UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
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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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(Address of principal executive offices) (Zip code)
(203) 853-4321
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(Registrant's telephone number, including area code)
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
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Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Date Class Shares Outstanding
- ------- ------------------------------ ------------------
5/14/03 Common Stock - $1.00 Par Value 973,243
5/14/03 Class B Stock - $1.00 Par Value 287,505
(Immediately convertible into a like
number of shares of Common Stock.)
TRANS-LUX CORPORATION AND SUBSIDIARIES
Table of Contents
Page No.
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Part I - Financial Information
Item 1. Consolidated Balance Sheets - March 31, 2003
and December 31, 2002 (unaudited) 1
Consolidated Statements of Operations - Three Months
Ended March 31, 2003 and 2002 (unaudited) 2
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 2003 and 2002 (unaudited) 3
Notes to Consolidated Financial Statements (unaudited) 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk 10
Item 4. Controls and Procedures 11
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Certifications 13
Part I - Financial Information
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TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31 December 31
In thousands, except share data 2003 2002
- ----------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 10,609 $ 8,270
Available-for-sale securities 557 522
Receivables, less allowance of $1,148 in 2003 and $1,009 in 2002 6,888 7,617
Unbilled receivables 1,245 966
Inventories 6,487 7,440
Prepaids and other 1,196 745
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Total current assets 26,982 25,560
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Rental equipment 89,396 88,374
Less accumulated depreciation 45,365 43,423
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44,031 44,951
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Property, plant and equipment 41,413 47,427
Less accumulated depreciation and amortization 10,987 12,170
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30,426 35,257
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Goodwill 1,035 1,264
Other assets 3,551 3,942
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TOTAL ASSETS $106,025 $110,974
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,016 $ 2,754
Accrued liabilities 7,987 7,189
Current portion of long-term debt 2,974 3,763
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Total current liabilities 12,977 13,706
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Long-term debt:
7 1/2% convertible subordinated notes due 2006 30,177 30,177
9 1/2% subordinated debentures due 2012 1,057 1,057
Notes payable 31,135 35,975
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62,369 67,209
Deferred revenue, deposits and other 2,768 2,942
Deferred income taxes 4,597 4,092
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Stockholders' equity:
Capital stock
Common - $1 par value - 5,500,000 shares authorized
2,452,900 shares issued in 2003 and 2002 2,453 2,453
Class B - $1 par value - 1,000,000 shares authorized
287,505 shares issued in 2003 and 2002 287 287
Additional paid-in-capital 13,901 13,901
Retained earnings 19,834 19,612
Accumulated other comprehensive loss (1,324) (1,391)
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35,151 34,862
Less treasury stock - at cost - 1,479,688 shares in 2003 and 2002
(excludes additional 287,505 shares held in 2003 and 2002
for conversion of Class B stock) 11,837 11,837
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Total stockholders' equity 23,314 23,025
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $106,025 $110,974
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The accompanying notes are an integral part of these consolidated financial statements.
1
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS ENDED
MARCH 31
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In thousands, except per share data 2003 2002
- ---------------------------------------------------------------------------------------------
Revenues:
Equipment rentals and maintenance $ 5,019 $ 5,629
Equipment sales 7,364 8,119
Theatre receipts and other 3,107 3,414
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Total revenues 15,490 17,162
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Operating expenses:
Cost of equipment rentals and maintenance 3,558 3,353
Cost of equipment sales 5,731 5,947
Cost of theatre receipts and other 2,320 2,528
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Total operating expenses 11,609 11,828
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Gross profit from operations 3,881 5,334
General and administrative expenses 4,038 4,268
Interest income 47 23
Interest expense (1,002) (1,172)
Gain on sale of assets 1,578 -
Other income - 15
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Income (loss) before income taxes and income from joint venture 466 (68)
Provision for income taxes 297 38
Income from joint venture 98 152
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Net income $ 267 $ 46
====== ======
Earnings per share - basic and diluted $ 0.21 $ 0.04
Average common shares outstanding - basic and diluted 1,261 1,261
Cash dividends per share:
Common stock $ 0.035 $ 0.035
Class B stock $0.0315 $0.0315
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The accompanying notes are an integral part of these consolidated financial statements.
