-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, kL7SiLmxk/1kplc/YpXs+Av1LElyGp939PbYA/glzs8CaZIhEHWzwDx1X2/6zOWg B8e+TlvO4S1WGCB7XnUEyw== 0000097886-95-000011.txt : 19950616 0000097886-95-000011.hdr.sgml : 19950616 ACCESSION NUMBER: 0000097886-95-000011 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950322 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: THOMAS INDUSTRIES INC CENTRAL INDEX KEY: 0000097886 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 610505332 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-05426 FILM NUMBER: 95522276 BUSINESS ADDRESS: STREET 1: P O BOX 35120 CITY: LOUISVILLE STATE: KY ZIP: 40232 BUSINESS PHONE: 5028934600 MAIL ADDRESS: STREET 1: P O BOX 35120 CITY: LOUISVILLE STATE: KY ZIP: 40232 10-K405 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION (Mark One) Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-5426 THOMAS INDUSTRIES INC. (Exact name of Registrant as specified in its Charter) DELAWARE 61-0505332 (State of incorporation) (I.R.S. Employer Identification Number) 4360 BROWNSBORO ROAD, LOUISVILLE, KENTUCKY 40207 (Address of principal executive offices) (Zip Code) 502/893-4600 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE SECURITIES EXCHANGE ACT OF 1934: Title of Each Class Name of Each Exchange on which Registered Common Stock, $1 Par Value New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange 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 or any amendment to this Form 10-K. [X] 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. [X] As of March 3, 1995, 10,082,678 shares of the registrant's Common Stock were outstanding. The aggregate market value of the voting stock held by non-affiliates of the Registrant at March 3, 1995, was approximately $150,000,000. Portions of Proxy Statement for the Annual Meeting of Shareholders on April 20, 1995, are incorporated by reference in Part III of this report. Portions of the Annual Report to Shareholders for fiscal year ended December 31, 1994 are incorporated by reference in Parts I and II of this report. PART I. ITEM 1. BUSINESS a. General Development of Business. The Company began operations in 1928 and has grown through both internal expansion and new business acquisitions. Efforts since 1984 have focused on expansion of the Lighting Segment and the Compressors and Vacuum Pumps Segment as the two core businesses. The significant recent additions to these two core segments have been ASF, Pneumotive, Brey, and WISA, all compressor and vacuum pump companies, acquired from 1987 through 1990; and the Lumec and Day-Brite Lighting additions in 1987 and 1989, respectively. These acquisitions have been strategically important as they allow the Company to offer a more complete product line and make the Company a more prominent participant in both the lighting and compressor and vacuum pump markets. The Lighting Segment operates in a multi-faceted industry, serving the consumer, commercial, industrial, and outdoor markets. The industry is dominated by five companies in the U.S. and Canada, one of which is Thomas Industries. Although the industry is subject to the cyclicality of residential and commercial construction activity, replacement and renovation activity moderates these cycles somewhat. Operations of the Compressors and Vacuum Pumps Segment help the Company moderate the impact of the Lighting Segment's vulnerability to construction and economic cycles. Thomas believes it is the major supplier to the original equipment manufacturer (OEM) medical market and a significant participant in its other OEM compressor and vacuum pump markets. During 1994, the Company divested the three remaining disassociated operating units that manufactured commercial construction hardware and consumer fireplaces and fireplace accessory products. These operations were insignificant, both individually and in the aggregate, to the Company. b. Financial Information about Industry Segments. The information required by this item is set forth in Exhibit 13 under the heading "Notes to Consolidated Financial Statements," which information is hereby incorporated herein by reference. c. Narrative Description of Business. The Company's principal businesses are lighting, including consumer, commercial, industrial, and outdoor lighting fixtures; and compressors and vacuum pumps. The Company designs, manufactures, markets, and sells these products; and maintains corporate offices in Louisville, Kentucky. The Company operates numerous divisions and subsidiaries, with facilities throughout the U.S. and operations in Canada and Germany. The Company also maintains sales offices in Brazil, England, Italy, and Japan and has joint ventures in Japan and in the U.S. and Canada with a Belgian company. ITEM 1. (Continued) Lighting Segment The Company's consumer lighting products--its original base--are designed for a broad range of consumers. The Company stresses product development to meet changing needs and demands. The Company typically targets the more upscale, single-family homeowner but also has a line for the do-it-yourself homeowner. The Company also is strongly involved in the replacement lighting market, which is a growing component of the overall lighting industry. Under the Thomas, Premier, and Do-It- Yourself brand names, the Company's consumer lighting line includes high-style chandeliers and bathroom fixtures, plus quality lighting products for foyers, dining rooms, living rooms, entertainment areas, kitchens, bedrooms, and outdoors. The Thomas, Premier, and Do-It-Yourself lines are distributed throughout the United States through a network of electrical distributors, lighting showrooms, and home centers, which, in turn, sell to electrical contractors, builders, and consumers. Consumer lighting fixtures are manufactured and sold in the U.S. and Canada under the Thomas, Premier, and Do-It-Yourself trade names; and those trade names are recognized as important to this Segment's business. The Company believes it has established a reputation as an innovator and pioneer in track and recessed lighting technology and is one of the nation's leading manufacturers of fluorescent and high-intensity discharge ("HID") commercial and industrial products. The Company's commercial and industrial product line can be applied to virtually any application, using a variety of lamp sources, and is designed for efficiency as well as energy savings. The Company's outdoor lighting products are known for their high performance in efficiency, glare control, and uniformity of illumination. Products are manufactured and sold in the U.S. and Canada under the Day-Brite, Gardco, Capri, Electro/Connect, McPhilben, Omega, Emco, Lumec, and Thomas Lighting trade names. The Lighting Segment accounted for 67 percent of the Company's sales in 1994, compared to 66 percent in 1993 and 68 percent in 1992. Compressors and Vacuum Pumps Segment This Segment includes air compressors and vacuum pumps manufactured under the Thomas name for use in the finished products of other domestic or foreign manufacturers. Its products also are manufactured for private-label sale in the construction compressor industry. Thomas specializes in compressor applications below the 1.5 horsepower range. Such compressors and vacuum pumps are found in medical equipment, vending machines, photocopiers, computer tape drives, automotive and transportation equipment, liquid dispensing applications, gasoline vapor recovery, and waste disposal equipment. Thomas is the major compressor and vacuum pump participant in the medical OEM industry ITEM 1. (Continued) worldwide. The Company offers a wide selection of branded standard air compressors and vacuum pumps and will modify or design its products to meet exacting OEM applications. In addition, the Company manufactures and sells compressors and related accessories for commercial and consumer use. Sales, both domestic and international, traditionally are made through hardware stores, home centers, building supply dealers, and mass merchandisers. The Pneumotive Division manufactures rotary vane and piston compressors and vacuum pumps, as well as air motors and vacuum ejectors, for a variety of applications to the OEM market as well as through fluid power and large compressor distributors. The Brey Division produces a complementary line of rotary vane compressors and vacuum pumps, with expertise in applications of less than 1/8 horsepower. These products are currently distributed for sale primarily in Europe, with increasing worldwide marketing. Under the ASF name, the Company produces diaphragm and peristaltic compressors and vacuum pumps with applications in photography, medical, air and gas sampling, and dish washing equipment, as well as laboratory instruments and leak detection devices. These products are marketed worldwide to original equipment manufacturers. WISA produces a line of linear-type vibrating and diaphragm compressors and vacuum pumps for various applications, the foremost of which is gas analyzers. Sales and distribution are made primarily in Europe and the U.S., with expanding availability worldwide. The Thomas, ASF, Pneumotive, Brey, WISA, and Sprayit trade names are recognized in the market and are important to the Segment. The Compressors and Vacuum Pumps Segment accounted for 32 percent of the Company's sales in 1994, compared to 29 percent in 1993 and 26 percent in 1992. Other Products These products, on a combined basis, accounted for 1 percent of the Company's sales in 1994, compared to 5 percent in 1993 and 6 percent in 1992. --------------------- No single customer of the Company accounted for more than 10 percent of consolidated net sales or more than 10 percent of any segment's net sales in 1994, and no material part of the business is dependent upon a single customer the loss of which could have a materially adverse effect on the business of the Company. The backlog of unshipped orders was $90 million at December 31, 1994--48 percent Lighting and 52 percent Compressors and Vacuum Pumps--and ITEM 1. (Continued) $86 million at December 31, 1993--56 percent Lighting, 43 percent Compressors and Vacuum Pumps, and 1 percent Other. The Company believes substantially all of such orders are firm, although some orders are subject to cancellation. Substantially all of these orders are filled in the succeeding year. Competition in the lighting industry is strong in all markets served by the Company. The industry has been consolidating significantly over the last few years. It is estimated that five companies control the majority of the market in the U.S. and Canada. Thomas Industries is one of these top five. The Company stresses high quality, and energy efficient lighting products, while providing value and strong customer support to compete in its markets. The Compressors and Vacuum Pumps Segment competes worldwide in the fractional horsepower compressor and vacuum pump markets. Management believes it is the major supplier to the OEM medical market and a significant participant in its other OEM markets. The Company believes that it has adequate sources of materials and supplies for each of its businesses. There is no significant seasonal impact on the business of any industry segment of the Company. Many of the lighting businesses continue to be dependent on the construction markets, which are subject to the overall health of the economy. Working capital is provided principally from operating profits. The Company maintains adequate lines of credit and financial resources to meet the anticipated cash requirements in the year ahead. The Company has various patents and trademarks but does not consider its business to be materially dependent upon any individual patent or trademark. During 1994, the Company spent $12.7 million on research activities relating to the development of new products and the improvement of existing products. Substantially all of this amount was Company-sponsored activity. During 1993, the Company spent $12.4 million on these activities and during 1992, $12.5 million. Continued compliance with present and reasonably expected federal, state, and local environmental regulations is not expected to have any material effect upon capital expenditures, earnings, or the competitive position of the Company and its subsidiaries. The Company employs approximately 3,200 people. ITEM 1. (Continued) d. Financial Information about Foreign and Domestic Operations and Export Sales. See Notes to Consolidated Financial Statements, as set forth in Exhibit 13, which information is incorporated herein by reference to the Company's 1994 Annual Report to Shareholders, for financial information about foreign and domestic operations. Export sales for the years 1994, 1993, and 1992, were $36,600,000, $34,500,000, and $32,800,000, respectively. e. Executive Officers of the Registrant.
Year Office or Position First Elected with Company Age as an Officer Timothy C. Brown President, Chief Executive 44 1984 Officer, Chairman of the Executive Committee, and Director Richard J. Crossland Group Vice President-- 51 1994 (A) Lighting Clifford C. Moulton Group Vice President-- 47 1993 (B) Compressors and Vacuum Pumps Phillip J. Stuecker Vice President, Finance, 43 1984 Chief Financial Officer, and Secretary Ronald D. Schneider Vice President, 44 1992 (C) Lighting Operations C. Barr Schuler Vice President, Corporate 54 1977 Development and Acquisitions Gilbert R. Grady, Jr. Vice President, Corporate 58 1981 Employee Relations (A) Richard J. Crossland was elected an officer on August 18, 1994. Mr. Crossland spent the past 10 years with Philips Lighting Company, Somerset, New Jersey, where he was Group Vice President/General Manager of four divisions since 1990 and Vice President, Operations, of seven manufacturing facilities from 1989 to 1990. (B) Clifford C. Moulton was elected an officer effective March 1, 1993. Mr. Moulton had spent the past 23 years with Honeywell Corporation in various management positions, most recently as Vice President and General Manager of the Skinner Valve Division, since 1987. ITEM 1. (Continued) (C) Ronald D. Schneider was elected an officer effective April 16, 1992. Mr. Schneider had held the position of Director, Manufacturing Services, since 1989 and prior to that was Manufacturing Services Manager at the Company's Power Air Division. He has been with the Company since 1984.
All other officers listed have been executive officers for the past five years. ITEM 2. PROPERTIES The Corporate offices of the Company are located in Louisville, Kentucky. Due to the large number of individual locations and the diverse nature of the operating facilities, it is neither practical nor significant to describe all of the properties owned and leased by the Company. All of the buildings are of steel, masonry, and concrete construction, are in generally good condition, provide adequate and suitable space for the operations at each location, and are of sufficient capacity for present and foreseeable future needs. The following listing summarizes the Company's properties.
