SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
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Commission File Number 1-5426.
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THOMAS INDUSTRIES INC.
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(Exact name of registrant as specified in its charter)
Delaware 61-0505332
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4360 Brownsboro Road, Louisville, Kentucky 40207
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 502/893-4600
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Not Applicable
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(Former name, former address, and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve 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
The number of shares outstanding of issuer's Common Stock, $1 par value, as of
April 28, 2001, was 15,161,185 shares.
Page 1 of 11
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in Thousands Except Amounts Per Share)
Three Months Ended
March 31
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2001 2000
---- ----
Net sales $49,696 $50,811
Cost of products sold 31,395 33,012
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Gross profit 18,301 17,799
Selling, general, and
administrative expenses 11,384 11,159
Equity income from Lighting 5,061 5,411
------ ------
Operating income 11,978 12,051
Interest expense 942 987
Interest income and other 612 575
------ ------
Income before income taxes 11,648 11,639
Income taxes 4,368 4,481
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Net income $ 7,280 $ 7,158
====== ======
Net income per share:
Basic $.48 $.46
Diluted $.47 $.45
Dividends declared per share $.085 $.075
Weighted average number of shares outstanding
Basic 15,117 15,582
Diluted 15,620 15,950
See notes to condensed consolidated financial statements.
2
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
March 31 December 31
ASSETS 2001 2000*
---- ----
Current assets:
Cash and cash equivalents $ 8,288 $ 13,941
Accounts receivable, less allowance
(2001--$766; 2000--$752) 24,436 22,255
Inventories:
Finished goods 6,964 7,046
Raw materials 11,020 11,032
Work in process 4,542 4,210
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22,526 22,288
Deferred income taxes 3,170 3,082
Other current assets 3,491 2,251
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Total current assets 61,911 63,817
Investment in GTG 173,143 168,954
Property, plant and equipment 88,818 87,556
Less accumulated depreciation and amortization 49,143 48,035
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39,675 39,521
Note receivable from GTG 22,287 22,287
Intangible assets--less accumulated amortization 9,594 10,111
Other assets 3,677 3,430
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Total assets $310,287 $308,120
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 5,750 $ --
Accounts payable 7,289 7,385
Accrued expenses and other current liabilities 18,878 18,014
Current portion of long-term debt 7,786 7,786
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Total current liabilities 39,703 33,185
Deferred income taxes 9,319 9,415
Long-term debt (less current portion) 32,983 40,727
Other long-term liabilities 6,965 7,436
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Total liabilities 88,970 90,763
Shareholders' equity:
Preferred Stock, $1 par value,
3,000,000 shares authorized--none issued -- --
Common Stock, $1 par value, shares authorized:
60,000,000; shares issued: 2001 -- 17,774,045;
2000 -- 17,670,342 17,774 17,670
Capital surplus 113,046 111,982
Deferred compensation 715 401
Treasury stock held for deferred compensation (715) (401)
Retained earnings 141,145 135,153
Accumulated other comprehensive income (loss) (12,191) (9,058)
Less cost of treasury shares:
(2001--2,622,339; 2000--2,619,039) (38,457) (38,390)
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Total shareholders' equity 221,317 217,357
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Total liabilities and shareholders' equity $310,287 $308,120
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*Derived from the audited December 31, 2000, consolidated balance sheet. See
notes to condensed consolidated financial statements.
