UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------- ---------
Commission file number 1-2257
------
TRANS-LUX CORPORATION
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-1394750
-------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Richards Avenue, Norwalk, CT 06856-5090
---------------------------------- ------------
(Address of principal executive offices) (Zip code)
(203) 853-4321
--------------------
(Registrant's telephone number, including area code)
- - -----------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Date Class Shares Outstanding
- - ------- ------------------------ ------------------
08/07/98 Common Stock - $1.00 Par Value 993,134
08/07/98 Class B Stock - $1.00 Par Value 297,286
(Immediately convertible into a like
number of shares of Common Stock.)
<PAGE>
TRANS-LUX CORPORATION AND SUBSIDIARIES
Index
Part I - Financial Information Page No.
Consolidated Balance Sheets - June 30, 1998 (unaudited) and
December 31, 1997 1
Consolidated Statements of Stockholders' Equity - June 30, 1998 (unaudited)
and December 31, 1997 2
Consolidated Statements of Income - Three and Six Months Ended June 30,
1998 and 1997 (unaudited) 3
Consolidated Statements of Cash Flows - Six Months Ended June 30,
1998 and 1997 (unaudited) 4
Notes to Consolidated Financial Statements (unaudited) 5
Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
Part II - Other Information
Item 4. Submission of Matters to a Vote of Stockholders 10
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
Part I - FINANCIAL INFORMATION
------------------------------
<TABLE>
<CAPTION>
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30 December 31
In thousands, except share data 1998 1997
--------- -----------
<S> <C> <C>
(unaudited)
ASSETS
- - ------
Current assets:
Cash and cash equivalents $ 1,118 $ 1,843
Available-for-sale securities 6,509 8,245
Receivables 8,538 6,833
Unbilled receivables 605 620
Inventories 5,108 4,644
Prepaids and other current assets 521 831
------- -------
Total current assets 22,399 23,016
------- -------
Rental equipment 66,975 62,910
Less accumulated depreciation 25,667 23,009
------- -------
41,308 39,901
------- -------
Property, plant and equipment 28,230 27,064
Less accumulated depreciation and amortization 8,934 8,070
------- -------
19,296 18,994
Prepaids, intangibles and other 5,639 5,371
Maintenance contracts, net 902 1,006
Note receivable, joint venture
(excludes $94 current portion) 643 690
------- -------
$90,187 $88,978
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Current liabilities:
Accounts payable and accruals $ 6,460 $ 6,814
Income taxes payable 210 --
Current portion of long-term debt 1,020 258
------- -------
Total current liabilities 7,690 7,072
------- -------
Long-term debt:
7 1/2% convertible subordinated
notes due 2006 31,625 31,625
9 1/2% subordinated debentures due 2012 1,057 1,057
Notes payable 16,372 16,770
------- -------
49,054 49,452
Deferred revenue, deposits and other 4,042 3,369
Deferred income taxes 4,439 4,753
Stockholders' equity 24,962 24,332
------- -------
$90,187 $88,978
======= =======
</TABLE>
[FN]
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
1
<TABLE>
<CAPTION>
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
June 30 December 31
In thousands, except per share data 1998 1997
------- -----------
<S> <C> <C>
(unaudited)
Capital stock:
Preferred - $1.00 par value
Authorized - 500,000 shares
Issued - none
Common - $1.00 par value
Authorized - 5,500,000 shares
Issued - 2,443,119 shares in 1998
and 2,442,765 in 1997 $ 2,443 $ 2,443
Class B - $1.00 par value
Authorized - 1,000,000 shares
Issued - 297,286 shares in 1998
and 297,640 in 1997 297 297
Class A - $1.00 par value
Authorized - 3,000,000 shares
Issued - none
Additional paid-in capital 13,902 13,904
Retained earnings 19,917 19,297
Other 30 29
------ ------
36,589 35,970
Less treasury stock - at cost
1,450,007 shares in 1998 and 1,453,722
in 1997 (excludes additional 297,286
shares held in 1998 and 297,640 in
1997 for conversion of Class B stock) 11,627 11,638
------ ------
Total stockholders' equity $24,962 $24,332
====== ======
</TABLE>
<TABLE>
<CAPTION>
THE CHANGES IN CONSOLIDATED STOCKHOLDERS'
EQUITY ARE AS FOLLOWS:
Additional
Common Class Paid-in Retained Treasury
Stock B Stock Capital Earnings Other Stock
------ ------- --------- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997 $2,443 $297 $13,904 $19,297 $29 $(11,638)
1/1/98 - 6/30/98: (unaudited)
Net income 709
Cash dividends (89)
Exercise of stock options (2) 11
Unrealized holding losses (27)
Foreign currency
translation losses 28
----- --- ------ ------ -- -------
June 30, 1998 $2,443 $297 $13,902 $19,917 $30 $(11,627)
===== === ====== ====== == =======
</TABLE>
[FN]
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
2
<TABLE>
<CAPTION>
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
In thousands, except per share data 1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Equipment rentals and maintenance $ 6,031 $ 6,110 $11,793 $11,946
Equipment sales 8,391 6,229 17,005 9,733
Theatre receipts and other 1,455 1,260 3,035 2,468
------ ------ ------ ------
Total revenues 15,877 13,599 31,833 24,147
------ ------ ------ ------
Operating expenses:
Cost of equipment rentals and maintenance 3,210 3,320 6,368 6,190
Cost of equipment sales 5,534 3,909 11,188 6,094