Number of Facilities Combined Segment Owned Leased Square Feet Nature of Facilities Lighting 9 5 1,867,887 Manufacturing plants 2 4 516,616 Distribution centers 0 4 65,630 Administrative offices Compressors and Vacuum 3 3 558,100 Manufacturing plants Pumps 0 1 6,000 Distribution center Corporate 0 2 16,186 Corporate headquarters 4 1 355,600 Leased to third parties 3 0 279,200 Property for sale
ITEM 3. LEGAL PROCEEDINGS In the normal course of business, the Company and its subsidiaries are parties to legal proceedings. Management believes that these proceedings will be resolved with no materially adverse impact on the financial condition of the Company. 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 SHAREHOLDER MATTERS The information required by this item is set forth in Exhibit 13 under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" and under the heading "Notes to Consolidated Financial Statements," which information is contained in the Company's 1994 Annual Report to Shareholders and hereby incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information required by this item is set forth in Exhibit 13 under the heading "11-Year Summary of Operations and Statistics," which information is contained in the Company's 1994 Annual Report to Shareholders and hereby incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is set forth in Exhibit 13 under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations," which information is contained in the Company's 1994 Annual Report to Shareholders and hereby incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is set forth in Exhibit 13 under the headings "Consolidated Financial Statements," "Notes to Consolidated Financial Statements," and "Report of Management and Independent Auditors," which information is contained in the Company's 1994 Annual Report to Shareholders and hereby incorporated herein by reference. The supplementary data regarding quarterly results of operations is set forth in Exhibit 13 under the heading "Notes to Consolidated Financial Statements," which information is contained in the Company's 1994 Annual Report to Shareholders and hereby incorporated herein by reference. 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. Directors of the Company The information required by this item is set forth in registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on April 20, 1995, under the headings "Election of Directors" and "Compliance with ITEM 10. (Continued) Section 16(a)," which information is hereby incorporated herein by reference. b. Executive Officers of the Company Reference is made to "Executive Officers of the Registrant" in Part I, Item 1e. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is set forth in registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on April 20, 1995, under the headings "Executive Compensation," "Compensation Committee Interlocks and Insider Participation," and "Board of Directors, which information is hereby incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is set forth in registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on April 20, 1995, under the heading "Securities Beneficially Owned by Principal Shareholders and Management," which information is hereby incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is set forth in registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on April 20, 1995, under the caption "Board of Directors," which information is hereby incorporated herein by reference. PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K a. (1) Financial Statements The following consolidated financial statements of Thomas Industries Inc. and subsidiaries, included in the Company's 1994 Annual Report to Shareholders are included in Part II, Item 8: Consolidated Balance Sheets--December 31, 1994 and 1993 Consolidated Statements of Income--Years ended December 31, 1994, 1993, and 1992 Consolidated Statements of Shareholders' Equity--Years ended December 31, 1994, 1993, and 1992 Consolidated Statements of Cash Flows--Years ended December 31, 1994, 1993, and 1992 Notes to Consolidated Financial Statements--December 31, 1994 11-Year Summary of Operations and Statistics Independent auditors report from KPMG Peat Marwick LLP Independent auditors report from Ernst & Young LLP ITEM 14. (Continued) (2) Financial Statement Schedules Schedule VIII -- Valuation and Qualifying Accounts (3) Listing of Exhibits
Exhibit No. Exhibit 3(a) Restated Certificate of Incorporation, as amended, filed as Exhibit 3(a) to registrant's report on Form 10-Q dated August 11, 1988, hereby incorporated by reference. 3(b) Bylaws, as amended March 17, 1993, filed as Exhibit 3(b) to registrant's report on Form 10-K dated March 25, 1993, hereby incorporated by reference. 4(a) Note Agreement dated January 19, 1990, by and among the Company and its Day-Brite Lighting, Inc., subsidiary, Allstate Life Insurance Company, and other investors filed as Exhibit No. 4 to registrant's report on Form 10-K dated March 22, 1990, hereby incorporated by reference. Copies of debt instruments for which the related debt is less than 10% of consolidated total assets will be furnished to the Commission upon request. 4(b) Rights Agreement filed as Exhibit 1 to registrant's report on Form 8-A on December 23, 1987, hereby incorporated by reference. 4(c) Amendment to Rights Agreement filed as Exhibit 1 to the registrant's report on Form 8-K on October 18, 1990, hereby incorporated by reference. 10(a) Employment Agreements with Timothy C. Brown, Gilbert R. Grady, Jr., C. Barr Schuler, and Phillip J. Stuecker filed as Exhibits 3(a), 3(f), 3(i), and 3(j), respectively, to registrant's report on Form 10-Q dated November 11, 1988, hereby incorporated by reference. ITEM 14. (Continued) Exhibit No. Exhibit 10(b) Employment Agreement with Clifford C. Moulton filed as Exhibit 10(b) to registrant's report on Form 10-K dated March 25, 1993, hereby incorporated by reference. 10(c) Employment Agreement between Richard J. Crossland and the Company, dated August 29, 1994. 10(d) Trust Agreement, filed as Exhibit 10(1) to registrant's report on Form 10-Q dated November 11, 1988, hereby incorporated by reference. 10(e) Form of Indemnity Agreement and Amendment thereto entered into by the Company and each of its Executive Officers filed as Exhibits 10 (g) and (h) to registrant's report on Form 10-K dated March 23, 1988, hereby incorporated by reference. 10(f) Severance pay policy of the Company, effective October 1, 1988, covering all Executive Officers, filed as Exhibit 10(d) to registrant's report on Form 10-K dated March 23, 1989, hereby incorporated by reference. 10(g) 1987 Incentive Stock Plan as Amended, filed as Annex A to the registrant's Proxy Statement on March 17, 1989, hereby incorporated by reference. 10(h) Non-Employee Director Stock Option Plan, filed as Exhibit A to the registrant's Proxy Statement on March 10, 1994, hereby incorporated by reference. 10(i) 1995 Incentive Stock Plan, filed as Exhibit A to the registrant's Proxy Statement on March 14, 1995, hereby incorporated by reference. 13 Certain portions of the Company's 1994 Annual Report to Shareholders as specified in Part II hereof to be incorporated by reference in this Annual Report on Form 10-K. ITEM 14. (Continued) Exhibit No. Exhibit 21 Subsidiaries of the Registrant. 23 Consent of KPMG Peat Marwick LLP. 23(a) Consent of Ernst & Young LLP. 27 Financial Data Schedule.
b. Reports on Form 8-K There were no reports on Form 8-K for the three months ended December 31, 1994. c. Exhibits The exhibits filed as part of this Annual Report on Form 10-K are as specified in Item 14(a)(3) herein. S I G N A T U R E S 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, there unto duly authorized. THOMAS INDUSTRIES INC. Date: March 22, 1995 By TIMOTHY C. BROWN ---------------------------- Timothy C. Brown, President
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 dates indicated.
Signature Title Date WALTER S. DAVIS - ---------------------------------- Chairman of the Board; 3/22/95 Walter S. Davis Director TIMOTHY C. BROWN - ---------------------------------- President; Chief Executive 3/22/95 Timothy C. Brown Officer; Chairman of the Executive Committee; Director (Principal Executive Officer) PHILLIP J. STUECKER - ----------------------------------- Vice President, Finance; 3/22/95 Phillip J. Stuecker Chief Financial Officer; Secretary (Principal Financial Officer) RONALD D. WISEMAN - ----------------------------------- Controller; Assistant 3/22/95 Ronald D. Wiseman Secretary (Principal Accounting Officer) PETER P. DONIS - ----------------------------------- Director 3/22/95 Peter P. Donis WALLACE H. DUNBAR - ----------------------------------- Director 3/22/95 Wallace H. Dunbar ROGER P. EKLUND - ----------------------------------- Director 3/22/95 Roger P. Eklund Signatures (Continued) Signature Title Date H. JOSEPH FERGUSON - ----------------------------------- Director 3/22/95 H. Joseph Ferguson GENE P. GARDNER - ----------------------------------- Director 3/22/95 Gene P. Gardner LAWRENCE E. GLOYD - ----------------------------------- Director 3/22/95 Lawrence E. Gloyd RALPH D. KETCHUM - ----------------------------------- Director 3/22/95 Ralph D. Ketchum FRANKLIN J. LUNDING, JR. - ----------------------------------- Director 3/22/95 Franklin J. Lunding, Jr. BERNARD W. ROGERS - ----------------------------------- Director 3/22/95 Bernard W. Rogers
Independent Auditors' Report The Board of Directors and Shareholders Thomas Industries Inc. We have audited the consolidated balance sheets of Thomas Industries Inc. and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, shareholders' equity, and cash flows for the years then ended as listed in the accompanying index. In connection with our audits of the 1994 and 1993 consolidated financial statements, we also have audited the 1994 and 1993 financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these 1994 and 1993 consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 provides a reasonable basis for our opinion. In our opinion, the 1994 and 1993 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Thomas Industries Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. Also, in our opinion, the related 1994 and 1993 financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in Note 8 to the consolidated financial statements, the Company changed its method of accounting for postretirement benefits in 1993 to adopt the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." As discussed in Note 4, the Company changed its method of accounting for income taxes in 1993 to adopt the provisions of SFAS No. 109, "Accounting for Income Taxes." As discussed in Note 1, the Company changed its method of accounting for certain inventories in 1993. KPMG PEAT MARWICK LLP ---------------------- Louisville, Kentucky February 9, 1995 The Board of Directors and Shareholders Thomas Industries Inc. We have audited the accompanying consolidated statements of income, shareholders' equity, and cash flows of Thomas Industries Inc. and subsidiaries for the year ended December 31, 1992. Our audit also included the financial statement schedule for the year ended December 31, 1992, listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Thomas Industries Inc. and subsidiaries for the year ended December 31, 1992, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP ----------------- Louisville, Kentucky February 11, 1993
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS Thomas Industries Inc. and Subsidiaries December 31, 1994 ADDITIONS Balance at Charged to Charged to Balance at DESCRIPTION Beginning Costs Other Accounts - Deductions- End of of Period and Expenses Describe Describe Period Year ended December 31, 1994 Allowance for doubtful accounts $1,763,000 $ 705,000 $ 695,000 (1) $1,773,000 Allowance for obsolete and slow moving inventory 6,419,000 4,079,000 4,774,000 (2) 5,724,000 --------- --------- --------- --------- $8,182,000 $4,784,000 $5,469,000 $7,497,000 Year ended December 31, 1993 Allowance for doubtful accounts $2,220,000 $1,040,000 $1,497,000 (1) $1,763,000 Allowance for obsolete and slow moving inventory 4,742,000 4,470,000 2,793,000 (2) 6,419,000 --------- --------- $6,962,000 $5,510,000 $4,290,000 $8,182,000 Year ended December 31, 1992 Allowance for doubtful accounts $2,012,000 $1,921,000 $23,000 (3) $1,736,000 (1) $2,220,000 Allowance for obsolete and slow moving inventory 5,315,000 1,066,000 1,639,000 (2) 4,742,000 --------- --------- ------ --------- --------- $7,327,000 $2,987,000 $23,000 $3,375,000 $6,962,000 (1) Uncollectible accounts written off, less recoveries on accounts previously written off and effect of translation in accordance with SFAS No. 52 (2) Disposal of obsolete inventory and effect of translation in accordance with SFAS No. 52 (3) Balance at date of acquisition of subsidiary companies
EXHIBIT INDEX
Exhibit No. Exhibit Page 10c. Employment Agreement 19 13. Certain portions of the Company's 35 1994 Annual Report to Shareholders as specified in Part II hereof to be incorporated by reference in this Annual Report on Form 10-K 21. Subsidiaries of the Registrant 67 23. Consent of KPMG Peat Marwick 68 23.a Consent of Ernst & Young 69 27 Financial Data Schedule 70
EX-10 2 EMPLOYMENT AGREEMENT THIS AGREEMENT is entered into as of the 29th day of August, 1994, by and between THOMAS INDUSTRIES INC., a Delaware corporation (the "Company"), and Richard J. Crossland (the "Employee"). RECITALS A. Employee has been elected by the Board of Directors of the Company (the "Board"), or otherwise has been duly appointed by the Company, to the position of the Company (or one of its divisions or subsidiaries) as set forth on Exhibit A hereto. B. Employee possesses executive skills and experience which the Company believes are of substantial value and importance to the success of the Company's business operations. C. The Board has determined that it is in the best interests of the Company and its shareholders to ensure that the Company will have the continued dedication of the Employee, notwithstanding the possibility, threat, or occurrence of a Change of Control (as defined below) of the Company. D. The Board believes it is imperative to diminish the inevitable distraction of the Employee by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control, to encourage the Employee's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Employee with compensation arrangements upon a Change of Control which provide the Employee with individual financial security and which are competitive with those of other corporations. E. In order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. TERMS AND CONDITIONS NOW, THEREFORE, In consideration of the mutual agreements, conditions, and covenants hereinafter expressed, it is hereby agreed as follows: Section 1. Certain Definitions (a) Effective Date. The "Effective Date" shall be the first date during the Change of Control Period (as defined in Section 1(b) below) on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if the Employee's employment with the Company is terminated prior to the date on which a Change of Control occurs, and it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control, or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement, the "Effective Date" shall mean the date immediately prior to the date of such termination. (b) Change of Control Period; Normal Retirement Date; Renewal Date. The "Change of Control Period" is the period commencing on the date hereof and ending on the earlier to occur of (i) October 1, 1996, or (ii) the first day of the month next following the Employee's sixty-fifth birthday ("Normal Retirement Date"); provided, however, that commencing on October 1, 1994, and on each annual anniversary of such date (such date and each annual anniversary thereof is hereinafter referred to as the "Renewal Date"), the Change of Control Period shall be automatically extended so as to terminate on the earlier of (x) three years from such Renewal Date or (y) the first day of the month coinciding with or next following the Employee's Normal Retirement