<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
------------------
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
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TRANS-LUX CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-1394750
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Richards Avenue, Norwalk, CT 06856-5090
---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
(203) 853-4321
----------------------------------------------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Date Class Shares Outstanding
-------- ------------------------------------ ------------------
11/13/00 Common Stock - $1.00 Par Value 964,905
11/13/00 Class B Stock - $1.00 Par Value 295,843
(Immediately convertible into a like
number of shares of Common Stock.)
<PAGE>
TRANS-LUX CORPORATION AND SUBSIDIARIES
Index
Part I - Financial Information Page No.
--------
Consolidated Balance Sheets - September 30, 2000 (unaudited)
and December 31, 1999 1
Consolidated Statements of Operations - Three and Nine Months
Ended September 30, 2000 and 1999 (unaudited) 2
Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 2000 and 1999 (unaudited) 3
Notes to Consolidated Financial Statements (unaudited) 4
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
<PAGE>
Part I - Financial Information
------------------------------
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31
In thousands, except share data 2000 1999
----------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,190 $ 3,651
Available-for-sale securities 1,250 3,666
Receivables 9,122 9,064
Unbilled receivables 1,456 114
Inventories 6,605 6,146
Prepaids and other 671 776
-------- --------
Total current assets 22,294 23,417
-------- --------
Equipment on rental 80,851 75,200
Less accumulated depreciation 36,300 31,487
-------- --------
44,551 43,713
-------- --------
Property, plant and equipment 50,583 44,411
Less accumulated depreciation and amortization 10,453 8,832
-------- --------
40,130 35,579
Other assets 6,075 6,449
Construction funds 291 3,290
-------- --------
$113,341 $112,448
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,503 $4,688
Accrued liabilities 5,485 5,093
Current portion of long-term debt 2,698 2,381
-------- --------
Total current liabilities 10,686 12,162
-------- --------
Long-term debt:
7 1/2% convertible subordinated notes due 2006 30,397 30,490
9 1/2% subordinated debentures due 2012 1,057 1,057
Notes payable 37,747 34,405
-------- --------
69,201 65,952
Deferred revenue, deposits and other 3,950 3,715
Deferred income taxes 4,136 4,606
-------- --------
Commitments and contingencies
Stockholders' equity:
Capital stock
Common - $1.00 par value
Authorized - 5,500,000 shares
Issued - 2,444,562 shares in 2000 and 2,444,400 in 1999 2,444 2,444
Class B - $1.00 par value
Authorized - 1,000,000 shares
Issued - 295,843 shares in 2000 and 296,005 in 1999 296 296
Additional paid-in-capital 13,901 13,901
Retained earnings 20,683 21,434
Accumulated other comprehensive loss (119) (225)
-------- --------
37,205 37,850
Less treasury stock - at cost
1,479,688 shares in 2000 and 1,479,672 in 1999
(excludes additional 295,843 shares held in 2000 and
296,005 in 1999 for conversion of Class B stock) 11,837 11,837
-------- --------
Total stockholders' equity 25,368 26,013
-------- --------
$113,341 $112,448
======== ========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
1
<PAGE>
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------- -----------------------
In thousands, except per share data 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Equipment rentals and maintenance $ 6,052 $ 6,065 $18,073 $17,676
Equipment sales 9,689 9,258 23,741 23,599
Theatre receipts and other 3,152 2,246 8,343 5,782
------- ------- ------- -------
Total revenues 18,893 17,569 50,157 47,057
------- ------- ------- -------
Operating expenses:
Cost of equipment rentals and maintenance 3,502 3,405 10,119 9,859
Cost of equipment sales 6,122 6,199 15,976 15,355
Cost of theatre receipts and other 2,656 1,735 7,006 4,609
------- ------- ------- -------
Total operating expenses 12,280 11,339 33,101 29,823
------- ------- ------- -------
Gross profit from operations 6,613 6,230 17,056 17,234
General and administrative expenses 5,065 4,689 14,292 13,766
------- -------- ------- -------
1,548 1,541 2,764 3,468
Interest income 83 112 315 364
Interest expense (1,586) (1,040) (4,350) (3,007)
Other income (expense) (28) - (27) 145
Income from joint venture 65 81 170 152
------- ------- ------- -------
Income (loss) before income taxes 82 694 (1,128) 1,122
Provision (benefit) for income taxes 38 313 (507) 505
------- ------- ------- -------
Net income (loss) $ 44 $ 381 ($621) $ 617
======= ======= ======= =======
Earnings (loss) per share:
Basic $ 0.04 $ 0.30 ($0.49) $ 0.48
Diluted $ 0.04 $ 0.21 ($0.49) $ 0.48
