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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2000
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Commission file number 1-2257
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TRANS-LUX CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 13-1394750
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Richards Avenue, Norwalk, CT 06856-5090
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(203) 853-4321
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(Address, zip code, and telephone number, including
area code, of Registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $1.00 par value American Stock Exchange
7 1/2% Convertible Subordinated
Notes due 2006 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. [ X ]
CONTINUED
TRANS-LUX CORPORATION
2000 Form 10-K Cover Page Continued
As of the close of business on March 29, 2001, there were outstanding, 965,905
shares of the Registrant's Common Stock and 294,843 shares of its Class B Stock.
The aggregate market value of the Registrant's Common and Class B Stock (based
upon the closing price on the American Stock Exchange) held by non-affiliates
on March 29, 2001 (based on the last sale price on the American Stock Exchange
as of such date) was $4,410,894. (The value of a share of Common Stock is used
as the value for a share of Class B Stock, as there is no established market for
Class B Stock, which is convertible into Common Stock on a share-for-share
basis.)
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held June 1, 2001 (the "Proxy Statement") are incorporated
by reference into Part III, Items 10-13 of this Form 10-K to the extent stated
herein.
TRANS-LUX CORPORATION
2000 Form 10-K Annual Report
Table of Contents
PART I
Page
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ITEM 1. Business 1
ITEM 2. Properties 7
ITEM 3. Legal Proceedings 7
ITEM 4. Submission of Matters to a Vote of Security Holders 8
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 8
ITEM 6. Selected Financial Data 9
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
ITEM 8. Financial Statements and Supplementary Data 14
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 25
PART III
ITEM 10. Directors and Executive Officers of the Registrant 25
ITEM 11. Executive Compensation 26
ITEM 12. Security Ownership of Certain Beneficial Owners and Management 26
ITEM 13. Certain Relationships and Related Transactions 26
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 26
Signatures 29
PART I
ITEM 1. BUSINESS
Unless the context otherwise requires, the term "Company" as used herein refers
to Trans-Lux Corporation and its subsidiaries. The Company is a manufacturer,
distributor, and marketer of large-scale, real-time electronic information
displays for both indoor and outdoor use. These display systems utilize LED
(light emitting diodes); plasma screens, and light bulb technologies to display
real-time information entered by the user or via a third party information
supplier. The Company provides high quality, reliable display products
configured to suit its customers needs, and offers on-site installation, service
and maintenance. The Company's display products include data, graphics, and
video displays for stock and commodity exchanges, financial institutions, sports
stadiums and venues, casinos, convention centers, corporate, government,
theatres, retail, airports, and numerous other applications. In addition to its
core display business, the Company also owns and operates a chain of motion
picture theatres in the western Mountain States and owns real estate used for
both corporate and income-producing purposes.
ELECTRONIC INFORMATION DISPLAY PRODUCTS
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The Company's high performance electronic information displays are used to
communicate messages and information in a variety of indoor and outdoor
applications. The Company's product line encompasses a wide range of
state-of-the-art electronic displays in various shape, size and color
configurations. Most of the Company's display products include hardware
components and sophisticated software. In both the indoor and outdoor markets
in which the Company serves, the Company adapts basic product types and
technologies for specific use in various niche market applications. The Company
also operates a direct service network throughout the United States and parts of
Canada and Australia, which performs on-site installation, service and
maintenance for its customers and others.
The Company employs a modular engineering design strategy, allowing basic
"building blocks" of electronic modules to be easily combined and configured in
order to meet the broad application requirements of the industries it serves.
This approach ensures product flexibility, reliability, ease of service and
minimum spare parts requirements.
The Company's electronic information display market is broken down into two
distinct markets: the indoor market and the outdoor market. Electronic
information displays are used by financial institutions, including brokerage
firms, banks, energy companies, insurance companies and mutual fund companies;
by sports stadiums and venues; educational institutions; outdoor advertising
companies; by corporate and government communication centers; by retail outlets;
by casinos, race tracks and other gaming establishments; in airports, train
stations, bus terminals, and other transportation facilities; on highways and
major thoroughfares; by movie theatres; by health maintenance organizations, and
in various other applications.
The Indoor Market: The indoor electronic display market is currently dominated
by three categories of users: financial, government and private, and gaming.
The financial market segment, which includes trading floors, exchanges,
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brokerage firms, banks, mutual fund companies and energy companies, has long
been a user of electronic information displays due to the need for real-time
dissemination of data. The major stock and commodity exchanges depend on
reliable information displays to post stock and commodity prices, trading
volumes, interest rates and other financial data. Brokerage firms continue to
install electronic ticker displays for both customers and brokers; they have
also installed other larger displays to post major headline news events in their
brokerage offices to enable their sales force to stay up-to-date on events
affecting general market conditions and specific stocks. The changing
regulatory environment in the financial marketplace has resulted in the influx
of banks and other financial institutions into the brokerage business and the
need for these institutions to use information displays to advertise product
offerings to consumers.
The government and private segment includes applications found in major
corporations, public utilities and government agencies for the display of
real-time, critical data in command/control centers, data centers, help desks,
visitor centers, inbound/outbound telemarketing centers and for employee
communications. Electronic displays have found acceptance in applications for
the healthcare industry such as outpatient pharmacies; military hospitals and
HMOs to automatically post patient names when prescriptions are ready for pick
up. Theatres use electronic displays to post current box office and ticket
information, directional information, promote concession sales and use the
Company's Rear WindowTM system for the hearing-impaired. Information displays
are consistently used in airports, bus terminals and train stations to post
arrival and departure, gate and baggage claim information, all of which help to
guide passengers through these facilities.
The gaming segment includes casinos and Indian gaming establishments. These
establishments generally use large information displays to post odds for race
and sporting events and to display timely information such as results, track
conditions, jockey weights and scratches. Casinos also use electronic displays
throughout their facilities to advertise to and attract gaming patrons. This
includes using electronic displays in conjunction with slot machines using
enhanced serial controllers to attract customer attention to potential payoffs
and thus increase customer play. Indoor equipment generally has a lead-time of
30 to 120 days depending on the size and type of equipment ordered and material
availability.
The Outdoor Market: The outdoor electronic display market is even more diverse
than the indoor market. Displays are being used by sports stadiums, banks and
other financial institutions, gas stations, highway departments, educational
institutions and outdoor advertisers attempting to capture the attention of
passers-by. The outdoor division has a new line of LED message centers and
video displays available in monochrome and full color. The Company has
utilized its strong position in the indoor market combined with several
acquisitions to enhance its presence in the outdoor display market. Outdoor
displays are installed in amusement parks, entertainment facilities, high
schools, major and minor league parks, professional and college sports
stadiums, military installations, bridges and other roadway installations,
automobile dealerships, banks and other financial institutions. Outdoor
equipment generally has a lead- time of 10 to 120 days depending on the size
and type of equipment ordered and material availability.
Sales Order Backlog (excluding leases): The amount of sales order backlog at
December 31, 2000 was approximately $3.9 million compared with the December 31,
1999 sales order backlog of $4.3 million. The December 31, 2000 backlog will be
recognized in 2001. These amounts do not include new lease orders or renewals
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of existing lease agreements presently in-house.
ENGINEERING AND PRODUCT DEVELOPMENT
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The Company's ability to compete and operate successfully depends upon, among
other factors, its ability to anticipate and respond to the changing
technological and product needs of its customers. The Company continually
examines and tests new display technologies and develops enhancements to its
existing products in order to meet the needs of its customers.
Development of new indoor products includes progressive meter and serial
controller systems for use in the gaming industry; new monochrome and tricolor
ticker displays utilizing improved LED display technology, curved and flexible
displays; higher speed processors for faster data access and improved update
speed; integration of blue LED's to provide full color text, graphics and video
displays; wireless controlled displays and a new graphics interface to display
more data in higher resolutions.
The Company developed full-color LED video displays for the outdoor market which
has applications particularly in the sports market where enhancing the
presentation of live action is of central importance. To drive the video
display, the Company developed the ProLineTM controller, which is Windows 32-bit
software based. The Company also developed a wireless scoreboard controller, an
LED scoreboard and a bar-digit scoreboard for its Trans-Lux/Fair-PlayTM catalog
business.
As part of its ongoing development efforts, the Company seeks to package certain
products for specific market segments as well as to continually track emerging
technologies that can enhance its products. Future technologies under
consideration are trending toward full color, live video, and digital input.
The Company is currently focused on certain technologies that incorporate these
features and which are expected to provide a choice of products for the custom
applications demanded by its customers.
The Company maintains a staff of 51 people who are responsible for product
development and support. The engineering and product enhancement and
development efforts are supplemented by outside independent engineering
consulting organizations and colleges where required. Engineering expense, and
product enhancement and development amounted to $4,244,000, $4,280,000 and
$3,603,000 in 2000, 1999 and 1998, respectively.
MARKETING AND DISTRIBUTION
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The Company markets its indoor and outdoor electronic information display
products primarily through its 44 direct sales representatives, 5 telemarketers
and a network of independent dealers and distributors. During 2000, the Company
entered into an exclusive, long-term affiliation with a sports marketing firm,
packaging sponsorship opportunities with its scoreboard systems to colleges and
universities. The Company uses a number of different techniques in order to
attract new customers, including direct marketing efforts by its sales force to
known or potential users of information displays, advertising in industry
publications, and exhibiting at approximately 36 domestic and international
trade shows annually.
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In the outdoor market, the Company supplements these efforts by using a network
of independent dealers and distributors who market and sell its products.
Working with software vendors and utilizing the internet to expand the quality
and quantity of the multimedia content that can be delivered to our displays, we
are able to offer customers total communication packages.
Internationally, the Company uses a combination of internal sales people and
independent distributors to market its products outside the U.S. The Company
currently has assembly operations, service centers and sales offices in New
South Wales, Australia and Brampton, Canada. The Company has existing
relationships with approximately 27 independent distributors worldwide covering
Europe, South and Central America, Canada, Asia and Australia. International
sales have represented less than 10% of total revenues in the past three years,
but the Company believes that it is well positioned for expansion.
Headquartered in Norwalk, Connecticut, the Company has major sales and service
offices in New York; Chicago; Las Vegas; Norcross, Georgia; Torrance,
California; Brampton, Canada; Logan, Utah; Des Moines, Iowa; and New South
Wales, Australia, as well as approximately 69 satellite offices in the United
States and Canada.
The Company's equipment is both leased and sold. A significant portion of the
electronic information display revenues is from equipment rentals with current
lease terms ranging from 30 days to ten years.
The Company's revenues in 2000, 1999 and 1998 did not include any single
customer that accounted for more than 10% of total revenues.
MANUFACTURING AND OPERATIONS
- - - ----------------------------
The Company's production facilities are located in Norwalk, Connecticut; Logan,
Utah; Des Moines, Iowa; and New South Wales, Australia and consist principally
of the manufacturing, assembly and testing of display units, and related
components. The Company performs most subassembly and all final assembly of its
products. During 2000, the Company completed the construction of a new 55,000
square foot outdoor display manufacturing facility in Logan, Utah.