3
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
Three Months Ended
March 31
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2001 2000
---- ----
Operating activities:
Net income $ 7,280 $ 7,158
Adjustments to reconcile net income to net
cash (used in)/provided by operating activities:
Depreciation and amortization 2,140 2,189
Deferred income taxes (334) (280)
Equity income from Lighting (5,061) (5,411)
Other items 24 133
Changes in operating assets and liabilities:
Accounts receivable (2,720) (4,640)
Inventories (1,074) (380)
Accounts payable 19 1,083
Accrued expenses and other liabilities 475 3,864
Other (1,148) 322
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Net cash (used in)/provided by operating activities (399) 4,038
Investing activities:
Purchases of property, plant and equipment (2,596) (2,002)
Sale of property, plant and equipment 10 2
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Net cash used in investing activities (2,586) (2,000)
Financing activities:
Proceeds from notes payable to banks, net 5,750 600
Payments on long-term debt (7,744)
(7,743)
Treasury stock purchased (67) (5,334)
Dividends paid (1,129) (1,187)
Other 1,168 316
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Net cash used in financing activities (2,022) (13,348)
Effect of exchange rate change (646) (306)
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Net decrease in cash and cash equivalents (5,653) (11,616)
Cash and cash equivalents at beginning of period 13,941 16,487
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Cash and cash equivalents at end of period $ 8,288 $ 4,871
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See notes to condensed consolidated financial statements.
4
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note A - Basis of Presentation
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The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and with the instructions to Form 10-Q and Article 10-01 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
The results of operations for the three-month period ended March 31, 2001, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2001. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. For further
information, refer to the consolidated financial statements and footnotes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2000.
Note B - Contingencies
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In the normal course of business, the Company is a party to legal proceedings
and claims. When costs can be reasonably estimated, appropriate liabilities for
such matters are recorded. While management currently believes the amount of
ultimate liability, if any, with respect to these actions will not materially
affect the financial position, results of operations, or liquidity of the
Company, the ultimate outcome of any litigation is uncertain. Were an
unfavorable outcome to occur, the impact could be material to the Company.
Note C - Comprehensive Income
-----------------------------
Reconciliation of net income to comprehensive income for the period indicated
follows:
(In Thousands)
For the three months ended March 31: 2001 2000
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Net income $7,280 $7,158
Foreign currency translation (3,133) (1,215)
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Comprehensive income $4,147 $5,943
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5
Note D - Net Income Per Share
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The computation of the numerator and denominator in computing basic and diluted
net income per share follows:
(In Thousands) Three Months
Ended March 31
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2001 2000
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Numerator:
Net income $ 7,280 $ 7,158
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Denominator:
Weighted average shares outstanding 15,117 15,582
Effect of dilutive securities:
Director and employee stock options 486 334
Employee performance shares 17 34
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Dilutive potential common shares 503 368
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Denominator for diluted earnings per
share--adjusted weighted average
shares and assumed conversions 15,620 15,950
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Note E - Genlyte Thomas Group LLC
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The following table contains certain unaudited financial information for the
Joint Venture.
Genlyte Thomas Group LLC
Condensed Financial Information
(Dollars in Thousands)
(Unaudited)
March 31 December 31
2001 2000
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Balance sheet:
Current assets $336,939 $326,626
Long-term assets 282,420 288,082
Current liabilities 159,353 177,454
Long-term liabilities 97,957 89,948
Three Months Ended
March 31
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2001 2000
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Income statement:
Net sales $244,795 $246,360
Gross profit 85,347 83,940
Earnings before interest and taxes 19,929 20,196
Net income* 17,632 18,563
*Amounts recorded by Thomas Industries Inc.:
Equity income from GTG $ 5,642 $ 5,940
Stock option expense (52) --
Amortization of excess investment (529) (529)
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Equity income reported by Thomas $ 5,061 $ 5,411
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6
Note F - Receivables from Affiliate
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Our note receivable from GTG at March 31, 2001, and December 31, 2000, is
$22,287,000 which represents a debt equalization note payable to Thomas by GTG
related to the formation of the Joint Venture. Interest on the principal amount
outstanding under the note accrues at a variable rate and is payable on a
quarterly basis. The principal amount of the note is due on August 29, 2003, and
may be prepaid in whole or in part at any time without premium or penalty.