Average common shares outstanding:
Basic 1,261 1,292 1,261 1,292
Diluted 1,261 3,479 1,261 3,518
Cash dividends per share:
Common stock $ 0.035 $ 0.035 $ 0.105 $ 0.105
Class B stock $0.0315 $0.0315 $0.0945 $0.0945
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
2
<PAGE>
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-------------------------
In thousands 2000 1999
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ($621) $ 617
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 7,036 6,441
Net income of joint venture (170) (152)
Deferred income taxes (507) (69)
Loss on sale of securities 41 --
Gain on repurchase of Company's 7 1/2% convertible subordinated notes (15) (148)
Changes in operating assets and liabilities:
Receivables (1,400) (2,392)
Inventories (459) 103
Prepaids and other assets 154 (554)
Accounts payable and accruals (1,812) 1,726
Deferred revenue, deposits and other 135 (757)
------ -------
Net cash provided by operating activities 2,382 4,815
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment manufactured for rental (5,651) (5,013)
Purchases of property, plant and equipment (7,623) (7,016)
Usage of (increase in) construction funds 2,999 (4,694)
Payments for acquisitions (net) -- (1,163)
Proceeds from joint venture 72 71
Proceeds from sale of securities 2,458 1,056
Proceeds from the sale of fixed assets 1,451 --
------ -------
Net cash used in investing activities (6,294) (16,759)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 5,249 14,696
Repayment of long-term debt (1,590) (865)
Repurchase of Company's 7 1/2% convertible subordinated notes (78) (887)
Purchase of treasury stock -- (7)
Cash dividends (130) (132)
------ -------
Net cash provided by financing activities 3,451 12,805
------ -------
Net increase (decrease) in cash and cash equivalents (461) 861
Cash and cash equivalents at beginning of year 3,651 1,298
------ -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,190 $ 2,159
====== =======
---------------------------------------------------------------------------------------------------------
Interest paid $3,559 $ 2,486
Interest received 403 412
Income taxes paid 13 782
---------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
TRANS-LUX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(unaudited)
Note 1 - Basis of Presentation
Financial information included herein is unaudited, however, such information
reflects all adjustments which are, in the opinion of management, necessary for
the fair presentation of the consolidated financial statements for the interim
periods. The results for the interim periods are not necessarily indicative of
the results to be expected for the full year. It is suggested that the
September 30, 2000 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, 1999. Certain
reclassifications of prior years' amounts have been made to conform to the
current year's presentation.
The Company will adopt the provisions of Statement of Financial Accounting
Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133) effective January 1, 2001. The standard requires
companies to recognize all derivatives as either assets or liabilities and
measure those instruments at fair value. Gains or losses resulting from changes
in the values of those derivatives would be accounted for depending on the use
of the derivative and whether it qualifies for hedge accounting. The Company
does not expect the adoption of SFAS 133 to have a significant impact on its
consolidated financial statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in the Financial Statements" (SAB 101).
The bulletin addresses the staff's views in applying accounting principles
generally accepted in the United States to revenue recognition in financial
statements, and must be implemented no later than the fourth quarter of 2000.
The Company does not expect SAB 101 to have a significant impact on its
consolidated financial statements.
Note 2 - Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30 December 31
In thousands 2000 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and spare parts $4,395 $3,532
Work-in-progress 1,156 1,459
Finished goods 1,054 1,155
------ ------
$6,605 $6,146
====== ======
</TABLE>
4
<PAGE>
Note 3 - Long-Term Debt
During the nine months ended September 30, 2000, long-term debt increased $3.2
million, of which $3.9 million represents additional long-term theatre
construction mortgages at interest rates ranging from 7.5% to 9.5%, $1.3 million
represents borrowings against the revolving credit facility and $1.6 million
represents repayment of long-term debt. The Company has a bank Credit Agreement
which provides for a $15.0 million revolving credit facility which is available
until June 2002. At September 30, 2000, $10.1 million was outstanding leaving
$4.9 million of additional borrowing capacity available under such facility.
