-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TYPuBHe9+m0HUcoYzJguvbsR3RuaFsztuYWqR4qnOtdFaqmFKjBzr+5s8jkNkl9X f54WC42uFWy4YhrxZiMD+w== 0000914760-97-000060.txt : 19970325 0000914760-97-000060.hdr.sgml : 19970325 ACCESSION NUMBER: 0000914760-97-000060 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970324 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: 97561160 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 Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 1996 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 7, 1997, 10,555,782 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 7, 1997, was approximately $262,575,077. Portions of Proxy Statement for the Annual Meeting of Shareholders on April 17, 1997, are incorporated by reference in Part III of this report. Portions of the Annual Report to Shareholders for fiscal year ended December 31, 1996 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. The Company has focused on expansion of the Lighting Segment and the Compressors and Vacuum Pumps Segment as its two core businesses. Significant additions to these two core segments have been ASF, Pneumotive, Brey, WISA, and Welch, all compressor and vacuum pump companies, acquired from 1987 through 1996; 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. Five companies in the U.S. and Canada, one of which is Thomas Industries, share a substantial portion of the market. Although the industry is subject to the cyclicality of residential and commercial construction activity, replacement and renovation activity moderates these cycles somewhat. Thomas is the leading supplier to the original equipment manufacturer (OEM) medical market and a significant participant in its other OEM compressor and vacuum pump markets. 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. 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. The Company operates numerous divisions and subsidiaries, with facilities throughout the U.S. and operations in Canada, Germany, and Mexico. The Company also maintains sales offices in Brazil, England, Italy, Japan, and Taiwan and has joint ventures in the U.S. and Canada with a Belgian company. The Company maintains corporate offices in Louisville, Kentucky. Lighting Segment The Company's consumer lighting products 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 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 and Do-It-Yourself lines are distributed throughout the United States and Canada 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., Canada, and Mexico under the Thomas 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 lighting products. The Company's commercial and industrial product line can be utilized for 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., Canada, and Mexico 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 1996, compared to 68 percent in 1995 and 67 percent in 1994. Compressors and Vacuum Pumps Segment This Segment includes air compressors and vacuum pumps manufactured under the Thomas and Welch names in the U.S. and ASF/Thomas in Europe. Thomas specializes in compressor applications below the 1.5 horsepower range for use in the finished products of other domestic or foreign manufacturers and in the manufacture of high vacuum systems for laboratory and chemical markets. Such compressors and vacuum pumps are used in medical equipment, vending machines, photocopiers, computer tape drives, automotive and transportation equipment, liquid dispensing applications, gasoline vapor recovery, and refrigerant recovery, waste disposal, and laboratory equipment. Thomas is the major compressor and vacuum pump participant in the medical OEM industry worldwide. The Company offers a wide selection of standard air compressors and vacuum pumps and will modify or design its products to meet exacting OEM applications. Its products also are manufactured for private-label sale in the construction compressor, laboratory, and chemical markets. 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, and building supply dealers. The U.S. operations manufacture rotary vane, linear, piston, and diaphragm compressors and vacuum pumps, as well as air motors and vacuum ejectors. These products are distributed worldwide to original equipment manufacturers as well as through fluid power and large compressor distributors. Primary markets served include medical, environmental, instrumentation, mobile, construction, laboratory, chemical, and consumer. The European operations manufacture a complementary line of miniature rotary vane, piston, linear, and diaphragm compressors and vacuum pumps, with expertise in applications of less than 1/8 horsepower. These products are currently distributed worldwide to original equipment manufacturers. Primary applications for products manufactured in Europe include medical, air and gas sampling, photography, and dish washing equipment, as well as laboratory instruments and leak detection devices. The Thomas, ASF/Thomas, Welch, Sprayit, and Medi-Pump trade names are recognized in the market and are important to the Segment. The Compressors and Vacuum Pumps Segment accounted for 33 percent of the Company's sales in 1996, compared to 32 percent in 1995 and 32 percent in 1994. --------------------- 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 1996, 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 $92 million at December 31, 1996--42 percent Lighting and 58 percent Compressors and Vacuum Pumps--and $90 million at December 31, 1995--47 percent Lighting and 53 percent Compressors and Vacuum Pumps. The Company believes substantially all of such orders are firm, although some orders are subject to cancellation. Substantially all of these orders are expected to be filled in 1997. Competition in the lighting industry is strong in all markets served by the Company. It is estimated that five companies share a substantial 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. Thomas is the leading 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. The lighting industry continues 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 1996, the Company spent $14.3 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 1995, the Company spent $13.4 million on these activities and during 1994, $12.7 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 employed approximately 3,000 people at December 31, 1996. 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 1996 Annual Report to Shareholders, for financial information about foreign and domestic operations. Export sales for the years 1996, 1995, and 1994, were $41,400,000, $40,900,000, and $36,600,000 respectively. e. Executive Officers of the Registrant.
Year Office or Position First Elected Name with Company Age as an Officer Timothy C. Brown Chairman of the Board, 46 1984 President, Chief Executive Officer, Chairman of the Executive Committee, and Director Richard J. Crossland Vice President; Lighting 53 1994 (A) Group Manager Cliff C. Moulton Vice President, 49 1993 (B) Business Development Phillip J. Stuecker Vice President of Finance, 45 1984 Chief Financial Officer, and Secretary Ronald D. Schneider Vice President; General 46 1992 (C) Manager C&I Business Unit Gilbert R. Grady, Jr. Vice President, Corporate 60 1981 Employee Relations (A) Richard J. Crossland was elected an officer effective August 18, 1994. Mr. Crossland spent the previous 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) Cliff C. Moulton was elected an officer effective March 1, 1993, and held the position of Vice President; Compressor and Vacuum Pump Group Manager. Mr. Moulton spent the previous 23 years with Honeywell Corporation in various management positions, most recently as Vice President and General Manager of the Skinner Valve Division, since 1987. (C) Ronald D. Schneider was elected an officer effective April 16, 1992. Mr. Schneider had held the position of Vice President, Lighting Operations since 1994 and prior to that was Director, Manufacturing Services for the Lighting Group and Manufacturing Services Manager at the Company's Power Air Division. 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, specific description of the properties owned and leased by the Company is not necessary to an understanding of the Company's business. 