2
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
THREE MONTHS ENDED
MARCH 31
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In thousands 2003 2002
- ---------------------------------------------------------------------------------------
Cash flows from operating activities
Net income $ 267 $ 46
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,961 2,547
Income from joint venture (98) (152)
Deferred income taxes 491 37
Gain on sale of assets (1,578) -
Changes in operating assets and liabilities:
Receivables (78) (605)
Inventories 160 (255)
Prepaids and other assets (530) 335
Accounts payable and accruals (211) (789)
Deferred revenue, deposits and other (174) 59
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Net cash provided by operating activities 1,210 1,223
----- -----
Cash flows from investing activities
Equipment manufactured for rental (1,022) (1,559)
Purchases of property, plant and equipment (437) (157)
Proceeds from joint venture 350 -
Proceeds from sale of assets 3,757 -
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Net cash provided by (used in) investing activities 2,648 (1,716)
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Cash flows from financing activities
Repayment of long-term debt (18,474) (1,533)
Proceeds from long-term debt 17,000 -
Cash dividends (45) (44)
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Net cash used in financing activities (1,519) (1,577)
----- -----
Net increase (decrease) in cash and cash equivalents 2,339 (2,070)
Cash and cash equivalents at beginning of year 8,270 5,699
----- -----
Cash and cash equivalents at end of period $10,609 $3,629
====== =====
- ---------------------------------------------------------------------------------------
Interest paid $ 422 $ 526
Interest received 52 34
Income taxes paid (refunded) (119) 229
- ---------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
3
TRANS-LUX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003
(unaudited)
Note 1 - Basis of Presentation
Financial information included herein is unaudited, however, such information
reflects all adjustments which are, in the opinion of management, necessary for
the fair presentation of the consolidated financial statements for the interim
periods. The results for the interim periods are not necessarily indicative of
the results to be expected for the full year. It is suggested that the March
31, 2003 consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes included in the Company's Annual
Report and Form 10-K for the year ended December 31, 2002. Certain
reclassifications of prior years' amounts have been made to conform to the
current year's presentation.
On January 1, 2002, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS
142). Under SFAS 142, goodwill and indefinite-lived intangible assets are no
longer amortized, but are reviewed annually for impairment, or more frequently
if indications of potential impairment exist. The Company performed the
requisite transitional impairment tests for goodwill as of January 1, 2002,
which indicated that there was no transitional impairment loss. The Company
performed the annual impairment tests for goodwill as of October 1, 2002 and had
determined that goodwill was not impaired as of that date. All other intangible
assets continue to be amortized over their useful lives and are evaluated when
indicators of impairment exist. During the three months ended March 31, 2003,
the Company wrote off $229,000 of goodwill relating to the sale of assets (see
Note 4). In addition, during the three months ended March 31, 2003, the Company
paid $250,000 (the first of two installments) toward a $450,000 restrictive
covenant agreement in Dillon Colorado, where the Company operates a six-plex
theatre in the same community. The Company made the second installment of
$200,000 during April 2003.
In June 2002, the FASB issued Statement of Financial Accounting Standards No.
146, "Accounting for Costs Associated with Exit or Disposal Activities" (SFAS
146). SFAS 146 requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred and that the
initial measurement of a liability be at fair value. SFAS 146 is effective for
exit or disposal activities that are initiated after December 31, 2002. The
adoption of SFAS 146 did not have a material impact on the Company's financial
statements and results of operations.
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45). FIN 45 requires that upon
issuance of a guarantee, a guarantor must recognize a liability for the fair
value of an obligation assumed under a guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and annual financial
statements about the obligations associated with guarantees issued. The
recognition provisions of FIN 45 are effective for any guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002.