All product lines are design engineered by the Company and controlled throughout
the manufacturing process. The Company has the ability to produce printed
circuit board fabrications, very large sheet metal fabrications, plastic molded
parts, cable assemblies, and surface mount and through-hole designed assemblies.
The Company produces more than 50,000 board assemblies annually which are tested
with the latest state-of-the-art automated testing equipment. Additional board
assembly capacity is increased through outsourcing. The Company's production of
many of the subassemblies and all of the final assemblies gives the Company the
control needed for on-time delivery to its customers.
The Company also has the ability to rapidly modify its product lines. The
Company's displays are designed with flexibility in mind, enabling the Company
to customize its displays to meet different applications with a minimum of
lead-time. The Company also partners with large distributors via volume
purchase agreements, giving it the benefit of a third party stocking its
components ready for delivery on demand. The Company designs certain of its
materials to match components furnished by suppliers. If such suppliers were
4
unable to provide the Company with those components, the Company would have to
contract with other suppliers to obtain replacement sources. Such replacement
might result in engineering design changes, as well as delays in obtaining such
replacement components. The Company believes it maintains suitable inventory
and has contracts providing for delivery of sufficient quantities of such
components to meet its needs. The Company also believes there presently are
other qualified vendors of these components. The Company does not acquire a
material amount of purchases directly from foreign suppliers, but certain
components are manufactured by foreign sources.
The Company is ISO-9001 registered by Underwriters Laboratories for its Norwalk
plant facility. The Company's products are also third-party certified as
complying with applicable safety, electromagnetic emissions and susceptibility
requirements worldwide. The Company believes these distinctions in its industry
give it a competitive advantage in the global marketplace.
SERVICE AND SUPPORT
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The Company emphasizes the quality and reliability of its products and the
ability of its field service personnel to provide timely and expert service to
the Company's installed base. The Company believes that the quality and
timeliness of its on-site service personnel are important components in the
Company's success. The Company provides turnkey installation and support for
the products it leases and sells in the United States, Canada and Australia.
The Company provides training to end-users and provides ongoing support to users
who have questions regarding operating procedures, equipment problems or other
issues. The Company provides installation and service to those who purchase and
lease equipment. In the market segments covered by the Company's distributors,
the distributors offer support for the products they sell.
Personnel based in regional and satellite service locations throughout the
United States, Canada and Australia provide high quality and timely on-site
service for the installed rental equipment and maintenance base and other types
of customer owned equipment. Purchasers or lessees of the Company's larger
products, such as financial exchanges, casinos and sports stadiums, often retain
the Company to provide on-site service through the deployment of a service
technician who is on-site daily or for the scheduled event. The Company also
maintains a National Technical Services Center in Norcross, Georgia, which
performs equipment repairs and dispatches service technicians on a nationwide
basis. The Company's field service is augmented by various outdoor service
companies in the United States, Canada and overseas. From time to time the
Company uses various third-party service agents to install, service and/or
assist in the service of outdoor displays for reasons that include geographic
area, size and unusual height of displays.
COMPETITION
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The Company's offer of short and long-term leases to customers and its
nationwide sales, service and installation capabilities are major competitive
advantages in the display business. The Company believes that it is the largest
5
supplier of large-scale stock, commodity, sports and race book gaming displays
in the United States, as well as one of the largest outdoor electronic display
and service organizations in the country.
The Company competes with a number of competitors, both larger and smaller than
itself, and with products based on different forms of technology. In addition,
there are several companies whose current products utilize similar technology
and who possess the resources necessary to develop competitive and more
sophisticated products in the future.
The Company's motion picture theatres are subject to varying degrees of
competition in the geographic areas in which they operate. In one area,
theatres operated by national circuits compete with the Company's theatres. The
Company's theatres also face competition from all other forms of entertainment
competing for the public's leisure time and disposable income.
THEATRE OPERATIONS
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The Company currently operates 68 screens in 14 locations in the western
Mountain States. In 1998, the Company expanded its Storyteller theatre in
Taos, New Mexico to a seven-plex; in 1999, the Company closed a single theatre
and converted a four-plex theatre to a six-plex in Laramie Wyoming, opened a
six- plex theatre in Espanola, New Mexico and a six-plex theatre in Dillon,
Colorado; and in 2000, the Company opened an eight-plex theatre in Los Lunas,
New Mexico and a six-plex theatre in the Green Valley, Arizona area and closed
a single theatre in Laramie, Wyoming. The Company also operates a twelve-plex
theatre in Loveland, Colorado which is a 50% owned joint venture partnership.
The Company's theatre revenues are generated from box office admissions,
theatre concessions, theatre rentals and other sales. Theatre revenues are
generally seasonal and coincide with the release dates of major films during
the summer and holiday seasons. The Company is not currently operating any
multimedia entertainment venues, but continues to stay abreast of innovations
in this area of technology and continues to investigate new opportunities. In
the first quarter of 2000, the Company opened a film booking office, through
which it arranges film exhibition for its own theatres and for other
independent theatres around the country.
INTELLECTUAL PROPERTY
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The Company owns or licenses a number of patents and holds a number of
trademarks for its display equipment and theatrical enterprises and considers
such patents, licenses and trademarks important to its business.
EMPLOYEES
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The Company has approximately 710 employees as of February 28, 2001, of which
approximately 491 employees support the Company's electronic display business.
Less than 1% of the employees are unionized. The Company believes its employee
relations are good.
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ITEM 2. PROPERTIES
The Company's headquarters and principal executive offices are located at 110
Richards Avenue, Norwalk, Connecticut. The Company owns the 102,000 square foot
facility located at such site, which is occupied by the Company and is used for
administration, sales, engineering, production and assembly of its indoor
display products. Approximately 14,000 square feet of the building is currently
leased to others.
In addition, the Company owns facilities in:
Norcross, Georgia
Des Moines, Iowa
Logan, Utah
Theatre Properties in:
Sahuarita, Arizona
Dillon, Colorado
Durango, Colorado
Espanola, New Mexico
Los Lunas, New Mexico
Santa Fe, New Mexico
Taos, New Mexico
Laramie, Wyoming
The Company also leases 13 premises throughout North America and in Australia
for use as sales, service and/or administrative operations, and leases 5 theatre
locations. The aggregate rental expense was $687,000, $601,000 and $585,000 for
the years ended December 31, 2000, 1999 and 1998, respectively.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to legal proceedings and claims, which arise, in the
ordinary course of its business. During June 1999, a jury in the state of New
Mexico 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 and is appealing such verdict. 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 asserted defenses including that the
former employee resigned following her failure to timely report to work. The
Company believes it has made adequate provisions to cover such matters.
Certain of the amounts are subject to insurance recoveries. Management has
received certain claims by customers related to contractual matters, which are
being discussed, and believes that it has adequate provisions for such matters.
The Company is currently involved in arbitration related to the construction of
its six-plex movie theatre in Dillon, Colorado. The contractor has alleged
claims against the Company in the amount of $489,000 due under a contract. The
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Company has denied any liability and has asserted claims in the amount of
$467,000 that, among other matters, the contractor failed to build the theatre
in accordance with the architectural plans. The outcome of this arbitration is
not determinable at this time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) The Company's Common Stock is traded on the American Stock Exchange
under the symbol "TLX." Sales prices are set forth in (d) below.
(b) The Company had approximately 739 holders of record of its Common Stock
and approximately 67 holders of record of its Class B Stock as of March
29, 2001.
(c) The Board of Directors approved four quarterly cash dividends of $0.035
per share for Common Stock and $0.0315 per share for Class B Stock
during 2000. Management and the Board of Directors will continue to
review payment of the quarterly cash dividends. The Company is subject
to an annual limitation of $750,000 on the payment of cash dividends.
(d) The range of Common Stock prices on the American Stock Exchange are set
forth in the following table:
High Low
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2000
First Quarter $ 7.875 $6
Second Quarter 6.875 4.25
Third Quarter 5.9375 4.375
Fourth Quarter 4.875 3.125
1999
First Quarter $11.125 $8.5
Second Quarter 9.25 7.75
Third Quarter 8.25 5.875
Fourth Quarter 8.25 6.5
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ITEM 6. SELECTED FINANCIAL DATA
(a) The following table sets forth selected consolidated financial data with
respect to the Company for the five years ended December 31, 2000, which
were derived from the audited consolidated financial statements of the
Company and should be read in conjunction with them.
Years Ended 2000 1999 1998 1997 1996
- - - ----------- ---- ---- ---- ---- ----
In thousands, except per share data
Revenues $ 66,763 $ 62,818 $63,778 $53,363 $45,285
Net income (loss) (2,231) 788 1,699 1,510 1,250
Earnings (loss) per share:
Basic $ (1.77) $ 0.61 $ 1.32 $ 1.18 $ 0.99
Diluted $ (1.77) $ 0.61 $ 0.85 $ 0.80 $ 0.89
Cash dividends per share:
Common stock $ 0.14 $ 0.14 $ 0.14 $ 0.14 $ 0.14
Class B stock $ 0.126 $ 0.126 $ 0.126 $ 0.126 $ 0.126
Average common shares outstanding 1,261 1,286 1,290 1,281 1,258
Total assets $113,015 $112,448 $91,146 $88,978 $84,031
Long-term debt 68,552 65,952 49,523 49,452 48,112
Stockholders' equity 23,696 26,013 25,851 24,332 22,662
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(b) The following table sets forth quarterly financial data for the years
ended December 31, 2000 and 1999:
Quarter Ended (unaudited) March 31 June 30 September 30 December 31 (1)
- - - ------------------------- -------- ------- ------------ ---------------
In thousands, except per share data
2000
Revenues $14,652 $16,612 $18,893 $16,606
Gross profit 4,623 5,820 6,613 3,733
Income (loss) before income taxes (1,250) 40 82 (1,970)
Net income (loss) (688) 23 44 (1,610)
Earnings (loss) per share:
Basic $ (0.55) $ 0.02 $ 0.04 $ (1.28)
Diluted $ (0.55) $ 0.02 $ 0.04 $ (1.28)
Cash dividends per share:
Common stock $ 0.035 $ 0.035 $ 0.035 $ 0.035
Class B stock $0.0315 $0.0315 $0.0315 $0.0315
1999
Revenues $13,485 $16,003 $17,569 $15,761
Gross profit 4,977 6,027 6,230 5,555
Income before income taxes 69 359 694 110
Net income 38 198 381 171
Earnings per share:
Basic $ 0.03 $ 0.15 $ 0.30 $ 0.13
Diluted (2) $ 0.03 $ 0.15 $ 0.21 $ 0.13
Cash dividends per share:
Common stock $ 0.035 $ 0.035 $ 0.035 $ 0.035
Class B stock $0.0315 $0.0315 $0.0315 $0.0315
(1) The Company recorded the following items during the quarter ended December
31, 2000: (1) an impairment charge of $1,044,000 (net of tax) related to an
intangible theatre asset and equipment at its older Lake Dillon, CO theatre and
certain older outdoor display manufacturing equipment, (2) a decrease to net
income (loss) of $72,000 related to an outdoor sports display sales contract,
and (3) a reduction in the effective tax benefit rate for the year, which had
the effect of reducing the quarterly income tax benefit by approximately
$192,000. During the quarter ended December 31, 1999, the Company adjusted
certain research and development expenses resulting in a decrease to net income
of approximately $78,000.