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 8 4 1,699,887 Manufacturing plants 3 3 633,116 Distribution centers 0 4 65,550 Administrative offices Compressors and Vacuum 3 4 659,464 Manufacturing plants Pumps 0 3 11,440 Distribution centers Corporate 0 2 16,186 Corporate headquarters 3 1 299,300 Leased to third parties 2 0 210,200 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 and results of operations 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 headings "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Common Stock Market Prices and Dividends," and "Notes to Consolidated Financial Statements," which information is contained in the Company's 1996 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 "Five-Year Summary of Operations and Statistics," which information is contained in the Company's 1996 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 headings "Management's Discussion and Analysis of Financial Condition and Results of Operations," which information is contained in the Company's 1996 Annual Report to Shareholders and hereby incorporated herein by reference. The Company makes forward-looking statements from time to time and desires to take advantage of the "safe harbor" which is afforded such statements under the Private Securities Litigation Reform Act of 1995 when they are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statements. The statements contained in the foregoing "Management's Discussion and Analysis of Financial Condition and Results of Operations," statements contained in future filings with the Securities and Exchange Commission and publicly disseminated press releases, and statements which may be made from time to time in the future by management of the Company in presentations to shareholders, prospective investors, and others interested in the business and financial affairs of the Company, which are not historical facts, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward- looking statements. Any projections of financial performances or statements concerning expectations as to future developments should not be construed in any manner as a guarantee that such results or developments will, in fact, occur. There can be no assurance that any forward-looking statement will be realized or that actual results will not be significantly different from that set forth in such forward-looking statement. In addition to the risks and uncertainties of ordinary business operations, the forward-looking statements of the Company referred to above are also subject to the following risks and uncertainties: o The Company operates in a highly competitive business environment, and its sales could be negatively affected by its inability to maintain or increase prices, changes in geographic or product mix, or the decision of its customers to purchase competitive products instead of the Company's products. Sales could also be affected by pricing, purchasing, financing, operational, advertising, or promotional decisions made by purchasers of the Company's products. o The Lighting Group Segment participates in a highly competitive market that is dependent on the level of residential, commercial, and industrial construction activity. Changes in consumer preferences and acceptance of new products affects the Lighting Segment. o The Compressor & Vacuum Pump Segment operates in a market where technology improvements and the introduction of products for new applications are necessary for future growth. The Company could experience difficulties or delays in the development, production, testing, and marketing of new products. As an original equipment supplier, the Company's results of operations are directly affected by the success of customer products. o As the Company's business continues to expand outside the United States, the Company could experience changes in its ability to obtain or hedge against foreign currency rates and fluctuations in those rates. The Company could also be affected by nationalizations, unstable governments or legal systems, or inter-governmental disputes. These currency, economic, and political uncertainties may affect the Company's results. o The forward-looking statements made by the Company are based on estimates which the Company believes are reasonable. This means that the Company's actual results could differ materially from such estimates as a result of being negatively affected as described above or otherwise positively affected. 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" and "Notes to Consolidated Financial Statements" which information is contained in the Company's 1996 Annual Report to Shareholders and hereby incorporated herein by reference. The Report of Independent Auditors is also set forth in Exhibit 13 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 1996 Annual Report to Shareholders and hereby incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. Reference is made to registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on April 17, 1997, under the heading "Accountants." 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 17, 1997, under the headings "Election of Directors" and "Compliance with 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 1.e. 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 17, 1997, 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 17, 1997, 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 17, 1997, under the headings "Board of Directors" and "Compensation Committee InterLocks and Insider Participation" 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 1996 Annual Report to Shareholders, are included in Part II, Item 8: Consolidated Balance Sheets--December 31, 1996 and 1995 Consolidated Statements of Income--Years ended December 31, 1996, 1995, and 1994 Consolidated Statements of Shareholders' Equity--Years ended December 31, 1996, 1995, and 1994 Consolidated Statements of Cash Flows--Years ended December 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements--December 31, 1996 (2) Financial Statement Schedule Schedule II -- Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. (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 April 18, 1996, submitted as Exhibit 3 to registrant's report on Form 10-Q dated May 11, 1996. 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 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., and Phillip J. Stuecker filed as Exhibits 3(a), 3(f), and 3(j), respectively, to registrant's report on Form 10-Q dated November 11, 1988, hereby incorporated by reference. 10(b) Employment Agreement with Cliff 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 with Richard J. Crossland filed as Exhibit 10(c) to registrant's report on Form 10-K dated March 22, 1994, hereby incorporated by reference. 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) Nonemployee Director Stock Option Plan as Amended and Restated as of February 5, 1997, filed herewith. 10(i) 1995 Incentive Stock Plan as Amended and Restated as of December 11, 1996, filed herewith. 10(j) Employment Agreement with Timothy C. Brown dated January 29, 1997, filed herewith. 13 Certain portions of the Company's 1996 Annual Report to Shareholders as specified in Parts I and II, hereby incorporated by reference in this Annual Report on Form 10-K. 21 Subsidiaries of the Registrant. 23(a) Consent of Ernst & Young LLP. 23(b) Consent of KPMG Peat Marwick 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, 1996. 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 20, 1997 By /s/ Timothy C. Brown Timothy C. Brown, Chairman of the Board 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 /s/ Timothy C. Brown Chairman of the Board; 3/20/97 Timothy C. Brown President; Chief Executive Officer; Chairman of the Executive Committee; Director (Principal Executive Officer) /s/ Phillip J. Stuecker Vice President of Finance; 3/20/97 Phillip J. Stuecker Chief Financial Officer; Secretary (Principal Financial Officer) /s/ Ronald D. Wiseman Controller; Assistant 3/20/97 Ronald D. Wiseman Secretary (Principal Accounting Officer) /s/ Wallace H. Dunbar Director 3/20/97 Wallace H. Dunbar /s/ Roger P. Eklund Director 3/20/97 Roger P. Eklund /s/ H. Joseph Ferguson Director 3/20/97 H. Joseph Ferguson /s/ Gene P. Gardner Director 3/20/97 Gene P. Gardner /s/ Lawrence E. Gloyd Director 3/20/97 Lawrence E. Gloyd /s/ William M. Jordan Director 3/20/97 William M. Jordan /s/ Ralph D. Ketchum Director 3/20/97 Ralph D. Ketchum /s/ Franklin J. Lunding, Jr. Director 3/20/97 Franklin J. Lunding, Jr. Report of Independent Auditors The Board of Directors and Shareholders Thomas Industries Inc. We have audited the consolidated balance sheet of Thomas Industries Inc. and subsidiaries as of December 31, 1996, and the related consolidated statements of income, shareholders' equity, and cash flows for the year then ended. Our audit also included the 1996 financial statement schedule 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 consolidated financial statements and schedule based on our audit. The financial statements and schedule of Thomas Industries Inc. and subsidiaries for the years ended December 31, 1995 and 1994 were audited by other auditors whose report dated February 7, 1996 expressed an unqualified opinion on those statements and schedule. 