The Company records compensation expense for its stock-based employee
compensation plans in accordance with the intrinsic-value method prescribed by
APB Opinion No. 25, "Accounting for Stock Issued to Employees". Intrinsic
value is the amount by which the market price of the underlying stock exceeds
the exercise price of the stock option or award on the measurement date,
generally the date of
4
grant. The Company's options are issued at fair market value, accordingly, no
compensation cost has been recognized for its stock option plans. In December
2002, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" (SFAS 148), that amends Statement of
Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation". The Company adopted the disclosure provisions of SFAS 148 at
December 31, 2002. The following table illustrates the effect on net income and
earnings per share for the three months ended March 31, 2003 and 2002 if the
Company had applied the fair value recognition provisions of SFAS 123 to
stock-based employee compensation:
March 31 March 31
In thousands, except per share data 2003 2002
- ---------------------------------------------------------------------------
Net income, as reported $ 267 $ 46
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of tax 10 3
--- --
Pro forma net income $ 257 $ 43
--- --
Earnings per share
Basic and diluted, as reported $0.21 $0.04
---- ----
Basic and diluted, pro forma $0.20 $0.03
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Note 2 - Inventories
Inventories consist of the following:
March 31 December 31
In thousands 2003 2002
- ---------------------------------------------------------------
Raw materials and spare parts $4,434 $4,663
Work-in-progress 1,507 1,384
Finished goods 546 1,393
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$6,487 $7,440
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Note 3 - Long-Term Debt
During the three months ended March 31, 2003, long-term debt, including the
current portion, decreased $5.6 million, primarily as a result of assumption of
$4.2 million in Industrial Revenue Bonds by the purchaser of the Company's
custom sports business in Logan, Utah, (see Note 4), and other scheduled
payments of long-term debt. On February 12, 2003, the Company completed a
refinancing of its senior debt with two term loans totaling $17.0 million and a
revolving credit facility of up to $5.0 million at variable interest rates
ranging from LIBOR plus 1.75% to Prime plus 0.25% (4.25% at March 31, 2003) and
maturing September 30, 2005. At March 31, 2003, the entire revolving credit
facility was available as none had been drawn. The Credit Agreement requires an
annual facility fee on the unused commitment of .30%, and requires compliance
with certain financial covenants, which include a fixed charge coverage ratio of
1.0 to 1.0, a total funded debt ratio of 5.0 to 1.0, a leverage ratio of 3.0 to
1.0 and maintaining a tangible net worth of not less than $19.5 million. At
March 31, 2003, the Company was in compliance with such financial covenants.
Note 4 - Sale of Assets
On March 28, 2003, the Company sold its custom sports business located in Logan,
Utah for $7.9 million,
5
of which $3.7 million was paid in cash and $4.2 million was in assumption of two
Industrial Revenue Bonds. The Company recorded a gain of approximately
$745,000, net of tax, on the sale. As part of the sale, the Company recorded
bonuses to certain continuing employees of $75,000, which was offset against the
gain. As part of the asset purchase agreement, the Company provided standard
representations and warranties with respect to the assets sold and guaranteed
indemnification of up to $400,000, provided notification of the claim is made by
the purchaser prior to December 30, 2003, and the Company would re-acquire any
sold accounts receivable greater than 90 days old. The Company believes it will
not incur any liability with respect to the guarantee, and accordingly does not
believe the fair value of the guarantee is significant. As of May 13, 2003, the
purchaser has not notified the Company of any claims relating to such guarantee.
Note 5 - Reporting Comprehensive Income (Loss)
The components of other comprehensive income (loss) are foreign currency
translation adjustments relating to the foreign subsidiaries, unrealized holding
gains or losses on the available-for-sale securities, and a minimum pension
liability adjustment relating to the defined benefit pension plan. Total
comprehensive income was $334,000 and $40,000 for the three months ended March
31, 2003 and 2002, respectively.
Note 6 - Business Segment Data
The Company evaluates segment performance and allocates resources based upon
operating income. The Company's operations are managed in three reportable
business segments. The Display Division comprises two operating segments,
indoor display and outdoor display. Both design, produce, lease, sell and
service large-scale, multi-color, real-time electronic information displays.
Both operating segments are conducted on a global basis, primarily through
operations in the U.S. The Company also has operations in Canada and Australia.
The indoor display and outdoor display segments are differentiated primarily by
the customers they serve. The Entertainment/Real Estate segment owns a chain of
motion picture theatres in the western Mountain States, a national film booking
service and income-producing real estate properties. Segment operating income
is shown after general and administrative expenses directly associated with the
segment and includes the operating results of the joint venture activities.
Corporate general and administrative items relate to costs that 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 months ended March 31, 2003 and 2002 is as follows:
In thousands 2003 2002
- --------------------------------------------------------------------------
Revenues:
Indoor display $ 5,106 $ 5,687
Outdoor display 7,277 8,061
Entertainment/real estate 3,107 3,414
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Total revenues $15,490 $17,162
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Operating income (loss):
Indoor display $ 988 $ 1,411
Outdoor display (521) 183
Entertainment/real estate 675 834
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Total operating income $ 1,142 $ 2,428
Other income 1,578 15
Corporate general and administrative expenses (1,201) (1,210)
Interest expense-net (955) (1,149)
Income tax provision (297) (38)
------ ------
Net income $ 267 $ 46
====== ======
6
Note 7 - Legal Proceedings and Claims
The Company is subject to legal proceedings and claims, which arise in the
ordinary course of its business. The Company is not a party to any pending
legal proceedings and claims that it believes will have a material adverse
effect on the consolidated financial position or operations of the Company.