Cost of theatre receipts and other 1,256 964 2,538 1,839
------ ------ ------ ------
Total operating expenses 10,000 8,193 20,094 14,123
------ ------ ------ ------
Gross profit from operations 5,877 5,406 11,739 10,024
General and administrative expenses 4,360 4,126 8,836 7,478
------ ------ ------ ------
1,517 1,280 2,903 2,546
Interest income 157 309 331 677
Interest expense (1,041) (1,038) (2,046) (2,219)
Other income (expense) 28 (6) 100 16
------ ------ ------ ------
Income before income taxes 661 545 1,288 1,020
------ ------ ------ ------
Provision for income taxes:
Current 231 210 294 347
Deferred 66 25 285 92
------ ------ ------ ------
297 235 579 439
------ ------ ------ ------
Net income $ 364 $ 310 $ 709 $ 581
------ ------ ------ ------
Earnings per share:
Basic $ 0.28 $ 0.24 $ 0.55 $ 0.45
Diluted $ 0.19 $ 0.18 $ 0.38 $ 0.36
Average common shares outstanding:
Basic 1,290 1,283 1,290 1,277
Diluted 3,577 3,569 3,579 3,659
Cash dividends per share:
Common stock $ 0.035 $ 0.035 $ 0.070 $ 0.070
Class B stock $ 0.0315 $ 0.0315 $ 0.0630 $ 0.0630
</TABLE>
[FN]
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
3
<TABLE>
<CAPTION>
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
SIX MONTHS ENDED
JUNE 30
------------------
In thousands 1998 1997
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 709 $ 581
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,900 3,522
Net income of joint venture (53) (16)
Deferred income taxes (284) (120)
Gain on sale of securities (47) --
Changes in operating assets and liabilities:
Receivables (1,705) (997)
Unbilled receivables 15 1,859
Inventories (464) (712)
Prepaids and other current assets 310 (20)
Prepaids, intangibles and other (489) (306)
Accounts payable and accruals (328) (2,828)
Income taxes payable 210 44
Deferred revenue, deposits and other 673 280
------ ------
Net cash provided by operating activities 2,447 1,287
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of rental equipment (4,065) (5,590)
Purchases of property, plant and equipment (1,166) (261)
Payments for acquisitions (net) -- (763)
Proceeds from joint venture 47 47
Purchases of available-for-sale securities -- (14,846)
Redemption of available-for-sale securities 1,728 2,172
------ ------
Net cash (used in) investing activities (3,456) (19,241)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 1,500 6,725
Repayment of long-term debt (1,136) (2,864)
Redemption of Company's 9% convertible
subordinated debentures -- (4,573)
Proceeds from exercise of stock options 9 8
Cash dividends (89) (87)
------ ------
Net cash provided by (used in) financing activities 284 (791)
------ ------
Net decrease in cash and cash equivalents (725) (18,745)
Cash and cash equivalents at beginning of year 1,843 19,274
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,118 $ 529
====== ======
- - -------------------------------------------------------------------------------
Interest paid $ 1,713 $ 2,096
Interest received 351 446
Income taxes paid 267 504
- - -------------------------------------------------------------------------------
</TABLE>
[FN]
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
4
<PAGE>
TRANS-LUX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(unaudited)
Note 1 - Basis of Presentation
Financial information included herein is unaudited, however, such information
reflects all adjustments which are, in the opinion of management, necessary for
the fair presentation of the consolidated financial statements for the interim
periods. The results for the interim periods are not necessarily indicative of
the results to be expected for the full year. It is suggested that the June 30,
1998 consolidated financial statements be read in conjunction with the
consolidated financial statements and notes included in the Company's Annual
Report and Form 10-K for the year ended December 31, 1997. Certain
reclassifications of prior years' amounts have been made to conform to the
current year's presentation.
Note 2 - Accounting for Income Taxes
The provision for income tax expense for the three months ended June 30, 1998
was $297,000 of which $231,000 and $66,000 are current and deferred tax expense,
respectively. The provision for income tax expense for the six months ended June
30, 1998 was $579,000 of which $294,000 and $285,000 are current and deferred
tax expense, respectively.
Note 3 - Prepaids, Intangibles and Other
Prepaids, intangibles and other consist of the following (net of amortization):
<TABLE>
<CAPTION>
June 30, December 31,
In thousands 1998 1997
------- -----------
<S> <C> <C>
Deferred note and debenture costs $1,662 $1,759
Goodwill and noncompete agreements 1,546 1,572
Prepaids and other 1,169 798
Long-term portion of officers' and employees' loans 454 440
Deferred financing costs 296 310
Patents 167 198
Investment in joint ventures 173 120
Deposits and advances 89 88
Acquisition costs 83 86
------ ------
$5,639 $5,371
====== ======
</TABLE>
Note 4 - Reporting Comprehensive Income
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" (SFAS 130) during the first
quarter of 1998, as required. SFAS 130 establishes standards for reporting and
displaying comprehensive income and its components in a set of financial
statements. The adoption of this standard had no impact on the Company's net
income.
