<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 June 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
------
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
-------- ------------------------------------ ------------------
08/10/00 Common Stock - $1.00 Par Value 964,909
08/10/00 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 - June 30, 2000 (unaudited)
and December 31, 1999 1
Consolidated Statements of Operations - Three and Six Months
Ended June 30, 2000 and 1999 (unaudited) 2
Consolidated Statements of Cash Flows - Six Months
Ended June 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 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
------------------------------
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
In thousands, except share data 2000 1999
---------------------------------------------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,371 $ 3,651
Available-for-sale securities 2,237 3,666
Receivables 8,061 9,064
Unbilled receivables 1,315 114
Inventories 6,996 6,146
Prepaids and other 687 776
-------- --------
Total current assets 21,667 23,417
-------- --------
Equipment on rental 79,266 75,200
Less accumulated depreciation 34,665 31,487
-------- --------
44,601 43,713
-------- --------
Property, plant and equipment 51,103 44,411
Less accumulated depreciation and amortization 9,915 8,832
-------- --------
41,188 35,579
Other assets 6,124 6,449
Construction funds 443 3,290
-------- --------
$114,023 $112,448
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,940 $4,688
Accrued liabilities 5,590 5,093
Current portion of long-term debt 2,445 2,381
-------- --------
Total current liabilities 9,975 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 39,330 34,405
-------- --------
70,784 65,952
Deferred revenue, deposits and other 3,862 3,715
Deferred income taxes 4,080 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 (165) (225)
-------- --------
37,159 37,850
Less treasury stock - at cost
1,479,684 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 25,322 26,013
-------- --------
$114,023 $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 SIX MONTHS ENDED
JUNE 30 JUNE 30
---------------------- --------------------
In thousands, except per share data 2000 1999 2000 1999
--------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C> <C>
Revenues:
Equipment rentals and maintenance $ 6,062 $ 5,754 $12,021 $11,611
Equipment sales 7,674 8,193 14,052 14,341
Theatre receipts and other 2,876 2,056 5,191 3,536
-------- -------- -------- --------
Total revenues 16,612 16,003 31,264 29,488
-------- -------- -------- --------
Operating expenses:
Cost of equipment rentals and maintenance 3,282 3,207 6,617 6,454
Cost of equipment sales 5,085 5,097 9,854 9,156
Cost of theatre receipts and other 2,425 1,672 4,350 2,874
-------- -------- -------- --------
Total operating expenses 10,792 9,976 20,821 18,484
-------- -------- -------- --------
Gross profit from operations 5,820 6,027 10,443 11,004
General and administrative expenses 4,477 4,885 9,227 9,077
-------- -------- -------- --------
1,343 1,142 1,216 1,927
Interest income 136 131 232 252
Interest expense (1,486) (983) (2,764) (1,967)
Other income (expense) (5) -- 1 145
Income from joint venture 52 69 105 71
-------- -------- -------- --------
Income (loss) before income taxes 40 359 (1,210) 428
Provision (benefit) for income taxes 17 161 (545) 192
-------- -------- -------- --------
Net income (loss) $23 $198 ($665) $236
======== ======== ======== ========
Earnings (loss) per share:
Basic $0.02 $0.15 ($0.53) $0.18
Diluted $0.02 $0.15 ($0.53) $0.18
Average common shares outstanding:
Basic 1,261 1,292 1,261 1,292
Diluted 1,261 1,295 1,261 1,296
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
<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>
SIX MONTHS ENDED
JUNE 30
------------------------
In thousands 2000 1999
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ($665) $ 236
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 4,549 4,294
Net income of joint venture (105) (71)
Deferred income taxes (545) (372)
Loss on sale of securities 13 --
Gain on repurchase of Company's 7 1/2% convertible subordinated notes (15) (145)
Changes in operating assets and liabilities:
Receivables 1,003 (75)
Inventories (850) 287
Prepaids and other assets (1,018) (758)
Accounts payable and accruals (2,214) 312
Deferred revenue, deposits and other 147 (767)
------- --------
Net cash provided by operating activities 300 2,941
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment manufactured for rental (4,066) (3,127)
Purchases of property, plant and equipment (6,692) (4,292)
Usage of (increase in) construction funds 2,847 (4,694)
Payments for acquisitions (net) -- (1,163)
Proceeds from joint venture 48 47
Proceeds from sale of securities 1,458 --
------- --------
Net cash used in investing activities (6,405) (13,229)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 6,026 12,737
Repayment of long-term debt (1,037) (783)
Repurchase of Company's 7 1/2% convertible subordinated notes (78) (855)
Cash dividends (86) (88)
------- --------
Net cash provided by financing activities 4,825 11,011
------- --------
Net increase (decrease) in cash and cash equivalents (1,280) 723
Cash and cash equivalents at beginning of year 3,651 1,298
------ -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,371 $ 2,021
====== =======
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Interest paid $2,678 $1,976
Interest received 283 243
Income taxes paid (refunded) (92) 772
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<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
June 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 June 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 material 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 generally accepted
accounting principles to selected revenue recognition issues and must be
implemented no later than the fourth quarter of 2000. The Company will
implement SAB 101 in the fourth quarter 2000 and has not yet determined the
effect, if any, on the financial statements.