Date, unless at least 60 days prior to the Renewal Date the Company shall give notice that the Change of Control Period shall not be so extended. (c) Change of Control; Incumbent Board. For the purpose of this Agreement, a "Change in Control" shall mean a change of control of a nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), or any comparable successor provisions. Without limiting the foregoing, a "Change of Control" also means for purposes of this Agreement, regardless of its meaning under the provisions of the Exchange Act: (i) The purchase or other acquisition (other than from the Company) by any person, entity, or group of persons within the meaning of Section 13(d) or 14(d) of the Exchange Act (excluding, for this purpose, the Company or its subsidiaries or any employee benefit plan of the Company or its subsidiaries), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either the then outstanding shares of common stock or the combined voting power of the Company's then outstanding voting securities entitled to vote in the election of directors; or (ii) The receipt of proxies for the election of directors of the Company in opposition to management's slate of nominees, which proxies aggregate more than 40% of the then outstanding voting stock of the Company; or (iii) Individuals who, as of the date hereof, constitute the Board (as of the date hereof the "Incumbent Board") cease for any reason to constitute a least two-thirds of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least three-quarters of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (iv) Approval by the shareholders of the Company of a reorganization, merger, or consolidation, in each case, with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger, or consolidation do not, immediately thereafter, own more than 50% of the combined power entitled to vote generally in the election of directors of the reorganized, merged, or consolidated Company's then outstanding voting securities, or a liquidation or dissolution of the Company, or of the sale of all or substantially all of the assets of the Company. (d) Employment Period. The Company hereby agrees to continue the Employee in its employ, and the Employee hereby agrees to remain in the employ of the Company, for the period commencing on the Effective Date and ending on the earlier to occur of (i) the second anniversary of such date or (ii) the first day of the month coinciding with or next following the Employee's Normal Retirement Date (the "Employment Period"). (e) Accounting Firm. "Accounting Firm" shall mean a "big-eight" public accounting firm designated by the Company which does no substantial work for either the Company or any person owning more than 25% of the outstanding voting stock of the Company. (f) Internal Revenue Code. "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as amended. (g) Disability. "Disability" shall mean the total inability because of bodily injury or disease to carry out the duties of the Employee provided in Section 2 hereof for a period of six consecutive months. (h) Substantial Authority. "Substantial Authority" shall mean legal authority satisfying the criteria set forth in Section 1.6661-3 of the Income Tax Regulations currently in effect or similar successor provisions of the Internal Revenue Code and Income Tax Regulations. Section 2. Position and Duties of Employee. (a) Position. During the Employment Period, (i) the Employee's position (including status, offices, titles, and reporting requirements), authority, duties, and responsibilities shall be at least commensurate in all material respects with the most significant of those held or exercised by or assigned to the Employee at any time during the 90-day period immediately preceding the Effective Date, and (ii) the Employee's services shall be performed at the location where the Employee was employed immediately preceding the Effective Date or at any other office or location less than thirty-five (35) miles from such location. (b) Duties. During the Employment Period, and excluding any periods of vacation and sick leave to which the Employee is entitled, the Employee agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Employee hereunder, to use the Employee's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Employee to (i) serve on corporate, civic, or charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements, or teach at educational institutions, and (iii) manage personal investments, so long as such activities do not significantly interfere with the performance of the Employee's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Employee prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Employee's responsibilities to the Company. Section 3. Compensation. (a) Base Salary. During the Employment Period, the Employee shall receive a base salary (the "Base Salary") at a monthly rate at least equal to the highest monthly base salary paid or payable to the Employee by the Company during the twelve-month period immediately preceding the month in which the Effective Date occurs. Payment of such salary shall be made in regular installments in accordance with the Company's usual paying practices but not less frequently than monthly. During the Employment Period, the Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary awarded in the ordinary course of business to other key employees of the Company and its subsidiaries. Any increase in Base Salary shall not serve to limit or reduce any other obligation to the Employee under this Agreement. Base Salary shall not be reduced after any such increase. (b) Annual Bonus. In addition to Base Salary, the Employee shall be awarded, for each fiscal year during the Employment Period, an annual bonus (the "Annual Bonus") (either pursuant to the incentive compensation plan of the Company or otherwise) in cash at least equal to the average bonus payable to the Employee from the Company and its subsidiaries in respect of the three fiscal years immediately preceding the fiscal year in which the Effective Date occurs. (c) Incentive, Savings, and Retirement Plans. In addition to Base Salary and Annual Bonus payable as hereinabove provided, the Employee shall be entitled to participate during the Employment Period in all incentive, savings, and retirement plans, practices, policies, and programs applicable to other key employees of the Company and its subsidiaries (including the Company's employee benefit plans, in each case providing benefits which are the economic equivalent to those in effect or as subsequently amended). Such plans, practices, policies, and programs, in the aggregate, shall provide the Employee with compensation, benefits, and reward opportunities at least as favorable as the most favorable of such compensation, benefits, and reward opportunities provided by the Company for the Employee under such plans, practices, policies, and programs as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee, as provided at any time thereafter with respect to other key employees of the Company and its subsidiaries. (d) Welfare Benefit Plans. During the Employment Period, the Employee and/or the Employee's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies, and programs provided by the Company and its subsidiaries (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death, and travel accident insurance plans and programs), at least as favorable as the most favorable of such plans, practices, policies, and programs in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee and/or the Employee's family, as in effect at any time thereafter with respect to other key employees of the Company and its subsidiaries. (e) Expenses. During the Employment Period, the Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Employee in accordance with the most favorable policies, practices, and procedures of the Company and its subsidiaries in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee, as in effect at any time thereafter with respect to other key employees of the Company and its subsidiaries. (f) Fringe Benefits. During the Employment Period, the Employee shall be entitled to fringe benefits, including use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs, and policies of the Company and its subsidiaries in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee, as in effect at any time thereafter with respect to other key employees of the Company and its subsidiaries. (g) Office and Support Staff. During the Employment Period, the Employee shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Employee by the Company and its subsidiaries at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee, as provided at any time thereafter with respect to other key employees of the Company and its subsidiaries. (h) Vacation. During the Employment Period, the Employee shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs, and practices of the Company and its subsidiaries as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee, as in effect at any time thereafter with respect to other key employees of the Company and its subsidiaries. (i) Severance Plan. Except as provided in Section 7, during the Employment Period the Employee shall be entitled to the benefits of any severance plan of the Company in existence and applicable to the Employee at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee, as in effect at any time thereafter with respect to other key employees of the Company and its subsidiaries. Furthermore, any Waiver and Release executed by the Employee pursuant to any such severance plan shall not constitute a waiver and release of any kind to the rights that the Employee may have under this Agreement. Section 4. Termination. Termination of the Employee's employment during the Employment Period will occur or may be effected as follows: (a) Death or Disability. This Agreement shall terminate automatically upon the Employee's death. If the Company determines in good faith that the Disability of the Employee has occurred, it may give to the Employee written notice of its intention to terminate the Employee's employment. In such event, the Employee employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Employee (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Employee shall not have returned to full-time performance of the Employee's duties. (b) Cause. The Company may terminate the Employee's employment for Cause. For purposes of this Agreement, "Cause" means (i) a good faith determination by the Board, after notice to the Employee and opportunity by the Employee to be heard, that the Employee committed a fraud, misappropriation, embezzlement, or theft against or from the Company or any of its subsidiaries, intended to result in substantial personal enrichment of the Employee at the expense of the Company, (ii) conviction of the Employee of a felony, or (iii) good faith determination by the Board, after a ninety (90) day warning and the opportunity to cure and to be heard by the Board, on substantial evidence that the Employee was grossly negligent in carrying out, or unreasonably refused to serve or carry out, the duties and responsibilities as provided in Section 2 hereof. (c) Good Reason. The Employee's employment may be terminated by the Employee for Good Reason. For purposes of this Agreement, "Good Reason" means: (i) The assignment to the Employment of any duties inconsistent in any respect with the Employee's position (including status, offices, titles, and reporting requirements), authority, duties, or responsibilities as contemplated by Section 2 of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties, or responsibilities excluding for this purpose an isolated, insubstantial, and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee; (ii) Any failure by the Company to comply with any of the provisions of Section 3 of this Agreement, other than an isolated, insubstantial, and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee; (iii) The Company's requiring the Employee to be based at any office or location other than that described in Section 2(a)(ii) hereof, except for travel reasonably required in the performance of the Employee's responsibilities and not in excess of an average of five (5) business days a month during any year; (iv) Any purported termination by the Company of the Employee's employment otherwise than as expressly permitted by this Agreement; or (v) Any failure by the Company to comply with and satisfy Section 10(c) of this Agreement. For purposes of this Section 4(c), any good faith determination of "Good Reason" made by the Employee shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Employee for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (d) Notice of Termination. Any termination by the Company for Cause or by the Employee for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee's employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date, which date shall be not more than fifteen (15) days after the giving of such notice. The failure by the Employee to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Employee hereunder or preclude the Employee from asserting such fact or circumstance in enforcing his rights hereunder. (e) Date of Termination. "Date of Termination" means the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, provided, however, that (i) if the Employee's employment is terminated by the Company other than for Cause of Disability, the Date of Termination shall be the date on which the Company notifies the Employee of such termination, and (ii) if the Employee's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Employee or the Disability Effective Date, as the case may be. Section 5. Obligations of the Company upon Termination. (a) Death. If during the Employment Period the Employee's employment is terminated by reason of the Employee's death, this Agreement shall terminate without further obligation to the Employee's legal representatives under this Agreement, other than those obligations accrued or earned and vested (if applicable) by the Employee as of the Date of Termination, including, for this purpose, (i) the Employee's full Base Salary through the Date of Termination at the rate in effect on the Date of Termination or, if higher, at the highest rate in effect at any time from the 90-day period preceding the Effective Date through the Date of Termination (the "Highest Base Salary"), (ii) the product of the Annual Bonus paid to the Employee for the last full fiscal year, and a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365, and (iii) any compensation previously deferred by the Employee (together with any accrued interest thereon) and not yet paid by the Company. (Such amounts specified in clauses (i), (ii), and (iii) are hereinafter referred to as "Accrued Obligations".) All such Accrued Obligations shall be paid to the Employee's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. Anything in this Agreement to the contrary notwithstanding, the Employee's family shall be entitled to receive benefits at least equal to the most favorable benefits provided by the Company and any of its subsidiaries to surviving families of employees of the Company and such subsidiaries under such plans, programs, practices, and policies relating to family death benefits, if any, in accordance with the most favorable plans, programs, practices, and policies of the Company and its subsidiaries in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee and/or the Employee's family, as in effect on the date of the Employee's death with respect to other key employees of the Company and its subsidiaries and their families. (b) Disability. If during the Employment Period the Employee's employment is terminated by reason of the Employee's Disability, this Agreement shall terminate without further obligation to the Employee other than those obligations accrued or earned and vested (if applicable) by the Employee as of the Date of Termination, including, for this purpose, all Accrued Obligations. All such Accrued Obligations shall be paid to the Employee in a lump sum in cash