The Credit Agreement contains certain financial covenants, including a defined
debt service coverage ratio which was reset as of September 30, 2000 to 1.40 to
1.0. At September 30, 2000 the Company was in compliance with such financial
covenants.
Note 4 - Reporting Comprehensive Income (Loss)
The components of comprehensive income (loss) for the Company are foreign
currency translation adjustments relating to the Company's foreign subsidiaries
and unrealized holding gains or losses on the Company's available-for-sale
securities. Comprehensive income is $83,000 and $341,000 for the three months
ended September 30, 2000 and 1999, respectively; and comprehensive (loss)
income of ($534,000) and $471,000 for the nine months ended September 30, 2000
and 1999, respectively.
Note 5 - Earnings (Loss) per Share
The following table represents the computation of basic and diluted earnings
(loss) per common share:
<TABLE>
<CAPTION>
Three months ended Sept. 30 Nine months ended Sept. 30
In thousands, except per share data 2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic earnings (loss) per share computation:
Net income (loss) $ 44 $ 381 $ (621) $ 617
------ ------ ------ ------
Weighted average common shares outstanding 1,261 1,292 1,261 1,292
------ ------ ------ ------
Basic earnings (loss) per common share $ 0.04 $ 0.30 $(0.49) $ 0.48
====== ====== ====== ======
Diluted earnings (loss) per share computation:
Net income (loss) $ 44 $ 381 $ (621) $ 617
Add: After tax interest expense applicable to convertible
debt (1) - 344 - 1,055
------ ------ ------ ------
Adjusted net income (loss) $ 44 $ 725 $ (621) $1,672
====== ====== ====== ======
Weighted average common shares outstanding 1,261 1,292 1,261 1,292
Assumes exercise of options reduced by the number of shares
which could have been purchased with the proceeds from
exercise of such options (2) - 1 - 33
Assumes conversion of 7 1/2% convertible subordinated notes
(1) - 2,186 - 2,193
------ ------ ------ ------
Total weighted average common shares 1,261 3,479 1,261 3,518
====== ====== ====== ======
Diluted earnings (loss) per common share $ 0.04 $ 0.21 $(0.49) $ 0.48
====== ====== ====== ======
<FN>
(1) The 2000 diluted earnings (loss) per share computation does not include the assumed conversion of the Company's 7 1/2%
convertible subordinated notes, as the effect is antidilutive. The 7 1/2% convertible subordinated notes were convertible into
2,169 shares at September 30, 2000 and 2,193 shares at September 30, 1999.
(2) Options to purchase 130 shares of common stock with exercise prices ranging from $6.3125 to $15.1875 were outstanding at
September 30, 2000, and options to purchase 59 shares of common stock with exercise prices ranging from $8.625 to $15.1875
were outstanding at September 30, 1999. These options were not included in the 2000 calculation because the options' exercise
price was greater than the average market price of the common stock.
</FN>
</TABLE>
5
<PAGE>
Note 6 - Business Segment Data
The Company evaluates segment performance and allocates resources based upon
operating income. The Company's operations are managed in three reportable
business segments. The Display Division comprises two operating segments,
indoor display and outdoor display. Both design, produce, lease, sell and
service large-scale, multi-color, real-time electronic information displays.
Both operating segments are conducted on a global basis, primarily through
operations in the U.S. The Company also has operations in Canada and Australia.
The indoor display and outdoor display segments are differentiated primarily by
the customers they serve. The Entertainment and Real Estate Division owns a
chain of motion picture theatres in the western Mountain States and owns real
estate used for both corporate and income-producing purposes in the U.S. and
Canada. Segment operating income is shown after general and administrative
expenses directly associated with the segment and includes the operating results
of the joint venture activities. Corporate items relate to resources and costs
which are not directly identifiable with a segment. There are no intersegment
sales.