5
<PAGE>
Comprehensive income is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances from non-
owner sources. The components of comprehensive income for the Company are on
foreign currency translation adjustments relating to the Company's foreign
subsidiaries (gain of $22,000 and $15,000 for the three and six months ended
June 30, 1998, respectively net of 45% tax and gain of $7,000 and $10,000 for
the three and six months ended June 30, 1997, respectively net of 43% tax), and
unrealized holding gains or losses on the Company's available-for-sale
securities (loss of $17,000 and $28,000 for the three and six months ended June
30, 1998, respectively net of 45% tax and gain of $132,000 and loss of $70,000
for the three and six months ended June 30, 1997, respectively net of 43% tax).
Other comprehensive income (loss) is $5,000 and $139,000 for the three months
ended June 30, 1998 and 1997, respectively and $(13,000) and $(60,000) for the
six months ended June 30, 1998 and 1997, respectively. Comprehensive income is
$369,000 and $449,000 for the three months ended June 30, 1998 and 1997,
respectively and $696,000 and $521,000 for the six months ended June 30, 1998
and 1997, respectively.
Note 5 - New Accounting Standards
The Company will adopt the provisions of Statement of Financial Accounting
Standards No. 131 "Disclosure about Segments of an Enterprise and Related
Information" in the fourth quarter of 1998. The new standard requires certain
information be reported about operating segments and about products and
services, geographic areas in which a company operates and its major customers.
The Company is in the process of evaluating the impact this standard will have
on disclosure in the Company's financial statements.
Note 6 - Earnings per Share
The following table represents the computation of basic and diluted earnings per
common share as required by Statement of Financial Accounting Standards No. 128,
"Earnings per Share" for the three and six months ended June 30, 1998 and 1997,
respectively:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
In thousands, except per share data 1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Basic earnings per share computation:
Net income $ 364 $ 310 $ 709 $ 581
----- ----- ----- -----
Weighted average common shares outstanding 1,290 1,283 1,290 1,277
----- ----- ----- -----
Basic earnings per common share $0.28 $0.24 $0.55 $0.45
===== ===== ===== =====
Diluted earnings per share computation:
Net income $ 364 $ 310 $ 709 $ 581
Add: After tax interest expense applicable
to convertible debt 352 361 704 824
Add: After tax changes to income applicable
to assumed conversion (33) (14) (59) (54)
----- ----- ----- -----
Adjusted net income $ 683 $ 657 $ 1,354 $ 1,351
===== ===== ===== =====
Weighted average common shares outstanding 1,290 1,283 1,290 1,277
Assumes exercise of options reduced by the
number of shares which could have been
purchased with proceeds from exercise of
such options 30 29 32 28
Assumes conversion of 9% convertible
subordinated debentures -- -- -- 119
Assumes conversion of 7 1/2% convertible
subordinated notes 2,257 2,257 2,257 2,235
----- ----- ----- -----
Total weighted average common shares 3,577 3,569 3,579 3,659
===== ===== ===== =====
Diluted earnings per common share $0.19 $0.18 $0.38 $0.36
===== ===== ===== =====
</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
The Company's total revenues for the six months ended June 30, 1998 increased
31.8% to $31.8 million from $24.1 million for the same period in the previous
year. Revenues from equipment rentals and maintenance decreased $153,000 or
1.3% in 1998, primarily due to the expected decline in revenues from the outdoor
lease and maintenance bases previously acquired, although the decline is at a
slower rate than originally anticipated, offset by increased rental of indoor
displays. Revenues from equipment sales increased $7.3 million or 74.7% in
1998, primarily due to an increase in the sales of indoor displays as a result
of certain sales which are being recognized on the percentage of completion
basis and the acquisition of the Fairtron catalog and custom scoreboard sign
business in May 1997. Revenues from theatre receipts and other increased
$567,000 or 23.0% in 1998, attributable to the acquisitions of the Gaslight
Cinemas in March 1997 and Lake Dillon Cinemas in September 1997, and the
expansion of the Taos Storyteller Cinemas from a four-plex to a seven-plex in
February 1998.
Gross profit as a percentage of revenues was 36.9% in 1998 compared to 41.5% in
1997. The decrease in gross profit percentage was expected as the Company
enters and increases its market share in existing and new industry segments of
the outdoor market. Cost of equipment rentals and maintenance, which includes
field service expenses, plant repair and maintenance and depreciation, increased
$178,000 or 2.9% in 1998, primarily due to increased depreciation of indoor
rental equipment, offset by decreased field service expenses. The cost of
equipment rentals and maintenance represented 54.0% of related revenues for the
six months ended June 30, 1998 compared to 51.8% in 1997. Cost of equipment
sales increased $5.1 million or 83.6% in 1998, primarily due to the Fairtron
acquisition and certain sales of indoor displays being recognized on the
percentage of completion basis. The cost of equipment sales represented 65.8%
of related revenues for the six months ended June 30, 1998 compared to 62.6% in
1997. Cost of theatre receipts and other, which includes film rental expenses,
increased $699,000 or 38.0% in 1998, primarily due to the acquisition of the
Gaslight Cinemas and Lake Dillon Cinemas, and the expansion of the Taos
Storyteller Cinemas. The cost of theatre receipts and other represented 83.6%
of related revenues for the six months ended June 30, 1998 compared to 74.5% in
1997.