Note 2 - Inventories
<TABLE>
<CAPTION>
Inventories consist of the following:
June 30 December 31
In thousands 2000 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and spare parts $4,509 $3,532
Work-in-progress 1,451 1,459
Finished goods 1,036 1,155
----- -----
$6,996 $6,146
====== ======
</TABLE>
4
<PAGE>
Note 3 - Long-Term Debt
During the first half of 2000, long-term debt increased $4.8 million, of which
$3.6 million represents additional theatre construction mortgages. The Company
has a bank Credit Agreement which provides for a $15 million revolving credit
facility which is available until June 2002. At June 30, 2000, $11.2 million
was outstanding leaving $3.8 million of additional borrowing capacity available
under such facility. The Credit Agreement contains certain financial covenants,
including a defined debt service coverage ratio of 1.75 to 1.0. At June 30,
2000 the Company was not in compliance with this ratio and received a waiver
from the bank.
Note 4 - Reporting Comprehensive Loss
The components of comprehensive 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 $45,000 and $176,000 for the three months
ended June 30, 2000 and 1999, respectively; and comprehensive (loss) income of
($649,000) and $130,000 for the six months ended June 30, 2000 and 1999,
respectively.
Note 5 - Earnings (Loss) per Share
<TABLE>
<CAPTION>
The following table represents the computation of basic and diluted earnings (loss) per common share:
Three months ended June 30 Six months ended June 30
In thousands, except share data 2000 1999 2000 1999
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic earnings (loss) per share computation:
Net income (loss) $ 23 $ 198 $ (665) $ 236
--- --- --- ---
Weighted average common shares outstanding 1,261 1,292 1,261 1,292
----- ----- ----- -----
Basic earnings (loss) per common share $ 0.02 $ 0.15 $(0.53) $ 0.18
------ ====== ======= ======
Diluted earnings (loss) per share computation:
Net income (loss) $ 23 $ 198 $ (665) $ 236
Add: After tax interest expense applicable to convertible debt (1) - - - -
------ ------ ------- ------
Adjusted net income (loss) $ 23 $ 198 $ (665) $ 236
====== ====== ======= ======
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) - 3 - 4
Assumes conversion of 7 1/2% convertible subordinated notes (1) ------ ------ ------- ------
Total weighted average common shares 1,261 1,295 1,261 1,296
====== ====== ======= ======
Diluted earnings (loss) per common share $ 0.02 $ 0.15 $(0.53) $ 0.18
====== ====== ======= ======
<FN>
(1) The 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
June 30, 2000 and 2,185 shares at June 30, 1999.
(2) Options to purchase 130 shares of common stock with exercise prices ranging from $6.3125 to $15.1875 were outstanding at June
30, 2000, and options to purchase 59 shares of common stock with exercise prices ranging from $8.625 to $15.1875 were outstanding at
June 30, 1999. These option were not included in the 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 June 30 Six months ended June 30
In thousands 2000 1999 2000 1999
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Indoor display $ 6,301 $ 6,351 $11,328 $11,558
Outdoor display 7,435 7,596 14,745 14,394
Entertainment and real estate 2,876 2,056 5,191 3,536
----- ----- ----- -----
Total revenues $16,612 $16,003 $31,264 $29,488
------ ------ ------ ------
Operating income:
Indoor display $ 2,300 $ 1,984 $ 3,678 $ 3,336
Outdoor display 210 692 244 1,337
Entertainment and real estate 290 243 481 316
--- --- --- ---
Total operating income $ 2,800 $ 2,919 $ 4,403 $ 4,989
Other income (loss) (5) - 1 145
Corporate general and administrative expenses (1,405) (1,708) (3,082) (2,991)
Interest expense-net (1,350) (852) (2,532) (1,715)
----- --- ----- -----
Income (loss) before income taxes $ 40 $ 359 $(1,210) $ 428
== === ===== ===
</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
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
The Company's total revenues for the six months ended June 30, 2000 increased
6.0% to $31.3 million from $29.5 million for the six months ended June 30, 1999.