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 1996 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Thomas Industries Inc. and subsidiaries at December 31, 1996 and the consolidated 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 1996 financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /S/ Ernst & Young LLP Louisville, Kentucky February 5, 1997 Independent Auditors' Report The Board of Directors and Shareholders Thomas Industries Inc. We have audited the consolidated balance sheet of Thomas Industries Inc. and subsidiaries as of December 31, 1995, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the years in the two- year period ended December 31, 1995. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the financial statement schedule for each of the years in the two-year period ended December 31, 1995, 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 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 provide a reasonable basis for our opinion. In our opinion, the 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, 1995, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /S/ KPMG Peat Marwick LLP Louisville, Kentucky February 7, 1996
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Thomas Industries Inc. and Subsidiaries December 31, 1996 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, 1996 Allowance for doubtful accounts $2,014,000 $451,000 $222,000 (1) $2,243,000 Allowance for obsolete and slow moving inventory 7,751,000 3,260,000 2,140,000 (2) 8,871,000 $9,765,000 $3,711,000 2,362,000 $11,114,000 Year ended December 31, 1995 Allowance for doubtful accounts $1,773,000 $519,000 $278,000 (1) $2,014,000 Allowance for obsolete and slow moving inventory 5,724,000 4,004,000 1,977,000 (2) 7,751,000 $7,497,000 $4,523,000 $2,255,000 $9,765,000 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 (1) Uncollectible accounts written off, less recoveries on accounts previously written off and effect of currency translation in accordance with SFAS No. 52. (2) Disposal of obsolete inventory and effect of currency translation in accordance with SFAS No. 52.
EXHIBIT INDEX Exhibit No. Exhibit Page 10(h) Nonemployee Director Stock Option Plan as Amended and Restated as of February 5, 1997 10(i) 1995 Incentive Stock Plan as Amended and Restated as of December 11, 1996, 10(j) Employment agreement with Timothy C. Brown dated January 29, 1997 13 Certain portions of the Company's 1996 Annual Report to Shareholders as specified in Parts I and II hereof to be incorporated by reference in this Annual Report on Form 10-K 21 Subsidiaries of the Registrant 23(a) Consent of Ernst & Young LLP 23(b) Consent of KPMG Peat Marwick LLP 27 Financial Data Schedule EX-10.(H) 2 Exhibit 10(h) THOMAS INDUSTRIES INC. NONEMPLOYEE DIRECTOR STOCK OPTION PLAN (as amended and restated February 5, 1997) ARTICLE I GENERAL 1.1 Purpose. Thomas Industries Inc., a Delaware corporation (the "Company"), hereby adopts this Thomas Industries Inc. Nonemployee Director Stock Option Plan (the "Plan"). The purpose of the Plan is to increase the stock ownership of nonemployee directors and to foster and promote the long-term financial success of the Company by attracting and retaining outstanding nonemployee directors by enabling them to participate in the Company's growth through automatic, nondiscretionary grants of Options (as defined in Article II). 1.2 Participation. Only directors who have not been for at least one year an employee or officer of the Company or any subsidiary of the Company at the time a grant is made shall be eligible to receive grants under the Plan. 1.3 Shares Subject to The Plan. Shares of stock covered by grants under the Plan may be in whole or in part authorized and unissued or treasury shares of the Company's common stock or such other shares as may be substituted pursuant to Section 3.2 ("Common Stock"). The maximum number of shares of Common Stock which may be issued for all purposes under the Plan shall be 250,000 (subject to adjustment pursuant to Section 3.2). Any shares of Common Stock subject to an Option which for any reason is cancelled or terminated without having been exercised, shall again be available for grants under the Plan. No fractional shares shall be issued. 1.4 Gender and Number. Except when otherwise indicated by the context, words in the masculine gender when used in the Plan shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular. ARTICLE II STOCK OPTIONS 2.1 Grant of Stock Options. Effective on the date of each annual meeting of the shareholders of the Company at which Directors are elected ("Annual Meeting") commencing with the Annual Meeting in 1994, each Director then in office will automatically be awarded a stock option (an "Option") under the Plan to purchase 2000 (subject to adjustment pursuant to Section 3.2) shares of Common Stock. The Options are not intended to qualify as "incentive stock options" under Section 422 of the Internal Revenue Code of 1986, as amended. 2.2 Stock Option Certificates. The grant of an Option shall be evidenced by a certificate executed by an officer of the Company. 2.3 Option Price. The purchase price of Common Stock under each Option (the "Option Price") granted as of the Annual Meeting shall be the Fair Market Value of the Common Stock as of the date of the Annual Meeting. 2.4 Exercise and Term of Options. (a) Options may be exercised by the delivery of written notice of exercise and the Option Price for the shares to be purchased to the Corporate Secretary of the Company. The Option Price shall be paid in cash (including check, bank draft or money order) or, unless in the opinion of counsel to the Company to do so may result in a possible violation of law, by delivery of Common Stock already owned by the Director valued at Fair Market Value on the date of exercise. As soon as practicable after receipt of each notice and full payment, the Company shall deliver to the Director a certificate or certificates representing the acquired shares of Common Stock. (b) Each Option may be exercised at any time after the date it is granted until (subject to Section 3.1) the first to occur of the tenth anniversary of the date such Option was granted or the second anniversary of the date the Director ceases to be a Director (whether by death, disability, retirement or resignation). In the event of the death of a former Director prior to the exercise of any Option which were then exercisable, such Options may be exercised as provided in Section 3.1 until the second anniversary of the date the former Director ceased to be a Director. ARTICLE III MISCELLANEOUS PROVISIONS 3.1 Non Transferability; Beneficiaries. No Option granted under the Plan shall be transferable by the Director otherwise than by will or, if the Director dies intestate, by the laws of descent and distribution. All grants shall be exercisable during the Director's lifetime only by the Director or his personal representative. Any transfer contrary to this Section 3.1 will nullify the Option. In the event of a Director's death prior to the exercise of any Options which were then exercisable, such Options may be exercised by the Director's beneficiary, designated as provided below, or, in the absence of any such designation, his estate. Each Director may name, from time to time, any beneficiary or beneficiaries (who may be named contingently or successively) who may exercise such Options and receive such certificates. Each designation will revoke all prior designations by such Director, will be in writing and will be effective only when filed with the Corporate Secretary of the Company during his lifetime. Notwithstanding the foregoing, the Board of Directors may permit the transferability of an Option by a Director solely to members of the Director's immediate family or trusts or family partnerships for the benefit of such persons subject to such terms and conditions as may be established by the Board of Directors. 