General and administrative expenses increased $1.4 million or 18.2%, primarily
due to expanded sales efforts, increased payroll and benefits costs and the
Fairtron acquisition.
Interest income decreased $346,000, primarily attributable to the utilization of
investments as a result of use of funds for acquisitions and investment in
rental equipment. Interest expense decreased $173,000, primarily due to a
special one-time charge in the first quarter of 1997 of approximately $113,000
for the unamortized portion of the financing costs pertaining to the call of the
Company's 9% Convertible Subordinated Debentures. Other income/expense relates
to the operations of the theatre joint venture, MetroLux Theatres and gain on
sale of securities.
The effective tax rate at June 30, 1998 and 1997 was 45.0% and 43.0%,
respectively.
7
<PAGE>
Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997
The Company's total revenues for the three months ended June 30, 1998 increased
16.8% to $15.9 million from $13.6 million for the same period in the previous
year. Revenues from equipment rentals and maintenance decreased $79,000 or 1.3%
in 1998, primarily due to the expected decline in revenues from the outdoor
lease and maintenance bases previously acquired, although the decline is at a
lower rate than originally anticipated, offset by increased rental of indoor
displays. Revenues from equipment sales increased $2.2 million or 34.7% in
1998, primarily due to the acquisition of the Fairtron catalog and custom
scoreboard sign business in May 1997 and an increase in the sales of indoor
displays as a result of certain sales which are being recognized on the
percentage of completion basis. Revenues from theatre receipts and other
increased $195,000 or 15.5% in 1998, primarily attributable to the acquisition
of the Lake Dillon Cinemas in September 1997 and the expansion of the Taos
Storyteller Cinemas in February 1998.
Gross profit as a percentage of revenues was 37.0% in 1998 compared to 39.8% in
1997. The decrease in gross profit percentage was expected as the Company
enters and increases its market share in existing and new industry segments of
the outdoor market. Cost of equipment rentals and maintenance decreased
$110,000 or 3.3% in 1998, primarily due to decreased field service costs related
to the installation of indoor displays, offset by an increase in depreciation of
indoor rental equipment. The cost of equipment rentals and maintenance
represented 53.2% of related revenues for the three months ended June 30, 1998
compared to 54.3% in 1997. Cost of equipment sales increased $1.6 million or
41.6% in 1998, primarily due to the Fairtron acquisition and certain sales of
indoor displays being recognized on the percentage of completion basis. The
cost of equipment sales represented 66.0% of related revenues for the three
months ended June 30, 1998 compared to 62.8% in 1997. Cost of theatre receipts
and other increased $292,000 or 30.3% in 1998, primarily due to the acquisition
of the Lake Dillon Cinemas and the expansion of the Taos Storyteller Cinemas.
The cost of theatre receipts and other represented 86.3% of related revenues for
the three months ended June 30, 1998 compared to 76.5% in 1997.
General and administrative expenses increased $234,000 or 5.7%, primarily due to
the Fairtron acquisition.
Interest income decreased $152,000, primarily attributable to the utilization of
investments as a result of use of funds for acquisitions and investment in
rental equipment. Interest expense increased $3,000. Other income/expense
relates to the operations of the theatre joint venture, MetroLux Theatres and
gain on sale of securities.
Accounting Standards
The Company will adopt the provisions of Statement of Financial Accounting
Standards No. 131 "Disclosure about Segments of an Enterprise and Related
Information" in the fourth quarter of 1998. The new standard requires certain
information be reported about operating segments and about products and
services, geographic areas in which a company operates and their major
customers. The Company is in the process of evaluating the impact this standard
will have on disclosure in the Company's financial statements.
Liquidity and Capital Resources
The regular quarterly cash dividend for the second quarter of 1998 of $0.035 per
share on the Company's Common Stock and $0.0315 per share on the Company's Class
B Stock was declared by the Board of Directors on May 27, 1998 payable to
stockholders of record as of July 7, 1998 and was paid July 17, 1998.
8
<PAGE>
The Company has a $10.0 million revolving credit facility accessible through
June 2000, at which time it will convert into a five-year term loan. At June
30, 1998 the Company had $7.8 million available under such facility. The
Company believes that cash generated from operations together with the cash and
cash equivalents on hand and the availability under the revolving credit
facility will be sufficient to meet its anticipated near term cash requirements.
