consolidated financial statements):
Jurisdiction of Percentage
Name Incorporation Owned
- - ------------------------- -------------- ----------
FSC Corporation (3) Barbados 100%
Integrated Systems Engineering, Inc Utah 100
Saunders Realty Corporation New York 100
Trans-Lux Canada Ltd Canada 100
Trans-Lux Castle Rock Corporation (2) Colorado 100
Trans-Lux Cocteau Corporation (2) New Mexico 100
Trans-Lux Colorado Corporation (2) Colorado 100
Trans-Lux Consulting Corporation Delaware 100
Trans-Lux Dillon Corporation (2) Colorado 100
Trans-Lux Durango Corporation (2) Colorado 100
Trans-Lux Experience Corporation New York 100
Trans-Lux High Five Corporation (2) Colorado 100
Trans-Lux Investment Corporation Delaware 100
Trans-Lux Loma Corporation (2) New Mexico 100
Trans-Lux Loveland Corporation (2) Colorado 100
Trans-Lux Midwest Corporation Iowa 100
Trans-Lux Montezuma Corporation (2) New Mexico 100
Trans-Lux Multimedia Corporation New York 100
Trans-Lux Pennsylvania Corporation (2) Pennsylvania 100
Trans-Lux Pty Ltd Australia 100
Trans-Lux Seaport Corporation New York 100
Trans-Lux Service Corporation New York 100
Trans-Lux Sign Corporation Delaware 100
Trans-Lux Southwest Corporation (2) New Mexico 100
Trans-Lux Storyteller Corporation (2) New Mexico 100
Trans-Lux Summit Corporation (2) Colorado 100
Trans-Lux Syndicated Programs Corporation New York 100
Trans-Lux Taos Corporation (2) New Mexico 100
Trans-Lux Theatres Corporation (1) Texas 100
(1) Wholly-owned subsidiary of Trans-Lux Investment Corporation
(2) Wholly-owned subsidiary of Trans-Lux Theatres Corporation
(3) Wholly-owned subsidiary of Trans-Lux Syndicated Programs Corporation
<PAGE>
B. Other entities (accounted for in the consolidated financial statements
under the equity method):
MetroLux Theatres - A joint venture in which Trans-Lux Loveland
Corporation, listed in A. above as a wholly-owned subsidiary of the
Registrant, is a 50% venturer. Metro Colorado Corporation owns the
remaining 50% of the joint venture and is unrelated to the Registrant.
Mossgood Theatre-Saunders Realty - A joint venture in which Saunders
Realty Corporation, listed in A. above as a wholly-owned subsidiary of
the Registrant, is a 50% venturer. Peggy Crystal Michaelmen and Clement
S. Crystal, own the remaining 50% of the joint venture and are unrelated
to the Registrant.
<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 ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,843
<SECURITIES> 8,245
<RECEIVABLES> 7,453
<ALLOWANCES> 0
<INVENTORY> 4,644
<CURRENT-ASSETS> 23,016
<PP&E> 89,974
<DEPRECIATION> 31,079
<TOTAL-ASSETS> 88,978
<CURRENT-LIABILITIES> 7,095
<BONDS> 32,682
<COMMON> 2,740
0
0
<OTHER-SE> 21,569
<TOTAL-LIABILITY-AND-EQUITY> 88,978
<SALES> 24,434
<TOTAL-REVENUES> 53,363
<CGS> 15,478
<TOTAL-COSTS> 31,571
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,353
<INCOME-PRETAX> 2,847
<INCOME-TAX> 1,337
<INCOME-CONTINUING> 1,510
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,510
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 0.80
</TABLE>