3.2 Adjustments Upon Certain Changes. In the event of a stock dividend or stock split, or combination or other change in the number of issued shares of Common Stock, a merger, consolidation, reorganization, recapitalization, sale or exchange of substantially all assets or dissolution of the Company, the Board of Directors of the Company ("Board of Directors") shall, in order to prevent the dilution or enlargement of rights under Options make such adjustments in the number and type of shares authorized by the Plan, the number and type of shares covered by outstanding Options and the Option Prices specified therein as may be required to prevent such dilution or enlargement. In the event fractional shares would otherwise result from any such adjustment, the number of shares so authorized and covered and the prices thereof shall be further adjusted so as to eliminate such fractions. 3.3 Amendment, Suspension and Termination of Plan. (a) The Board of Directors may suspend or terminate the Plan or any portion thereof at any time and may amend it from time to time in such respects as the Board of Directors may deem advisable in order that any grants thereunder shall conform to or otherwise reflect any change in applicable laws or regulations, or to permit the Company or the Directors to enjoy the benefits of any change in applicable laws or regulations, or in any other respect the Board of Directors may deem to be in the best interests of the Company; provided, however, that no such amendment shall, without stockholder approval to the extent required by law, agreement or the rules of any exchange upon which the Common Stock is listed (a) except as provided in Section 3.2, materially increase the number of shares of Common Stock which may be issued under the Plan, (b) materially modify the requirements as to eligibility for participation in the Plan, (c) materially increase the benefits accruing to Directors under the Plan or (d) extend the termination date of the Plan. No such amendment, suspension, or termination shall (x) impair the rights of Directors under any outstanding Options without the consent of the Directors affected thereby or (y) make any change that would disqualify the Plan, or any other plan of the Company intended to be so qualified, from the exemption provided by Rule 16b-3. (b) The provisions of Sections 2.1 and 2.3 may not be amended more than once every six months other than to comply with changes in the Internal Revenue Code of 1986, the Employee Retirement Income Security Act of 1974, and the rules thereunder. 3.4 Definition of Fair Market Value. The term "Fair Market Value" as it relates to Common Stock on any given date means (a) the closing sales prices of the Company's Common Stock as reported by the Company Tape of the New York Stock Exchange (or, if not so reported, on any domestic stock exchanges on which the Common Stock is then listed); or (b) if the Common Stock is not listed on an domestic stock exchange, the closing sales price of the Company's Common Stock as reported by the National Association of Securities Dealers Automated Quotation System (or, if not so reported, by the system then regarded as the most reliable source of such quotations) or, if there are no reported sales on such date, the mean of the closing bid and asked prices are so reported; or (c) if the Common Stock is listed on a domestic exchange or quoted in the domestic over-the-counter market, but there are no reported sales or quotations, as the case may be, on the given date, the value determined pursuant to (a) or (b) above using the reported sale prices or quotations on the last previous date on which so reported; or (d) if none of the foregoing clauses apply, the fair value as determined in good faith by the Board of Directors. 3.5 Plan Not Exclusive. The adoption of the Plan shall not preclude the adoption by appropriate means of any other stock option or other incentive plan for Directors. 3.6 Listing, Registration and Legal Compliance. Each Option shall be subject to the requirement that if at any time counsel to the Company shall determine that the listing, registration or qualification thereof or of any shares of Common Stock or other property subject thereto upon any securities exchange or under any foreign, federal or state securities or other law or regulation, or the consent or approval of any governmental body or the taking of any other action to comply with or otherwise with respect to any such law or regulation, is necessary or desirable as a condition to or in connection with the grant of such Option or the issue, delivery or purchase of shares of Common Stock or other property thereunder, no such Option may be exercised unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained free of any conditions not acceptable to the Company and the holder of the Option will supply the Company with such certificates, representations and information as the Company shall request and shall otherwise cooperate with the Company in effecting or obtaining such listing, registration, qualification, consent, approval or other action. The Company may at any time impose any limitations upon the exercise, of any Option which, in the opinion of the Board of Directors, are necessary or desirable in order to cause the Plan or any other plan of the Company to comply with Rule 16b-3. If the Company, as part of an offering of securities or otherwise, finds it desirable because of foreign, federal or state legal or regulatory requirements to reduce the period during which Options may be exercised, the Board of Directors may, without the holders' consent, so reduce such period on not less than 15 days' written notice to the holders thereof. 3.7 Rights of Directors. Nothing in the Plan shall confer upon any Director any right to serve as a Director for a period of time or to continue his present or any other rate of compensation. 3.8 Requirements of Law; Governing Law. The granting of Options and the issuance of shares of Common Stock shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. The Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Delaware. 3.9 Effective Date. The Plan was approved by the shareholders of the Company on April 21, 1994 and amended and restated by the Board of Directors on February 5, 1997. No grants shall be made hereunder after April 21, 2004. THOMAS INDUSTRIES INC. SUPPLEMENT NO. 1 TO NONEMPLOYEE DIRECTOR STOCK OPTION PLAN (EFFECTIVE FEBRUARY 5, 1997) PURPOSE The purpose of this Supplement is to increase the stock ownership of Nonemployee Directors by enabling them to elect to receive their retainer and meeting fees in shares of the Company's Common Stock and by allowing them to defer receipt of those shares until termination of service on the Board. ELECTION TO RECEIVE RETAINER AND MEETING FEES IN STOCK RETAINER A Director may elect to receive quarterly retainer fees in shares of Company Common Stock. The election will entitle the Director to receive, on each scheduled quarterly retainer payment date, a number of shares of Common Stock determined by dividing the retainer fee for that quarter by the average closing price of a share of Common Stock for the five business days immediately preceding the scheduled quarterly retainer payment date. MEETING FEES Each Director may also elect to receive any meeting fees earned in a quarter in shares of Company Common Stock. The election will entitle the Director to receive, on each scheduled quarterly meeting fees payment date, a number of shares of Common Stock determined by dividing the meeting fees for that quarter by the average closing price of a share of Common Stock for the five business days immediately preceding the scheduled quarterly meeting fees payment date. FRACTIONAL SHARES Any fraction of a share shall be disregarded and the remaining amount