(2) Diluted earnings per share is computed independtly for each of the periods
presented. Accordingly, the sum of the quarterly diluted earnings per share
amounts do not equal the total for the year.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
2000 Compared to 1999
The Company's total revenues for the year ended December 31, 2000 increased 6.3%
to $66.8 million from $62.8 million for the year ended December 31, 1999.
Indoor display revenues increased 4.0% to $24.4 million in 2000 from $23.4
million in 1999. Of this increase, $677,000 or 4.4% was in the indoor display
equipment rental and maintenance revenues, primarily due to new rental and
maintenance contracts and renewal of existing contracts. Indoor display sales
increased $266,000 or 3.3%, primarily in the financial industries segment.
Outdoor display revenues decreased 2.6% to $30.5 million in 2000 from $31.3
million in 1999. Of this decrease, $141,000 or 1.7% was in the outdoor display
equipment rental and maintenance revenues, primarily due to the continued
expected revenue decline in the outdoor lease and maintenance bases previously
acquired, although the decline has lessened. Outdoor display sales decreased
$664,000 or 2.9%, primarily in the custom outdoor sports segment. Entertainment
and real estate revenues increased 47.3% to $11.9 million in 2000 from $8.1
million in 1999. This increase is primarily from the revenues from the 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 year ended December 31, 2000 decreased 22.2% to
$8.3 million from $10.6 million for the year ended December 31, 1999. Indoor
display operating income increased $141,000 or 1.9%. The cost of indoor
displays represented 45.7% of related revenues in 2000 compared to 44.8% in
1999. Indoor display cost of equipment rentals and maintenance increased
$537,000 or 8.0%, largely due to increased depreciation expense and field
service costs, mainly due to the increase in equipment on rental. Indoor
display cost of equipment sales increased $94,000 or 2.5%, due to additional
volume. The indoor display general and administrative expenses increased
$171,000 or 3.1%.
Outdoor operating income decreased $1.9 million or 83.6%. The cost of outdoor
displays represented 77.8% of related revenues in 2000 and 73.5% in 1999. The
sports segment of the outdoor division has become increasingly competitive. As
a result, the Company expects to continue to experience erosion in the
operating income of the sports sector of the outdoor division, as it continues
to attempt to increase its market share. Outdoor display cost of equipment
sales increased $1.0 million or 6.0%, principally due to higher content of raw
materials due to the new LED technology, installation costs, and higher costs
related to the new 55,000 square foot manufacturing facility in Logan, UT. In
the fourth quarter, the Company has written off approximately $145,000 of net
book value of certain older manufacturing equipment held for sale at its former
Logan, UT manufacturing facility after recent marketplace activity provided
indication that the Company's carrying value was in excess of net realizable
value; due mainly to the installation of state-of-the-art equipment in the new
Logan, UT factory. Also during the fourth quarter of 2000, the Company reduced
its gross profit by $100,000 relating to an outdoor sports display sales
contract. Outdoor display cost of equipment rental and maintenance decreased
$268,000 or 4.0%, primarily due to reduced field service costs mainly as a
result of the expected decline in the outdoor lease and maintenance bases
previously acquired. The outdoor display general and administrative expenses
increased $365,000 or 6.0%, primarily due to expanded sales and marketing
efforts related to the sports segment and the operating costs related to the
new manufacturing facility in Logan, UT. Cost of indoor and outdoor equipment
rentals and maintenance includes field service expenses, plant repair costs,
maintenance and depreciation. As a result of declining operating income in the
outdoor display segment, management evaluated the carrying value of the assets,
including goodwill, and has concluded that no adjustment to carrying value is
necessary at this time. Such adjustments may need to be made in the future if
circumstances indicate that the carrying value of such assets may not be
recoverable.
The entertainment and real estate operating income decreased $610,000 or 59.4%.
This decrease was due to the fourth quarter charge for the write-off of the $1.3
million intangible asset and equipment at its older Lake Dillon, CO theatre.
The charge relating to the theatre was taken as a result of continuing
disappointing box office receipts resulting in part from the Company's opening
of a modern six-plex theatre in the same community in 1999. The Company
recorded this impairment after analyzing its latest plans and projections of
cash flows for this theatre, and determined that a charge was appropriate at
this time. Previously, management had been working various strategies to
improve operating results, such strategies were not having the desired effect,
resulting in the need to record an impairment at this time. Under the terms of
its lease, the Company is obligated to operate this theatre for the next 14
11
years. Before the write-off, the entertainment and real estate division would
have had an operating income of $1.7 million, an increase of $696,000 or 67.8%.
The cost of entertainment and real estate represented 93.5% (which included the
write-off) of related revenues for the year ended December 31, 2000 and 80.6% in
1999. The cost of entertainment and real estate increased $3.3 million or 50.8%
in 2000 (before the write-off), mainly as a result of the expansion of theatre
operations and theatre start-up expenses for new theatre locations. Cost of
entertainment and real estate includes film rental costs and depreciation
expense. The entertainment and real estate general and administrative expenses
decreased slightly.
Corporate general and administrative expenses increased $472,000 or 7.9%,
primarily due to a $420,000 negative impact of the effect of foreign currency
exchange rates in 2000 versus a $344,000 positive impact in 1999 (a net change
of $764,000). Before the negative impact of the foreign currency exchange
losses and the 1999 special litigation charge of $408,000 on a retaliatory
discharge claim (see Note 15), corporate general and administrative expenses
would have increased slightly.
Net interest expense increased $1.9 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, UT, and an increase in
interest rates in 2000 vs. 1999. Other income for 2000 relates largely to the
gain on the sale of real estate holdings in Torrance, CA and in Mississauga,
Canada. The 1999 other income relates primarily to the gain on the repurchase
of $1,135,000 par value of the Company's 7-1/2% Convertible Subordinated Notes
(the "Notes") at a discount and the earned income portion of municipal
forgivable loans. The income from joint venture relates to the equity in
earnings of the theatre joint venture, MetroLux Theatre in Loveland, CO.
The effective tax benefit rate for the year ended December 31, 2000 was 28.0%.
The benefit rate was unfavorably impacted primarily by the inability to
recognize tax benefits for losses of a foreign subsidiary. Such benefits could
be realized in the future to the extent the foreign subsidiary shows profits.
For the year ended December 31, 1999, the effective tax rate of 36.0% was
primarily as a result of favorable impacts created by the utilization of foreign
carryforward tax benefits which had previously been fully reserved.
1999 Compared to 1998
The Company's total revenues for the year ended December 31, 1999 decreased 1.5%
to $62.8 million from $63.8 million for the year ended December 31, 1998.
Indoor display revenues decreased 9.9% to $23.4 million in 1999 from $26.0
million in 1998. Of this decrease, $3.6 million or 30.5% was in indoor display
sales, primarily because 1998 included a multi-million dollar order from a major
exchange, which did not recur in 1999. This was offset by an increase in indoor
display equipment rental and maintenance revenues of $1.0 million or 7.2%, due
to new rental and maintenance contracts and renewal of existing contracts.
Outdoor display revenues increased 0.9% to $31.3 million in 1999 from $31.1
million in 1998. Of this increase, $1.0 million or 4.5% was in outdoor display
sales, primarily in the outdoor sports segment. This was offset by a decrease
in outdoor rental and maintenance of $0.7 million or 8.0% due to the continued,
expected revenue decline in the outdoor rental and maintenance bases previously
acquired. Entertainment and real estate revenues increased 19.5% to $8.1
million in 1999 from $6.7 million in 1998. This increase is primarily from the
revenues from two newly constructed multiplex theatres consisting of 12 screens
in Dillon, CO, and Espanola, NM, which opened in August 1999 and November 1999,
and the acquisition of two theatres in Laramie, WY in May 1999.
Total operating income for the year ended December 31, 1999 decreased 15.4% to
$10.6 million from $12.5 million for the year ended December 31, 1998. Indoor
display operating income decreased $318,000 or 4.2%. The cost of indoor
displays represented 44.8% of related revenues for 1999 and 47.3% in 1998.
Indoor display cost of equipment rentals and maintenance increased $292,000 or
4.6%, largely due to increased depreciation expense and field service costs.
Indoor display cost of equipment sales decreased $2.1 million or 35.4%, due to
reduced volume, as 1998 included a large exchange sale which did not recur in
1999. The indoor display general and administrative expenses decreased $445,000
or 7.4%, primarily due to reduced sales overhead expenses.
Outdoor operating income decreased $1.8 million or 44.8%. The cost of outdoor
displays represented 73.5% of related revenues in 1999 and 70.6% in 1998.
Outdoor display cost of equipment sales increased $654,000 or 4.2%, primarily
due to a higher content of raw materials, due to the new LED technology and
installation costs. The sports segment of the outdoor division is a very
competitive business, and the Company expects to continue to experience erosion
in the operating income of the sports sector of the outdoor display market, as
it continues to attempt to increase its market share. Outdoor display cost of
equipment rental and maintenance increased $472,000 or 7.6%, primarily due to
increased field service costs. The outdoor display general and administrative
expenses increased $988,000 or 19.5%, primarily due to expanded sales and
marketing efforts related to the sports segment.
The entertainment and real estate operating income increased $216,000 or 26.6%.
The cost of entertainment and real estate represented 80.6 % of related revenues
for the year ended December 31, 1999 and 80.1% in 1998. The cost of
entertainment and real estate increased $1.1 million or 20.2% in 1999, 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 decreased slightly.
Corporate general and administrative expenses decreased 3.3%, primarily due to
the positive impact of the effect of foreign currency exchange rates and
12
reduced administrative expenses, offset by the special litigation charge of
$408,000 on a retaliatory discharge claim (See Note 15).
Net interest expense increased $207,000, which is primarily attributable to the
increase in long-term debt due to the expansion of theatre operations. Other
income primarily relates to the gain on the repurchase of $1,135,000 par value
of its Notes at a discount, and the earned income portion of municipal
forgivable loans. The income from joint venture relates to the equity in
earnings of the joint venture, MetroLux Theatres,
The effective tax rate was 36.0% in 1999 and 43.9% in 1998. The decrease in the
effective tax rate for 1999 was largely due to utilization of foreign tax net
operating losses by the international subsidiaries.
Accounting Standards
The Company adopted 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 designate hedging instruments as either fair value, cash flow, or
hedges of a net investment in a foreign operation prior to adoption. All
derivatives are to be recognized as assets or liabilities and measured at fair
value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending upon its designation and whether it
qualifies for hedge accounting. The Company will record a transitional
adjustment upon adoption of SFAS 133 in the amount of $21,000.
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 on applying accounting principles
generally accepted in the United States to revenue recognition in financial
statements. The Company adopted SAB 101 in the fourth quarter 2000. It did not
have an impact on the consolidated financial statements.