Cash and cash equivalents decreased $725,000 for the six months ended June
30, 1998 compared to a decrease of $18.7 million in 1997. The decrease in 1998
is primarily attributable to an increase in receivables which is primarily
related to certain contracts being recorded on the percentage of completion
basis and cash utilized for investment in rental equipment and purchases of
equipment. The decrease in cash and cash equivalents for the six months ended
June 30, 1997 was primarily attributable to the net investment of $12.7 million
of the net proceeds of the 7 1/2% Convertible Subordinated Notes due 2006 in
available-for-sale securities, cash utilized for investment in rental equipment
and cash utilized in connection with the Fairtron acquisition offset by an
increase in unbilled receivables related to certain significant contracts being
recognized on the percentage of completion basis.
The Company has limited involvement with derivative financial instruments and
does not use them for trading purposes; they are only used to manage well-
defined interest rate risks. The Company entered into two interest rate swap
agreements having a notional value of $10.3 million during the first quarter of
1998 to reduce exposure to interest fluctuations.
Impact of the Year 2000 Issue
The Company is presently implementing changes required for its information
systems relative to the new millennium "year 2000". There have been no material
developments or changes relative to this on-going implementation program or its
other year 2000 initiatives during the quarter.
- - -------------------------------------------------------------------------------
The Company may, from time to time, provide estimates as to future performance.
These forward looking statements will be estimates, and may or may not be
realized by the Company. The Company undertakes no duty to update such forward
looking statements. Many factors could cause actual results to differ from
these forward looking statements, including loss of market share through
competition, introduction of competing products by others, pressure on prices
from competition or purchasers of the Company's products, interest rate and
foreign exchange fluctuations.
- - -------------------------------------------------------------------------------
9
<PAGE>
Part II - Other Information
Item 4. Submission of Matters to a Vote of Stockholders
The Annual Meeting of Stockholders of Trans-Lux Corporation was held on May 27,
1998 for the purpose of electing directors, amending the Corporation's
Certificate of Incorporation to increase the authorized shares of Common Stock
and Class A Stock and approving the appointment of auditors as set forth below.
All of management's nominees for directors for a three-year term as listed in
the proxy statement were elected by the following vote:
For Not For
--------- -------
Richard Brandt 3,745,139 9,008
Jean Firstenberg 3,750,201 3,946
Gene Jankowski 3,750,201 3,946
Victor Liss 3,750,201 3,946
The following directors are continuing their terms as directors:
Steven Baruch, Two-Years Remaining
Howard M. Brenner, Two-Years Remaining
Allan Fromme, Two-Years Remaining
Robert Greenes, One-Year Remaining
Howard S. Modlin, One-Year Remaining
The recommendation to amend the Corporation's Certificate of Incorporation to
increase the authorized shares of Common Stock to 11,000,000 shares was approved
by the following vote:
For Against Abstain
--------- ------- -------
Common Stockholders 709,484 104,403 8,660
Class B Stockholders 2,930,100 1,500 0
The recommendation to amend the Corporation's Certificate of Incorporation to
increase the authorized shares of Class A Stock to 6,000,000 shares was approved
by the following vote:
For Against Abstain
--------- ------- -------
Common Stockholders 698,205 113,823 10,519
Class B Stockholders 2,930,100 1,500 0
10
<PAGE>
The recommendation to retain Deloitte & Touche LLP as the independent auditors
for the Corporation was approved by the following vote:
For Against Abstain
--------- ------- -------
3,750,316 2,356 1,475
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10 Employment Agreement with Thomas F. Mahoney dated as of June 1,
1998.
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 quarter covered by this
report.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRANS-LUX CORPORATION
------------------------
(Registrant)
Date: August 11, 1998
by /s/ Angela Toppi
------------------------------
Angela D. Toppi
Senior Vice President and
Chief Financial Officer
by /s/ Robert P. Bosworth
------------------------------
Robert P. Bosworth
Chief Accounting Officer
12
AGREEMENT made as of the 1st day of June 1998 by and between TRANS-LUX
CORPORATION, a Delaware corporation having an office at 110 Richards Avenue,
Norwalk, Connecticut 06856-5090 (hereinafter called "Employer"), and THOMAS F.
MAHONEY residing at 19 Mine Hill Road, Redding, CT 06896 (hereinafter called,
"Employee").
W I T N E S S E T H:
1. Employer hereby employs Employee, and Employee hereby accepts
employment, upon the terms and conditions hereinafter set forth.
2. (a) The term ("Term") of the Agreement shall be the three (3) year
period commencing on the date hereof and terminating May 3l, 2001.
(b) In the event that Employee remains or continues in the employ of
Employer after the Term, such employment, in the absence of a further written
agreement, shall be on an at-will basis, terminable by either party
hereto on thirty (30) days' notice to the other and, upon the 30th day following
such notice the employment of Employee shall terminate.
(c) Upon expiration of the Term of this Agreement, neither party shall
have any further obligations or liabilities to the other except as otherwise
specifically provided in this Agreement.