of the retainer or meeting fees shall be paid in cash on the respective scheduled quarterly payment date. METHOD OF ELECTION An election to receive fees in shares must be in writing and delivered to the Chief Financial Officer of the Company before the first day of a quarterly retainer period, except that the election for the first quarter of 1997 must be made prior to February 15, 1997. An election shall be effective for subsequent retainer periods until terminated by the Director by 30 days written notice to the Chief Financial Officer of the Company. ELECTION TO DEFER SHARES TERMS OF DEFERRAL A Director who elects to receive retainer or meeting fees in shares of Company Common Stock may elect to defer receipt of such shares (including any fractions) until termination of the Director's service as a member of the Board of Directors of the Company. An election to defer shares must be made in writing and delivered to the Chief Financial Officer of the Company before the first day of a quarterly retainer period except that the election for the first quarter of 1997 must be made prior to February 15, 1997. Any election to defer receipt of shares shall be effective for subsequent periods until terminated by the Director by 30 days prior written notice to the Chief Financial Officer of the Company, but any such termination shall have no effect on shares previously deferred. DIVIDENDS DURING DEFERRAL PERIOD If the Company pays a dividend with respect to its Common Stock during the deferral period, the number of deferred shares then credited to each electing Director will be increased by a number of shares (including fractions) equal to (a) the cash dividend the Director would have received had the Director actually owned the deferred shares then credited to his or her account divided by (b) the closing price of a share of Common Stock on the dividend payment date. DELIVERY OF DEFERRED SHARES A Director may elect to receive delivery of deferred shares either in a single delivery on the first business day of the calendar year following the year of termination of service on the Board or in five annual installments commencing on that date and continuing on the next four anniversaries of that date. Any fraction of a share shall be paid in cash. An election with respect to the delivery of deferred shares may be amended by the Director from time-to- time, but not later than six months prior to the date of the Director's termination of service on the Board. DEATH OF DIRECTOR In the event of the death of the Director, any deferred shares shall be delivered in a lump sum to the designated beneficiary of the Director or the Director's estate in the absence of such a designation. CHANGE IN CONTROL If there is a change in control of the Company, all deferred shares shall be delivered immediately to the Director as soon as possible after the change in control. For these purposes, change in control is defined in Exhibit A attached to this Supplement. STOCK CHANGES In the event of a stock dividend, stock split or other transaction in which the Company changes the number of its shares of Common Stock without new consideration to the Company, the number of deferred shares credited to each Director shall be changed in proportion to the change in the Company's shares. In the case of any merger, consolidation or combination of the Company with or into another corporation as defined in Section 10(c) of the 1995 Incentive Stock Plan other than a transaction which constitutes a change in control, any deferred shares shall be converted into the Acquisition Consideration as defined in Section 10(c) of the 1995 Plan. UNFUNDED OBLIGATION The Company's obligation with respect to deferred shares shall not be secured or funded in any manner. Nothing contained herein shall give any Director any rights that are greater than those of a general creditor of the Company. NONASSIGNABILITY A Director will have no right to anticipate any delivery of shares to be made pursuant to this Supplement or to alienate, dispose or encumber any of the Director's rights with respect to deferred shares. The Company will not recognize any assignment or alienation of the deferred shares either in whole or in part, nor shall any deferred shares be subject to attachment, garnishment or execution following judgment or other legal process. Exhibit A A change of control of the Company shall be deemed to occur upon the happening of any of the following: (a) any "person" (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding the Company, its affiliates and any qualified or non-qualified plan maintained by the Company or its affiliates) becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under such Act), directly or indirectly, of securities of the Company representing more than 20% of the combined voting power of the Company's then outstanding securities; (b) during any period of two consecutive years, individuals who at the beginning of any such period constitute the directors of the Company cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Company's shareholders, of each new director of the Company was approved by a vote of at least two- thirds of such directors of the Company then still in office who were directors of the Company at the beginning of any such period; (c) the Company is combined (by merger, share exchange, consolidation, or otherwise) with another corporation and as a result of such combination, less than 75% of the outstanding securities of the surviving or resulting corporation are owned in the aggregate by the former shareholders of the Company; or (d) the Company sells, leases, or otherwise transfers all or substantially all of its properties or assets to another person or entity. EX-10.(I) 3 Exhibit 10(i) THOMAS INDUSTRIES INC. 1995 INCENTIVE STOCK PLAN (AS AMENDED AND RESTATED DECEMBER 11, 1996) 1. Purpose. The Thomas Industries Inc. 1995 Incentive Stock Plan (the "Plan") is intended to provide incentives which will attract and retain highly competent persons as officers and key employees of Thomas Industries Inc. (the "Company") and its subsidiaries, by providing them opportunities to acquire shares of Common Stock of the Company ("Common Stock") or to receive monetary payments based on the value of such shares pursuant to the Benefits described herein. 2. Administration. The Plan will be administered by the Compensation Committee of the Board of Directors of the Company or another committee (the "Committee"), appointed by the Board from among its members consisting of two or more non-employee Directors as set forth in Securities and Exchange Commission Regulation Section 240.16b-3 ("Rule 16b-3") or any successor regulation. 3. Participants. Participants will consist of such key employees (including officers) of the Company or its subsidiaries as the Committee in its sole discretion determines to be significantly responsible for the success and future growth and profitability of the Company and whom the Committee may designate from time to time to receive Benefits under the Plan. Designation of a participant in any year shall not require the Committee to designate such person to receive a Benefit in any other year or, once designated, to receive the same type or amount of Benefit as granted to the participant in any year. The Committee shall consider such factors as it deems pertinent in selecting participants and in determining the type and amount of their respective Benefits. 4. Types of Benefits. Benefits under the Plan may be granted in any one or a combination of (a) Incentive Stock Options; (b) Non-qualified Stock Options; (c) Stock Appreciation Rights; (d) Stock Awards and Performance Share Awards; and (e) Tax-Offset Bonus Rights; all as described below. 