Liquidity and Capital Resources
The Company has a $15.0 million revolving credit facility available until June
2002. At December 31, 2000, $9.1 million was outstanding, leaving $5.9 million
of additional borrowing capacity under this facility. The interest rate is
LIBOR plus 2.5%, (9.06% at December 31, 2000). The Company has the option to
convert the outstanding balance into a four-year term loan. The revolving
credit facility also requires an annual facility fee on the unused commitment of
0.375%.
During 2000, the Company entered into $5.1 million of real estate construction
loans and mortgages, principally to fund the construction of theatre expansion
projects. At December 31, 2000, the interest rates ranged from 7.50% to 9.50%.
The Company is currently authorized by the Board of Directors to repurchase up
to $400,000 of its Common Stock. As of December 31, 2000, a total of 31,656
shares of Common Stock at a cost of $226,000 were repurchased under this
program. As of December 31, 2000, the Company had repurchased $1,428,000 par
value of its Notes, of which $293,000 par value were purchased during 2000 at an
average price of $79.56, resulting in an after tax gain of $35,000.
The Company believes that cash generated from operations together with 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.
The Company has two term loans under its amended bank Credit Agreement for a
total of $7.1 million of indebtedness at a rate of interest at LIBOR plus 1.75%.
The Company has two interest rate swap agreements in place, with a notional
value equal to the amount of the two term loans and with corresponding maturity
terms, which have the effect of converting the interest rate on such term loans
to a fixed average annual rates of 7.82% and 7.88% through July 2002. The
Credit Agreement contains certain financial covenants with which the Company
must comply, absent a waiver by the bank, on a continuing basis, with which the
Company is in compliance at December 31, 2000 and expects to remain in
compliance.
Cash and cash equivalents increased $0.3 million in 2000 compared to an increase
of $2.4 million in 1999. The increase in 2000 is primarily attributable to the
proceeds received from sale of assets and securities, offset by an increase in
inventories and cash utilized for investment is rental equipment and
construction of theatres. The increase in 1999 was primarily attributable to an
increase in accounts payable and accruals, offset somewhat by an increase in
trade receivables and inventories, primarily due to the increase of sales and
related cost of sales in the outdoor sports division. The Company continues to
experience a favorable collection cycle on its trade receivables.
Safe Harbor Statement under the Private Securities 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.
13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary financial information
are set forth below:
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except per share data Years ended December 31 2000 1999 1998
- - - ----------------------------------------------------------------------------------------------------------
Revenues:
Equipment rentals and maintenance $24,026 $23,490 $23,181
Equipment sales 30,876 31,273 33,858
Theatre receipts and other 11,861 8,055 6,739
------- ------- -------
Total revenues 66,763 62,818 63,778
Operating expenses: ------- ------- -------
Cost of equipment rentals and maintenance 13,636 13,366 12,602
Cost of equipment sales 21,245 20,171 21,609
Cost of theatre receipts and other 9,787 6,492 5,400
Write-down of theatre assets 1,306 - -
------- ------- -------
Total operating expenses 45,974 40,029 39,611
------- ------- -------
Gross profit from operations 20,789 22,789 24,167
General and administrative expenses 19,331 18,341 17,993
------- ------- -------
1,458 4,448 6,174
Interest income 445 592 646
Interest expense (5,980) (4,251) (4,098)
Other income 626 258 123
Income from joint venture 353 185 183
------- ------- -------
Income (loss) before income taxes (3,098) 1,232 3,028
Provision (benefit) for income taxes: ------- ------- -------
Current 104 510 799
Deferred (971) (66) 530
------- ------- -------
(867) 444 1,329
------- ------- -------
Net income (loss) $(2,231) $ 788 $ 1,699
------- ------- -------
Earnings (loss) per share:
Basic $ (1.77) $ 0.61 $ 1.32
Diluted $ (1.77) $ 0.61 $ 0.85
------- ------- -------
Average common shares outstanding:
Basic 1,261 1,286 1,290
Diluted 1,261 1,288 3,554
- - - ----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
14
CONSOLIDATED BALANCE SHEETS
In thousands, except share data December 31 2000 1999
- - - -------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,920 $ 3,651
Available-for-sale securities 495 3,666
Receivables, less allowance of $311 and $501 8,010 9,064
Unbilled receivables 1,158 114
Inventories 7,781 6,146
Prepaids and other 754 776
-------- --------
Total current assets 22,118 23,417
-------- --------
Equipment on rental 80,725 75,200
Less accumulated depreciation 34,787 31,487
-------- --------
45,938 43,713
-------- --------
Property, plant and equipment 48,528 44,411
Less accumulated depreciation and amortization 9,248 8,832
-------- --------
39,280 35,579
Other assets 5,679 6,449
Construction funds - 3,290
-------- --------
$113,015 $112,448
- - - -------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,214 $ 4,688
Accrued liabilities 6,079 5,093
Current portion of long-term debt 2,562 2,381
-------- --------
Total current liabilities 12,855 12,162
-------- --------
Long-term debt:
7 1/2% convertible subordinated notes due 2006 30,197 30,490
9 1/2% subordinated debentures due 2012 1,057 1,057
Notes payable 37,298 34,405
-------- --------
68,552 65,952
Deferred revenue, deposits and other 4,248 3,715
Deferred income taxes 3,664 4,606
Commitments and contingencies -------- --------
Stockholders' equity:
Capital stock
Common - $1 par value - 5,500,000 shares authorized
2,445,562 shares issued in 2000 and 2,444,400 in 1999 2,445 2,444
Class B - $1 par value - 1,000,000 shares authorized
294,843 shares issued in 2000 and 296,005 in 1999 295 296
Additional paid-in-capital 13,901 13,901
Retained earnings 19,029 21,434
Accumulated other comprehensive loss (137) (225)
-------- -------
35,533 37,850
Less treasury stock - at cost - 1,479,688 shares in 2000 and 1,479,672 in 1999
(excludes additional 294,843 shares held in 2000 and 296,005 in 1999
for conversion of Class B stock) 11,837 11,837
-------- --------
Total stockholders' equity 23,696 26,013
-------- --------
$113,015 $112,448
- - - -------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
15
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands Years ended December 31 2000 1999 1998
- - - -------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Net income (loss) $(2,231) $ 788 $ 1,699
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 9,532 8,682 7,862
Net income of joint venture (353) (185) (183)
Deferred income taxes (971) (126) 108
Gain on sale of fixed assets (585) ---- ----
Loss (gain) on sale of securities 54 3 (87)
Gain on repurchase of Company's 7 1/2% convertible subordinated notes (49) (108) ----
Write-off of non-recoverable assets 1,451 ---- ----
Changes in operating assets and liabilities:
Receivables 10 (1,891) (454)
Inventories (1,635) (765) (737)
Prepaids and other assets 339 (405) 622
Accounts payable and accruals 564 2,257 (348)
Deferred revenue, deposits and other 433 (539) 599
------- -------- -------
Net cash provided by operating activities 6,559 7,711 9,081
------- -------- -------
Cash flows from investing activities
Equipment manufactured for rental (8,708) (7,373) (7,802)
Purchases of property, plant and equipment (9,607) (12,992) (5,160)
Usage of (increase in) construction funds 3,290 (3,290) ----
Payments for acquisitions (net) ---- (1,163) ----
Proceeds from joint venture 227 94 94
Proceeds from sale of securities 3,182 1,054 3,322
Proceeds from sale of fixed assets 2,659 ---- ----
------- --------- -------
Net cash used in investing activities (8,957) (23,670) (9,546)
------- -------- -------
Cash flows from financing activities
Proceeds from long-term debt 5,430 20,671 1,876
Repayment of long-term debt (2,356) (984) (1,805)
Proceeds from exercise of stock options ---- ---- 24
Repurchase of Company's 7 1/2% convertible subordinated notes (233) (974) ----
Purchase of treasury stock ---- (226) ----
Cash dividends (174) (175) (175)
------- -------- -------
Net cash provided by (used in) financing activities 2,667 18,312 (80)
------- -------- -------
Net increase (decrease) in cash and cash equivalents 269 2,353 (545)
Cash and cash equivalents at beginning of year 3,651 1,298 1,843
------- -------- -------
Cash and cash equivalents at end of year $ 3,920 $ 3,651 $ 1,298
- - - -------------------------------------------------------------------------------------------------------------------------------
Interest paid $ 5,657 $ 4,185 $ 3,674
Interest received 558 617 733
Income taxes paid (refunded) (14) 1,003 519
- - - -------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
16
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Accumulated
Additional Other
In thousands, except share data Common Stock Class B Paid-in Treasury Retained Comprehensive
For the three years ended December 31, 2000 Shares Amount Shares Amount Capital Stock Earnings Income (Loss)
- - - ------------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 2,442,765 $2,443 297,640 $297 $13,904 $(11,638) $19,297 $29
Net income --- --- --- --- --- --- 1,699 ---
Cash dividends --- --- --- --- --- --- (175) ---
Other comprehensive income (loss):
Unrealized foreign currency translation --- --- --- --- --- --- --- 49
Unrealized holding loss --- --- --- --- --- --- --- (78)
Exercise of stock options --- --- --- --- (3) 27 --- ---
Class B conversion to common stock 354 --- (354) --- --- --- --- ---
--------- ------ ------- ---- ------- ------- ------- ------
Balance December 31, 1998 2,443,119 2,443 297,286 297 13,901 (11,611) 20,821 0
Net income --- --- --- --- --- --- 788 ---
Cash dividends --- --- --- --- --- --- (175) ---
Other comprehensive income (loss):
Unrealized foreign currency translation --- --- --- --- --- --- --- (142)
Unrealized holding loss --- --- --- --- --- --- --- (83)
Common stock acquired (31,656 shares) --- --- --- --- --- (226) --- ---
Class B conversion to common stock 1,281 1 (1,281) (1) --- --- --- ---
--------- ------ -------- ---- ------- ------- ------- -----
Balance December 31, 1999 2,444,400 2,444 296,005 296 13,901 (11,837) 21,434 (225)
Net income (loss) --- --- --- --- --- --- (2,231) ---
Cash dividends --- --- --- --- --- --- (174) ---
Other comprehensive income (loss):
Unrealized foreign currency translation --- --- --- --- --- --- --- 20
Unrealized holding gain --- --- --- --- --- --- --- 68
Class B conversion to common stock 1,162 1 (1,162) (1) --- --- --- ---
--------- ------ ------- ---- ------- ------- ------- -------
Balance December 31, 2000 2,445,562 $2,445 294,843 $295 $13,901 $(11,837) $19,029 $(137)
- - - ------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In thousands Years ended December 31 2000 1999 1998
- - - ------------------------------------------------------------------------------------------------------
Net income (loss) $(2,231) $ 788 $1,699
------- ----- -------
Other comprehensive income / (loss), net of tax:
Unrealized foreign currency translation 20 (142) 49
Unrealized holding gain / (loss) on securities 68 (83) (78)
------ ----- -------
Total other comprehensive income / (loss) 88 (225) (29)
------ ----- -------
Comprehensive income (loss) $(2,143) $ 563 $1,670
- - - ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
17
Notes To Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Principles of consolidation: The consolidated financial statements include the
accounts of Trans-Lux Corporation and its majority-owned subsidiaries (the
Company). The investment in a 50% owned joint venture partnership, MetroLux
Theatres, is reflected under the equity method and is recorded as a separate
line in the Consolidated Statements of Operations.
