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, 2005
Commission file number 1-2257
TRANS-LUX CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-1394750
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Richards Avenue, Norwalk, CT 06856-5090
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
(203) 853-4321
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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
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
--- ---
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
- -------- ------------------------------- ------------------
05/12/05 Common Stock - $1.00 Par Value 973,285
05/12/05 Class B Stock - $1.00 Par Value 287,463
(Immediately convertible into a like
number of shares of Common Stock.)
TRANS-LUX CORPORATION AND SUBSIDIARIES
Table of Contents
Page No.
Part I - Financial Information (unaudited)
Item 1. Consolidated Balance Sheets - March 31, 2005
and December 31, 2004 (audited) 1
Consolidated Statements of Operations - Three Months
Ended March 31, 2005 and 2004 2
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 2005 and 2004 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
Item 4. Controls and Procedures 13
Part II - Other Information
Item 5. Other Information 13
Item 6. Exhibits 13
Signatures 14
Exhibits
Part I - Financial Information
------------------------------
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31 December 31
In thousands, except share data 2005 2004
- ----------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $11,203 $ 12,398
Available-for-sale securities 446 388
Receivables, less allowance of $856 - 2005 and $711 - 2004 5,802 5,989
Unbilled receivables 732 585
Inventories 6,801 6,565
Prepaids and other 765 534
------- --------
Total current assets 25,749 26,459
------- --------
Rental equipment 91,917 90,938
Less accumulated depreciation 54,488 52,538
------- --------
37,429 38,400
------- --------
Property, plant and equipment 38,075 37,747
Less accumulated depreciation and amortization 9,160 8,787
------- --------
28,915 28,960
Goodwill 1,004 1,004
Other assets 6,267 6,291
------- --------
TOTAL ASSETS $99,364 $101,114
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,038 $ 2,413
Accrued liabilities 6,345 7,353
Current portion of long-term debt 2,078 1,744
------- --------
Total current liabilities 10,461 11,510
------- --------
Long-term debt:
7 1/2% convertible subordinated notes due 2006 12,309 12,309
8 1/4% limited convertible senior subordinated notes due 2012 17,868 17,868
9 1/2% subordinated debentures due 2012 1,057 1,057
Notes payable 25,047 25,562
------- --------
56,281 56,796
Deferred credits, deposits and other 4,521 3,959
Deferred income taxes 3,993 4,244
Stockholders' equity:
Capital stock
Common - $1 par value - 5,500,000 shares authorized,
2,452,942 shares issued in 2005 and 2004 2,453 2,453
Class B - $1 par value - 1,000,000 shares authorized,
287,463 shares issued in 2005 and 2004 287 287
Additional paid-in-capital 13,901 13,901
Retained earnings 20,386 20,852
Accumulated other comprehensive loss (1,081) (1,050)
------- --------
35,946 36,443
Less treasury stock - at cost - 1,479,714 shares in 2005 and 2004
(excludes additional 287,463 shares held in 2005 and 2004
for conversion of Class B stock) 11,838 11,838
------- --------
Total stockholders' equity 24,108 24,605
------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $99,364 $101,114
======= ========
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
In thousands, except per share data 2005 2004
- ---------------------------------------------------------------------------------
Revenues:
Equipment rentals and maintenance $ 3,775 $ 4,248
Equipment sales 4,813 4,860
Theatre receipts and other 3,061 3,221
------- -------
Total revenues 11,649 12,329
------- -------
Operating expenses:
Cost of equipment rentals and maintenance 3,045 3,151
Cost of equipment sales 3,267 3,255
Cost of theatre receipts and other 2,200 2,298
------- -------
Total operating expenses 8,512 8,704
------- -------
Gross profit from operations 3,137 3,625
General and administrative expenses 2,990 2,812
Interest income 46 33
Interest expense (992) (948)
Other income 25 12
------- -------
Loss from continuing operations before income taxes,
income from joint venture and discontinued operation (774) (90)
Provision (benefit) for income taxes (262) 19
Income from joint venture 90 132
------- -------
Income (loss) from continuing operations (422) 23
Income from discontinued operation, net of income taxes - 15
------- -------
Net income (loss) $ (422) $ 38
======= =======
Earnings (loss) per share - basic and diluted:
Continuing operations $ (0.33) $ 0.02
Discontinued operation - 0.01
------- -------
Total earnings (loss) per share - basic and diluted $ (0.33) $ 0.03