5. Shares Reserved under the Plan. There is hereby reserved for issuance under the Plan an aggregate of 600,000 shares of Common Stock, which may be authorized but unissued or treasury shares. In addition, any shares of Common Stock remaining available for Benefits under the Company's 1987 Incentive Stock Plan, as amended, (the "1987 Plan") on the date of the 1995 annual meeting of shareholders of the Company and any shares of Common Stock subject to Benefits under the Company's 1987 Plan on such date which thereafter lapse, expire or are terminated shall thereafter be available for Benefits hereunder. All of such shares may, but need not, be issued pursuant to the exercise of Incentive Stock Options. The maximum number of option shares which may be awarded to any participant in any fiscal year during the term of the Plan is 50,000 shares. No more than 100,000 shares may be issued as Stock Awards not based on performance goals during the term of the Plan. Any shares subject to stock options or Stock Appreciation Rights or issued under such options or rights or as Stock Awards may thereafter be subject to new options, rights or awards under this Plan if there is a lapse, expiration or termination of any such options or rights prior to issuance of the shares or if shares are issued under such options or rights or as such awards, and thereafter are reacquired by the Company without consideration pursuant to rights reserved by the Company upon issuance thereof. 6. Stock Options. Incentive Stock Options and Non-qualified Stock Options will consist of stock options to purchase Common Stock at purchase prices not less than 100% of the fair market value of the Common Stock on the date the option is granted. Said purchase price may be paid by check or, in the discretion of the Committee, by the delivery (or certification of ownership) of shares of Common Stock of the Company owned by the participant for a period of at least six months. In the discretion of the Committee, payment may also be made by delivering a properly executed exercise notice to the Company, together with a copy of the irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price. Non- qualified Stock Options shall be exercisable not later than fifteen years after the date they are granted and Incentive Stock Options shall be exercisable not later than ten years after the date they are granted. In the event of termination of employment, all stock options shall terminate at such times and upon such conditions or circumstances as the Committee shall in its discretion set forth in such option at the date of grant. The aggregate fair market value (determined as of the time the option is granted) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by a participant during any calendar year (under all option plans of the Company and its subsidiary corporations) shall not exceed $100,000. The Committee may provide, either at the time of grant or subsequently, that a stock option include the right to acquire a replacement stock option upon exercise of the original stock option (in whole or in part) prior to termination of employment of the participant and through payment of the exercise price in shares of Common Stock. The terms and conditions of a replacement option shall be determined by the Committee in its sole discretion. 7. Stock Appreciation Rights. The Committee may, in its discretion, grant Stock Appreciation Rights to the holders of any stock options granted hereunder. In addition, Stock Appreciation Rights may be granted independently of and without relation to options. Each Stock Appreciation Right shall be subject to such terms and conditions consistent with the Plan as the Committee shall impose from time to time, including the following: (a) A Stock Appreciation Right relating to an option may be made part of such option at the time of its grant or at any time thereafter. (b) Each Stock Appreciation Right will entitle the holder to elect to receive the appreciation in the fair market value of the shares subject thereto up to the date the right is exercised. In the case of a right issued in relation to a stock option, such appreciation shall be measured from not less than the option price and in the case of a right issued independently of any stock option, such appreciation shall be measured from not less than the fair market value of the Common Stock on the date the right is granted. Payment of such appreciation shall be made in cash or in Common Stock, or a combination thereof, as set forth in the award, but no Stock Appreciation Right shall entitle the holder to receive, upon exercise thereof, more than the number of shares of Common Stock (or cash of equal value) with respect to which the right is granted. (c) Each Stock Appreciation Right will be exercisable at the times and to the extent set forth therein, but no Stock Appreciation Right may be exercisable more than fifteen years after it was granted. Exercise of a Stock Appreciation Right shall reduce the number of shares issuable under the Plan (and the related option, if any) by the number of shares with respect to which the right is exercised. 8. Stock Awards and Performance Share Awards. Stock Awards will consist of Common Stock transferred to participants without other payment therefor as additional compensation for services to the Company and its subsidiaries. Stock Awards shall be subject to such terms and conditions as the Committee determines appropriate, including, without limitation, restrictions on the sale or other disposition of such shares, rights of the Company to reacquire such shares upon termination of the participant's employment within specified periods and conditions requiring that the shares be earned in whole or in part upon the achievement of performance goals established by the Committee over a designated period of time. The Committee may award performance shares (which may include dividend equivalents) to participants subject to such terms and conditions as the Committee determines appropriate. Performance shares may be earned in whole or in part if certain goals established by the Committee are achieved over a period of time designated by the Committee, which may include overlapping performance periods. The goals established by the Committee may be based on business criteria selected by the Committee including total shareholder return, economic value added, net income, return on equity or assets, earnings per share, cash flow and cost control. The maximum number of performance shares payable for a performance period to any participant that is intended to satisfy the requirements for "performance-based compensation" under Section 162(m) of the Internal Revenue Code of 1954 shall not exceed 20,000. 9. Tax-Offset Bonus Rights. The Committee, in its sole discretion, may grant Tax-Offset Bonus Rights with respect to Non-qualified Stock Options. Such Tax-Offset Bonus Rights may be granted to a participant at the time of the grant of the related Non-qualified Stock Option or subsequent thereto, but only with respect to the related Non-qualified Stock Option. A Tax-Offset Bonus Right shall entitle the participant to receive from the Company or a subsidiary upon exercise of the related Non-qualified Stock Option an amount in cash equal to (1) the excess, if any, of the aggregate fair market value of shares acquired by the exercise of a Non-qualified Stock Option on the date of exercise over the aggregate purchase price of the shares acquired by such exercise, multiplied by (2) a fraction, the numerator of which is not more than the maximum marginal individual income tax rate, and the denominator of which is one minus such rate. The Committee shall determine all of the terms and provisions of any Tax-Offset Bonus Right including but not limited to the date of grant, the term, the effect of employment termination and death. No Tax-Offset Bonus Right shall be assignable or transferable except to the extent the Committee permits such Tax- Offset Bonus Right to be assigned by will or through the laws of descent and distribution. 