Cash equivalents: The Company considers all highly liquid investments
with a maturity of three months or less, when purchased, to be cash equivalents.
Available-for-sale securities: Available-for-sale securities consist of
common and preferred stock holdings and corporate debt securities and are stated
at fair value.
Inventories: Inventories are stated at the lower of cost (first-in,
first-out method) or market value.
Equipment on rental and property, plant and equipment: Equipment on
rental and property, plant and equipment are stated at cost and are being
depreciated over their respective useful lives using straight line or 150%
declining balance methods. Leaseholds and improvements are amortized over the
lesser of the useful lives or term of the lease. The estimated useful lives are
as follows:
- - - ------------------------------------------------------------------------------
Equipment on rental 5 to 15 years
Buildings and improvements 10 to 45 years
Machinery, fixtures and equipment 4 to 15 years
Leaseholds and improvements 2 to 15 years
- - - ------------------------------------------------------------------------------
When equipment on rental and property, plant and equipment are fully
depreciated, retired or otherwise disposed of, the cost and accumulated
depreciation are eliminated from the accounts.
Goodwill and intangibles: Goodwill and intangible assets are amortized on
a straight line basis, using the following useful lives: Goodwill over 20
years; non-compete agreements over their contractual terms of five and seven
years; deferred financing costs over the life of the related debt; and patents
and other intangibles over 14 to 30 years.
Maintenance contracts: Purchased maintenance contracts are stated at cost
and are being amortized over their economic lives of eight to 15 years using an
accelerated method which contemplates contract expiration, fall-out, and
non-renewal.
Impairment of long-lived assets: The Company evaluates long-lived assets,
including intangible assets and goodwill, for possible impairment when events or
changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. In making such an evaluation for assets to be held and
used, the Company estimates the future cash flows expected to result from the
use of the asset and its eventual disposition to measure whether the asset is
recoverable. For assets held for sale, possible impairment is measured by
comparing the carrying amount of the asset to net realizable value.
Revenue recognition: Rental revenue from leasing of equipment and revenue
from maintenance contracts are recognized as they accrue during the term of the
respective agreements. The Company recognizes revenues on long-term equipment
sales contracts, which require more than three months to complete, using the
percentage of completion method. The Company records unbilled receivables
representing amounts due under these long-term equipment sales contracts which
have not yet been billed to the customer. Income is recognized based on the
percentage of incurred costs to the estimated total costs. Revenues on
equipment sales, other than long-term equipment sales contracts, are recognized
upon shipment. Theatre receipts and other revenues are recognized at time
service is provided.
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 on applying accounting
principles generally accepted in the United States to revenue recognition in
financial statements. The Company adopted SAB 101 in the fourth quarter 2000.
It did not have an impact on the consolidated financial statements.
Taxes on income: The Company computes income taxes using the asset and
liability method, under which deferred income taxes are provided for the
temporary differences between the financial reporting basis and the tax basis of
the assets and liabilities.
Foreign currency: The functional currency of the Company's non-U.S.
business operations is the applicable local currency. The assets and
liabilities of such operations are translated into U.S. dollars at the year-
end rate of exchange, and the income and cash flow statements are converted at
the average annual rate of exchange. The resulting translation adjustment is
recorded as a separate component of stockholders' equity. Gains and losses
related to the settling of transactions not denominated in the functional
currency are recorded as a component of general and administrative expenses in
the Consolidated Statements of Operations.
Derivative financial instruments: The Company has limited involvement
with derivative financial instruments and does not use them for trading
purposes; they are only used to manage well-defined interest rate risks. From
time to time the Company enters into interest rate swap agreements to reduce
exposure to interest fluctuations. The net gain or loss from the exchange of
interest rate payments is included in interest expense in the Consolidated
Statements of Operations and in interest paid in the Consolidated Statements of
Cash Flows.
Accounting pronouncement: 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 designate hedging instruments as either fair
value, cash flow, or hedges of a net investment in a foreign operation prior to
adoption. All derivatives are to be recognized as assets or liabilities and
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending upon its designation and
whether it qualifies for hedge accounting. The Company will record a
transitional adjustment upon adoption of SFAS 133 in the amount of $21,000.
18
Use of estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Reclassifications: Certain reclassifications of prior years' amounts have
been made to conform to the current year's presentation.
2. Available-for-Sale Securities
Available-for-sale securities are carried at estimated fair values and the
unrealized holding gains and losses are excluded from earnings and are reported
net of income taxes in a separate component of stockholders' equity until
realized. Adjustments of $36,000 and $105,000 (before reclassification
adjustment for realized gains and losses) were made to equity to reflect the net
unrealized losses on available-for-sale securities as of December 31, 2000 and
1999, respectively. The Company realized losses on the sales of
available-for-sale securities of $54,000 in 2000 and $3,000 in 1999.
Available-for-sale securities consist of the following:
2000 1999
-------------------------------------------------
Fair Unrealized Fair Unrealized
In thousands Value Losses Value Losses
- - - ---------------------------------------------------------------------------------
Equity securities $495 $212 $ 473 $232
Corporate debt securities-
maturities of up to 5 years - - 3,193 45
--- --- ----- ---
$495 $212 $3,666 $277
- - - ---------------------------------------------------------------------------------
3. Inventories
Inventories consist of the following:
In thousands 2000 1999
- - - ------------------------------------------------------
Raw materials and spare parts $4,837 $3,532
Work-in-progress 1,450 1,459
Finished goods 1,494 1,155
------ ------
$7,781 $6,146
- - - ------------------------------------------------------
4. Property, Plant and Equipment
Property, plant and equipment consist of the following:
In thousands 2000 1999
- - - ------------------------------------------------------------
Land, buildings and improvements $32,716 $27,437
Machinery, fixtures and equipment 13,919 13,133
Leaseholds and improvements 1,893 3,841
------- -------
$48,528 $44,411
- - - ------------------------------------------------------------
Land, buildings and equipment having a net book value of $30.0 million and $20.5
million at December 31, 2000 and 1999, respectively, were pledged as collateral
under mortgage agreements.
5. Other Assets
Other assets consist of the following:
In thousands 2000 1999
- - - --------------------------------------------------------------------------------
Deferred financing costs, net of
accumulated amortization of $1,079 - 2000
and $957 - 1999 $1,658 $1,861
Goodwill and noncompete agreements,
net of accumulated amortization of $945 -
2000 and $834 - 1999 1,362 1,473
Investment in and loans to joint venture 899 964
Maintenance contracts, net of accumulated
amortization of $2,108 - 2000
and $1,980 - 1999 517 645
Prepaids, including pension asset 492 781
Patents and other intangibles, net of
accumulated amortization of $432 - 2000
and $386 - 1999 106 152
Deposits and other 645 573
------ ------
$5,679 $6,449
- - - --------------------------------------------------------------------------------
Deferred financing costs relate to issuance of the 7-1/2% convertible
subordinated notes, the 9-1/2% subordinated debentures, and other financing
agreements.
Goodwill and noncompete agreements relate to the acquisitions of two
separate outdoor businesses.
The loan to the joint venture, MetroLux Theatres, had a balance of
$502,000 and $596,000 at December 31, 2000 and 1999, respectively, of which
$502,000 and $94,000 were classified as current at December 31, 2000 and 1999,
respectively.
Maintenance contracts represent the present value of acquired agreements
to service outdoor display equipment.
6. Write-Off of Assets
During the fourth quarter of 2000, the Company recorded an impairment charge of
$1,306,000 relating to an intangible asset and equipment at its older Lake
Dillon, Colorado, theatre, and $145,000 for certain older outdoor manufacturing
equipment. The charge relating to the theatre was taken as a result of
continuing disappointing box office receipts resulting in part from the
Company's opening of a modern six-plex theatre in the same community in 1999.
The Company recorded this impairment after analyzing its latest plans and
projections of cash flows for this theatre, and determined that a charge was
appropriate at this time. Previously, management had been working various
strategies to improve operating results, such strategies were not having the
desired effect, resulting in the need to record an impairment at this time.
Under the terms of its lease, the Company is obligated to operate this theatre
for the next 14 years. The charge for the outdoor manufacturing equipment
relates to assets held for sale at its former Logan, Utah manufacturing facility
after recent marketplace activity provided indication that the Company's
carrying value was in excess of net realizable value.
7. Taxes on Income
The components of income tax expense (benefit) are as follows:
In thousands 2000 1999 1998
- - - ----------------------------------------------------------------------
Current:
Federal $(320) $ 277 $ 637
State and local (23) 64 144
Foreign 447 169 18
----- ----- ------
104 510 799
Deferred:
Federal (601) (157) 304
State and local (313) 131 226
Foreign (57) (40) -
----- ----- -----
(971) (66) 530
----- ----- ------
Total income tax expense (benefit) $(867) $ 444 $1,329
- - - ----------------------------------------------------------------------
19
Income taxes provided (benefit) differed from the expected federal statutory
rate of 34% as follows:
2000 1999 1998
- - - ------------------------------------------------------------------------------------
Statutory federal income tax (benefit) rate (34.0%) 34.0% 34.0%
State income taxes, net of federal benefit (7.2) 10.4 8.1
Foreign operating losses (income) not
providing current tax benefit (expense) 5.4 (12.3) -
Foreign income taxed at different rates 2.7 (0.5) -
Unused income tax credits 3.9 - -
Other 1.2 4.4 1.8
------ ---- ----
Effective income tax (benefit) rate (28.0%) 36.0% 43.9%
- - - ------------------------------------------------------------------------------------
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities are as follows:
In thousands 2000 1999
- - - -------------------------------------------------------------
Deferred tax asset:
Tax credit carryforwards $ 2,276 $2,469
Operating loss carryforwards 3,687 1,852
Net pension cost 451 247
Litigation 201 176
Other 739 695
Valuation allowance (320) (219)
------- ------
7,034 5,220
Deferred tax liability:
Depreciation 9,675 8,809
Gain on purchase of
Company's 9% debentures 439 439
Net pension benefit 373 373
Other 211 205
------- ------
10,698 9,826
------- ------
Net deferred tax liability $ 3,664 $4,606
- - - -------------------------------------------------------------
Tax credit carryforwards primarily relate to federal alternative minimum taxes
of $2,162,000 paid by the Company which may be carried forward indefinitely.
Operating tax loss carryforwards primarily relate to U.S. federal net operating
loss carryforwards of approximately $8,600,000, which begin to expire in 2019,
and Australian net operating loss carryforwards of approximately $300,000, which
may be carried forward indefinitely.
A valuation allowance has been established for the amount of deferred tax assets
related to Australian and state net operating loss carryforwards, which
management estimates will more likely than not expire unused.