Indoor display revenues decreased $230,000 or 2.0%. Of this decrease, indoor
display equipment sales decreased $824,000 or 19.5%, due to lower volume, mainly
as a result of the advent of electronic trading on trading floors and
consolidation within the financial industry. This was offset by an increase of
$594,000 or 8.1% of indoor display equipment rental and maintenance revenues,
primarily due to new rental and maintenance contracts and renewal of existing
contracts. Outdoor display revenues increased $351,000 or 2.4%. Of this
increase, outdoor display equipment sales increased $535,000 or 5.3%, primarily
in the outdoor sports segment. This was offset by a decrease of $184,000 or
4.3% of 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 $1.7
million or 46.8% in 2000. This increase is primarily from the revenues from
four newly constructed 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 six months ended June 30, 2000 decreased 11.7%
to $4.4 million from $5.0 million for the six months ended June 30, 1999.
Indoor operating income increased $342,000 or 10.3%. The cost of indoor
displays represented 44.6% of related revenues for the six months ended June
30, 2000 and 46.1% in 1999. Indoor display cost of equipment sales decreased
$436,000 or 21.2%, due to lower volume. This was offset by the increase in
indoor display cost of equipment rental and maintenance of $150,000 or 4.6%,
primarily due to additional depreciation expense. The indoor display general
and administrative expenses decreased $286,000 or 9.9%, primarily due to
increased efforts to control expenses. Outdoor operating income decreased $1.1
million or 81.8%. The cost of outdoor displays represented 77.5% of related
revenues for the six months ended June 30, 2000 and 71.4% 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
$1.1 million or 16.0% 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 remained level. The
outdoor display general and administrative expenses increased $297,000 or
10.7%, primarily due to expanded sales and marketing efforts related to the
sports segment. 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
$165,000 or 52.2%. The cost of entertainment and real estate represented 83.8%
of related revenues for the six months ended June 30, 2000 and 81.3% in 1999.
Cost of entertainment and real estate, which includes film rental costs and
depreciation expense, increased $1.5 million or 51.4% 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 increased $48,000 or 11.5%, due to the expansion of
theatre operations.
7
<PAGE>
Corporate general and administrative expenses increased $91,000 or 3.0%,
primarily due to a $272,000 negative impact of the effect of foreign currency
exchange rates in 2000 versus a $208,000 positive impact in 1999 (a net change
of $480,000) and the moving costs to the new Logan, Utah outdoor display
manufacturing facility. 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 $817,000, 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 June 30, 2000 and 1999 was 45.0%.
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
The Company's total revenues for the three months ended June 30, 2000 increased
3.8% to $16.6 million from $16.0 million for the three months ended June 30,
1999. Indoor display revenues decreased $50,000 or 0.8%. Of this decrease,
indoor display sales decreased $446,000 or 16.5% due to lower volume, mainly as
a result of the advent of electronic trading on trading floors and consolidation
within the financial industry. This was offset by an increase of $396,000 or
10.9% of indoor display rental and maintenance revenues, primarily due to new
rental and maintenance contracts and renewal of existing contracts. Outdoor
display revenues decreased $161,000 or 2.1%. Of this decrease, outdoor display
sales decreased $73,000 or 1.3%, primarily in the outdoor sports division and
outdoor display rental and maintenance revenues decreased $88,000 or 4.2%, due
to the continued expected decline in the outdoor lease and maintenance bases
previously acquired. Entertainment and real estate revenues increased $820,000
or 40.0% in 2000. This increase is primarily from the revenues from four newly
constructed 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 three months ended June 30, 2000 decreased 4.0%
to $2.8 million from $2.9 million for the three months ended June 30, 1999.