Note G - Segment Disclosures
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(In Thousands) Three Months Ended
March 31
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2001 2000
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Revenues
Total net sales including intercompany sales
Pump and Compressor $56,482 $55,573
Intercompany sales
Pump and Compressor (6,786) (4,762)
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Net sales to unaffiliated customers
Pump and Compressor $49,696 $50,811
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Operating Income
Pump and Compressor $ 8,543 $ 8,474
Lighting* 5,061 5,411
Corporate (1,626) (1,834)
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$11,978 $12,051
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*Consists of equity income of $5,642,000 in 2001 and $5,940,000 in 2000 from our
32% interest in the Genlyte Thomas Group (GTG) joint venture, less $529,000 of
amortization in both 2001 and 2000 of Thomas' excess investment and less $52,000
in 2001 related to expense recorded for Thomas Industries stock options issued
to GTG employees.
Note H - Shipping and Handling Costs
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In September 2000, the Emerging Issues Task Force (EITF) reached a consensus on
Issue 00-10, "Accounting for Shipping and Handling Fees and Costs." The EITF
requires that all shipping and handling amounts billed to a customer in a sale
transaction be classified as revenue. The EITF also states that a company cannot
net the shipping and handling costs against the shipping and handling revenues
in the financial statements. Accordingly, the Company has restated net sales and
cost of sales for the three months ended March 31, 2000, by reclassifying
shipping and handling costs totaling $425,000 from net sales to cost of sales.
7
Note I - Short-Term Borrowings
------------------------------
As of March 31, 2001, the Company had short-term borrowings of $5,750,000 which
bear interest at variable rates. These borrowings were primarily used to fund
working capital needs, capital expenditures, and our long-term debt payment.
Short-term borrowings at December 31, 2000, and March 31, 2000, were zero and
$600,000, respectively.
Item 2. Management's Discussion and Analysis of inancial Condition and Results
of Operations.
Results of Operations
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Net sales during the first quarter ended March 31, 2001, decreased 2.2% to $49.7
million compared to $50.8 million for the first quarter of 2000. The 2000 net
sales and cost of sales have been restated due to an Emerging Issues Task Force
consensus on Issue 00-10, "Accounting for Shipping and Handling Fees and Costs,"
as noted in our 2000 Annual Report. Our North American operations had a decline
in net sales, primarily as a result of our larger OEM medical customers pushing
out orders and adjusting their inventories. Our European and Asia Pacific
operations showed strong results despite weakening local currencies. Our overall
sales would be 3% higher if measured in constant exchange rates.
Operating income for the first quarter ended March 31, 2001, was $12.0 million,
or .6% lower than the prior-year amount of $12.1 million. Our Pump and
Compressor Segment posted an .8% increase in operating income over the 2000
first quarter. This was principally due to favorable sales mix and continued
cost reduction programs in our manufacturing process. As a percent of net sales,
our gross profit and operating income percentages for this segment showed
improvement over the first quarter of 2000. Our Lighting Segment (GTG Joint
Venture) results decreased to $5.1 million in the first quarter of 2001,
compared to $5.4 million in the same period last year. This was primarily due to
our share of increased interest expense, foreign income tax, and domestic
franchise tax at the Joint Venture level, which were higher due to acquisitions
made by the Joint Venture. Additionally, the economic slowdown has led to
relatively flat sales for the Joint Venture.
Net income for the 2001 first quarter of $7.3 million was 1.7% higher than the
$7.2 million for the comparable 2000 period and was a record for any
first-quarter period. The increase was primarily related to a lower effective
tax rate in the first quarter of 2001.
Interest expense for the 2001 first quarter was $.9 million, or 4.6% lower than
the 2000 amount of $1.0 million. This reduction was primarily related to the
$7.7 million payment of long-term debt on January 31, 2001, which reduced our
interest expense over the prior-year amount.
8
Item 2. Management's Discussion and Analysis - Continued
Our note receivable from GTG at March 31, 2001, and December 31, 2000, is
$22,287,000 which represents the debt equalization note payable to Thomas by GTG
related to the formation of the Joint Venture. Interest on the principal amount
outstanding under the note accrues at a variable rate and is payable on a
quarterly basis. The principal amount of the note is due on August 29, 2003, and
may be prepaid in whole or in part at any time without premium or penalty.