8. Accrued Liabilities
Accrued liabilities consist of the following:
In thousands 2000 1999
- - - --------------------------------------------------------------------
Compensation and employee benefits $1,213 $1,298
Taxes payable 1,210 999
Interest payable 643 617
Other 3,013 2,179
------ ------
$6,079 $5,093
- - - --------------------------------------------------------------------
9. Long-Term Debt
Long-term debt consist of the following:
In thousands 2000 1999
- - - -------------------------------------------------------------------------------------
7-1/2% convertible subordinated notes due 2006 $30,197 $30,490
9-1/2% subordinated debentures due 2012 1,057 1,057
Term loans - bank, secured due in quarterly installments
through 2005 7,095 8,712
Revolving credit facility - bank, secured 9,050 8,750
Real estate mortgages - secured, due in monthly
installments through 2020 18,561 9,478
Loan payable - IRB, due in annual installments through
2014 4,615 4,825
Construction loans - secured - 4,326
Loan payable - CEBA, secured due in monthly installments
through 2006 at 0.0% 295 336
Loan payable - CDA, secured due in monthly installments
through 2002 at 5.0% 135 219
Capital lease obligations - secured, due in monthly
installments through 2004 at 5.3% 109 140
------- ------
71,114 68,333
Less portion due within one year 2,562 2,381
------- -------
Long-term debt $68,552 $65,952
- - - -------------------------------------------------------------------------------------
Payments of long-term debt due for the next five years are:
In thousands 2001 2002 2003 2004 2005
- - - ------------------------------------------------------------------
$2,562 $2,890 $3,805 $3,849 $6,758
The 7-1/2% convertible subordinated notes (the "Notes") are due in 2006.
Interest is payable semiannually. The Notes are convertible into Common Stock
of the Company at a conversion price of $14.013 per share. The Notes may be
redeemed by the Company, in whole or in part, at any time on or after December
1, 2001, at declining premiums. The related Indenture agreement contains
certain financial covenants which include limitations on the Company's ability
to incur indebtedness of five times EBITDA plus $5.0 million. During 2000, the
Company repurchased $293,000 face value of its Notes at an average price of
$79.56, and recognized $35,000 of income (net of tax).
The 9-1/2% subordinated debentures (the "Debentures") are due in annual
sinking fund payments of $105,700, beginning in 2009 with the remainder due in
2012. Interest is payable semiannually. The Debentures may be redeemed by the
Company, in whole or in part, at declining premiums.
The Company has a bank Credit Agreement, which was amended subsequent to
year end, which provides for both term loans and a $15 million revolving credit
facility which is available until June 2002, and requires an annual facility fee
on the unused commitment of 0.375%. The Company has provided the bank with a
security interest in substantially all assets of its display business. At
December 31, 2000, under the term loans, $5.2 million and $1.9 million were
outstanding, under the revolving credit facility, $9.1 million was outstanding
leaving $5.9 million in borrowing capacity under this facility. The Credit
Agreement contains certain financial covenants, which at December 31, 2000
included a defined debt service coverage ratio of 1.25 to 1.0, a defined debt to
cash flow ratio of 4.25 to 1.0 and an annual limitation of $750,000 on cash
dividends. At December 31, 2000 the Company was in compliance with such
financial covenants. The term loans bear interest at LIBOR plus 1.75%. At
December 31, 2000 there were two interest rate swap agreements in place, with a
notional value equal to the amount of the two term loans and with corresponding
maturity terms, which have the effect of converting the interest rate on such
term loans to a fixed average annual rate of 7.86% through July 2002. At
December 31, 2000, the gain to the Company to terminate the interest rate swap
agreements was $21,000. Payments on the $1.9 million term loan are due in even
20
quarterly installments through July 2002, payments on the $5.2 million term loan
are due in even quarterly installments through July 2005 and a final maturity of
$2.7 million in August 2005.
Under the Credit Agreement, the Company has the option to convert the
outstanding balance on the revolving credit facility into a four-year term loan.
Upon conversion to a term loan, the revolving credit borrowings would be
repayable in even quarterly installments until maturity. Interest is computed
at LIBOR plus 2.5% (9.06% at December 31, 2000).
The Company has mortgages on certain of its facilities, which are payable
in monthly installments, the last of which extends to 2020. Depending upon the
mortgage, the interest rate is either fixed, floating or adjustable. At
December 31, 2000, such interest rates ranged from 7.50% to 9.50%.
On June 3, 1999 as part of a loan agreement entered into with the City of
Logan, Cache County, Utah, the Company financed $4.8 million of a combination of
Tax-Exempt and Taxable Revenue Bonds ("Bonds") for the construction of its new
55,000 square foot outdoor display facility in Logan, Utah. The Bonds are
secured by an irrevocable letter of credit issued by a bank. At the direction
of the Company, the Bonds may be redeemed in whole or in part prior to the
maturity date. The Bonds were issued with a variable interest rate based upon a
Weekly Rate (as determined by a Remarketing Agent) which is the minimum rate
necessary for the Remarketing Agent to sell the Bonds on the effective date of
such Weekly Rate at a price equal to 100% of the Bonds' principal amount without
regard to accrued interest. The Company may, from time to time, change the
method of determining the interest rate to a daily, weekly, commercial paper or
long-term interest rate. At December 31, 2000, the interest rates on the Bonds
were 5.00% and 7.10%, respectively, plus a 1.25% letter of credit fee.
During 2000, the Company incurred interest costs of $5.98 million of which
$0.1 million was capitalized during construction of qualified assets. At
December 31, 2000, the fair value of the Notes and the Debentures was $24.7
million and $1.1 million, respectively. The fair value of the remaining
long-term debt approximates the carrying value.
During 1999 the Company had construction loans for certain of its theatre
properties being constructed, which did not require monthly principal
installments and matured in 2000.
10. Stockholders' Equity
During 2000, the Board of Directors declared four quarterly cash dividends of
$0.035 per share on the Company's Common Stock and $0.0315 per share on the
Company's Class B Stock, which were paid in April, July and October 2000 and
January 2001. Each share of Class B Stock is convertible at any time into one
share of Common Stock and has ten votes per share, as compared to Common Stock
which has one vote per share but receives a higher dividend.
The Company has 3.0 million shares of authorized and unissued capital
stock designated as Class A Stock, $1.00 par value. Such shares would have no
voting rights except as required by law and would receive a 10% higher dividend
than the Common Stock. The Company also has 0.5 million shares of authorized
and unissued capital stock designated as Preferred Stock, $1.00 par value.
During 1999, the Board of Directors authorized the repurchase, from time
to time, of up to $400,000 in shares of the Company's Common Stock. As of
December 31, 2000, under this program, the Company had purchased 31,656 shares
at a cost of $226,000.
During 1998, the stockholders approved an increase in the authorized
shares of Common Stock to 11.0 million and Class A Stock to 6.0 million. A
Certificate of Amendment increasing the authorized shares will be filed when
deemed necessary.
Shares of Common Stock reserved for future issuance in connection with
convertible securities and stock option plans were 2.3 million at both December
31, 2000 and 1999.
11. Engineering Development
Engineering development expense was $326,000, $535,000 and $352,000 for 2000,
1999 and 1998, respectively.
12. Pension Plan
All eligible salaried employees of Trans-Lux Corporation and certain of its
subsidiaries are covered by a non-contributory defined benefit pension plan.
Pension benefits vest after five years of service and are based on years of
service and final average salary. The Company's general funding policy is to
contribute amounts sufficient to satisfy regulatory funding standards. At
December 31, 2000, plan assets consist principally of insurance company funds,
mutual funds and $185,000 in the Company's 9-1/2% subordinated debentures.
The funded status of the plan as of December 31, 2000 and 1999 is as
follows:
In thousands 2000 1999
- - - ------------------------------------------------------------------------------
Change in projected benefit obligation
Projected benefit obligation at beginning of year $ 6,438 $6,625
Service cost 568 565
Interest cost 493 446
Actuarial (gain)/loss 340 (657)
Benefits paid (242) (541)
------ -----
Projected benefit obligation at end of year $ 7,597 $6,438
------ -----
Change in plan assets
Fair value of plan assets at beginning of year $ 5,988 $5,320
Actual return on plan assets (121) 752
Company contributions - 457
Benefits paid (242) (541)
------ -----
Fair value of plan assets at end of year $ 5,625 $5,988
------ -----
Funded status (underfunded)
Funded status $(1,972) $ (450)
Unrecognized net actuarial (gain)/loss 1,747 732
Unrecognized prior service cost 11 13
------ -----
Prepaid benefit cost/(liability) $ (214) $ 295
------ -----
Weighted-average assumptions as of December 31
Discount rate 7.50% 7.75%
Expected return on plan assets 9.50% 9.50%
Rate of compensation increase 4.25% 4.50%
- - - -----------------------------------------------------------------------------
The following items are components of the net periodic pension cost for the
three years ended December 31, 2000:
In thousands 2000 1999 1998
- - - --------------------------------------------------------------------------------
Service cost $ 568 $ 565 $ 535
Interest cost 493 446 401
Expected return on plan assets (561) (536) (481)
Amortization of prior service cost 2 2 2
Amortization of transition asset - - (12)
Amortization of net actuarial loss 8 88 59
--- --- ---
Net periodic pension cost - funded plan $ 510 $ 565 $ 504
- - - --------------------------------------------------------------------------------
In addition, the Company provides unfunded supplemental retirement benefits for
the Chief Executive Officer. The Company accrued $111,000, $97,000 and $97,000
for 2000, 1999 and 1998, respectively, for such benefits. The total liability
accrued was $583,000, $472,000 and $375,000 at December 31, 2000, 1999 and 1998,
respectively.
21
The Company does not offer any postretirement benefits other than the
pension and the supplemental retirement benefits described herein.
13. Stock Option Plans
The Company has three stock option plans. Under the 1995 Stock Option Plan and
the 1992 Stock Option Plan, 125,000 and 50,000 shares of Common Stock,
respectively, were authorized for grant to key employees. Under the Non-
Employee Director Stock Option Plan, 30,000 shares of Common Stock were
authorized for grant.
Changes in the stock option plans are as follows:
Weighted
Number of Shares Average
Authorized Granted Available Exercise Price
- - - -----------------------------------------------------------------------------------------------
Balance December 31, 1997 173,650 106,550 67,100 $ 9.14
Terminated (12,500) (13,400) 900 7.54
Granted - 1,000 (1,000) 13.00
Exercised (8,341) (8,341) - 7.57
------- ------- ------- ------
Balance December 31, 1998 152,809 85,809 67,000 9.58
Terminated (300) (1,300) 1,000 7.71
Granted - 44,000 (44,000) 8.83
------- ------- ------- ------
Balance December 31, 1999 152,509 128,509 24,000 9.35
Additional shares authorized 25,000 - 25,000 -
Terminated (2,650) (3,850) 1,200 8.16
Granted - 5,500 (5,500) 6.40
------- ------- ------- ------
Balance December 31, 2000 174,859 130,159 44,700 $ 9.26
- - - --------------------------------------------------------------------------
Under the 1995 and 1992 Stock Option Plans, option prices must be at least
100% of the market value of the Common Stock at time of grant. No option may
be exercised prior to one year after date of grant. Exercise periods are for
ten years from date of grant (five years if the optionee owns more than 10%
of the voting power) and terminate at a stipulated period of time after an
employee's termination of employment. At December 31, 2000, under the 1995
Plan, options for 89,539 shares with exercise prices ranging from $6.50 to
$15.1875 per share were outstanding, 67,039 of which were exercisable.