3. Employee shall be employed in an executive sales capacity of Employer
(and such of its affiliates, divisions and subsidiaries as Employer shall
designate). Employer shall use its best efforts to cause Employee to be
elected and continue to be elected a Senior Vice President Sales of Employer
during the Term of this Agreement. The precise services of Employee may be
designated or assigned from time to time at the direction of the Board of
Directors, the Chairman of the Board, or the Vice-Chairman of the Board,
President, Executive Vice President or other person designated by the President
or Executive Vice President, and all of the services to be rendered hereunder by
Employee shall at all times be subject to the control, direction and supervision
of the Board of Directors of Employer, to which Employee does hereby agree to be
bound. Employee shall devote his entire time, attention and energies during
usual business hours (subject to Employer's policy with respect to holidays and
illnesses for comparable executives of Employer) to the business and affairs of
Employer, its affiliates, divisions and subsidiaries as Employer shall from time
to time direct. Employee further agrees during the Term of this Agreement to
serve as an officer or director of Employer or of any affiliate or subsidiary of
Employer as Employer may request, and if Employee serves as such officer or a
director he will do so without additional compensation, other than director's
fees or honoraria, if any.
During the Term of this Agreement and during any subsequent employment of
Employee by Employer, Employee shall use his best efforts, skills and abilities
in the performance of his services hereunder and to promote the interests of
Employer, its affiliates, divisions and subsidiaries. Employee shall not,
during the Term and during any subsequent employment of Employee by Employer, be
engaged in any other business activity, whether or not such business activity is
pursued for gain, profit or other pecuniary advantage. The foregoing shall not
be construed as preventing Employee from investing his assets in such form or
manner as will not require any services on the part of Employee in the operation
of the affairs of the companies in which such investments are made, provided,
however, that Employee shall not, either directly or indirectly, be a director
of or make any investments in any company or companies which are engaged in
businesses competitive with those conducted by Employer or by any of its
subsidiaries or affiliates except where such investments are in stock of a
company listed on a national securities exchange, and such stock of Employee
does not exceed one percent (1%) of the outstanding shares of stock of such
listed company. Employee shall not at any time during or after the Term of this
Agreement use (except on behalf of Employer) divulge, furnish or make accessible
to any third person or organization any confidential information concerning
Employer or any of its subsidiaries or affiliates or the businesses of any of
the foregoing including, without limitation, inventions, confidential methods of
operations and organization, confidential sources of supply, identity of
employees, customer lists and confidential financial information.
4. (a) For all services rendered by Employee during the Term of this
Agreement, Employer shall pay Employee a salary at the rate of ONE HUNDRED
THOUSAND DOLLARS ($100,000) per annum during the period June l, 1998 to May 31,
1999; at the rate of ONE HUNDRED FIVE THOUSAND DOLLARS ($105,000) per annum
during the period June 1, 1999 to May 31, 2000; and at the rate of ONE HUNDRED
TEN THOUSAND DOLLARS ($110,000) during the period June 1, 2000 to May 31, 2001.
Such salary shall be payable weekly, or monthly, or in accordance with the
payroll practices of Employer for its executives. The Employee shall also be
entitled to all rights and benefits for which he shall be eligible under any
stock option plan, bonus, participation or extra compensation plans, pensions,
group insurance or other benefits which Employer presently provides, or may
provide for him and for its employees generally. Such rights and benefits
include the sales override commission plan (as currently in place and currently
compensated monthly) based on all sales and rentals of Employer's world-wide
sales staff. The sales override commission shall not exceed (x) $24,500 for the
period June 1-December 31, 1998, $49,000 for January 1-December 31, 1999,
$53,000 for January 1-December 31, 2000, or $22,083.33 for the period January 1-
May 31, 2001 plus (y) for any such period in which the bonus sales goal is
exceeded, an additional bonus of 110% (100% plus 7/12 of 10% for June 1-
December 31, 1998 period) times the override factor times the excess. For
example, if the sales override amount for a given period (year) is $42,000 and
if the mutually agreed upon goal for that period is $49,358,826, the factor is
.0008509 (override amount divided by goal) and sales reached is $50,358,826 then
there is an additional override commission of $935.99 ($1,000,000 x .0008509 x
110%). Notwithstanding the foregoing, in no event shall an additional override
be paid for any amount which exceeds twice the mutually agreed goal (e.g. up to
$98,717,652 if the goal is $49,358,826). This Agreement shall not be deemed
abrogated or terminated if Employer, in its discretion, shall determine to
increase the compensation of Employee for any period of time, or if the Employee
shall accept such increase.
All payments under this Agreement are in United States dollars unless
otherwise specified.
(b) Employer may make appropriate deductions from the said payments
required to be made in this Section 4 to Employee to comply with all
governmental withholding requirements.
(c) If, during the Term of this Agreement and if the Employee is
still in the employ of Employer, Employee shall be prevented from performing or
be unable to perform, or fail to perform, his duties by reason of illness or any
other incapacity for (4) consecutive months (excluding normal vacation time)
during the Term hereof, Employer agrees to pay Employee thereafter during the
Term for the duration of such incapacity 35% of the base salary which Employee
would otherwise have been entitled to receive if not for the illness or other
incapacity.