======= =======
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
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
------------------
In thousands 2005 2004
- ---------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Net income (loss) $ (422) $ 38
Income from discontinued operation - 15
------- -------
Income (loss) from continuing operations (422) 23
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,396 2,444
Income from joint venture (90) (132)
Deferred income taxes (240) 295
Gain on sale of available-for-sale securities (1) (11)
Changes in operating assets and liabilities:
Receivables 40 (922)
Inventories (236) 480
Prepaids and other assets (190) (188)
Accounts payable and accruals (1,399) (161)
Deferred credits, deposits and other 562 572
------- -------
Net cash provided by operating activities 420 2,400
------- -------
Cash flows from investing activities
Equipment manufactured for rental (979) (795)
Purchases of property, plant and equipment (328) (976)
Purchases of available-for-sale securities (114) (239)
Proceeds from sale of available-for-sale securities 31 100
------- -------
Net cash used in investing activities (1,390) (1,910)
------- -------
Cash flows from financing activities
Proceeds from long-term debt 50 870
Payments of long-term debt (231) (279)
Cash dividends (44) (45)
------- -------
Net cash provided by (used in) financing activities (225) 546
------- -------
Net cash used in discontinued operation - (160)
------- -------
Net increase (decrease) in cash and cash equivalents (1,195) 876
Cash and cash equivalents at beginning of year 12,398 12,022
------- -------
Cash and cash equivalents at end of period $11,203 $12,898
======= =======
- ---------------------------------------------------------------------------------------------------------
Interest paid $ 932 $ 290
Interest received 47 36
Income taxes paid (refunded) 160 (201)
- ---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
3
TRANS-LUX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
(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, 2005 consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2004. Certain
reclassifications of prior years' amounts have been made to conform to the
current year's presentation.
The Company records compensation expense for its stock-based employee
compensation plans in accordance with the intrinsic-value method prescribed by
Accounting Principles Board 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 grant. The Company's options are issued
with a strike price equal to the market price of the underlying stock at date of
grant and, accordingly, no compensation cost has been recognized for its stock
option plans. In December 2004, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 123
(revised 2004), "Share-Based Payment" ("SFAS 123 (revised 2004)"). SFAS 123
(revised 2004) establishes standards that require companies to record the cost
resulting from all share-based payment transactions using the fair value method.
Transition under SFAS 123 (revised 2004) requires using a modified version of
prospective application under which compensation costs are recorded for all
unvested share-based payments outstanding or a modified retrospective method
under which all prior periods impacted by SFAS 123 are restated. SFAS 123
(revised 2004) is effective, for the Company, as of January 1, 2006, with early
adoption permitted.
The following table illustrates the effect on net income (loss) and earnings
(loss) per share for the three months ended March 31, 2005 and 2004 if the
Company had applied the fair value recognition provisions of SFAS 123 to
stock-based employee compensation:
Three months ended
March 31
In thousands, except per share data 2005 2004
- ---------------------------------------------------------------------------
Net income (loss), as reported $ (422) $ 38
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of tax 6 2
------ -----
Pro forma net income (loss) $ (428) $ 36
====== =====
Earnings (loss) per share:
As reported - basic and diluted $(0.33) $0.03
------ -----
Pro forma - basic and diluted $(0.34) $0.03
------ -----
4
Note 2 - Inventories
Inventories consist of the following:
March 31 December 31
In thousands 2005 2004
- -----------------------------------------------------------------
Raw materials and spare parts $4,768 $4,704
Work-in-progress 1,437 1,357
Finished goods 596 504
------ ------
$6,801 $6,565
====== ======
Note 3 - Long-Term Debt
During the three months ended March 31, 2005, long-term debt, including current
portion, decreased $181,000, primarily due to regular scheduled payments of
long-term debt, offset by a $50,000 advance on a construction loan to expand the
Company's movie theatre in Dillon, Colorado.