During 2000, options for 5,000 shares were granted at an exercise price of
$6.50 per share, no options were exercised, and options for 1,200 shares
expired. During 1999, options for 42,500 shares were granted at exercise
prices ranging from $8.80 to $9.00 per share, no options were exercised, and
options for 1,000 shares expired. During 1998, options for 4,411 shares with
an exercise price of $8.125 per share were exercised, and options for 900
shares expired.
At December 31, 2000, under the 1992 Plan, options for 28,620 shares with
exercise prices ranging from $6.3125 to $9.6875 per share were outstanding, all
of which were exercisable. During 2000, no options were exercised, and options
for 2,650 shares expired. During 1999, no options were exercised, and options
for 300 shares expired. During 1998, options for 3,930 shares with exercise
prices ranging from $6.3125 to $7.5625 per share were exercised.
Under the Non-Employee Director Stock Option Plan, option prices must be
at least 100% of the market value of the Common Stock at time of grant. No
option may be exercised prior to one year after date of grant and the optionee
must be a director of the Company at time of exercise, except in certain cases
as permitted by the Compensation Committee. Exercise periods are for six years
from date of grant and terminate at a stipulated period of time after an
optionee ceases to be a director. At December 31, 2000, options for 12,000
shares with exercise prices ranging from $5.375 to $13.00 per share were
outstanding, 11,500 of which were exercisable. During 2000, options for 500
shares were granted at an exercise price of $5.375 per share, and no options
were exercised. During 1999, options for 1,500 shares were granted at an
exercise price of $8.00 per share, and no options were exercised. During 1998,
options for 1,000 shares were granted at an exercise price of $13.00 per share,
and no options were exercised.
The following tables summarize information about stock options outstanding
at December 31, 2000:
Weighted Average
Range of Number Remaining Weighted Average
Exercise Prices Outstanding Contractual Life Exercise Price
- - - ----------------------------------------------------------------------------
$5.38 - $6.31 4,420 2.8 $ 6.21
6.32 - 7.56 8,900 6.0 6.97
7.57 - 8.63 30,839 4.2 8.14
8.64 - 9.69 50,400 4.6 8.97
9.70 - 12.63 33,500 5.1 11.41
12.64 - 15.19 2,100 5.2 14.15
------- --- ------
130,159 4.7 $ 9.26
- - - ----------------------------------------------------------------------------
Range of Number Weighted Average
Exercise Prices Excercisable Exercise Price
- - - ----------------------------------------------------------------
$5.38 - $6.31 3,920 $ 6.31
6.32 - 7.56 3,900 7.56
7.57 - 8.63 30,839 8.14
8.64 - 9.69 32,900 9.07
9.70 - 12.63 33,500 11.41
12.64 - 15.19 2,100 14.15
------- ------
107,159 $ 9.48
- - - ----------------------------------------------------------------
The estimated fair value of options granted during 2000, 1999 and 1998 was
$2.69, $3.93 and $5.24 per share, respectively. The Company applies Accounting
Principles Board Opinion No. 25 and related Interpretations in accounting for
its stock option plans. Accordingly, no compensation cost has been recognized
for its stock option plans. Had compensation cost for the Company's stock
option plans been determined based on the fair value at option grant dates for
awards in accordance with the accounting provisions of Statement of Financial
Accounting Standards No. 123 (SFAS 123), the Company's net income (loss) and
earnings (loss) per share for the years ended December 31, 2000, 1999 and 1998
would have been reported as the pro forma amounts indicated below:
In thousands, except per share data 2000 1999 1998
- - - ---------------------------------------------------------------------------------------
Net income (loss) applicable to common shareholders
Basic:
As reported $(2,231) $788 $1,699
Pro forma (2,274) 737 1,676
- - - ---------------------------------------------------------------------------------------
Net income (loss) per common and common equivalent share
Basic:
As reported $ (1.77) $0.61 $1.32
Pro forma (1.80) 0.56 1.30
Diluted:
As reported (1.77) 0.61 0.85
Pro forma (1.80) 0.56 0.84
- - - ---------------------------------------------------------------------------------------
The fair value of options granted under the Company's stock option plans during
2000, 1999 and 1998 was estimated on dates of grant using the binomial
options-pricing model with the following weighted-average assumptions used:
dividend yield of approximately 2.60% in 2000, 1.77% in 1999 and 1.24% in 1998,
expected volatility of approximately 37% in 2000 and 1999 and 38% in 1998, risk
free interest rate of approximately 5.48% in 2000, 6.48% in 1999 and 5.1% in
1998, and expected lives of option grants of approximately four years in 2000,
1999 and 1998. The effects of applying SFAS 123 in this pro forma disclosure
are not indicative of future pro forma effects, and additional awards in future
years are anticipated.
22
14. Earnings per Share
The following table represents the computation of basic and diluted earnings per
common share for the three years ended December 31, 2000:
In thousands, except per share data 2000 1999 1998
- - - ---------------------------------------------------------------------------------
Basic earnings (loss) per share
computation:
Net income (loss) $(2,231) $ 788 $1,699
------- ------ ------
Weighted average common
shares outstanding 1,261 1,286 1,290
------- ------ ------
Basic earnings (loss) per common share $ (1.77) $ 0.61 $ 1.32
------- ------ ------
Diluted earnings (loss) per share
computation:
Net income (loss) $(2,231) $ 788 $1,699
Add: After tax interest expense
applicable to convertible debt (1) - - 1,411
Add: After tax changes to income
applicable to assumed conversion - - (98)
------- ------ ------
Adjusted net income (loss) $(2,231) $ 788 $3,012
------- ------ ------
Weighted average common
shares outstanding 1,261 1,286 1,290
Assumes exercise of options reduced
by the number of shares which could
have been purchased with the proceeds
from exercise of such options (2) - 2 7
Assumes conversion of 7-1/2%
convertible subordinated notes (1) - - 2,257
------- ------ ------
Total weighted average shares 1,261 1,288 3,554
------- ------ ------
Diluted earnings (loss) per common share $(1.77) $ 0.61 $ 0.85
- - - ---------------------------------------------------------------------------------
(1) The incremental shares from the assumed conversion of the Company's 7-1/2%
convertible subordinated notes are not included in the 2000 and 1999 diluted
earnings (loss) per common share calculation, as the effect is antidilutive.
(2) The 2000 diluted earning (loss) per common share calculation does not
include options to purchase 130,159 shares of common stock as the effect is
antidilutive. The 1999 diluted earnings per common share calculation does not
include options to purchase 88,500 shares of common stock, which were
outstanding, with exercise prices ranging from $8.625 to $15.1875 per share
because the exercise prices were greater than the average market price of the
common stock. The 1998 diluted earnings per common share calculation does not
include options to purchase 9,600 shares of common stock, which were
outstanding, with exercise prices ranging from $11.4375 to $15.1875 per share
because the exercise prices were greater than the average market price of the
common stock.
15. Commitments and Contingencies
Contingencies: The Company has employment agreements with certain executive
officers which expire at various dates through December 2010. At December 31,
2000, the aggregate commitment for future salaries, excluding bonuses, was
approximately $5.8 million.
During 1999, the Company received $400,000 structured as forgivable
loans from the State of Iowa, City of Des Moines and Polk County, which are
classified as deferred revenue, deposits and other in the Consolidated Balance
Sheets. The loans will be forgiven on a pro-rata basis when predetermined
employment levels are attained.
During 1996, the Company received a $350,000 grant from the State of
Connecticut Department of Economic Development, which is classified as deferred
revenue, deposits and other in the Consolidated Balance Sheets. This grant will
be forgiven under certain circumstances, which include attainment of
predetermined employment levels within the state and maintaining business
operations within the state for a specified period of time.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. During June 1999, a jury in the state of New
Mexico 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 and is appealing such verdict. 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 asserted defenses including that the former employee
resigned following her failure to timely report to work. The Company believes
it has made adequate provisions to cover such matters. Certain of the amounts
are subject to insurance recoveries.
Management has received certain claims by customers related to contractual
matters which are being discussed, and believes that it has adequate provisions
for such matters.
The Company is currently involved in arbitration related to the
construction of its six-plex movie theatre in Dillon, Colorado. The contractor
has alleged claims against the Company in the amount of $489,000 due under a
contract. The Company has denied any liability and has asserted claims in the
amount of $467,000 that, among other matters, the contractor failed to build the
theatre in accordance with the architectural plans. The outcome of this
arbitration is not determinable at this time.
Operating leases: Theatre and other premises are occupied under
operating leases that expire at varying dates through 2044. Certain of these
leases provide for the payment of real estate taxes and other occupancy costs.
Future minimum lease payments due under operating leases at December 31, 2000
are as follows: $627,000 - 2001, $573,000 - 2002, $561,000 - 2003, $479,000 -
2004, $402,000 - 2005, $2,682,000 - thereafter. Rent expense was $687,000,
$601,000 and $585,000 in the years ended December 31, 2000, 1999 and 1998,
respectively.
Commitments: The Company has a purchase commitment with one of its
suppliers to purchase a specified quantity of raw materials over the next three
years. In the event the Company does not purchase the specified quantity, a
maximum surcharge of $100,000 can be imposed by the supplier.
Guarantees: The Company has guaranteed a $2.5 million mortgage loan
obtained by its joint venture, MetroLux Theatres. The Company has received a
guarantee from the unrelated general partner of MetroLux Theatres for their
pro-rata share of the indebtedness.
The Company entered into two sale/leaseback transactions for theatre
equipment that are classified as operating leases. The Company has guaranteed
up to a maximum of $1,375,000 if, upon default, the lessor cannot recover the
unamortized balance.
16. Business Segment Data
Operating segments are based on the Company's business components about which
separate financial information is available, and is evaluated regularly by the
Company's chief operating decision makers, in deciding how to allocate resources
and in assessing performance.