(d) The Board upon the recommendation of the Compensation Committee of
the Board shall consider no later than May 31, l999, 2000, 2001 and 2002,
respectively (provided there is no delay in obtaining the financial statements
as provided below, but in no event later than 45 days following receipt thereof)
the grant of a bonus ("Bonus") to Employee based on Employee's performance for
the immediately preceding fiscal year. Notwithstanding the foregoing, Employer
shall pay Employee the highest Bonus applicable for any of the fiscal years
ending December 31, l998, l999, 2000 and 2001 only, in the event Employer's
pre-tax consolidated earnings for such year determined in accordance with
Section 4(d) exceed the respective amounts hereinafter set forth. The Bonuses
shall not exceed $20,000 for 1998, 1999 and 2000, and $8,334 for 2001.
If Pre-Tax Consolidated
Earnings Exceed for
1998-1999- Annual Non-Cumulative Level of Bonus Payable
2000-2001
- - -----------------------------------------------------------------------------
1998, 1999 and 2000 2001(41.67%)
------------------- ------------
$ 250,000 $ 625.00 $ 260.44
375,000 937.50 390.66
500,000 1,250.00 520.88
625,000 1,562.50 651.09
750,000 1,875.50 781.52
875,000 2,187.50 911.53
1,000,000 2,500.00 1,041.75
1,125,000 2,812.50 1,171.97
1,250,000 3,125.00 1,302.19
1,375,000 3,437.50 1,432.41
1,500,000 3,750.00 1,562.63
1,625,000 4,062.50 1,692.84
1,750,000 4,375.00 1,823.06
1,875,000 4,687.50 1,953.28
2,000,000 5,000,00 2,083.50
2,125,000 5,312.50 2,213.72
2,250,000 5,625.00 2,343.94
2,375,000 5,937.50 2,474.16
2,500,000 6,250.00 2,604.38
2,625,000 6,562.50 2,734.59
2,750,000 6,875.00 2,864.81
2,875,000 7,187.50 2,995.03
3,000,000* 7,500.00 3,125.25
4,000,000* 10,000.00 4,167.00
5,000,000* 12,500.00 5,208.75
6,000,000* 15,000.00 6,250.50
7,000,000* 17,500,00 7,292.25
8,000,000* 20,000.00** 8,334.00**
- - -----------------------------------------------------------------------
* For each incremental level of $l25,000 between $3,000,000 and
$8,000,000 not listed, there is an additional Bonus of $3l2.50
** Maximum
There shall be excluded from the calculation of pre-tax consolidated
earnings during the Term of this Agreement the amount by which (x) any item or
items of unusual or extraordinary gain in the aggregate exceeds 20% of the
Employer's net book value as at the end of the immediate preceding fiscal year
or (y) any item of unusual or extraordinary loss in the aggregate exceeds 20% of
the Employer's net book value as at the end of the immediate preceding fiscal
year, in each case in (x) and (y) above as determined in accordance with
generally accepted accounting principles and items of gain and loss shall not be
netted against each other for purpose of the above 20% calculation.
Provided Employee is not in default of the Agreement, the Board may, in any
event, even if any of the aforesaid pre-tax consolidated earnings levels are not
exceeded, grant the Employee the aforesaid Bonus or any portion thereof for such
year based on his performance.
Notwithstanding anything to the contrary contained herein, if Employee is
not in the employ of Employer at the end of any aforesaid 1998, 1999 or 2000
fiscal year or on May 31, 2001, no Bonus shall be paid for such fiscal year
except 58.33% of the 1998 Bonus has vested in Employee and payable whether or
not he is in Employer's employ on December 31, 1998. In the event of Employee's
death on or after January 1 of 1999, 2000 or 2001, or June 1, 2002 as to 2002,
any Bonus to which he is otherwise entitled for the prior fiscal year shall be
paid to his widow if she shall survive him or if she shall predecease him to his
surviving issue per stirpes and not per capita.
Such pre-tax consolidated earnings shall be fixed and determined by the
independent certified public accountants regularly employed by Employer. Such
independent certified public accountants, in ascertaining such pre-tax
consolidated earnings, shall apply all accounting practices and procedures
heretofore applied by Employer's independent certified public accountants in
arriving at such annual pre-tax consolidated earnings as disclosed in Employer's
annual statement for that year of profit and loss released to its stockholders.
The determination by such independent certified public accountants shall be
final, absolute and controlling upon the parties. Payment of such amount, if
any is due, shall be made for each year by Employer to Employee within sixty
(60) days after which such accountant shall have furnished such statement to
Employer disclosing Employer's pre-tax consolidated earnings for each of the
years 1998, l999, 2000 and 2001. Employer undertakes to use reasonable efforts
to cause said accountants to prepare and furnish such statements within one
hundred thirty (130) days from the close of each such fiscal year and to cause
said independent certified public accountants, concomitantly with delivery of
such statement by accountants to it, to deliver a copy of such statement to
Employee. The Employer shall not have any liability to Employee arising out of
any delays with respect to the foregoing.
(e) In the event Employee dies during the Term of this Agreement while the
Employee is still in the Employ of Employer, Employer shall pay to Employee's
widow or his surviving issue, as the case may be, for the balance of the Term of
the Agreement, or eighteen (18) months, whichever is less, annual death benefits
payable weekly or in accordance with Employer's payroll practices in an amount
equal to 35% of Employee's then annual base salary rate.