Information about the Company's operations in its three business segments is as
follows:
<TABLE>
<CAPTION>
Three months ended September 30 Nine months ended September 30
In thousands 2000 1999 2000 1999
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Indoor display $ 6,627 $ 5,884 $17,955 $17,442
Outdoor display 9,113 9,439 23,859 23,833
Entertainment and real estate 3,153 2,246 8,343 5,782
----- ----- ----- -----
Total revenues $18,893 $17,569 $50,157 $47,057
------ ------ ------ ------
Operating income:
Indoor display $ 2,123 $ 1,842 $ 5,801 $ 5,178
Outdoor display 784 982 1,028 2,319
Entertainment and real estate 329 366 810 682
--- --- --- ---
Total operating income $ 3,236 $ 3,190 $ 7,639 $ 8,179
Other income (expense) (28) - (27) 145
Corporate general and administrative expenses (1,623) (1,568) (4,705) (4,559)
Interest expense-net (1,503) (928) (4,035) (2,643)
----- --- ----- -----
Income (loss) before income taxes $ 82 $ 694 $(1,128) $ 1,122
== === ===== =====
</TABLE>
Note 7 - Litigation
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. The Company is appealing a 1999 verdict in a
state of New Mexico court which awarded a former employee of the Company $15,000
in damages for lost wages and emotional distress and $393,000 in punitive
damages on a retaliatory discharge claim. The Company denied the charges on the
basis that the termination was proper. The Company believes it has made
adequate provisions to cover such matters. The appeal is currently pending. In
January 2000, a second former employee of the Company commenced a retaliatory
discharge action seeking compensatory and punitive damages in an unspecified
amount. The Company has denied such allegations and has asserted defenses
including that the former employee resigned following her failure to timely
report to work. This case is in the early stages and has yet to go to trial.
Certain of the amounts are subject to insurance recoveries.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999
The Company's total revenues for the nine months ended September 30, 2000
increased 6.6% to $50.2 million from $47.1 million for the nine months ended
September 30, 1999. Indoor display revenues increased $513,000 or 2.9%. Of
this increase, $688,000 or 6.1% was due to the indoor display equipment rental
and maintenance revenues, primarily due to new rental and maintenance contracts
and renewal of existing contracts, offset by a decrease of $175,000 or 2.8% in
indoor display equipment sales due to lower volume, mainly as a result of the
advent of electronic trading on trading floors and consolidation within the
financial industry. Outdoor display revenues remained level. Outdoor display
equipment sales increased $317,000 or 1.8%, primarily in the outdoor sports
segment, offset by a decrease of $291,000 or 4.5% in outdoor display equipment
rental and maintenance revenues, primarily due to the continued expected decline
in the outdoor lease and maintenance bases previously acquired. Entertainment
and real estate revenues increased $2.6 million or 44.3% in 2000. This increase
is primarily from the revenues from four newly constructed multiplex theatres
consisting of 26 screens in Dillon, CO, Espanola, NM, Los Lunas, NM and
Sahuarita, AZ which opened between August 1999 and May 2000, and the acquisition
of two theatres in Laramie, WY in May 1999.
Total operating income for the nine months ended September 30, 2000 decreased
6.6% to $7.6 million from $8.2 million for the nine months ended September 30,
1999. Indoor display operating income increased $623,000 or 12.0%. The cost of
indoor displays represented 44.7% of related revenues for the nine months ended
September 30, 2000 and 45.6% in 1999. Indoor display cost of equipment sales
decreased $269,000 or 9.0% due to lower volume. This decrease was offset by
the increase in indoor display cost of equipment rental and maintenance of
$342,000 or 6.9%, primarily due to additional depreciation expense. The indoor
display general and administrative expenses decreased $183,000 or 4.2%,
primarily due to increased efforts to reduce expenses.
Outdoor operating income decreased $1.3 million or 55.7%. The cost of outdoor
displays represented 75.7% of related revenues for the nine months ended
September 30, 2000 and 72.4% in 1999. Due to the competitive nature of the
outdoor display market, primarily in the sports segment, the Company expects
this erosion in the gross profit percentage to continue as it attempts to
increase its market share in the sports segment of the outdoor display market.