10. Adjustment Provisions. (a) If the Company shall at any time change the number of issued shares of Common Stock without new consideration to the Company (such as by stock dividends or stock splits), the total number of shares reserved for issuance under this Plan and the number of shares covered by each outstanding Benefit shall be adjusted so that the aggregate consideration payable to the Company and the value of each such Benefit shall not be changed. The Committee may also provide for the continuation of Benefits or for other equitable adjustments after changes in the Common Stock resulting from reorganization, sale, merger, consolidation or similar occurrence. (b) Notwithstanding any other provision of this Plan, and without affecting the number of shares otherwise reserved or available hereunder, the Committee may authorize the issuance or assumption of Benefits in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate. (c) In the case of any merger, consolidation or combination of the Company with or into another corporation, other than a merger, consolidation or combination in which the Company is the continuing corporation and which does not result in the outstanding Common Stock being converted into or exchanged for different securities, cash or other property, or any combination thereof (an "Acquisition"): (i) any participant to whom a stock option has been granted under the Plan shall have the right (subject to the provisions of the Plan and any limitation applicable to such option) thereafter and during the term of such option, to receive upon exercise thereof the Acquisition Consideration (as defined below) receivable upon such Acquisition by a holder of the number of shares of Common Stock which might have been obtained upon exercise of such option or portion thereof, as the case may be, immediately prior to such Acquisition; (ii) any participant to whom a Stock Appreciation Right has been granted under the Plan shall have the right (subject to the provisions of the Plan and any limitation applicable to such right) thereafter and during the term of such right to receive upon exercise thereof the difference between the aggregate fair market value on the applicable date (as set forth in such right) of the Acquisition Consideration receivable upon such Acquisition by a holder of the number of shares of Common Stock which might have been obtained upon exercise of the option related thereto or any portion thereof, as the case may be, immediately prior to such Acquisition and the aggregate option price of the related option, or the aggregate fair market value on the date of grant of the right, whichever is applicable. The term "Acquisition Consideration" shall mean the kind and amount of shares of the surviving or new corporation, cash, securities, evidence of indebtedness, other property or any combination thereof receivable in respect of one share of Common Stock of the Company upon consummation of an Acquisition. 11. Nontransferability. Each Benefit granted under the Plan to an employee shall not be transferable by him otherwise than by will or the laws of descent and distribution, and shall be exercisable, during his lifetime, only by him. In the event of the death of a participant, each Benefit theretofore granted to him shall be exercisable within the period after his death established by the Committee at the time of grant (but not beyond the stated duration of the Benefit) and then only: (a) By the executor or administrator of the estate of the deceased participant or the person or persons to whom the deceased participant's rights under the Benefit shall pass by will or the laws of descent and distribution; and (b) To the extent that the deceased participant was entitled to do so at the date of his death. Notwithstanding the foregoing, at the discretion of the Committee, an award of a Benefit may permit the transferability of the Benefit by the participant solely to members of the participant's immediate family or trusts or family partnerships for the benefit of such persons subject to such terms and conditions as may be established by the Committee. 12. Other Provisions. The award of any Benefit under the Plan may also be subject to such other provisions (whether or not applicable to the Benefit awarded to any other participant) as the Committee determines appropriate, including without limitation, provisions for the installment purchase of Common Stock under Stock Options, provisions for the installment exercise of Stock Appreciation Rights, provisions to assist the participant in financing the acquisition of Common Stock, restrictions on resale or other disposition, provisions for the acceleration of exercisability of Benefits in the event of a change of control of the Company, provisions for the payment of the value of the Benefits to participants in the event of a change of control of the Company, provisions to comply with Federal and state securities laws, or understandings or conditions as to the participant's employment in addition to those specifically provided for under the Plan. 13. Rules. The Committee may establish such rules and regulations as it considers desirable for the administration of the Plan. 14. Manner of Action by Committee. A majority of the members of the Committee qualified to act on a question may act by meeting or by writing signed without meeting and may execute, or delegate to one of its members authority to execute any instrument or document required. The Committee may delegate the performance of ministerial functions in connection with the Plan to such person or persons as the Committee may select. The costs of administration of the Plan will be paid by the Company. 15. Fair Market Value. For purposes hereof, fair market value of Common Stock shall be the closing sale price for the Company's Common Stock as reflected in the New York Stock Exchange Composite Transaction Quotations for the date of calculation (or on the next preceding trading date if Common Stock was not traded on the date of calculation). 16. Taxes. The Company shall be entitled if necessary or desirable to pay or withhold the amount of any tax attributable to any amounts payable under the Plan after giving the person entitled to receive such amount notice as far in advance as practicable, and the Company may defer making payment as to any Benefit if any such tax may be pending until indemnified to its satisfaction. When a person is required to pay to the Company an amount required to be withheld under applicable tax laws in connection with exercises of Non-qualified Stock Options or other Benefits under the Plan, the Committee may, in its discretion and subject to such rules as it may adopt, permit such person to satisfy the obligation, in whole or in part, by electing to have the Company withhold shares of Common Stock having a fair market value equal to the amount required to be withheld. 17. Tenure. A participant's right, if any, to continue to serve the Company and its subsidiaries as an officer, employee, or otherwise, shall not be enlarged or otherwise affected by his designation as a participant under the Plan. 18. Amendment and Termination. The terms and conditions applicable to any Benefit granted under the Plan may be amended or modified by mutual agreement between the Company and the participant or such other persons as may then have an interest therein. Also, by mutual agreement between the Company and a participant hereunder, or under any other present or future plan of the Company, stock options or other Benefits may be granted to such participant in substitution and exchange for, and in cancellation of, any Benefits previously granted such participant under this Plan, or any Benefit previously or hereafter granted to him under any other present or future plan of the Company. The Board of Directors may amend the Plan from time to time or terminate the Plan at any time. However, no action authorized by this paragraph shall reduce the amount of any existing Benefit or change the terms and conditions thereof without the participant's consent. No amendment of the Plan shall, without approval of the shareholders of the Company, (i) increase the total number of shares which may be issued under the Plan or increase the amount or type of Benefits that may be granted under the Plan; (ii) change the minimum purchase price, if any, of Common Stock which may be made subject to the Benefits under the Plan; or (iii) modify the requirements as to eligibility for Benefits under the Plan. However, the Board of Directors may amend the Plan in any respect without shareholder approval if shareholder approval is not then required to comply with Rule 16b-3 or other similar requirements. 19. Shareholder Approval. The Plan was approved by the shareholders of the Company on April 20, 1995 and amended and restated by the Board of Directors on December 11, 1996. This Plan shall continue in effect until terminated by the Board pursuant to Section 18; provided, however, that no Incentive Stock Option shall be granted more than ten years after the date of the adoption of this Plan by the Board. EX-10.