During the fourth quarter of 2004, the Company completed an amendment of its
senior debt, which included a term loan of $10.0 million, a non-revolving line
of credit of up to $6.2 million and a revolving loan of up to $5.0 million at
variable interest rates ranging from LIBOR plus 2.25% to Prime plus 0.25% (4.8%
at March 31, 2005). The term loan, non-revolving line of credit and revolving
loan mature on January 1, 2012, January 1, 2007 and January 1, 2008,
respectively. Upon maturity of the non-revolving line of credit, it is
convertible into a converted term loan maturing January 1, 2012. At March 31,
2005, both the non-revolving line of credit and the revolving loan were fully
available as none had been drawn. The credit agreement requires an annual
facility fee on the unused commitment of 0.25%, and requires compliance with
certain financial covenants, which include a fixed charge coverage ratio of 1.1
to 1.0, a loan-to-value ratio of not more than 50%, a leverage ratio of 3.0 to
1.0, maintaining a tangible net worth of not less than $20.8 million, plus 50%
of net income and maintaining accounts with an average monthly compensating
balance of not less than $750,000. At March 31, 2005, the Company was in
compliance with such financial covenants.
On April 14, 2004, the Company successfully completed its offer to exchange
$1,000 principal amount of its new 8 1/4% Limited Convertible Senior
Subordinated Notes due 2012 (the "New Notes") for each $1,000 principal amount
of its 7 1/2% Convertible Subordinated Notes due 2006 (the "Old Notes"). The
exchange offer commenced March 2, 2004 and expired on April 14, 2004. A total
of $17.9 million principal amount of Old Notes were exchanged, leaving $12.3
million principal amount of Old Notes outstanding. The New Notes provide for a
higher interest rate, have a longer term, are convertible into Common Stock at a
lower conversion price of $9.00 per share until March 1, 2007 and are senior to
the Old Notes and the Company's 9 1/2% Subordinated Debentures due 2012.
5
Note 4 - Discontinued Operation
On April 28, 2004, the Company completed an agreement to sell the capital stock
of its Australian subsidiary, Trans-Lux Pty Limited ("PTY"), for $1.7 million in
cash, and the operating results were assumed by the buyer effective as of
February 29, 2004. In accordance with the provisions of SFAS No. 144,
"Accounting For the Impairment or Disposal of Long-lived Assets," the Company
has accounted for PTY as a discontinued operation. The consolidated financial
statements reflect the assets and liabilities of the discontinued operation and
the operations for the current and prior periods are reported as a discontinued
operation.
The following table presents the financial results of the discontinued
operation:
Three months ended March 31
In thousands, 2004
- -------------------------------------------------------------
Revenues $ 135
Operating expenses 126
-----
Gross profit 9
General and administrative expenses (126)
Foreign currency gain 141
Interest income 3
Income tax provision (12)
-----
Income from discontinued operation $ 15
=====
Earnings per share $0.01
-----
Note 5 - Reporting Comprehensive Income
Total comprehensive income for the three months ended March 31, 2005 and 2004 is
as follows:
Three months ended March 31
In thousands 2005 2004
- ------------------------------------------------------------------------------
Net income (loss) $(422) $ 38
Other comprehensive income (loss): ----- ----
Unrealized foreign currency translation gain (loss) (16) (16)
Unrealized holding gain (loss) on securities (25) 1
Income taxes related to other comprehensive
income (loss) items 10 -
----- ----
Total other comprehensive income (loss), net of tax $ (31) $(15)
----- ----
Comprehensive income (loss) $(453) $ 23
===== ====
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. 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. Segment operating
income is
6
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, 2005 and 2004 is as follows:
Three months ended March 31
In thousands 2005 2004
- ------------------------------------------------------------------------
Revenues:
Indoor display $ 3,434 $ 4,330
Outdoor display 5,154 4,778
Entertainment/real estate 3,061 3,221
------- -------
Total revenues 11,649 12,329
======= =======
Operating income:
Indoor display 309 891
Outdoor display 124 114
Entertainment/real estate 812 943
------- -------
Total operating income 1,245 1,948
Other income 25 12
Corporate general and administrative expenses (1,008) (1,003)
Interest expense-net (946) (915)
Income tax benefit (provision) 262 (19)
------- -------
Income (loss) from continuing operations (422) 23
Income from discontinued operation, net of tax - 15
------- -------
Net income (loss) $ (422) $ 38
======= =======
Note 7 - Components of Net Periodic Pension Cost
In December 2003, the FASB issued SFAS No. 132R, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" ("SFAS 132R"). SFAS 132R revises
the financial statement disclosures required for pension and postretirement
obligations, including new interim disclosures. As of December 31, 2003, the
benefit service under the pension plan has been frozen and, accordingly, there
is no service cost for the period ended March 31, 2005.