within 30 days of the Date of Termination. Anything in this Agreement to the contrary notwithstanding, the Employee shall be entitled after the Disability Effective Date to receive disability and other benefits at least equal to the most favorable of those provided by the Company and its subsidiaries to disabled employees and/or their families in accordance with such plans, programs, practices, and policies relating to disability, if any, in accordance with the most favorable plans, programs, practices, and policies of the Company and its subsidiaries in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Employee and/or the Employee's family, as in effect at any time thereafter with respect to other key employees of the Company and its subsidiaries and their families. (c) Cause; Other Than for Good Reason. If during the Employment Period the Employee's employment shall be terminated for Cause, this Agreement shall terminate without further obligation to the Employee other than the obligation to pay to the Employee the Highest Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Employee (together with accrued interest thereon). All such Highest Base Salary and deferred compensation shall be paid to the Employee in a lump sum in cash within 30 days of the Date of Termination. If the Employee terminates employment other than for Good Reason, this Agreement shall terminate without further obligations to the Employee, other than those obligations accrued or earned and vested (if applicable) by the Employee through the Date of Termination, including for this purpose, all Accrued Obligations. All such amounts including Accrued Obligations shall be paid to the Employee in a lump sum in cash within 30 days of the Date of Termination. (d) Good Reason; Other Than for Cause or Disability. If during the Employment Period the Company shall terminate the Employee's employment other than for Cause, Disability, or death or if the Employee shall terminate his employment for Good Reason: (i) The Company shall pay to the Employee in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. To the extent not theretofore paid, the Employee's Highest Base Salary through the Date of Termination; and B. The product of (1) the Annual Bonus paid to the Employee for the last full fiscal year (if any) ending during the Employment Period or, if higher, the Annual Bonus paid to the Employee for the last full fiscal year prior to the Effective Date (as applicable, the "Recent Bonus") and (2) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365; and C. The present value of 36 monthly payments each equaling 1/12 of the sum of (1) the Highest Base Salary and (2) the Recent Bonus; for purposes of calculating the payment under this Section 5(d)(i)(C), present value will be determined in accordance with Section 280G(d)(4) of the Internal Revenue Code; and D. In the case of compensation previously deferred by the Employee, all amounts previously deferred (together with any accrued interest thereon) and not yet paid by the Company, and any accrued vacation pay not yet paid by the Company; and E. An amount equal to the present value of the sum of three payments, each equal to that portion of the annual contribution by the Company for the benefit of the Employee to all retirement plans and all supplemental and/or excess retirement plans (including but not limited to the Thomas Industries Profit Sharing Plan, the Thomas Industries Inc. Pension Floor Plan, and the Thomas Industries Supplemental Profit Sharing Plan, or any successor plan or amendment thereto) for (i) the two fiscal years of the Company ending prior to the Date of Termination, (ii) the two fiscal years of the Company ending prior to the Effective Date, or (iii) fiscal years 1994 and 1995, whichever is greatest. For purposes of the preceding sentence, the present value of such payment shall be computed in accordance with Section 280G(d)(4) of the Internal Revenue Code under the assumption that contributions to such plans were made in three equal installments on March 1 of each year. If the Employee has not been employed by the Company for each of the two fiscal years of the Company prior to the Date of Termination set forth above, the contribution of the Company on behalf of the Employee shall be annualized for the Employee's actual term of Employment; and, (ii) For a three-year period following the Date of Termination, or such longer period as any plan, program, practice, or policy may provide, the Company shall continue benefits to the Employee and/or the Employee's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices, and policies described in Section 3(d) of this Agreement if the Employee's employment had not been terminated, including health insurance and life insurance, in accordance with the most favorable plans, practices, programs, or policies of the Company and its subsidiaries during the 90- day period immediately preceding the Effective Date or, if more favorable to the Employee, as in effect at any time thereafter with respect to other key employees and their families and for purposes of eligibility for retiree benefits pursuant to such plans, practices, programs, and policies, the Employee shall be considered to have remained employed for a three-year period following the Date of Termination and to have retired on the last day of such period. Section 6. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in any benefit, bonus, incentive, or other plans, programs, policies, or practices, provided by the Company or any of its subsidiaries and for which the Employee may qualify, nor shall anything herein limit or otherwise affect such rights as the Employee may have under any stock option or other agreements with the Company or any of its subsidiaries. Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan, policy, practice, or program of the Company or any of its subsidiaries at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice, or program. Section 7. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right, or action which the Company may have against the Employee or others; provided, however, if the Employee is entitled to receive payments under Section 5(d)(i), all of the Employee's rights under the Company's employee severance plan and all of the Employee's non-compete obligations under any Non-Compete Agreement with the Company executed pursuant to such severance plan are terminated automatically. In no event shall the Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Employee under any of the provisions of this Agreement. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses with the Employee may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Employee about the amount of any payment pursuant to Section 8 of this Agreement), plus in each case interest at the applicable federal rate provided in Section 7872(f)(2) of the Internal Revenue Code. Section 8. Certain Additional Payments by the Company. (a) Gross-Up Payment. Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including pursuant to the Company's Incentive Stock Plan (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Determination of Gross-Up. Subject to the provisions of Section 8(c), all determinations required to be made under this Section 8, including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by an Accounting Firm which shall provide detailed supporting calculations both to the Company and the Employee within 15 business days of the Date of Termination, if applicable, or such earlier time as is requested by the Company. The initial Gross-Up Payment, if any, as determined pursuant to this Section 8(b), shall be paid to the Employee within 5 days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Employee, it shall furnish the Employee with a written opinion that he has Substantial Authority not to report any Excise Tax on his federal income tax return. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Internal Revenue Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (the "Under Payment"), consistent with the calculations required to be made hereunder. In the event the Employee receives a final assessment or enters into a closing agreement with the Internal Revenue Service (the "Service") for any tax year that gives rise to an Under Payment, and the Employee gives notice of such Under Payment pursuant to Section 8(c) hereof, the Accounting Firm shall determine the amount of the Under Payment that has occurred and give written notice thereof to the Company and the Employee. Any such Under Payment shall be paid by the Company to or for the benefit of the Employee within 10 business days after it has received such notice. (c) Dispute of Tax Claim. The Employee shall notify the Company in writing of any proposed assessment or proposed adjustment by the Service pursuant to an audit of the Employee's federal income tax return, or otherwise, that, if successful, would require the payment by the Company of a Gross-Up Payment (hereinafter referred to as a "Claim"). Such notice shall be given as soon as practicable but no later than ten business days after the earlier of (i) the receipt by the Employee of a written Notice of Proposed Adjustment from the Service (a "30-day Letter") or (ii) the receipt by the Employee of a statutory Notice of Deficiency. Such notice of the Employee to the Company shall include (i) notice of the amount of the proposed assessment or proposed adjustment which relates to the Claim and the taxable year or years in which the Claim arises, (ii) the general nature of the Claim, and (iii) all relevant written reports of the Service's Examining Agent relating to the Claim. Within thirty days of (i) the receipt by the Employee of a final assessment or (ii) the execution by the Employee and the Service of a closing agreement, with respect to any tax year of the Employee in which a Claim has been raised, pursuant to which the Employee is required to pay any amount with respect to the Claim, the Employee shall provide the Company and the Accounting Firm with a copy of such assessment or agreement, together with supporting documents sufficient to determine the amount of such tax liability that was attributable to the Claim. Section 9. Confidential Information. The Employee shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge, or data relating to the Company or any of its subsidiaries, and their respective businesses, which shall have been obtained by the Employee during the Employee's employment by the Company or any of its subsidiaries and which shall not be or become public knowledge (other than by acts by the Employee or his representatives in violation of this Agreement). After termination of the Employee's employment with the Company for any reason whether initiated by the Company or the Employee, the Employee shall not, without the prior written consent of the Company, communicate or divulge any such information, knowledge, or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Employee under this Agreement. Section 10. Successors. (a) This Agreement is personal to the Employee and without the prior written consent of the Company shall not be assignable by the Employee otherwise than by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Employee's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successor and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. Section 11. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Kentucky, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Company: Thomas Industries Inc. 4360 Brownsboro Road, Suite 300 Louisville, Kentucky 40207 Attention: Secretary If to the Employee: Mr. Richard J. Crossland 7708 Cedar Ridge Court Louisville, Kentucky 40059 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such federal, state, or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Employee's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision thereof. (f) This Agreement contains the entire understanding of the Company and the Employee with respect to the subject matter hereof. (g) The Employee and the Company acknowledge that the employment of the Employee by the Company is "at will" and, prior to the Effective Date, may be terminated by either the Employee or the Company at any time. Upon a termination of the Employee's employment or upon the Employee's ceasing to be an officer or general manager of the Company, as the case may be and in each such case, prior to the Effective Date there shall be no further rights under this Agreement. IN WITNESS WHEREOF, The Employee has hereunto set his hand; and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name, on its behalf, all as of the day and year first above written. R. J. CROSSLAND 9/1/94 --------------- Employee THOMAS INDUSTRIES INC. BY TIM BROWN ------------------- President ATTEST: DAVID J. STUMLER - ------------------- Assistant Secretary EXHIBIT A Employee: Richard J. Crossland Position: Vice President, Lighting Group Manager Company, Division, or Subsidiary: Thomas Industries Inc. EX-13 3 Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Net income for 1994 was $10.5 million, an increase of $6.7 million, or 177% over 1993; while net sales increased to $456.6 million in 1994 from $450.1 million in 1993. The 1994 net income includes an after-tax gain of $3.0 million from the sale of two noncore divisions. After adjusting for the divestitures, net sales for 1994 increased 5.6% over 1993. Results for 1993 showed improvement over 1992, with net sales up 7% and net income of $3.8 million in 1993 versus a $2.0 million loss in 1992. The 1993 net income and 1992 net loss include after-tax charges of $2.0 million and $4.0 million, respectively, for certain restructuring expenses. The Compressors and Vacuum Pumps Segment continued to extend its record growth. Net sales in the Segment of $146.3 million increased 14% in 1994 over 1993 following an increase of 16% in 1993 over 1992. The increases for both years are attributable to the growth of the Original Equipment Manufacturers (OEM) medical products market and the continued successful introduction of new products for new applications. European sales grew 12% in 1994, rebounding from flat sales in 1993 compared to 1992. Operating income for the Segment grew by 12% in 1994 over 1993, principally due to volume increases. Operating income for 1993 was 37% higher than for 1992, due to higher volumes. The Lighting Segment net sales of $304 million in 1994 were 2% higher than in 1993, after a 4% increase in 1993 over 1992. Both increases resulted from slightly higher unit volumes due to the improved construction markets. Operating income for the Lighting Segment improved to $4.9 million in 1994, up from $.1 million in 1993 and $2.7 million in 1992. The 1994 level was a 34% improvement over 1993 after excluding the $3.5 million pretax restructuring charge in 1993 referenced above. This improvement was in part due to the reduced costs resulting from the restructuring actions as well as additional cost savings and improved operating efficiencies introduced over the past three years in response to the soft lighting market conditions. Exclusive of the 1993 and 1992 restructuring charges, the 1993 operating income was down $2.6 million from 1992 in part due to the significant competitive pricing pressures experienced by the Consumer and Commercial & Industrial lighting operations during the year. Significant efforts were made during 1994 and 1993 to focus on more profitable product offerings. The 1994 Lighting Segment results include a gain of $2.0 million due to LIFO inventory quantity reductions at certain operating divisions, while 1993 results include a gain of $1.9 million due to a change in the method of applying LIFO for certain inventories within the Lighting Segment. The 1993 net income includes an after-tax charge of $2.0 million related primarily to exiting the Company's Long Island facility and the sale of a product line within the Commercial & Industrial Lighting Division. The 1992 net income includes an after-tax charge of $4.0 million for the costs associated with restructuring and consolidating certain of the operations within