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 and
operates a chain of motion picture theatres in the western Mountain States and
owns real estate used for both corporate and income-producing purposes. Segment
23
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
for the three years ended December 1, 2000 is as follows:
In thousands 2000 1999 1998
- - - -----------------------------------------------------------------------------------
Revenues:
Indoor display $ 24,363 $ 23,419 $25,983
Outdoor display 30,539 31,344 31,056
Entertainment and real estate 11,861 8,055 6,739
-------- -------- -------
Total revenues $ 66,763 $ 62,818 $63,778
-------- -------- -------
Operating income:
Indoor display $ 7,473 $ 7,331 $ 7,650
Outdoor display 370 2,252 4,078
Entertainment and real estate 417 1,027 811
-------- -------- -------
Total operating income 8,260 10,610 12,539
Other income 626 258 123
Corporate general and administrative expenses (6,449) (5,977) (6,182)
Interest expense - net (5,535) (3,659) (3,452)
-------- -------- -------
Income (loss) before income taxes $ (3,098) $ 1,232 $ 3,028
-------- -------- -------
Assets:
Indoor display $ 42,887 $ 42,283
Outdoor display 37,683 36,956
Entertainment and real estate 27,237 24,931
-------- --------
Total identifiable assets 107,807 104,170
General corporate 5,208 8,278
-------- --------
Total assets $113,015 $112,448
-------- --------
Depreciation and amortization:
Indoor display $ 5,187 $ 4,853 $ 4,238
Outdoor display 2,791 2,581 2,459
Entertainment and real estate 993 594 475
General corporate 561 654 690
-------- -------- -------
Total depreciation and amortization $ 9,532 $ 8,682 $ 7,862
-------- -------- -------
Capital expenditures:
Indoor display $ 7,162 $ 5,820 $ 6,847
Outdoor display 5,202 4,147 1,798
Entertainment and real estate 5,822 10,101 3,920
General corporate 129 297 397
-------- -------- -------
Total capital expenditures $ 18,315 $ 20,365 $12,962
- - - -----------------------------------------------------------------------------------
17. Fourth Quarter Events (unaudited)
The Company recorded the following items during the quarter ended December 31,
2000: (1) an impairment charge of $1,044,000 (net of tax) related to an
intangible theatre asset and equipment at its older Lake Dillon, CO
theatre and certain older outdoor display manufacturing equipment, (2) a
decrease to net income (loss) of $72,000 related to an outdoor sports display
sales contract, and (3) a reduction in the effective tax benefit rate for the
year, which had the effect on reducing the quarterly income tax benefit by
approximately $192,000. During the quarter ended December 31, 1999, the
Company adjusted certain research and development expenses resulting in a
decrease to net income of approximately $78,000.
Independent Auditors' Report
To the Board of Directors and Stockholders of Trans-Lux Corporation:
We have audited the accompanying consolidated balance sheets of Trans-Lux
Corporation and subsidiaries as of December 31, 2000 and 1999 and the related
consolidated statements of operations, comprehensive income, cash flows and
stockholders' equity for each of the three years in the period ended December
31, 2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company and its
subsidiaries at December 31, 2000 and 1999 and the results of their operations,
and their cash flows for each of the three years in the period ended December
31, 2000 in conformity with accounting principles generally accepted in the
United States of America.
/s/ Deloitte & Touche LLP
Stamford, Connecticut
March 28, 2001
24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) The information required by this Item with respect to directors is
incorporated herein by reference to the Section entitled "Election of
Directors" in the Company's Proxy Statement.
(b) The following executive officers were elected by the Board of Directors
for the ensuing year and until their respective successors are elected.
Name Office Age
- - - ------------------ ---------------------------- ---
Richard Brandt Chairman of the Board 73
Victor Liss Vice Chairman of the Board, 64
President and Chief Executive
Officer
Michael R. Mulcahy Executive Vice President 52
Matthew Brandt Senior Vice President 37
Thomas Brandt Senior Vice President 37
Karl P. Hirschauer Senior Vice President 55
Thomas F. Mahoney Senior Vice President 53
Al L. Miller Senior Vice President 55
Angela D. Toppi Senior Vice President, Treasurer, 45
Secretary and Chief Financial Officer
Messrs. R. Brandt, Liss, Mulcahy, Hirschauer and Ms. Toppi have been
associated in an executive capacity with the Company for more than five years.
Messrs. M. Brandt and T. Brandt were elected Senior Vice Presidents in
charge of theatre operations on September 27, 1997 and have been employed since
1985. They each served as Vice Presidents in charge of theatre operations
between May 22, 1991 and September 27, 1997.
25
Mr. Mahoney was elected Senior Vice President in charge of sales on June 1,
1996 and has been employed by the Company since 1967. Mr. Mahoney served as
Assistant Vice President of sales between December 1, 1994 and June 1, 1996.
Mr. Miller was elected Senior Vice President in charge of manufacturing
and materials on September 27, 1997, on February 1, 2000, field service
operations were added to his area of responsibility. Mr. Miller has been
employed by the Company since 1995. Mr. Miller served as Vice President in
charge of manufacturing and materials between March 13, 1995 and September 27,
1997. Mr. Miller was self-employed as a consultant in 1995.
(c) The information required by Item 405 of Regulation S-K is incorporated
herein by reference to the Section entitled "Compliance with Section
16(a) of the Securities Exchange Act of 1934" in the Company's Proxy
Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference
to the Section entitled "Executive Compensation and Transactions with
Management" in the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by reference
to the Section entitled "Security Ownership of Certain Beneficial Owners,
Directors and Executive Officers" in the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference
to the Section entitled "Executive Compensation and Transactions with
Management" in the Company's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements:
Consolidated Statements of Operations for the Years Ended December
31, 2000, 1999 and 1998.
Consolidated Balance Sheets as of December 31, 2000 and 1999.
Consolidated Statements of Cash Flows for the Years Ended December
31, 2000, 1999 and 1998.
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 2000, 1999 and 1998.
26
Consolidated Statements of Comprehensive Income for the Years
Ended December 31, 2000, 1999 and 1998.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
Individual financial statements for a 50% owned entity accounted for by the
equity method, has been omitted because it does not constitute a significant
subsidiary.
(2) Financial Statement Schedules: None
(3) Exhibits:
3(a) Form of Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 of Registration No.
333-15481).
(b) By-Laws of the Registrant (incorporated by reference to Exhibit
3.2 of Registration No. 333-15481).
4(a) Indenture dated as of December 1, 1994 (form of said indenture is
incorporated by reference to Exhibit 6 of Schedule 13E-4 Amendment
No.2 dated December 23, 1994).
(b) Indenture dated as of December 1, 1996 (form of said indenture is
incorporated by reference to Exhibit 4.2 of Registration No.
333-15481).
10.1 Form of Indemnity Agreement -- Directors (form of said agreement
is incorporated by reference to Exhibit 10.1 of Registration No.
333-15481).
10.2 Form of Indemnity Agreement -- Officers (form of said agreement is
incorporated by reference to Exhibit 10.2 of Registration No.
333-15481).
10.3 Amended and Restated Pension Plan dated August 14, 1996
(incorporated by reference to Exhibit 10.3 of Form 10-K for the
year ended December 31, 1996).
10.4(a) 1989 Non-Employee Director Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.4(a) of Form 10-K for the
year ended December 31, 1999).
(b) 1992 Stock Option Plan (incorporated by reference to Proxy
Statement dated April 3, 1992).
(c) 1995 Stock Option Plan, as amended (incorporated by reference to
Proxy Statement dated April 7, 2000).
10.5 Credit Agreement with First Fidelity Bank dated as of August 28,
1995 (incorporated by reference to Exhibit 10(d) of Form 10-Q for
the quarter ended September 30, 1995). Fourth Amendment Agreement
dated as of December 19, 1997 (incorporated by reference to
Exhibit 10.5 of Form 10-K for the year ended December 31, 1997).
Sixth Amendment Agreement dated as of November 5, 1998
(incorporated by reference to Exhibit 10.5 of Form 10-K for the
year ended December 31, 1998). Eighth Amendment Agreement dated
as of June 3, 1999 (incorporated by reference to Exhibit 10 of
Form 10-Q for the quarter ended June 30, 1999). Ninth Amendment
27
Agreement dated as of December 31, 1999 (incorporated by
reference to Exhibit 10.5 of Form 10-K for the year ended December
31, 1999). Letter Agreement dated as of September 30, 2000 and
Letter Agreement dated as of December 31, 2000, included herewith.
10.6 Employment Agreement with Richard Brandt dated as of September 1,
2000 (incorporated by reference to Exhibit 10(a) of Form 10-Q for
the quarter ended September 30, 2000).
10.7 Employment Agreement with Victor Liss dated as of January 1, 1997
(incorporated by reference to Exhibit 10.7 of Form 10-K for the
year ended December 31, 1996). Amendment to Employment Agreement
with Victor Liss dated as of September 23, 1999 (incorporated by
reference to Exhibit 10.7 of Form 10-K for the year ended December
31, 1999).
10.8 Employment Agreement with Michael R. Mulcahy dated as of June 1,
1998 (incorporated by reference to Exhibit 10(b) of Form 10-Q for
the quarter ended September 30, 1998).
10.9 Employment Agreement with Karl Hirschauer dated as of January 1,
2000 (incorporated by reference to Exhibit 10.10 of Form 10-K for
the year ended December 31, 1999).
10.10 Employment Agreement with Thomas F. Mahoney dated as of June 1,
1998 (incorporated by reference to Exhibit 10 of Form 10-Q for the
quarter ended June 30, 1998).
10.11 Employment Agreement with Al Miller dated as of January 1, 1999
(incorporated by reference to Exhibit 10.12 of Form 10-K for the
year ended December 31, 1998). Amendment to Employment Agreement
with Al Miller dated as of January 1, 2000 (incorporated by
reference to Exhibit 10.12 of Form 10-K for the year ended
December 31, 1999).
10.12 Employment Agreement with Angela Toppi dated as of January 1, 2000
(incorporated by reference to Exhibit 10.13 of Form 10-K for the
year ended December 31, 1999).
10.13 Agreement with Nottingham Partners, Deerfield Partners, Jonathan
P. Schwartz and Nathaniel B. Guild dated April 4, 1991
(incorporated by reference to Exhibit 28(a) of Form 8-K filed
April 9, 1991).
10.14 Agreement with Baupost Group, Inc. and Baupost Partners dated
April 4, 1991 (incorporated by reference to Exhibit 28(b) of Form
8-K filed April 9, 1991).
10.15 Agreement between Trans-Lux Midwest Corporation and Fairtron
Corporation dated as of April 30, 1997 (incorporated by reference
to Exhibit 10(a) of Form 8-K filed May 15, 1997).
21 List of Subsidiaries, included herewith.
(c) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized:
TRANS-LUX CORPORATION
by /s/ Angela D. Toppi
-------------------------
Angela D. Toppi
Senior Vice President and
Chief Financial Officer
by /s/ Robert P. Bosworth
------------------------
Robert P. Bosworth
Vice President and
Chief Accounting Officer
Dated: March 30, 2001
29
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated:
/s/ Richard Brandt March 30, 2001
- - - -------------------------------------
Richard Brandt, Chairman of the Board
/s/ Victor Liss March 30, 2001
- - - ------------------------------------
Victor Liss, Vice Chairman of the
Board, President and Chief Executive
Officer
/s/ Steven Baruch March 30, 2001
- - - ------------------------------------
Steven Baruch, Director
/s/ Matthew Brandt March 30, 2001
- - - ------------------------------------
Matthew Brandt, Senior Vice President
/s/ Thomas Brandt March 30, 2001
- - - ------------------------------------
Thomas Brandt, Senior Vice President
/s/ Howard M. Brenner March 30, 2001
- - - ------------------------------------
Howard M. Brenner, Director
/s/ Jean Firstenberg March 30, 2001
- - - ------------------------------------
Jean Firstenberg, Director
March 30, 2001
- - - ------------------------------------
Allan Fromme, PhD, Director
/s/ Robert B. Greenes March 30, 2001
- - - ------------------------------------
Robert Greenes, Director
/s/ Gene F. Jankowski March 30, 2001
- - - ------------------------------------
Gene F. Jankowski, Director
/s/ Howard S. Modlin March 30, 2001
- - - ------------------------------------
Howard S. Modlin, Director
30