Working capital of $22.2 million at March 31, 2001, is $8.4 million lower than
the amount at December 31, 2000, primarily resulting from the $7.7 million
long-term debt payment on January 31, 2001, capital expenditures of $2.6
million, increases in accounts receivable of $2.7 million, and increases in
inventory of $1.1 million, offset by proceeds from short-term borrowings of $5.8
million. For the period December 31, 2000, through March 31, 2001, the Company
purchased an additional 3,300 shares under the stock repurchase program that was
announced in December 1999. Through May 11, 2001, the Company has purchased, on
a cumulative basis, 879,189 shares at an aggregate cost of $17.3 million.
Accounts receivable at March 31, 2001, have increased by 9.8% since December 31,
2000, due to a higher concentration of shipments occurring toward the end of the
first quarter of 2001 compared to the end of the fourth quarter of 2000. The
number of days sales in receivables at March 31, 2001, compared to December 31,
2000, has decreased to 45.9 days from 49.3. Annualized inventory turnover at
March 31, 2001, of 4.94 decreased from the December 31, 2000, level of 5.04.
Certain loan agreements of the Company include restrictions on working capital,
operating leases, tangible net worth, and the payment of cash dividends and
stock distributions. Under the most restrictive of these arrangements, retained
earnings of $71.4 million are not restricted at March 31, 2001.
As of March 31, 2001, the Company had available credit of $15.3 million with
banks under borrowing arrangements, of which $7.3 million was unused.
Anticipated funds from operations, along with available short-term credit, are
expected to be sufficient to meet cash requirements in the year ahead. Cash in
excess of operating requirements will continue to be invested in investment
grade, short-term securities.
New European Currency
---------------------
Eleven European countries (The European Monetary Union) have implemented a
single currency zone as of January 1, 1999. The new currency (euro) will replace
the existing currencies of the participating countries. The transition from the
various currencies to the euro is occurring over a three-year period and will
become effective in 2002. The software used by our European operations has been
modified to accommodate the dual currencies during the transition period. A team
is in place to monitor any changing EMU requirements and has established the
final conversion timetable for the single EMU currency.
9
Item 2. Management's Discussion and Analysis - Continued
While management currently believes the Company has accommodated any required
changes in its operations, there can be no assurance that its customers,
suppliers, service providers, or government agencies will all meet the euro
currency requirements in a timely manner. Such failure to complete the necessary
work on a timely basis could result in material financial risk.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company's long-term debt bears interest at fixed rates with the exception of
the $8 million note that accrues interest at a variable rate. Short-term
borrowings are also priced at variable interest rates. The Company's results of
operations and cash flows, therefore, would only be affected by interest rate
changes to the extent of variable rate debt. At March 31, 2001, the variable
rate debt outstanding was $13.8 million, consisting of the $8 million long-term
note and the $5.8 million of short-term borrowings. A 100 basis point movement
in the interest rate on the $13.8 million variable rate debt would result in a
$138,000 annualized effect on interest expense and cash flows.
The Company also has a long-term note receivable from GTG of $22,287,000 that
bears interest at a variable rate. Therefore, a 100 basis point movement in the
interest rate on the $22,287,000 note would result in an approximate $223,000
annualized effect on interest income and cash flows.
The fair value of the Company's long-term debt with fixed interest rates is
estimated based on current interest rates offered to the Company for similar
instruments. A 100 basis point movement in the interest rate would result in an
approximate $700,000 annualized effect on the fair value of long-term debt.
The Company has significant operations consisting of sales and manufacturing
activities in foreign countries. As a result, the Company's financial results
could be significantly affected by factors such as changes in foreign currency
exchange rates or changing economic conditions in the foreign markets in which
the Company manufactures or distributes its products. Currency exposures for our
Pump and Compressor Segment are concentrated in Germany but exist to a lesser
extent in other parts of Europe and Asia. Our Lighting Segment currency exposure
is primarily in Canada.
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) No reports on Form 8-K were filed during the quarter.
10
SIGNATURE
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.
THOMAS INDUSTRIES INC.
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Registrant
/s/ Phillip J. Stuecker
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Phillip J. Stuecker, Vice President and
Chief Financial Officer
Date May 11, 2001
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