the Lighting Segment and other operations. In 1994, the Company recorded an after-tax gain of $3.0 million from the sale of the Portland Willamette and Builders Brass Works Divisions. These operations, whose products were fireplace screens and accessories and architectural door hardware and controls, were divested as part of the Company's strategy to focus on its two core businesses--Lighting and Compressors & Vacuum Pumps. Interest expense for 1994 was down $1.1 million or 10% from 1993, principally due to reduced levels of short-term bank borrowings during 1994. In 1993, interest expense was 1% lower than 1992 as the benefit from lower short-term rates during 1993 offset the increase in short-term bank borrowings. The Company, like other similar manufacturers, is subject to environmental rules and regulations regarding the use, disposal, and cleanup of substances regulated under environmental protection laws. It is the Company's policy to comply with these rules and regulations, and the Company believes that its practices and procedures are designed properly to meet this compliance. The Company is involved in remedial efforts at certain of its present and former locations; and when costs can be reasonably estimated, the Company records appropriate liabilities for such matters. During 1994, the Company employed an average of 3,200 people, down from 3,400 in 1993 and 3,500 in 1992, primarily due to the staff reductions resulting from the divestitures, restructuring and effected consolidation plans. LIQUIDITY AND SOURCES OF CAPITAL Cash and cash equivalents increased to $5.1 million at December 31, 1994, compared to $2.4 million at year-end 1993 and $3.5 million at year-end 1992. Cash flows from operations during 1994 amounted to $20.2 million compared to $15.7 million in 1993 and $10.7 million in 1992. These funds, along with the net change in cash on hand and the proceeds from the divestitures, have been utilized in funding of capital expenditures and dividends over the three-year period, along with the net pay down of short-term and long-term debt during 1992, 1993 and 1994 totaling $14.0 million. Working capital decreased $.9 million during 1994 from the December 31, 1993, level which had increased $8.0 million from year-end 1992. The 1993 working capital includes the recognition of a $7.0 million deferred tax asset, resulting from the required change in accounting for income taxes. Accounts receivable and inventory levels remain essentially unchanged from 1993 to 1994. Notes payable to banks have decreased from December 31, 1993, principally due to the application of the positive cash flows generated, while current portion of long-term debt increased $6.6 million due to the scheduled principal payments in 1995. 1994 1993 1992 Working capital $77,558 $78,466 $70,448 Current ratio 2.00 2.06 2.01 Long-term debt $79,693 $87,509 $89,900 Long-term debt as a % of capital 37.3% 41.2% 41.0%
Certain loan agreements of the Company include restrictions on working capital, operating leases, tangible net worth, and the payment of cash dividends and stock distributions. Under the most restrictive of these arrangements, retained earnings of $14 million are not restricted at December 31, 1994. As of December 31, 1994, the Company had available credit of $68 million with banks under short-term borrowing arrangements and a revolving line of credit, $61 million of which was available at year-end. Anticipated funds from operations, along with available short-term credit and other resources, are expected to be sufficient to meet cash requirements in the year ahead. Cash in excess of operating requirements will continue to be invested in high grade, short-term securities. COMMON STOCK MARKET PRICES AND DIVIDENDS The Company's common stock is traded on the New York Stock Exchange (ticker symbol TII). On February 9, 1995, there were 2,686 security holders of record. High and low stock prices and dividends (see Note 6) for the last two years were: 1994 1993 Cash Cash Market Price Dividends Market Price Dividends Quarter Ended High Low Declared High Low Declared March 31 $16-3/8 $13-1/4 $.10 $11-1/4 $ 9-1/8 $.10 June 30 15-3/4 13-1/8 .10 12-3/8 10-3/8 .10 September 30 15-3/8 14 .10 14 10-1/4 .10 December 31 15 12-3/4 .10 13-1/4 10-5/8 .10
CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31 Dollars in thousands, except share data 1994 1993 1992 Net sales $456,565 $450,149 $420,754 Cost of products sold 329,338 326,396 303,428 ------- ------- ------- Gross profit 127,227 123,753 117,326 Selling, general and administrative expenses 104,091 102,440 101,473 Restructuring costs (Note 3) _ 3,500 5,925 Interest expense 9,225 10,279 10,428 Interest income and other (Note 2) (4,287) (286) (748) ------- ------- ------- 109,029 115,933 117,078 Income before income taxes 18,198 7,820 248 Income taxes (Note 4) 7,656 4,015 2,280 ------- ------- ------- Net income (loss) $ 10,542 $ 3,805 $ (2,032) Net income (loss) per share (Note 1) $ 1.05 $ .38 $ (.20)
CONSOLIDATED BALANCE SHEETS DECEMBER 31 Dollars in thousands, except share data 1994 1993 ASSETS Current assets: Cash and cash equivalents $ 5,050 $ 2,364 Accounts receivable, less allowance ($1,773 - 1994; $1,763 - 1993) 61,075 61,214 Inventories (Note 1) 72,902 72,164 Deferred income taxes (Note 4) 5,874 7,031 Other current assets 10,454 10,057 ------- ------- Total current assets 155,355 152,830 Property, plant and equipment, net (Note 1) 75,962 76,587 Intangible assets, net (Note 1) 62,532 63,818 Other assets (Note 4) 11,222 9,525 ------- ------- Total assets $305,071 $302,760 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable to banks $ 8,252 $ 15,870 Accounts payable 25,892 24,562 Accrued expenses and other current liabilities (Notes 4 and 10) 33,814 30,721 Dividends payable 1,007 1,005 Current portion of long-term debt (Note 5) 8,832 2,206 ------- ------- Total current liabilities 77,797 74,364 Deferred income taxes (Note 4) 7,684 8,342 Long-term debt, less current portion (Note 5) 79,693 87,509 Minimum pension liability (Note 7) 1,759 4,322 Other long-term liabilities 4,372 3,174 Shareholders' equity (Notes 5, 6 and 7): Preferred stock, $1 par value, 3,000,000 shares - - authorized--none issued Common stock, $1 par value, authorized shares: 60,000,000; shares issued: 1994--11,447,873; 1993--11,415,790 11,448 11,416 Capital surplus 117,557 117,264 Retained earnings 31,264 24,746 Equity adjustment from translation of foreign currency (2,478) (2,156) Minimum pension liability adjustment (1,045) (3,241) Less cost of treasury shares (1994 and 1993--1,366,695 shares) (22,980) (22,980) ------- ------- Total shareholders' equity 133,766 125,049 Commitments and contingencies (Note 9) ------- ------- Total liabilities and shareholders' equity $305,071 $302,760
See accompanying notes
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31 Dollars in thousands 1994 1993 1992 Common stock: Beginning of year $ 11,416 $ 11,378 $ 11,377 Stock options exercised 32 38 1 ------- ------- ------- End of year 11,448 1,416 11,378 Capital surplus: Beginning of year 117,264 116,910 116,903 Stock options exercised 293 354 7 ------- ------- ------- End of year 117,557 117,264 116,910 Retained earnings: Beginning of year 24,746 24,955 30,991 Net income (loss) 10,542 3,805 (2,032) Cash dividends of $.40 per share (4,024) (4,014) (4,004) ------- ------- ------- End of year 31,264 24,746 24,955 Equity adjustment from translation of foreign currency: Beginning of year (2,156) (718) 2,284 Deferred adjustment (322) (1,438) (3,002) ------- ------- ------- End of year (2,478) (2,156) (718) Minimum pension liability adjustment: Beginning of year (3,241) _ _ Adjustment (Note 7) 2,196 (3,241) _ ------- ------- ------- End of year (1,045) (3,241) _ Treasury shares (22,980) (22,980) (22,980) ------- ------- ------- Total shareholders' equity $133,766 $125,049 $129,545
See accompanying notes
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31 Dollars in thousands 1994 1993 1992 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $10,542 $ 3,805 $(2,032) Reconciliation of net income (loss) to net cash provided by operating activities: Depreciation and amortization 15,524 16,517 16,339 Noncash portion of restructuring costs _ 3,500 4,911 Deferred income taxes 1,391 (1,850) (2,492) Provision for losses on accounts receivable 705 1,040 1,921 Gain on asset disposal, net (4,223) _ _ Changes in operating assets and liabilities net of effect of divestitures: Accounts receivable (3,412) (6,087) (2,143) Inventories (4,739) (1,907) (9,654) Other current assets 1,004 (1,143) (77) Accounts payable 1,565 1,446 5,153 Accrued expenses and other liabilities 1,037 432 (805) Other 822 (50) (404) ------ ------ ------ Net cash provided by operating activities 20,216 15,703 10,717 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (16,301) (13,908) (13,152) Proceeds from sale of property, plant and equipment and other assets 12,747 311 1,715 Other _ _ (442) ------ ------ ------ Net cash used in investing activities (3,554) (13,597) (11,879) CASH FLOWS FROM FINANCING ACTIVITIES: (Payments on) proceeds from short-term debt, net (8,615) 3,330 _ Payments on long-term debt (1,508) (2,927) (4,281) Dividends paid (4,022) (4,011) (4,905) Other 169 327 (301) ------ ------ ------ Net cash used in financing activities (13,976) (3,281) (9,487) Increase (decrease) in cash and cash equivalents 2,686 (1,175) (10,649) Cash and cash equivalents at beginning of year 2,364 3,539 14,188 ------ ------ ------ Cash and cash equivalents at end of year $ 5,050 $ 2,364 $ 3,539
See accompanying notes NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (NOTE 1) ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements include the accounts of Thomas Industries Inc. and subsidiaries (the Company). Equity in minority-owned affiliates is accounted for using the equity method, under which the Company's share of earnings of these affiliates is included in income as earned. Intercompany accounts and transactions are eliminated. Inventories: Inventories are valued at the lower of cost or market. Inventories valued using the last-in, first-out (LIFO) method represented approximately 79% of consolidated inventories at December 31, 1994 and 1993. Inventories not on LIFO are valued using the first-in, first-out (FIFO) method. The U.S. manufacturing operations previously using the FIFO method adopted LIFO in 1993. The effect of this change on net income for the year ended December 31, 1993, was not significant. In addition, in 1993, the Company changed its method of applying LIFO for certain inventories within the Lighting Segment as required by changes in the nature of the Company's business. The effect of this change on the results of operations for the year ended December 31, 1993, was to increase net income in the fourth quarter by approximately $1,148,000 ($.11 per share). The Company believes these changes are preferable because they provide a better matching of costs with related revenues. The cumulative effect of these changes and the pro forma effects on prior years' earnings have not been included because such effects cannot be reasonably determined. The impact on the Company's first, second and third quarters of 1993 was not material. Inventory quantities at certain operating divisions decreased in 1994. As a result, cost of products sold includes cost of inventories based on prior years' LIFO values which were less than current replacement costs, the effect of which increased net income by $1,192,000 ($.12 per share) in 1994.
Dollars in thousands Inventories consist of the following: 1994 1993 Finished goods $31,417 $33,374 Raw materials 29,970 26,969 Work in process 11,515 11,821 ------ ------ Total inventories $72,902 $72,164
On a current cost basis, inventories would have been $13,494,000 and $16,992,000 higher than that reported at December 31, 1994 and 1993, respectively. Notes to Consolidated Financial Statements (NOTE 1) ACCOUNTING POLICIES (CONTINUED) Property, Plant and Equipment: The cost of property, plant and equipment is depreciated principally by the straight-line method over their estimated useful lives.
Dollars in thousands Property, plant and equipment consist of the following: 1994 1993 Land $ 6,210 $ 6,379 Buildings 30,295 33,390 Leasehold improvements 10,210 9,455 Machinery and equipment 95,345 97,699 ------- ------- 142,060 146,923 Accumulated depreciation and amortization 66,098 70,336 Total property, plant and equipment, net $ 75,962 $ 76,587
Intangible Assets: Intangible assets represent the excess of cost over the fair value of net assets of companies acquired and are stated net of accumulated amortization of $14,294,000 and $12,176,000 at December 31, 1994 and 1993, respectively. The excess is being amortized over 40 years by the straight-line method. Net Income (Loss) Per Share: Net income (loss) per share is based on the weighted daily average number of common shares outstanding during the year. Outstanding stock options have an insignificant dilutive effect. Research and Development Costs: Research and development costs, which include costs of product improvements and design, are expensed as incurred ($12,705,000 in 1994, $12,431,000 in 1993 and $12,464,000 in 1992). NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (NOTE 1) ACCOUNTING POLICIES (CONTINUED) Financial Instruments: Various methods and assumptions were used by the Company in estimating its fair value disclosures for significant financial instruments. Fair values of cash equivalents approximate their carrying amount because they are highly liquid investments with a maturity of less than three months when purchased. The fair value of short-term debt approximates its carrying amount. The fair value of long-term debt is based on the present value of the underlying cash flows discounted at the current estimated borrowing rates available to the Company. Other: Certain prior year amounts have been reclassified to conform to the current year presentation. (NOTE 2) DIVESTITURES In the first quarter of 1994, the Company sold its Oliver-MacLeod Division. Oliver-MacLeod manufactures factory-built chimneys and zero clearance fireplaces. No gain or loss resulted from the transaction. In the second quarter of 1994, the Company sold its Portland Willamette and Builders Brass Works Divisions. Portland Willamette manufactures fireplace screens and related accessories. Builders Brass Works manufactures architectural hardware and door controls. These transactions resulted in a pretax gain of $4,175,000 and a net gain of $3,000,000 ($.30 per share). Proceeds from these transactions included cash of $10,900,000 and interest- bearing, secured notes receivable of $4,500,000. (NOTE 3) RESTRUCTURING COSTS During the fourth quarter of 1993, the Company recorded a $3,500,000 ($2,040,000 after-tax) restructuring charge to further consolidate its commercial and industrial lighting operations. The restructuring charge included the costs associated with exiting the Company's Long Island facility and the discontinuance and sale of a product line. During the first quarter of 1992, the Company recorded a $5,925,000 ($3,986,000 after-tax) charge for the costs associated with restructuring and consolidating certain of its operations. The restructuring included the nonrecurring costs of severance payments, relocation, environmental remediation and disposal of assets related to the consolidation of certain operations in the Lighting Segment. This included the closing of one of three consumer lighting plants, disposition of the Company's electronic ballast technology and related assets, and the consolidation of certain manufacturing and administrative functions. Other charges relate to the discontinuance of a joint venture and other nonproducing assets. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (NOTE 4) INCOME TAXES Effective January 1, 1993, the Company adopted the asset and liability method of SFAS No. 109, "Accounting for Income Taxes." The Company previously used the asset and liability method under SFAS No. 96, "Accounting for Income Taxes." The effect of this change on net income for 1993 was not significant.