Indoor operating income increased $317,000 or 16.0%. The cost of indoor
displays represented 42.5% of related revenues for the three months ended June
30, 2000 and 44.6% in 1999. Indoor display cost of equipment sales decreased
$200,000 or 16.4%, due to lower volume. This was offset by an increase in
indoor display cost of equipment rental and maintenance of $46,000 or 2.8%,
primarily due to additional depreciation expense. The indoor display general
and administrative expenses decreased $213,000 or 13.9%, primarily due to
increased efforts to control expenses. Outdoor operating income decreased
$481,000 or 69.5%. The cost of outdoor displays represented 76.5% of related
revenues for the three months ended June 30, 2000 and 72.0% 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 increased
$188,000 or 4.8%, 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 remained level. The
outdoor display general and administrative expenses increased $103,000 or 7.2%,
primarily due to expanded sales and marketing efforts related to the sports
segment. The entertainment and real estate operating income increased $46,000
or 18.9%. The cost of entertainment and real estate represented 84.3%
8
<PAGE>
of related revenues for the three months ended June 30, 2000 and 81.3% in 1999.
The cost of entertainment and real estate increased $753,000 or 45.0% 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 decreased $302,000 or 17.7%. The
1999 corporate general and administrative expenses included a special
litigation charge of $408,000 on a retaliatory discharge claim (see Note 7),
this was offset by a $30,000 positive impact of the effect of foreign currency
exchange rates. The 2000 corporate general and administrative expenses
included a $68,000 negative impact of the effect of foreign currency exchange
rates and moving costs related to the new Logan, Utah outdoor display
manufacturing facility. Net interest expense increased $498,000, 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 second 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 May 31, 2000 payable to
stockholders of record as of June 23, 2000 and was paid July 18, 2000.
The Company has a $15.0 million revolving credit facility with its bank 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 June 30, 2000, $11.2 million was
outstanding leaving $3.8 million of additional borrowing capacity available
under such facility. The Credit Agreement contains certain financial
covenants, including a defined debt service coverage ratio of 1.75 to 1.0. At
June 30, 2000 the Company was not in compliance with this one ratio and has
received a waiver from the bank. The Company is in compliance on all remaining
financial covenants. The Company is currently in discussion with the bank to
reset certain financial covenants by the end of the year. The Company does not
expect this discussion to have an effect on 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 $1.3 million for the six months ended June
30, 2000 compared to an increase of $723,000 in 1999. The decrease in 2000 is
primarily attributable to the decrease in accounts payable and accruals, and
cash utilized for investment in rental equipment and construction of theatres.
In 1999 the Company received $6.8 million in construction or real estate
mortgages utilized for construction and acquisition of theatres and purchases of
equipment, and refinancing of a mortgage. In June of 1999 the Company received
$4.8 million in proceeds from an industrial revenue bond financing for the
construction of a new 55,000 square foot manufacturing facility in Logan, Utah,
the proceeds are reflected in the long-term assets section of the Consolidated
Balance Sheets as Construction Funds.
The Company utilizes its revolving credit facility to finance the expansion of
its theatre operations until long-term financing is in place. The $6.0 million
proceeds from long-term debt for the six months ended June 30, 2000 relates to
construction borrowings for the new theatres, and borrowings under the revolving
credit facility for purchases of equipment for rental and working capital use.
9
<PAGE>
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 $7.9 million to reduce exposure to
interest fluctuations.
The Company has completed the construction of its new 55,000 square-foot outdoor
display facility in Logan, Utah and has moved into the new facility during the
second quarter of 2000.
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.
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 31,
2000 for the purpose of electing directors, amending the 1995 Stock Option plan
by which an additional 25,000 shares of the Corporation's capital stock will be
reserved for issuance thereunder 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
--- -------
Steven Baruch 3,682,769 127,876
Howard M. Brenner 3,682,769 127,876
Allan Fromme 3,682,769 127,876
The following directors are continuing their terms as directors:
Richard Brandt, One-Year Remaining
Jean Firstenberg, One-Year Remaining
Gene Jankowski, One-Year Remaining
Victor Liss, One-Year Remaining
Robert B. Greenes, Two-Years Remaining
Howard S. Modlin, Two-Years Remaining
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<PAGE>
The recommendation to amend the 1995 Stock Option Plan by which an additional
25,000 shares of the Corporations capital stock thereunder will be reserved for
issuance thereunder was approved by the following vote:
For Against Abstain
--- ------- -------
Common 714,802 163,176 7,107
Class B 2,925,100 460 0
--------- ------- -----
Total: 3,639,902 163,636 7,107
The recommendation to retain Deloitte & Touche LLP as the independent auditors
for the Corporation was approved by the following vote:
For Against Abstain
--- ------- -------
Total: 3,754,946 33,914 21,785
Item 6. Exhibits and Reports on Form 8-K
------- --------------------------------
(a) 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: August 11, 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
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