Outdoor display cost of equipment sales increased $890,000 or 7.2% due to
increased volume and a higher content of raw materials, primarily due to the new
LED technology, and installation costs. Outdoor display cost of equipment
rental and maintenance decreased slightly. The outdoor display general and
administrative expenses increased $509,000 or 12.0%, primarily due to expanded
sales and marketing efforts related to the sports segment and the operating
costs related to the new 55,000 square foot manufacturing facility in Logan
Utah. Cost of indoor and outdoor equipment rentals and maintenance includes
field service expenses, plant repair costs, maintenance and depreciation.
The entertainment and real estate operating income increased $128,000 or 18.8%.
The cost of entertainment and real estate represented 84.0% of related revenues
for the nine months ended September 30, 2000 and 79.7% in 1999. Cost of
entertainment and real estate, which includes film rental costs and depreciation
expense, increased $2.4 million or 52.0% in 2000, mainly as a result of the
expansion of theatre operations and theatre start-up expenses for new theatre
locations. The entertainment and real estate general and administrative
expenses increased $54,000 or 8.4%, due to the expansion of theatre operations.
7
<PAGE>
Corporate general and administrative expenses increased $146,000 or 3.2%,
primarily due to a $511,000 negative impact of the effect of foreign currency
exchange rates in 2000 versus a $168,000 positive impact in 1999 (a net change
of $679,000) offset by increased efforts to reduce costs. Before the negative
impact of the foreign currency exchange, corporate general and administrative
expenses would have decreased $533,000 or 11.3%. The 1999 corporate general and
administrative expenses included a special litigation charge of $408,000 on a
retaliatory discharge claim (see Note 7). Net interest expense increased $1.4
million, which is primarily attributable to the increase in long-term debt due
to the expansion of theatre operations and the new outdoor display manufacturing
facility in Logan, Utah, and an increase in interest rates. The 1999 other
income relates to the gain on the purchase of $1.0 million principal amount of
the Company's 7 1/2% convertible subordinated notes at a discount. The income
from joint venture relates to the operations of the theatre joint venture,
MetroLux Theatre in Loveland, CO.
The effective tax rate at September 30, 2000 and 1999 was 45.0%. The Company
has filed certain amended tax returns seeking additional refunds of state income
taxes.
Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999
The Company's total revenues for the three months ended September 30, 2000
increased 7.5% to $18.9 million from $17.6 million for the three months ended
September 30, 1999. Indoor display revenues increased $743,000 or 12.6%. Of
this increase, indoor display sales increased $649,000 or 33.0% due to
increased volume in the corporate and international exchange markets and the
indoor display rental and maintenance revenues increased $94,000 or 2.4%,
primarily due to new rental and maintenance contracts and renewal of existing
contracts. Outdoor display revenues decreased $326,000 or 3.4%. Of this
decrease, outdoor display sales decreased $219,000 or 3.0%, primarily in the
outdoor sports segment and outdoor display rental and maintenance revenues
decreased $107,000 or 5.0%, due to the continued expected decline in the
outdoor lease and maintenance bases previously acquired. Entertainment and
real estate revenues increased $907,000 or 40.4% in 2000. This increase is
primarily from the revenues from four newly constructed multiplex theatres
consisting of 26 screens in Dillon, CO, Espanola, NM, Los Lunas, NM and
Sahuarita, AZ, which opened between August 1999 and May 2000, partially offset
by a decline in revenues from existing theatres resulting from the industry
wide slump in attendance.
Total operating income for the three months ended September 30, 2000 remained
level at $3.2 million. Indoor display operating income increased $281,000 or
15.3%. The cost of indoor displays represented 45.0% of related revenues for
the three months ended September 30, 2000 and 44.5% in 1999. Indoor display
cost of equipment sales increased $167,000 or 17.8%, due to higher volume, and
indoor display cost of equipment rental and maintenance increased $192,000 or
11.4%, primarily due to additional depreciation expense. The indoor display
general and administrative expenses increased $103,000 or 7.2%, primarily due to
increased sales expenses.
Outdoor operating income decreased $198,000 or 20.2%. The cost of outdoor
displays represented 72.9% of related revenues for the three months ended
September 30, 2000 and 74.0% in 1999. Due to the competitive nature of the
outdoor display market, primarily in the sports segment, the Company expects
this erosion in the gross profit percentage to continue as it attempts to
increase its market share in the sports segment of the outdoor display market.