Dollars in thousands A summary of the provision for income taxes follows: 1994 1993 1992 Currently payable: Federal $ 3,614 $ 3,545 $ 3,352 State 850 1,100 810 Foreign 1,801 1,220 610 ------ ------ ------ 6,265 5,865 4,772 Deferred: Federal and state 1,366 (2,200) (2,662) Foreign 25 350 170 ______ ______ ______ 1,391 (1,850) (2,492) ______ ______ ______ Total provision for income taxes $ 7,656 $ 4,015 $ 2,280 The components of the provision (benefit) for deferred income taxes are as follows: 1994 1993 1992 Organization restructuring $ 814 $ (983) $(1,638) Depreciation (382) (414) (850) Inventory valuation 944 (598) _ Other 15 145 (4) Total provision for deferred income ------ ------ ------ taxes $ 1,391 $(1,850) $(2,492) The components of the deferred tax assets and deferred tax liabilities at December 31 are as follows: 1994 1993 Deferred tax assets: Net operating loss carryforwards $ 2,713 $ 3,078 Reserve for uncollectible accounts receivable 524 538 Inventory valuation 1,516 1,566 Accrued compensation expenses 2,798 2,652 Organization restructuring 2,244 3,058 Other 217 504 ------ ------ 10,012 11,396 Less valuation allowance 2,713 3,078 ------ ------ Deferred tax assets $ 7,299 $ 8,318
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (NOTE 4) INCOME TAXES (CONTINUED)
Dollars in thousands (Continued) 1994 1993 Deferred tax liabilities: Depreciation of fixed assets $ 6,167 $ 6,669 Inventory valuation 1,394 - Pension expense 938 904 Other 590 769 ------ ------ Deferred tax liabilities 9,089 8,342 ------ ------ Net deferred tax liability $ 1,790 $ 24 Classification: Current asset $ 5,874 $ 7,031 Long-term asset 1,425 1,287 Current liability 1,405 - Long-term liability 7,684 8,342 ------ ------ Net deferred tax liability $ 1,790 $ 24
SFAS No. 109 requires that deferred tax assets and liabilities are classified according to the related asset and liability classification on the balance sheet. The realization of deferred tax assets is dependent upon the Company generating future taxable income when temporary differences become deductible. Based upon historical and projected levels of taxable income, management believes it is more likely than not the Company will realize the benefits of the deductible differences, net of the valuation allowance of $2,713,000. The valuation allowance is provided for loss carryforwards in states and foreign jurisdictions, the realization of which is not assured within the carryforward periods.
Dollars in thousands The U.S. and foreign components of income (loss) before income taxes follow: 1994 1993 1992 Income (loss) before income taxes: United States $13,628 $ 5,669 $ 2,538 Foreign 4,570 2,151 (2,290) ------ ------ ------ Income before income taxes $18,198 $ 7,820 $ 248
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (NOTE 4) INCOME TAXES (CONTINUED)
Dollars in thousands A reconciliation of the normal statutory federal income tax with the Company's provision for Income taxes follows: 1994 1993 1992 Income taxes computed at U.S. statutory rates $ 6,369 $ 2,659 $ 84 State income taxes, net of federal taxes 553 570 350 Nondeductible amortization of intangible assets 561 538 538 Currently (utilizable) unutilizable benefit of foreign losses (262) 429 1,229 Effect of foreign tax rates 343 395 303 Refunds and overaccruals of prior years' taxes _ (532) _ Other 92 (44) (224) ------ ------ ------ Total income taxes $ 7,656 $ 4,015 $ 2,280
The Company's foreign subsidiaries have accumulated undistributed earnings ($17,900,000) on which U.S. taxes have not been provided. Under current tax regulations and with the availability of certain tax credits, it is management's belief that the likelihood of the Company incurring significant taxes on any distribution of such accumulated earnings is remote. Dividends, if any, would be paid principally from current earnings. At December 31, 1994, the Company had foreign net operating loss carryforwards for financial reporting purposes of approximately $6,100,000. For income tax purposes, these carryforwards are approximately $5,500,000 and expire $5,300,000 and $200,000 on January 1, 2000 and 2001, respectively. The Company made federal, state and foreign income tax payments of $7,025,000 in 1994, $4,655,000 in 1993 and $4,147,000 in 1992. (NOTE 5) LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Dollars in thousands A summary of long-term debt follows: 1994 1993 Domestic: 9.36%, due through 2005 $77,270 $85,000 Other 860 1,221 Foreign (Germany): 7.28% (variable), due through 1996 1,420 1,267 Other 143 21 ------ ------ Total long-term debt $79,693 $87,509
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (NOTE 5) LONG-TERM DEBT AND CREDIT ARRANGEMENTS (CONTINUED) The fair value of the Company' long-term debt at December 31, 1994 approximates its carrying value. Maturities of long-term debt for the next five years are as follows: 1995-- $8,832,000; 1996--$8,943,000; 1997--$8,850,000; 1998--$7,740,000 and 1999-- $7,730,000. Certain loan agreements include restrictions on working capital and tangible net worth and the payment of cash dividends and stock distributions. Under the most restrictive of these arrangements, retained earnings of $14,000,000 are not restricted at December 31, 1994. The Company has a $50,000,000 variable rate revolving line of credit expiring July 14, 1995. In addition, the Company has short-term lines of credit under which it may borrow up to $18,000,000, expiring on various dates in 1995. The Company plans to renew these lines annually. Actual cash paid for interest was $9,253,000 in 1994, $10,185,000 in 1993 and $10,454,000 in 1992. (NOTE 6) SHAREHOLDERS' EQUITY At the April 21, 1994 Annual Meeting, the Company's shareholders approved a Nonemployee Director Stock Option Plan. Under the Plan, each continuing non- employee director in office on the date of each annual meeting is awarded a stock option for the purchase of 2,000 shares of common stock at not less than market value at date of grant. The Plan provides for options to be awarded at each annual meeting beginning in 1994 and continuing through 2004 or until 250,000 options have been granted. Under the Company's 1987 Incentive Stock Plan, options may be granted to employees through 1997 at not less than market value at date of grant and expire ten years after date of grant. The Company's 1977 Incentive Stock Plan, amended in 1982 for the issuance of incentive stock options, terminated in 1987, except with respect to outstanding options which will remain exercisable until 1997.
A summary of outstanding stock options for all plans follows: 1994 1993 1992 Outstanding at beginning of year 412,801 456,068 387,710 Granted at $13.37 to $14.87 per share in 1994, $10.00 to $12.62 in 1993, and $10.00 in 1992 205,500 105,000 76,750 Canceled or expired (28,167) (110,025) (7,457) Exercised at $9.87 to $10.75 per share in 1994, $9.87 to $10.80 in 1993, and $8.65 in 1992 (32,083) (38,242) (935) ------- ------- ------- Outstanding at end of year 558,051 412,801 456,068
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (NOTE 6) SHAREHOLDERS' EQUITY (CONTINUED) Options outstanding at December 31, 1994, of which 292,967 options were exercisable, had option prices ranging from $9.87 to $18.75 (with an average option price of $12.88) and expire at various dates between December 12, 1995 and December 14, 2004. There were 270,176 shares reserved for future grant, of which 230,000 shares are reserved for the Nonemployee Director Stock Option Plan. On December 23, 1987, the Company's Board of Directors authorized the repurchase, at management's discretion, of up to 1,000,000 shares of its common stock in the open market or through privately negotiated transactions. At December 31, 1994, 377,023 shares had been purchased at a cost of $5,759,000 (none purchased since 1991). The Board of Directors of the Company adopted a shareholder rights plan (the Rights Plan) in 1987 pursuant to which preferred stock purchase rights (the Rights) were declared and distributed to the holders of the Company's common stock. On October 18, 1991, the Board of Directors of the Company adopted certain amendments to the Rights Plan. The Rights Plan, as amended, provides that the Rights separate from the common stock and become exercisable if a person or group of persons working together acquires at least 20% of the common stock (a 20% Acquisition) or announces a tender offer which would result in ownership by that person or group of at least 20% of the common stock (a 20% Tender Offer). Upon a 20% Acquisition, the holders of Rights may purchase the common stock at half-price. If following the separation of the Rights from the common stock the Company is acquired in a merger or sale of assets, holders of Rights may purchase the acquiring company's stock at half- price. Notwithstanding the foregoing discussion, under the Rights Plan, the Board of Directors has flexibility in certain events. In order to provide maximum flexibility, the Board of Directors may delay the date upon which the Rights become exercisable in the event of a 20% Tender Offer. In addition, the Board of Directors has the option to exchange one share of common stock for each outstanding Right at any time after a 20% Acquisition but before the acquirer has purchased 50% of the outstanding common stock. The Rights may also be redeemed at two cents per Right at any time prior to a 20% Acquisition or a 20% Tender Offer. (NOTE 7) RETIREMENT PLANS The Company has noncontributory defined benefit pension plans principally covering its hourly union employees. Such plans primarily provide flat benefits of stated amounts for each year of service. The Company's policy is to fund pension costs deductible for income tax purposes. The Company also sponsors defined contribution pension plans covering substantially all employees whose compensation is not determined by collective bargaining. Annual contributions are determined by the Board of Directors. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (NOTE 7) RETIREMENT PLANS (CONTINUED)
Dollars in thousands A summary of pension expense follows: 1994 1993 1992 Defined benefit plans: Service cost-benefits earned during the period $ 503 $ 448 $ 415 Interest cost on projected benefit obligation 1,492 1,518 1,472 Actual return on plan assets (3) (1,735) (1,494) Net amortization and deferral (1,394) 114 (98) ------ ------ ------ Net pension cost of defined benefit plans 598 345 295 Defined contribution plans 2,540 1,214 364 Multi-employer plans for certain union employees and other 264 450 572 ------ ------ ------ Total pension expense $ 3,402 $ 2,009 $ 1,231
The following table sets forth the funded status and amounts recognized in the consolidated balance sheets for the Company's defined benefit pension plans: Dollars in thousands 1994 1993 ---------------------------- ----------------------------- Plans Whose Plans Whose Plans Whose Plans Whose Assets Exceed Accumulated Assets Exceed Accumulated Accumulated Benefits Exceed Accumulated Benefits Exceed Benefits Assets Benefits Assets Actuarial present value of benefit obligations: Vested benefit obligation $ 8,674 $ 8,477 $ 4,135 $16,985 Accumulated benefit obligation 8,968 8,658 4,166 17,616 Projected benefit obligation 9,331 8,658 4,600 17,616 Plan assets at fair value 9,376 8,023 5,064 15,443 ------ ------ ------ ------ Projected benefit obligation less than (in excess of) plan assets 45 (635) 464 (2,173) Unrecognized net loss 590 1,045 72 3,241 Unrecognized net obligation, net of amortization 647 714 2 1,081 Adjustment required to recognize minimum liability _ (1,759) _ (4,322) ------ ------ ------ ------ Prepaid pension asset (liability) $ 1,282 $ (635) $ 538 $(2,173)
At December 31, 1994, approximately 95% of plan assets were invested in listed stocks and bonds. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (NOTE 7) RETIREMENT PLANS (CONTINUED)
Dollars in thousands The assumptions used in the accounting for the funded status of defined benefit plans follow: 1994 1993 1992 Weighted average discount rates 9.00% 7.50% 8.75% Rates of increase in compensation levels 5.00% 5.00% 5.00% Expected long-term rate of return on assets 9.00% 9.00% 9.00%
(NOTE 8) OTHER POSTRETIREMENT BENEFIT PLANS The Company provides postretirement medical and life insurance benefits for certain retirees and employees. Effective January 1, 1993, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." This statement requires the cost of postretirement benefits to be accrued during the service lives of employees. The Company elected the prospective method of recognizing the accumulated postretirement benefit obligation. The effect of adopting SFAS No. 106 on 1993 on-going operations was an increase in expense of $294,000 ($176,000 net of income tax benefit). Prior to 1993, the Company recognized the cost of these benefits on the cash basis. The following table presents the plans' funded status reconciled with amounts recognized in the Company's consolidated balance sheets at December 31, 1994 and 1993:
Dollars in thousands Accumulated postretirement benefit obligation: 1994 1993 Retiree participants $ 4,637 $ 5,325 Fully eligible active participants 398 410 Other active participants 1,225 1,300 ------ ------ 6,260 7,035 Unrecognized prior service cost (42) - Unrecognized net loss (631) (798) Unrecognized transition obligation (4,162) (4,393) Previously recognized liability - (705) ------ ------ Accrued postretirement benefit cost included in other liabilities $ 1,425 $ 1,139
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (NOTE 8) OTHER POSTRETIREMENT BENEFIT PLANS (CONTINUED)
Dollars in thousands Net periodic postretirement benefit cost for 1994 and 1993 includes the following components: 1994 1993 Service cost $ 93 $ 80 Interest cost 491 468 Net amortization and deferral 294 231 --- --- Net periodic postretirement benefit cost $878 $779
For measurement purposes, a 10% annual rate of increase in the per capita cost of future health benefits was assumed for 1995; the rate was assumed to decrease gradually to 5.5% by the year 2004, converging toward the assumed long-term rate of 5% thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1994 by $580,000 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year ended December 31, 1994 by $60,000. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 9% and 7.25% as of December 31, 1994 and 1993, respectively. (NOTE 9) LEASES, COMMITMENTS AND CONTINGENCIES Total rental expense amounted to $4,840,000 in 1994, $5,321,000 in 1993 and $5,444,000 in 1992. Future minimum rentals (on leases in effect at December 31, 1994) for the five years ending December 31, 1999, and in the aggregate thereafter, are as follows: 1995--$3,222,000; 1996--$2,831,000; 1997-- $2,366,000; 1998--$2,009,000; 1999--$1,576,000 and thereafter--$7,115,000. Capital leases are not significant. The Company has various letters of credit outstanding in the amount of $9,658,000 at December 31, 1994. The Company is involved in environmental remedial efforts at certain of its present and former locations. When costs can be reasonably estimated, the Company records appropriate liabilities for such matters. In the normal course of business, the Company and its subsidiaries are parties to legal proceedings. When costs can be reasonably estimated, the Company records appropriate liabilities for such matters. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (NOTE 10) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Dollars in thousands A summary of accrued expenses and other current liabilities follows: 1994 1993 Accrued wages, taxes and withholdings $ 7,757 $ 6,791 Accrued insurance 5,926 5,698 Accrued retirement expense 3,448 2,024 Accrued sales expense 3,786 3,254 Accrued interest expense 3,322 3,350 Income taxes payable 2,091 3,571 Accrued restructuring costs 1,945 2,549 Other current liabilities 5,539 3,484 Total accrued expenses and other current ------ ------ liabilities $33,814 $30,721
(NOTE 11) SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a tabulation of the unaudited quarterly results of operations for the years ended December 31, 1994 and 1993: Dollars in thousands, except per share data
Net Income Net Sales Gross Profit Net Income Per Share 1994 1993 1994 1993 1994 1993 1994 1993 1st Qtr. $109,391 $112,074 $ 29,650 $ 29,653 $ 1,011 $ 655 $ .10 $.07 2nd Qtr. 117,288 111,001 32,815 30,128 5,046 (1)(2) 1,175 .50 (1)(2) .12 3rd Qtr. 119,035 117,322 33,937 31,217 2,820 (2) 1,552 .28 (2) .15 4th Qtr. 110,851 109,752 30,825 32,755 1,665 (2) 423 (3) .17 (2) .04 (3) ------- ------- ------- ------- ------ ----- ---- --- $456,565 $450,149 $127,227 $123,753 $10,542 $3,805 $1.05 $.38 (1) Net income in the second quarter of 1994 includes a gain of $3,000,000 ($.30 per share) from the sale of the Builders Brass Works and the Portland Willamette Divisions. (2) Net income in the second, third and fourth quarters of 1994 includes gains of $440,000 ($.04 per share), $280,000 ($.03 per share) and $472,000 ($.05 per share), respectively, from the reduction of LIFO inventory quantities. (3) Net income in the fourth quarter of 1993 includes a charge of $2,040,000 ($.20 per share) for restructuring costs, and a credit of $1,148,000 ($.11 per share) from a change in the method of applying LIFO as required by changes in the nature of the Company's business.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (NOTE 12) INDUSTRY SEGMENT INFORMATION Dollars in thousands Industry segment information follows:
Compressors & Vacuum Lighting Pumps Other Corporate Consolidated 1994 Net sales $304,047 $146,323 $ 6,195 _ $456,565 Operating income (loss) 4,856 29,252 (263) _ 33,845 General corporate expenses _ _ _ $10,709 10,709 Identifiable assets 213,904 76,753 _ 14,414 305,071 Depreciation and amortization expense 9,829 5,224 241 230 15,524 Capital expenditures 6,364 9,758 83 96 16,301 1993 Net sales $298,432 $127,896 $23,821 _ $450,149 Operating income 120 26,183 710 _ 27,013 General corporate expenses _ _ _ $ 9,200 9,200 Identifiable assets 221,343 62,323 14,099 4,995 302,760 Depreciation and amortization expense 10,955 4,578 725 259 16,517 Capital expenditures 6,966 6,237 579 126 13,908 1992 Net sales $286,417 $110,022 $24,315 _ $420,754 Operating income 2,659 19,147 412 _ 22,218 General corporate expenses _ _ _ $ 9,969 9,969 Identifiable assets 214,561 59,976 14,876 5,040 294,453 Depreciation and amortization expense 10,974 4,331 768 266 16,339 Capital expenditures 7,806 4,384 521 441 13,152
Intersegment and interlocation sales are not significant and have been eliminated from the above tabulation. Operating income by segment is gross profit less operating expenses (including applicable restructuring costs), excluding interest, general corporate expenses, other income, and income taxes. Capital expenditures exclude property, plant and equipment of acquired companies at date of acquisition. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (NOTE 12) INDUSTRY SEGMENT INFORMATION (CONTINUED)
Dollars in thousands Information by geographic area follows: United States Canada Europe Eliminations Consolidated 1994 Net sales to unaffiliated customers $381,195 $31,605 $43,765 _ $456,565 Inter-area sales 9,879 266 5,248 $(15,393) _ ------- ------ ------ ------- ------- Total net sales 391,074 31,871 49,013 (15,393) 456,565 Operating income 28,719 412 4,714 _ 33,845 Identifiable assets 253,372 22,653 29,046 _ 305,071 1993 Net sales to unaffiliated customers $379,968 $31,268 $38,913 _ $450,149 Inter-area sales 5,716 83 4,586 $(10,385) _ ------- ------ ------ ------- ------- Total net sales 385,684 31,351 43,499 (10,385) 450,149 Operating income (loss) 22,716 (60) 4,357 _ 27,013 Identifiable assets 250,433 27,113 25,214 _ 302,760 1992 Net sales to unaffiliated customers $348,160 $34,303 $38,291 _ $420,754 Inter-area sales 5,444 153 5,271 $(10,868) _ ------- ------ ------ ------- ------- Total net sales 353,604 34,456 43,562 (10,868) 420,754 Operating income (loss) 21,758 (3,276) 3,736 _ 22,218 Identifiable assets 239,056 27,284 28,113 _ 294,453
FINANCIAL REVIEW RESPONSIBILITY FOR FINANCIAL REPORTING The Board of Directors and Shareholders Thomas Industries Inc. The financial statements herein have been prepared under management direction from accounting records which management believes present fairly the transactions and financial position of the Company. They were developed in accordance with generally accepted accounting principles appropriate in the circumstances. Management has established internal control systems and procedures, including an internal audit function, to provide reasonable assurance that assets are maintained and accounted for in accordance with its authorizations and that transactions are recorded in a manner to ensure reliable financial information. The Company has a formally stated and communicated policy demanding of employees high ethical standards in their conduct of its business. The Audit Committee of the Board of Directors is composed of outside directors who meet regularly with management, internal auditors, and independent auditors to review audit plans and fees, independence of auditors, internal controls, financial reports, and related matters. The Committee has unrestricted access to the independent and internal auditors with or without management attendance. /S/ Timothy C. Brown /S/ Phillip J. Stuecker Timothy C. Brown Phillip J. Stuecker President and Vice President of Finance Chief Executive Officer Chief Financial Officer Secretary
Louisville, Kentucky February 9, 1995 FINANCIAL REVIEW INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Thomas Industries Inc.: We have audited the accompanying consolidated balance sheets of Thomas Industries Inc. and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, shareholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The accompanying consolidated financial statements of Thomas Industries Inc. and subsidiaries for the year ended December 31, 1992, were audited by other auditors whose report thereon dated February 11, 1993, expressed an unqualified opinion on those statements. We conducted our audits in accordance with generally accepted auditing standards. 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, the 1994 and 1993 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Thomas Industries Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. As discussed in Note 8 to the consolidated financial statements, the Company changed its method of accounting for postretirement benefits in 1993 to adopt the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." As discussed in Note 4, the Company changed its method of accounting for income taxes in 1993 to adopt the provisions of SFAS No. 109, "Accounting for Income Taxes." As discussed in Note 1, the Company changed its method of accounting for certain inventories in 1993. /S/ KPMG Peat Marwick LLP Louisville, Kentucky February 9, 1995 11 YEAR SUMMARY OF OPERATIONS AND STATISTICS
Dollars in thousands except per share 1994 1993 1992 1991 1990 1989 Earnings Statistics (A) Net sales $456,565 $450,149 $420,754 $408,365 $461,725 $436,577 Cost of products sold 329,338 326,396 303,428 294,900 327,993 305,092 Selling, general and administrative expenses 104,091 102,440 101,473 96,206 103,380 100,705 Interest expense 9,225 10,279 10,428 11,004 12,198 10,464 Income before income taxes 18,198 7,820 248 7,248 20,186 34,791 As a % of net sales 4.0% 1.7% 0.1% 1.8% 4.4% 8.0% Income taxes 7,656 4,015 2,280 3,460 8,484 14,175 Effective tax rate 42.1% 51.3% N/A 47.7% 42.0% 40.7% Net income (loss) 10,542 3,805 (D) (2,032) (E) 3,788 11,702 20,616 Financial Position (A) Working capital $77,558 $78,466 $70,448 $77,332 $91,483 $105,028 Current ratio 2.0 to 1 2.1 to 1 2.0 to 1 2.2 to 1 2.4 to 1 2.4 to 1 Property, plant and equipment, net 75,962 76,587 79,799 84,446 87,208 80,675 Total assets 305,071 302,760 294,453 303,032 323,350 333,327 Return on ending assets 3.5% 1.3% (0.7)% 1.3% 3.6% 6.2% Long-term debt 79,693 87,509 89,900 93,309 108,853 117,254 Long-term debt to total capital 37.3% 41.2% 41.0% 40.2% 43.4% 45.8% Shareholders' equity 133,766 125,049 129,545 138,575 141,694 138,999 Return on average shareholders' equity 8.1% 3.0% (1.5)% 2.7% 8.3% 15.6% Data Per Common Share (B) Net income (loss) $1.05 $.38 ($.20) $.38 $1.15 $2.02 Dividends declared: cash .40 .40 .40 .76 .76 .73 stock Shareholders' equity 13.27 12.44 12.94 13.84 14.15 13.59 Price range 16-3/8 14 14-1/8 14-3/4 20-7/8 20-5/8 - 12-3/4 - 9-1/8 - 8-3/8 - 9-1/4 - 9-1/4 - 17-5/8 Closing price 14-3/8 13-1/8 9-1/8 12 10 20-1/4 Price/earnings ratio 13.7 34.5 N/A 31.6 8.7 10.0 Other Data Cash dividends declared $4,024 $4,014 $4,004 $7,608 $7,726 $7,437 Expenditures for property, plant and equipment (C) 16,301 13,908 13,152 11,636 17,161 20,974 Depreciation and amortization 15,524 16,517 16,339 16,096 15,658 11,512 Average number of employees 3,190 3,390 3,480 3,530 3,930 3,700 Sales per average number of employees 143.1 132.8 120.9 115.7 117.5 118.0 Number of shareholders of record 2,677 2,903 3,154 3,308 3,249 3,386 Average number common shares outstanding (B) 10,060,436 10,035,172 10,010,746 10,010,000 10,178,547 10,183,513 Segment Information (A) Net sales Lighting $304,047 $298,432 $286,417 $282,964 $332,802 $306,146 Compressors & Vacuum Pumps 146,323 127,896 110,022 99,444 98,355 87,466 Other 6,195 23,821 24,315 25,957 30,568 42,965 ------- ------- ------- ------- ------- ------- Total net sales $456,565 $450,149 $420,754 $408,365 $461,725 $436,577 Operating income (loss) Lighting $ 4,856 $ 120 (D) $ 2,659 (E) $ 7,910 $23,746 $22,135 Compressors & Vacuum Pumps 29,252 26,183 19,147 16,883 15,050 15,113 Other (263) 710 412 1,133 1,195 4,558 ------ ------ ------ ------ ------ ------ Total operating income $33,845 $27,013 $22,218 $25,926 $39,991 $41,806 11 YEAR SUMMARY OF OPERATIONS AND STATISTICS 1988 1987 1986 1985 1984 Earnings Statistics (A) Net sales $347,578 $321,911 $296,195 $294,711 $275,679 Cost of products sold 237,586 212,271 197,125 199,029 186,774 Selling, general and administrative expenses 83,212 80,160 72,322 66,910 60,229 Interest expense 3,983 3,500 2,615 4,018 