7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
Trans-Lux is a full service provider of integrated multimedia systems for
today's communications environments. The essential elements of these systems
are the real-time, programmable electronic information displays we manufacture,
distribute and service. Designed to meet the evolving communications needs of
both the indoor and outdoor markets, these displays are used primarily in
applications for the financial, banking, gaming, corporate, transportation,
entertainment and sports industries. In addition to its display business, the
Company owns and operates a chain of motion picture theatres in the western
Mountain States, as well as a national film booking service. The Company
operates in three reportable segments: Indoor Display, Outdoor Display, and
Entertainment/Real Estate.
The Indoor Display segment includes worldwide revenues and related expenses from
the rental, maintenance and sale of indoor displays. This segment includes the
financial, gaming, government and corporate markets. The Outdoor Display
segment includes worldwide revenues and related expenses from the rental,
maintenance and sale of outdoor displays. Included in this segment are the
custom sports (which the Company sold during the quarter), catalog sports,
retail and commercial markets. The Entertainment/Real Estate segment includes
the operations of the motion picture theatres in the western Mountain States, a
national film booking service and income-producing real estate properties.
Results of Operations
Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002
Total revenues for the three months ended March 31, 2003 decreased 9.7% to $15.5
million from $17.2 million for the three months ended March 31, 2002. Indoor
display revenues decreased $581,000 or 10.2%. Of this decrease, indoor display
equipment rentals and maintenance revenues decreased $508,000 or 13.2%,
primarily due to disconnects and non-renewals of equipment on rental and
maintenance on existing contracts in the financial services market, and indoor
display equipment sales decreased $73,000 or 4.0%, also primarily in the
financial services market. The financial services market continues to be
negatively impacted due to the consolidation within that industry resulting
mainly from the current economic downturn.
Outdoor display revenues decreased $784,000 or 9.7%. Of this decrease, outdoor
display equipment sales decreased $683,000 or 10.9%, primarily in the custom
outdoor sports business, which was sold during the quarter (see Note 4).
Outdoor display equipment rentals and maintenance revenues decreased $101,000 or
5.6%, primarily due to the continued expected revenue decline in the outdoor
equipment rentals and maintenance bases previously acquired.
Entertainment/real estate revenues decreased $307,000 or 9.0%. This decrease is
primarily from a decrease in overall admissions and concessions, mainly related
to fewer high grossing films. The Company closed its older non-profitable Lake
Dillon theatre at the end of January 2003 for a net payment of $34,000 to the
landlord. In connection with its newer six-plex theatre in Dillon, Colorado,
the Company entered into a 15-year non-compete agreement for $450,000, which was
paid in installments during January and April 2003.
8
Total operating income for the three months ended March 31, 2003 decreased 52.9%
to $1.1 million from $2.4 million for the three months ended March 31, 2002.
Indoor display operating income decreased $423,000 or 30.0%, primarily as a
result of the decrease in revenues in the financial services market. The cost
of indoor displays represented 57.2% of related revenues in 2003 compared to
50.0% in 2002. The cost of indoor displays as a percentage of related revenues
increased primarily due to the relationship between field service costs of
equipment rentals and maintenance increasing and the revenues from indoor
equipment rentals and maintenance decreasing. The Company continues to
strategically address the field service costs, and recently consolidated its
field service center from Norcross, Georgia to its Norwalk, Connecticut
headquarters. In addition, the Company is evaluating its strategic objectives
for its field service offices. Indoor display cost of equipment sales decreased
$22,000 or 2.3%, primarily due to the decrease in volume. Indoor display cost
of equipment rentals and maintenance increased $100,000 or 5.3%, largely due to
an increase in depreciation expense. Indoor display general and administrative
expenses decreased $235,000 or 16.4% due to continued reduction of certain
overhead costs such as sales and marketing expenses.
Outdoor display operating income decreased $704,000, primarily as a result of
the continuing expected revenue decline in outdoor equipment rentals and
maintenance bases from previous acquisitions and field service costs increasing
not in relation to the reduction of the revenues from outdoor equipment rentals
and maintenance. The cost of outdoor displays represented 87.5% of related
revenues in 2003 compared to 80.1% in 2002. Outdoor display cost of equipment
sales decreased $194,000 or 3.9%, principally due to the decrease in volume,
offset by increased costs associated with the sale of the custom sports business
(see Note 4). Outdoor display cost of equipment rentals and maintenance
increased $105,000 or 7.2%, primarily due to an increase in field service costs.