The following table presents the components of net periodic pension cost:
Three months ended March 31
In thousands 2005 2004
- ---------------------------------------------------------------------------
Service cost $ - $ -
Interest cost 156 152
Expected return on plan assets (156) (148)
Amortization of prior service cost 4 5
Amortization of net actuarial loss 67 61
----- -----
Net periodic pension cost $ 71 $ 70
===== =====
The Company estimates that a minimum of approximately $56,000 in contributions
will be made in 2005.
7
Note 8 - 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.
Note 9 - Joint Venture
The Company has a 50% ownership in a joint venture partnership, MetroLux
Theatres ("MetroLux"), accounted for by the equity method.
The following results of operations summary information relates to MetroLux for
the three months ended March 31, 2005 and 2004, and summary balance sheet
information relates to MetroLux as of March 31, 2005 and December 31, 2004:
Three months ended March 31
In thousands 2005 2004
- ---------------------------------------------------------------------------
Revenues $747 $957
Gross profit 453 545
Net income 180 264
Company's share of partnership net income 90 132
---- ----
March 31 December 31
In thousands 2005 2004
- ----------------------------------------------------------------------------
Current assets $ 562 $ 606
Noncurrent assets 3,914 3,897
------ ------
Total assets 4,476 4,503
====== ======
Current liabilities 453 608
Noncurrent liabilities 1,583 1,635
------ ------
Total liabilities 2,036 2,243
====== ======
Company's equity in partnership net assets $1,233 $1,133
------ ------
The Company's equity in partnership net assets is reflected in other assets in
the consolidated balance sheets.
8
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. 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
catalog sports, retail and commercial markets. In addition, on April 28, 2004,
the Company sold its Australian operations, effective as of February 29, 2004.
The Company has accounted for the Australian operations as a discontinued
operation. Accordingly, the consolidated financial statements reflect the
assets and liabilities of the discontinued operation and the operations for the
current and prior periods are reported as a discontinued operation (see Note 4).
The Entertainment/Real Estate segment includes the operations of the motion
picture theatres in the western Mountain States and income-producing real estate
properties.
Results of Operations
Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004
Total revenues for the three months ended March 31, 2005 decreased 5.5% to $11.6
million from $12.3 million for the three months ended March 31, 2004,
principally due to decreases in Indoor display sales and in Entertainment/Real
Estate revenues, offset by an increase in Outdoor display sales revenues.
Indoor display revenues decreased $896,000 or 20.7%. Of this decrease, Indoor
display equipment sales decreased $622,000 or 38.5%, primarily due to the timing
of recognizing percentage of completion sales, as the March 31, 2005 backlog is
approximately $600,000 larger than last year. Indoor display equipment rentals
and maintenance revenues decreased $274,000 or 10.1%, primarily due to
disconnects and non-renewals of equipment on rental and maintenance on existing
contracts in the financial services market. The financial services market
continues to be negatively impacted due to the recent downturn in the economy,
resulting in consolidation within that industry. Although the market conditions
appear to be improving, installations of new equipment tend to lag any economic
turnaround.
9
Outdoor display revenues increased $376,000 or 7.9%. Of this increase, Outdoor
display equipment sales increased $574,000 or 17.7%, primarily in the commercial
outdoor market. Outdoor display equipment rentals and maintenance revenues
decreased $198,000 or 12.9%, primarily due to the continued expected revenue
decline in the Outdoor display equipment rentals and maintenance bases
previously acquired.
Entertainment/Real Estate revenues decreased $160,000 or 5.0% primarily from a
decrease in overall admissions due to the lack of blockbuster films in 2005,
whereas 2004 included a blockbuster independent film. The Company expanded two
of its theatre locations with the opening of 2 new screens in Durango, Colorado
in April 2004 and 2 new screens in Dillon, Colorado in January 2005.