3,613 Income before income taxes 29,567 29,516 24,216 27,480 28,449 As a % of net sales 8.5% 9.2% 8.2% 9.3% 10.3% Income taxes 11,060 (F) 12,380 11,460 11,247 12,594 Effective tax rate 37.4% 41.9% 47.3% 40.9% 44.3% Net income (loss) 18,507 17,136 12,756 16,233 15,855 Financial Position (A) Working capital $78,180 $84,752 $73,939 $70,224 $83,167 Current ratio 2.7 to 1 3.3 to 1 3.8 to 1 3.3 to 1 3.6 to 1 Property, plant and equipment, net 44,133 37,957 32,541 31,488 33,212 Total assets 207,624 208,182 168,812 166,179 178,214 Return on ending assets 8.9% 8.2% 7.6% 9.8% 8.9% Long-term debt 32,790 35,294 20,133 22,329 43,074 Long-term debt to total capital 20.8% 21.4% 14.6% 16.9% 30.1% Shareholders' equity 124,701 129,773 117,411 109,962 99,851 Return on average shareholders' equity 14.5% 13.9% 11.2% 15.5% 16.7% Data Per Common Share (B) Net income (loss) $1.70 $1.56 $1.17 $1.50 $1.47 Dividends declared: cash .66 .62 .56 .53 .49 stock 5% 5% 10% 5% 10% Shareholders' equity 12.25 11.78 10.72 10.11 9.25 Price range 23-3/8 20-1/2 22-1/8 17-1/8 14-7/8 - 15 - 13-1/4 - 14 - 11-7/8 - 9-3/4 Closing price 18-1/2 14-3/4 14-5/8 17-1/8 14-3/8 Price/earnings ratio 10.9 9.5 12.5 11.4 9.7 Other Data Cash dividends declared $7,211 $6,793 $6,130 $5,794 $5,243 Expenditures for property, plant and equipment (C) 14,583 9,723 7,017 7,395 7,090 Depreciation and amortization 8,494 7,313 6,096 6,017 5,446 Average number of employees 3,170 3,140 3,080 3,160 3,180 Sales per average number of employees 109.6 102.5 96.2 93.3 86.7 Number of shareholders of record 3,530 3,702 3,830 3,940 4,000 Average number common shares outstanding (B) 10,916,302 10,999,754 10,920,883 10,833,894 10,788,728 Segment Information (A) Net sales Lighting $217,811 $201,785 $201,694 $186,617 $156,941 Compressors & Vacuum Pumps 67,259 51,650 34,787 35,511 39,647 Other 62,508 68,476 59,714 72,583 79,091 ------- ------- ------- ------- ------- Total net sales $347,578 $321,911 $296,195 $294,711 $275,679 Operating income (loss) Lighting $16,957 $21,467 $22,737 $20,976 $17,110 Compressors & Vacuum Pumps 12,029 8,742 3,206 (G) 6,484 8,268 Other 6,660 8,305 6,174 7,314 9,222 ------ ------ ------ ------ ------ Total operating income $35,646 $38,514 $32,117 $34,774 $34,600 Note: See accompanying Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations (A) Acquisitions and divestitures--major acquisitions during the period include Capri and Gardco in 1984, Lumec and ASF GmbH in 1987, and Day- Brite in 1989. Major divestitures and the effect on net income in the year of divestiture include North American Decorative Products and Lennon Wallpaper (minority interests), Pouliot Designs, and Paint Applicator in 1988 for a gain of $2,598,000; the Tool and Fastener Division in 1989 for a gain of $5,223,000; and Builders Brass Works and Portland Willamette in 1994 for a gain of $3,000,000 (B) Adjusted for stock dividends (C) Does not include property, plant and equipment of companies at dates acquired (D) Includes pretax charge of $3,500,000, or $2,040,000 after-tax, for restructuring costs (E) Includes pretax charge of $3,604,000 allocated to Lighting ($5,925,000 total), or $3,986,000 after-tax, for restructuring costs (F) Includes credit of $800,000 cumulative effect of change in accounting for income taxes (G) Includes pretax charge of $2,600,000 litigation settlement
OFFICERS AND BOARD OF DIRECTORS
CORPORATE OFFICERS Timothy C. Brown Bernard R. Berntson Peter Bissinger President Vice President, Vice President, Chief Executive Officer General Manager General Manager Chairman, Executive Committee North American Compressor European Compressor Group Group Richard J. Crossland Gilbert R. Grady, Jr. Clifford C. Moulton Vice President Vice President Vice President Lighting Group Manager Corporate Human Resources Compressor & Vacuum Pump Group Manager Ronald D. Schneider C. Barr Schuler Phillip J. Stuecker Vice President Vice President Vice President of Lighting Operations Corporate Development Finance Treasurer Chief Financial Officer Secretary David J. Stumler Ronald D. Wiseman Assistant Secretary Controller Assistant Secretary BOARD OF DIRECTORS Timothy C. Brown 1*,5 Walter S. Davis 1 Peter P. Donis 2*,3,5 Louisville, Kentucky (Retiring 4/20/95) Peoria, Illinois President Milwaukee, Wisconsin Retired President Chief Executive Officer Chairman of the Board Caterpillar Inc. Chairman, Executive Thomas Industries Inc. Committee Attorney and Member Thomas Industries Inc. Davis & Kuelthau, S.C. Wallace H. Dunbar 3 Roger P. Eklund 1,5* H. Joseph Ferguson 4* Louisville, Kentucky Chicago, Illinois Portland, Oregon Chairman Attorney and Partner Founder and Director Americo Group Eklund and Eklund Ferguson, Wellman, Rudd, Purdy & Van Winkle, Inc. Gene P. Gardner 2 Lawrence E. Gloyd 1,3* Ralph D. Ketchum 1,3,5 Louisville, Kentucky Rockford, Illinois Cleveland, Ohio Chairman Chairman, President and President Beaver Dam Coal Company Chief Executive Officer RDK Capital Inc. CLARCOR Franklin J. Lunding, Jr. 4 Bernard W. Rogers, 2,4 Monterey, California (Retiring 4/20/95) Attorney McLean, Virginia Private Practice General U.S. Army (Retired) 1. Member of the Executive Committttee (*-Chairman) 2. Member of the Audit Committee (*-Chairman) 3. Member of the Compensation Committee (*-Chairman) 4. Member of the Investment Committee (*-Chairman) 5. Member of the Nominating Committee (*-Chairman)
DIVISIONS AND SUBSIDIARIES
LIGHTING GROUP Richard J. Crossland David J. Stumler Donald S. Varshine Corporate Vice President Vice President, Vice President Lighting Group Manager Lighting, Finance Logistics Corporate Assistant Secretary Andy Ashley Ronald D. Schneider Vice President Corporate Vice President Sales Lighting Operations DIVISION MANAGERS THOMAS LIGHTING BRANDS Robert T. Armstrong CAPRI--Specification grade downlighting, Vice President, distributor grade downlighting, track General Manager lighting Commercial & Industrial Division MATRIX--Controls Tupelo, Mississippi DAY-BRITE--Fluorescent and H.I.D. lighting Richard S. Buehner systems including floodlighting, sports General Manager lighting, VDT lighting, and HI/LO warehouse Consumer Division lighting Louisville, Kentucky EMCO--Economy area luminaires William T. Gendron Vice President, GARDCO--High-performance area, flood, parking, General Manager and pathway lighting Architectural Outdoor Division LUMEC--Specification grade decorative/functional San Leandro, California street and area lighting Jean Francois Simard McPHILBEN--Architectural building mounted President & General lighting for outdoor applications as well as Manager exits and electrical signage for commercial/ Lumec, Boisbriand, Quebec industrial applications Barry P. Thomson OMEGA--Architectural grade specification General Manager downlighting Canadian Division Markham , Ontario THOMAS--Decorative indoor and outdoor lighting for the home and light commercial applications LUMEC-SCHREDER--Roadway luminaires (joint venture) THOMAS-SCHREDER--Tunnel lighting (joint venture) OPERATIONS R. Mark Norsworthy YAMADA-DAY-BRITE--Commercial lighting Vice President, (joint venture, Tokyo, Japan) Operations Manager Hopkinsville, Kentucky, and Dyersburg, Tennessee, Facilities Raymond L. Zaccagnini Vice President, Operations Manager Tupelo, Mississippi, Facility
DIVISIONS AND SUBSIDIARIES
COMPRESSOR & VACUUM PUMP GROUP Clifford C. Moulton Corporate Vice President Compressor & Vacuum Pump Group Manager Bernard R. Berntson John R. Kuecker Rainer K. Thielman Corporate Vice President Operations Manager Operations Manager General Manager Monroe, Louisiana Wuppertal, Germany North American Group Peter Bissinger Klaus P. Moger Corporate Vice President Operations Manager General Manager Puchheim, Germany European Group
Piston Air Compressors and Vacuum Pumps Diaphragm Air Compressors and Vacuum Pumps Rotary Vane Air Compressors and Vacuum Pumps Vibrating Diaphragm/Linear Air Compressors and Vacuum Pumps Peristaltic Liquid Pumps Air Motors Air Powered Vacuum Pumps Operations in Sheboygan, Wisconsin; Monroe, Louisiana; Atlanta, Georgia; Puchheim, Memmingen, and Wuppertal, Germany; and Alton, England. Sales and Engineering in Taipei, Taiwan; Tokyo, Japan; and Joinville, Brazil. Purchasing and Sales in Bologna, Italy. CORPORATE INFORMATION THOMAS INDUSTRIES INC. A Delaware Corporation Executive Office 4360 Brownsboro Road, Suite 300 Post Office Box 35120 Louisville, Kentucky 40232 Telephone: 502/893-4600 An Equal Opportunity Employer Annual Meeting The annual meeting will be held at 10 a.m. on Thursday, April 20, 1995, at The Seelbach Hotel, Louisville, Kentucky. A notice will be mailed to each shareholder. Form 10-K Report Any beneficial shareholder will be furnished a copy of the Company's annual report on Form 10-K to the Securities and Exchange Commission, without exhibits, at no charge, upon written request to Phillip J. Stuecker, Secretary, at the Company's Executive Office. Transfer Agent and Registrar Wachovia Bank of North Carolina, N.A. 301 North Church Street (27102) Post Office Box 3001 Winston-Salem, North Carolina 27105 Direct Deposit of Cash Dividends For information concerning Thomas Industries Inc.'s Direct Deposit of Cash Dividends service, please contact: Wachovia Bank of North Carolina, N.A. Dividend Deposit Service Corporate Trust Department Post Office Box 3001 Winston-Salem, North Carolina 27105 Automatic Dividend Reinvestment Plan An Automatic Dividend Reinvestment Plan--administered by Wachovia Bank of North Carolina, N.A.--is available to shareholders. The plan provides a convenient, low-cost method for shareholders to increase their ownership in Thomas Industries Inc. common stock. In addition, shareholders who elect to participate can make optional cash payments to purchase more Thomas Industries Inc. shares. Participation may begin with any regularly scheduled dividend payment if an authorization form is completed and returned to the administrator prior to the dividend record date. Shareholders wishing further information may contact: Wachovia Bank of North Carolina, N.A. Dividend Reinvestment Section Post Office Box 3001 Winston-Salem, North Carolina 27105 Stock Exchange New York Stock Exchange Symbol-TII EX-21 4
SUBSIDIARIES OF THE REGISTRANT Percentage of Place of Voting Name of Company Incorporation Securities ASF Gesellschaft fur Electrotechnische Gerate mbH Germany 100% ASF, Inc. Georgia 100% Lighting Center Holdings, Inc. Tennessee 100% Helmut Brey Verwaltung GmbH Germany 100% Bluegrass Holdings Inc. Nevada 100% Capri Lighting, Inc. California 100% Thomas Industries Holdings Inc. Delaware 100% Gardco Manufacturing, Inc. California 100% Lumec, Inc. Province of Quebec, 100% Canada Pouliot Designs Corporation Minnesota 100% T.I. Industries Corporation Delaware 100% TI Pneumotive, Inc. Delaware 100% Thomas Group U.K., Inc. Delaware 100% Thomas Imports, Inc. Nevada 100% Thomas Industries Corp. Province of Ontario, 100% Canada Thomas Industries Export, Inc. U.S. Virgin Islands 100% Tupelo Holdings Inc. Delaware 100% Thomas Lighting de Mexico, S.A. de C.V. Mexico 100% Wilhelm Sauer GmbH and Company KG (WISA) Germany 100% NON WHOLLY OWNED SUBSIDIARIES Jackson Hardware Company, Ltd. Thailand 60% Lumec-Schreder Inc. Province of Quebec, 50% Canada Thomas Americas Industria e Commercio, LTDA Brazil 95% Thomas-Schreder Company Delaware 50% Yamada Day-Brite, Ltd. Japan 50%
EX-23 5 Consent of Independent Auditors We consent to incorporation by reference in the Registration Statement (No. 33-16257), (No. 33-51653), and (No. 33-54689) on Form S-8 of Thomas Industries Inc. of our report dated February 9, 1995, relating to the consolidated balance sheets of Thomas Industries Inc. and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, shareholders' equity, and cash flows and related schedules for the years then ended, which report appears in the December 31, 1994, annual report on Form 10-K of Thomas Industries Inc. Our report refers to a change in the method of accounting for postretirement benefits, income taxes, and certain inventories in 1993. KPMG PEAT MARWICK LLP --------------------- KPMG PEAT MARWICK LLP March 21, 1995 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-16257) pertaining to the stock option plan, the Registration Statement (Form S-8 No. 33-51653) pertaining to the retirement savings and investment plan, and the Registration Statement (Form S-8 No. 33-54689) pertaining to the nonemployee director stock option plan of Thomas Industries Inc. of our report dated February 11, 1993, with respect to the 1992 consolidated financial statements and related schedule of Thomas Industries Inc. included and/or incorporated by reference in this Annual Report (Form 10-K) for the year ended December 31, 1994. ERNST & YOUNG LLP ----------------- March 21, 1995 EX-27 6 ART. 5 RDS FOR YEAR 1994
5 1,000 YEAR DEC-31-1994 DEC-31-1994 5,050 0 62,848 1,773 72,902 155,355 142,060 66,098 305,071 77,797 79,693 11,448 0 0 122,318 305,071 456,565 456,565 329,338 329,338 99,099 705 9,225 18,198 7,656 10,542 0 0 0 10,542 1.05 1.05
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