Outdoor display general and administrative expenses remained level. Cost of
indoor and outdoor equipment rentals and maintenance includes field service
expenses, plant repair costs, maintenance and depreciation.
Entertainment/real estate operating income decreased $159,000 or 19.0%,
primarily due to the decrease in revenues. The cost of entertainment/real
estate represented 74.7% of related revenues in 2003 compared to 74.0% in 2002.
Cost of entertainment/real estate, which includes film rental costs and
depreciation expense, decreased $208,000 or 8.2%, due to the decrease in overall
admissions. Entertainment/real estate general and administrative expenses
remained level.
Corporate general and administrative expenses decreased $9,000 or 0.7%,
principally due to a positive impact of the effect of foreign currency rates of
$344,000 in 2003 compared to $160,000 in 2002, continued reduction of certain
overhead costs, offset by an increase in medical costs, general insurance costs
and pension expense.
Net interest expense decreased $194,000, which is primarily attributable to the
decrease in variable interest rates in 2003 vs. 2002 and a decrease in
long-term debt due to scheduled payments. The Company uses its revolving credit
facility to meet its short-term working capital requirements, which at March 31,
2003 was fully available. The gain on sale of assets relates to the sale of the
custom sports business (see Note 4). The income from joint venture relates to
the operations of the theatre joint venture, MetroLux Theatres in Loveland,
Colorado.
The effective tax rate for the three months ended March 31, 2003 was 52.7% and
45.0% in 2002. The increase in the rate for 2003 is primarily from the gain on
the sale of the custom sports business and non deductibility of goodwill written
off in connection with the sale (see Note 4).
9
Liquidity and Capital Resources
The regular quarterly cash dividend for the first quarter of 2003 of $0.035 per
share on the Company's Common Stock and $0.0315 per share on the Company's Class
B Stock was declared by the Board of Directors on March 17, 2003 payable to
stockholders of record as of April 10, 2003 and was paid April 23, 2003.
On February 12, 2003, the Company refinanced its senior debt. The refinancing
consisted of two term loans totaling $17.0 million and a revolving line of
credit of up to $5.0 million at variable interest rates ranging from LIBOR plus
1.75% to Prime plus 0.25% and matures September 30, 2005. At March 31, 2003,
$17.0 million was outstanding under the term loans and the entire revolving
credit facility was available as none had been drawn. The Credit Agreement
contains certain financial covenants which include a fixed charge coverage
ratio of 1.0 to 1.0, a total funded ratio of 5.0 to 1.0, a leverage ratio of 3.0
to 1.0 and maintaining a tangible net worth of not less than $19.5 million. At
March 31, 2003 the Company was in compliance with such financial covenants.
Payments of long-term debt due, including the $17.0 million term loans and the
7.5% convertible subordinated notes that mature December 1, 2006, and the future
minimum lease payments due under operating leases for the remainder of 2003 and
the next four years are as follows:
Remainder of
In thousands 2003 2004 2005 2006 2007
- ------------ ---- ---- ---- ---- ----
Long-term debt $2,229 $2,982 $14,781 $31,307 $1,135
Operating leases 387 449 424 295 118
----- ----- ------ ------ -----
Total $2,616 $3,431 $15,205 $31,602 $1,253
===== ===== ====== ====== =====
Cash and cash equivalents increased $2.3 million for the three months ended
March 31, 2003 compared to a decrease of $2.1 million in 2002. The increase in
2003 is primarily attributable to cash received on the sale of the custom sports
business, offset by investment in rental equipment and a repayment of long-term
debt. The decrease in 2002 was primarily attributable to cash utilized for
investment in rental equipment and a repayment of long-term debt.
The Company reduced its long-term debt, including the current portion, during
the three months ended March 31, 2003 by $5.6 million, principally from the
assumption of $4.2 million of Industrial Revenue Bonds by the purchaser of the
custom sports business and scheduled payments of long-term debt.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
The Company may, from time to time, provide estimates as to future performance.
These forward-looking statements will be estimates, and may or may not be
realized by the Company. The Company undertakes no duty to update such
forward-looking statements. Many factors could cause actual results to differ
from these forward-looking statements, including loss of market share through
competition, introduction of competing products by others, pressure on prices
from competition or purchasers of the Company's products, interest rate and
foreign exchange fluctuations, terrorist acts and war.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is subject to interest rate risk on its long-term debt. The Company
manages its exposure to changes in interest rates by the use of variable and
fixed interest rate debt. In addition, the Company is exposed to foreign
currency exchange rate risk mainly as a result of investments in its Australian
and Canadian subsidiaries. The Company may, from time to time, enter into
derivative contracts to manage its
10
interest risk. The Company does not enter into derivatives for trading or
speculative purposes. At March 31, 2003, the Company was not involved in any
derivative financial instruments.