5. During the Term of this Agreement, Employer will reimburse Employee for
traveling or other out-of-pocket expenses and disbursements incurred by Employee
with Employer's approval in furtherance of the businesses of Employer, its
affiliates, divisions or subsidiaries, upon presentation of such supporting
information as Employer may from time to time request.
6. During the Term of this Agreement, Employee shall be entitled to a
vacation during the usual vacation period of Employer in accordance with such
vacation schedules as Employer may prescribe.
7. Both parties recognize that the services to be rendered by Employee
pursuant to this Agreement are extraordinary and unique. During the Term of
this Agreement, and during any subsequent employment of Employee by Employer,
Employee shall not, directly or indirectly, enter into the employ of or render
any services to any person, partnership, association or corporation engaged in a
business or businesses in anyway, directly or indirectly, competitive to those
now or hereafter engaged in by Employer or by any of its subsidiaries during the
Term of this Agreement and during any subsequent employment of Employee by
Employer and Employee shall not engage in any such business, directly or
indirectly on his own account and, except as permitted by paragraph 3 of this
Agreement, Employee shall not become interested in any such business, directly
or indirectly, as an individual, partner, shareholder, director, officer,
principal, agent, employee, trustee, consultant, or in any other relationship or
capacity. For a period of two (2) years following termination of employment for
any reason, Employee shall not directly or indirectly (i) engage or otherwise be
involved in the recruitment or employment of any Employer employee nor (ii)
solicit or render any service directly or indirectly to any other person or
entity with regard to soliciting any customer of the Employer during the two (2)
year period prior to termination of employment with respect to products or
services competitive with products or services of Employer. Employee at no time
during or after employment shall disclose to any person, other than Employer, or
otherwise use any information of or regarding Employer except on behalf of
Employer, nor communicate, publish, or otherwise transmit, in any manner
whatsoever, untrue information or negative, competitive, personal or other
information or comments regarding Employer. In addition, Employee agrees that
all lists, materials, books, files, reports, correspondence, records and other
documents and information ("Employer Materials") used, prepared or made
available to Employee, shall be and shall remain the property of Employer. Upon
the termination of employment of Employee or the expiration of this Agreement,
whichever is earlier, all Employer Materials shall be immediately returned to
Trans-Lux Corporation, and Employee shall not make or retain any copies thereof,
nor disclose or otherwise use any information relating to said Employer
Materials to any other party. As used herein the term Employer shall include
Employer, Employer's subsidiaries and affiliates, and any individuals employed
or formerly employed by any of them. Employer shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either in law or in equity, to obtain damages for any breach of
this Agreement, or to enjoin Employee from any breach of this Agreement, but
nothing herein contained shall be construed to prevent Employer from pursuing
such other remedies as Employer may elect to invoke.
8. In the event any provision of paragraph 7 of this Agreement shall be
held invalid or unenforceable by reason of the geographic or business scope or
the duration thereof, such invalidity or unenforceability shall attach only to
such provision and shall not affect or render invalid or unenforceable any other
provision of this Agreement, and this Agreement shall be construed as if the
geographic or business scope or the duration of such provision had been more
narrowly drawn so as not to be invalid or unenforceable.
9. The waiver by Employer of a breach of any provision of this Agreement
by Employee shall not operate or be construed as a waiver of any subsequent
breach by Employee.
10. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and served personally or sent by United States
certified or registered mail, return receipt requested, or overnight courier
such as Federal Express or Airborne to his address as stated on Employer's
records, in the case of Employee, or to the office of Trans-Lux Corporation,
attention of the Chairman or Vice Chairman of the Board, 110 Richards Avenue,
Norwalk, Connecticut 06856-5090, in the case of Employer, or such other address
as designated in writing by the parties.
11. This Agreement shall be construed in accordance with the laws of the
State of New York.
12. This instrument contains the entire agreement between the parties and
supersedes as of June 1, 1998 the Employment Agreement dated June 1, 1996
between the parties. It may not be changed, modified, extended or renewed
orally except by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, discharge or extension is
sought.
IN WITNESS WHEREOF, this Agreement has been duly executed on the day and
year above written.
TRANS-LUX CORPORATION
By: /s/ Michael R. Mulcahy
-------------------------
Executive Vice President
/s/ Thomas F. Mahoney
--------------------------
Thomas F. Mahoney
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,118
<SECURITIES> 6,509
<RECEIVABLES> 9,143
<ALLOWANCES> 0
<INVENTORY> 5,108
<CURRENT-ASSETS> 22,399
<PP&E> 95,205
<DEPRECIATION> 34,601
<TOTAL-ASSETS> 90,187
<CURRENT-LIABILITIES> 7,690
<BONDS> 32,682
<COMMON> 2,740
0
0
<OTHER-SE> 22,222
<TOTAL-LIABILITY-AND-EQUITY> 90,187
<SALES> 17,005
<TOTAL-REVENUES> 31,833
<CGS> 11,188
<TOTAL-COSTS> 20,094
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,046
<INCOME-PRETAX> 1,288
<INCOME-TAX> 579
<INCOME-CONTINUING> 709
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 709
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.38
</TABLE>