Total operating income for the three months ended March 31, 2005 decreased 36.1%
to $1.2 million from $1.9 million for the three months ended March 31, 2004,
principally due to the reduction in revenues in the Indoor display segment.
Indoor display operating income decreased $582,000 or 65.3%, primarily as a
result of the decrease in revenues in the financial services market. The cost
of Indoor displays represented 62.6% of related revenues in 2005 compared to
60.5% in 2004. 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 decreasing, and the revenues from Indoor
display equipment rentals and maintenance also decreasing but not at the same
rate. The Company continues to strategically address the field service costs.
Field service costs in the first quarter of 2005 compared to the first quarter
of 2004 were reduced by approximately $49,000. Indoor display cost of equipment
sales decreased $402,000 or 53.2%, primarily due to the decrease in revenues and
the volume mix. Indoor display cost of equipment rentals and maintenance
decreased $66,000 or 3.5%, largely due to the reduction in the rentals and
maintenance bases. Indoor display general and administrative expenses increased
$154,000 or 18.8% due primarily to an increase in the reserve for doubtful
accounts. Cost of Indoor display equipment rentals and maintenance includes
field service expenses, plant repair costs, maintenance and depreciation.
Outdoor display operating income increased $10,000 or 8.8%, primarily as a
result of the increase in sales, offset by the decrease in rentals and
maintenance. The cost of outdoor displays represented 80.7% of related revenues
in 2005 compared to 79.3% in 2004. This change is primarily due to the increase
in volume of sales in the commercial outdoor market. Outdoor display cost of
equipment sales increased $413,000 or 16.5%, principally due to the increase in
volume. Outdoor display cost of equipment rentals and maintenance decreased
$40,000 or 3.1%, primarily due to a decrease in field service costs. Outdoor
display general and administrative expenses decreased slightly. Cost of Outdoor
display equipment rentals and maintenance includes field service expenses, plant
repair costs, maintenance and depreciation.
Entertainment/Real Estate operating income decreased $131,000 or 13.9%,
primarily due to a decrease in overall admissions. The cost of
entertainment/real estate represented 71.9% of related revenues in 2005 compared
to 71.3% in 2004. Cost of entertainment/real estate, which includes film rental
costs and depreciation expense, decreased $97,000 or 4.2%, primarily due to the
reduction in revenues. Entertainment/Real Estate general and administrative
expenses increased $26,000 due to
10
increased travel and office expenses.
Corporate general and administrative expenses decreased slightly despite an
increase in the foreign currency loss compared to the prior year.
Net interest expense increased $31,000, which is primarily attributable to an
increase in interest rates. 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, 2005 and 2004 was
38.3% and 45.2%, respectively.
Liquidity and Capital Resources
The regular quarterly cash dividend for the first quarter of 2005 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 21, 2005, payable to
stockholders of record as of April 20, 2005, and was paid April 29, 2005.
During the fourth quarter of 2004, the Company completed an amendment of its
senior debt, which included a term loan of $10.0 million, a non-revolving line
of credit of up to $6.2 million and a revolving loan of up to $5.0 million at
variable interest rates ranging from LIBOR plus 2.25% to Prime plus 0.25% (4.8%
at March 31, 2005). The term loan, non-revolving line of credit and revolving
loan mature on January 1, 2012, January 1, 2007 and January 1, 2008,
respectively. Upon maturity of the non-revolving line of credit, it is
convertible into a converted term loan maturing January 1, 2012. At March 31,
2005, both the non-revolving line of credit and the revolving loan were fully
available as none had been drawn. The credit agreement requires an annual
facility fee on the unused commitment of 0.25%, and requires compliance with
certain financial covenants, which include a fixed charge coverage ratio of 1.1
to 1.0, a loan-to-value ratio of not more than 50%, a leverage ratio of 3.0 to
1.0, maintaining a tangible net worth of not less than $20.8 million, plus 50%
of net income and maintaining accounts with an average monthly compensating
balance of not less than $750,000. At March 31, 2005, the Company was in
compliance with such financial covenants.