A one percentage point change in interest rates would result in an annual
interest expense fluctuation of approximately $323,000. A 10% change in the
Australian and Canadian dollar relative to the U.S. dollar would result in a
currency exchange expense fluctuation of approximately $364,000. The fair value
is based on dealer quotes, considering current exchange rates.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
The Company evaluated the effectiveness of the design and operation of its
disclosure controls and procedures as of a date within 90 days of the filing
date of this quarterly report. The Company's disclosure controls and procedures
are designed to ensure that information required to be disclosed by the Company
in the reports that are filed or submitted under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms. Based on
this evaluation, Michael R. Mulcahy, the Company's President and Co-Chief
Executive Officer, Thomas Brandt, the Company's Executive Vice President and
Co-Chief Executive Officer, and Angela D. Toppi, the Company's Executive Vice
President and Chief Financial Officer, have concluded that these controls and
procedures are effective.
(b) Changes in internal controls.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the Company's evaluation, and there were no significant deficiencies or
material weaknesses requiring corrective action.
Part II - Other Information
---------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10(a) First Amendment to Commercial Loan and Security Agreement
and Waiver Agreement dated May 13, 2003 among Trans-Lux
Corporation, People's Bank as Agent and People's Bank and
The Bank of New York.
99.1 Certification of Michael R. Mulcahy, President and Co-Chief
Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
99.2 Certification of Thomas Brandt, Executive Vice President
and Co-Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.3 Certification of Angela D. Toppi, Executive Vice President
and Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
11
(b) Reports on Form 8-K. During the quarter for which this report on
Form 10-Q is filed, the registrant filed the following:
Form 8-K dated February 13, 2003, pertaining to the completion of
the Company's senior debt refinancing with People's Bank and The
Bank of New York.
Form 8-K dated March 27, 2003, press release pertaining to the
financial performance for the fourth quarter of 2002 and annual
results.
Form 8-K dated March 28, 2003, pertaining to the sale of the
custom sports business to Barco, Inc. for cash and assumption of
debt.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRANS-LUX CORPORATION
(Registrant)
Date: May 15, 2003
by /s/ Angela D. Toppi
----------------------
Angela D. Toppi
Executive Vice President and
Chief Financial Officer
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CERTIFICATIONS
I, Michael R. Mulcahy, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Trans-Lux
Corporation, the "registrant";
2. Based on my knowledge, the quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements and other financial
information included in this quarterly report fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have;
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
the equivalent function);
a) all significant deficiencies in the design or operation of the
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
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6. The registrant's other certifying officers and I have indicated in this
quarterly report there were no significant changes in internal controls or
in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, and there were no
significant deficiencies or material weaknesses requiring corrective
action.
/s/ Michael R. Mulcahy
----------------------------------------
Date: May 15, 2003 President and Co-Chief Executive Officer
Michael R. Mulcahy
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CERTIFICATIONS
I, Thomas Brandt, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Trans-Lux
Corporation, the "registrant";
2. Based on my knowledge, the quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements and other financial
information included in this quarterly report fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have;
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
the equivalent function);
a) all significant deficiencies in the design or operation of the
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
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6. The registrant's other certifying officers and I have indicated in this
quarterly report there were no significant changes in internal controls or
in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, and there were no
significant deficiencies or material weaknesses requiring corrective
action.
/s/ Thomas Brandt
-----------------------------------
Date: May 15, 2003 Executive Vice President and
Co-Chief Executive Officer
Thomas Brandt
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CERTIFICATIONS
I, Angela D. Toppi certify, that:
1. I have reviewed this quarterly report on Form 10-Q of Trans-Lux
Corporation, the "registrant";
2. Based on my knowledge, the quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements and other financial
information included in this quarterly report fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have;
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
the equivalent function);
a) all significant deficiencies in the design or operation of the
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
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6. The registrant's other certifying officers and I have indicated in this
quarterly report there were no significant changes in internal controls or
in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, and there were no
significant deficiencies or material weaknesses requiring corrective
action.
/s/ Angela D. Toppi
-----------------------------------
Date: May 15, 2003 Executive Vice President and
Chief Financial Officer
Angela D. Toppi
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