Outdoor display cost of equipment sales decreased $243,000 or 4.6% due to
decreased volume and outdoor display cost of equipment rental and maintenance
decreased $95,000 or 5.5% due to decreased volume. The outdoor display general
and administrative expenses increased $212,000 or 14.4%, primarily due to
expanded sales and marketing efforts related to the sports segment and the
increase in operating costs related to the new 55,000 square foot manufacturing
facility in Logan Utah.
8
<PAGE>
The entertainment and real estate operating income decreased $37,000 or 10.1%.
The cost of entertainment and real estate represented 84.3% of related revenues
for the three months ended September 30, 2000 and 77.2% in 1999. The cost of
entertainment and real estate increased $921,000 or 53.1% in 2000, mainly as a
result of the expansion of the theatre operations and theatre start-up expenses
for new theatre locations. The entertainment and real estate general and
administrative expenses remained level.
Corporate general and administrative expenses increased $55,000 or 3.5%. The
2000 corporate general and administrative expenses included a $239,000 negative
impact of the effect of foreign currency exchange rates offset by increased
efforts to reduce costs. Before the negative impact of the foreign currency
exchange, corporate general and administrative expenes would have decreased
$144,000 or 9.4%. Net interest expense increased $575,000, which is primarily
attributable to the increase in long-term debt due to expansion of theatre
operations and the new outdoor display manufacturing facility in Logan, Utah,
and an increase in interest rates. The income from joint venture relates to the
operations of the theatre joint venture, MetroLux Theatre in Loveland, CO.
Liquidity and Capital Resources
The regular quarterly cash dividend for the third quarter of 2000 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 September 12, 2000 payable to
stockholders of record as of October 9, 2000 and was paid October 20, 2000.
The Company has a $15.0 million revolving credit facility under its Credit
Agreement which is available until June 2002, and requires an annual facility
fee on the total commitment of .375%. The Company has the option to convert the
outstanding balance into a four-year term loan. At September 30, 2000, $10.1
million was outstanding leaving $4.9 million of additional borrowing capacity
available under such facility. The Credit Agreement contains certain financial
covenants, including a defined debt service coverage ratio which was reset as of
September 30, 2000 to 1.40 to 1.0. At September 30, 2000 the Company was in
compliance with such financial covenants. The Company is currently in
discussion with the bank to reset certain financial covenants beyond September
30, 2000. The Company does not expect these discussions to have an impact in
its existing borrowing capacity. 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 fund its
anticipated near term cash requirements.
Cash and cash equivalents decreased $461,000 for the nine months ended September
30, 2000 compared to an increase of $861,000 in 1999. The decrease in 2000 is
primarily attributable to cash utilized for investment in rental equipment and
construction of theatres, the decrease in accounts payable and accruals, and the
increase in receivables.
The Company utilizes its revolving credit facility to finance the expansion of
its theatre operations until long-term financing is in place. The $5.2 million
proceeds from long-term debt for the nine months ended September 30, 2000 relate
to construction borrowings for the new theatres, and borrowings under the
revolving credit facility for purchases of equipment for rental and working
capital use.
The Company has limited involvement with derivative financial instruments and
does not use them for trading purposes; they are only used to manage and fix
well-defined interest rate risks. The Company has two interest rate swap
agreements having a notional value of $7.5 million to reduce exposure to
interest fluctuations. (See Note 1.)
9
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Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
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, and interest rate and
foreign exchange fluctuations such as the decline in the value of the Australian
dollar.
Part II - Other Information
---------------------------
Item 6. Exhibits and Reports on Form 8-K
------ --------------------------------
(a) Exhibits
10(a) Employment Agreement with Richard Brandt dated as
of September 1, 2000.
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
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRANS-LUX CORPORATION
---------------------
(Registrant)
Date: November 14, 2000
by /s/ Angela D. Toppi
-------------------------
Angela D. Toppi
Senior Vice President and
Chief Financial Officer
by /s/ Robert P. Bosworth
-------------------------
Robert P. Bosworth
Vice President and
Chief Accounting Officer
11