During the second quarter of 2004, the Company successfully completed its offer
to exchange $1,000 principal amount of its new 8 1/4% Limited Convertible Senior
Subordinated Notes due 2012 for each $1,000 principal amount of its 7 1/2%
Convertible Subordinated Notes due 2006. The exchange offer commenced March 2,
2004 and expired on April 14, 2004. A total of $17.9 million principal amount
of Old Notes were exchanged, leaving $12.3 million principal amount of Old Notes
outstanding. The New Notes provide for a higher interest rate, have a longer
term, are convertible into Common Stock at a lower conversion price of $9.00 per
share until March 1, 2007 and are senior to the Old Notes and the Company's 9
1/2% Subordinated Debentures due 2012.
Under various agreements, the Company is obligated to make future cash payments
in fixed amounts. These include payments under the Company's long-term debt
agreements, including the 7 1/2% Convertible Subordinated Notes not exchanged
in the Exchange Offer that mature December 1,
11
2006, employment and consulting agreement payments and rent payments required
under operating lease agreements.
The following table summarizes the Company's fixed cash obligations as of March
31, 2005 for the remainder of 2005 and the next four years:
Remainder of
In thousands 2005 2006 2007 2008 2009
- ------------ ---- ---- ---- ---- ----
Long-term debt $1,512 $14,458 $2,090 $4,704 $2,258
Employment and consulting
agreement obligations 1,161 1,298 1,309 1,345 851
Operating leases 558 645 466 359 263
------ ------- ------ ------ ------
Total $3,231 $16,401 $3,865 $6,408 $3,372
====== ======= ====== ====== ======
Cash and cash equivalents decreased $1.2 million for the three months ended
March 31, 2005 compared to an increase of $876,000 in 2004. The decrease in
2005 is primarily attributable to a reduction in cash provided by operating
activities of $420,000, offset by investment in equipment for rental, expansion
of the Company's movie theatre in Dillon, Colorado, and scheduled payments of
long-term debt. The increase in 2004 is primarily attributable to cash provided
by operating activities of $2.4 million and proceeds received from construction
loan borrowings, offset by investment in equipment for rental, expansion of the
Company's movie theatre in Durango, Colorado 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 investment in its Canadian
subsidiary and previously its Australian subsidiary. The Company may, from time
to time, enter into derivative contracts to manage its interest risk. The
Company does not enter into derivatives for trading or speculative purposes. At
March 31, 2005, the Company did not hold any derivative financial instruments.
A one percentage point change in interest rates would result in an annual
interest expense fluctuation of approximately $259,000. A 10% change in the
Canadian dollar relative to the U.S. dollar would result in a currency exchange
expense fluctuation of approximately $188,000, based on dealer quotes,
considering current exchange rates.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. The Company's President
and Co-Chief Executive Officer, Michael R. Mulcahy, the Company's Executive
Vice President and Co-Chief Executive Officer, Thomas Brandt, and the Company's
Executive Vice President and Chief Financial Officer, Angela D. Toppi, have
evaluated the effectiveness of the design and operation of its disclosure
controls and procedures as of the end of the period covered by this quarterly
report. The Company's disclosure controls and procedures are designed to ensure
that material 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, the Company's Co-Chief Executive Officers and Chief Financial
Officer have concluded that these controls and procedures are effective.
Changes in Internal Control over Financial Reporting. There has been no
change in the Company's internal control over financial reporting, that occurred
in the first fiscal quarter, that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.
Part II - Other Information
---------------------------
Item 5. Other Information
During the quarter for which this report on Form 10-Q is filed, the
registrant filed a Form 8-K dated March 31, 2005, containing a press release
pertaining to the financial performance for the fourth quarter of 2004 and
annual results.
Item 6. Exhibits
31.1 Certification of Michael R. Mulcahy, President and Co-Chief
Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certification of Thomas Brandt, Executive Vice President and
Co-Chief Executive Officer, pursuant to Rule 13a-14(a) and
15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.3 Certification of Angela D. Toppi, Executive Vice President
and Chief Financial Officer, pursuant to Rule 13a-14(a) and
15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of Michael R. Mulcahy, President and Co-Chief
Executive
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Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 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.
32.3 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.
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 13, 2005
by /s/ Angela D. Toppi
-------------------------------
Angela D. Toppi
Executive Vice President and
Chief Financial Officer
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