(J) 4 Exhibit 10(j) January 29, 1997 Mr. Timothy C. Brown 1401 Hawkshead Lane Louisville, Kentucky 40220 Dear Mr. Brown: This letter agreement sets forth the terms and conditions of your continuing employment with Thomas Industries Inc. Please affix your signature to the enclosed copy of this letter to document your agreement with these terms and conditions and return the copy to me at your earliest convenience. 1. Position. During the term of your employment with the Company, you will continue to serve as President and Chief Executive Officer of the Company. You agree to devote your full business time and attention to the duties of such offices and use your best efforts to protect, encourage and promote the interests of the Company during the term. You shall not during your employment be employed by, or, without the consent of the Board of Directors, be a director of, any other business. However nothing shall prevent you from continuing to serve as a director of National City Bank, Kentucky, or to serve as a director of any civic or charitable organization. 2. Term. Your term of employment under this Agreement shall be for a three-year period, commencing as of January 1, 1997. The term shall be automatically extended at the end of each day for an additional day so that the remaining term of the Agreement shall be three years. Such automatic extensions shall terminate upon your receipt of written notice from the Board of Directors of the Company that the Agreement will not be so extended at the completion of its remaining three-year term. 3. Compensation. As compensation for the services which you will render pursuant to this Agreement, you will receive the following payments and benefits: a. Salary. You will be paid an annual salary of $360,000 for the calendar year 1997. Your salary will automatically increase to $375,000 for 1998 and $390,000 for 1999. Thereafter, your performance will be subject to review by the Compensation Committee on an annual basis in accordance with the usual review procedures from time to time in effect for senior management of the Company and your salary may be increased (but not decreased) from time to time based on those reviews. b. Bonus. You will participate in the Company's annual executive bonus program for senior executives. Your annual target bonus will be not less than 60% of your salary and will be earned if the Company achieves annual financial performance goals established by the Compensation Committee. c. Long-Term Incentives. You will participate in the Company's 1995 Incentive Stock Plan and will be awarded stock options and performance share awards as determined from time to time by the Compensation Committee based upon the Committee's evaluation of your performance and the performance of the Company from year to year. d. Benefits. You will be entitled to participate in all employee benefit plans and programs of the Company (other than any severance pay plan) which are made available from time to time to senior officers of the Company, relating to medical care, dental care, annual physical examination, long-term disability, and retirement. The Company's objective is to provide you compensation at a level of at least the 50% quartile of competitive compensation for chief executive officers in companies of comparable revenues. The Company intends to reach this objective over a 3 to 5-year period. 4. Expenses. The Company will pay or reimburse you for any expenses you reasonably incur in furtherance of your duties hereunder upon submission of vouchers or itemized reports prepared in compliance with Company policies and as may be required in order to qualify such payments as proper deductions for tax purposes. The Company shall also lease or purchase an automobile for your use in the rendition of services hereunder and you shall be reimbursed for all expenses incurred in the use of the automobile. 5. Vacation. You shall be entitled to paid vacation during each year of the term of your employment in accordance with Company policy applicable to salaried employees. 6. Death. In the event of your death during the employment term, the Company will pay your estate, or designated beneficiary, any unpaid salary or other accrued compensation through the date of termination and a pro rata portion of your target bonus for the year in which your death occurs. 7. Disability. Any physical or mental ailment which prevents you from performing your duties hereunder for a period of more than 180 consecutive days and which is expected to be of permanent duration shall constitute total permanent disability hereunder. In the event of your permanent total disability, your employment will terminate, the Company will pay you or your representative your salary through the date of termination and a pro rata portion of your target bonus for the year in which disability occurs, and all rights, duties and obligations of both parties under this Agreement (other than your obligation of noncompetition and confidentiality under paragraph 12 hereof) shall cease and you shall be entitled to all the benefits then being provided to senior officers of the Company who become so disabled. 8. Resignation. If you voluntarily terminate your employment at any time during the term, all obligations of the Company under this Agreement shall immediately cease, except for obligations involving accrued but unpaid compensation under this Agreement through the date of such termination. 9. Termination for Cause. The Company may terminate your employment at any time for cause. For purposes hereof, the term "cause" shall have the same meaning as it does in the "Employment Agreement" between the parties dated October 1, 1988 (the "1988 Agreement"). All obligations of the Company under this Agreement shall immediately cease upon termination of your employment for cause except for obligations involving accrued but unpaid compensation under this Agreement through the date of such termination. 10. Severance. If your employment is terminated by the Company without cause, the Company shall continue to pay you your base salary for a 36-month period from the date of termination, continue your medical and other insurance coverage for that period and make a payment to you equal to the present value of three annual contributions to the Company's retirement plan (based on average of the Company's last two contributions). Any payments under this paragraph shall constitute liquidated damages and shall be your sole right to compensation in the event of such termination of employment. The amount of any payment provided for under this paragraph 10 shall not be reduced by any compensation earned by you as a result of employment by another employer after the date of termination. 11. Change of Control. In the event of a change of control of the Company, the provisions of the 1988 Agreement shall supersede the provisions of this letter agreement for the "Employment Period" described in the 1988 Agreement. If you are still employed by the Company at the end of that Employment Period, the terms and conditions of this letter agreement shall apply to your continuing employment as if the change of control had not occurred. "Change of control" shall have the same meaning in this letter agreement as it does in the 1988 Agreement. 12. Noncompetition; Confidential Information. a. You agree that for a period of one year following your termination of employment you will not participate in the management of, or maintain any interest in, any organization which offers services or products similar to those offered by the Company or its subsidiaries without the prior written approval of the Board of Directors of the Company. This subparagraph shall not apply if termination of your employment is effected by the Company without cause. b. Upon termination of your employment, you agree not to take or retain any records, papers, files or other documents (including copies thereof) and shall not disclose to any person or entity any confidential information of any kind relating to the business, financial or other affairs of the Company or its affiliates without the prior written approval of the Board of Directors of the Company. 13. Arbitration. Any controversy relating to this Agreement shall be settled exclusively by arbitration in Louisville, Kentucky in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on an arbitrator's award relating to this Agreement in any court having jurisdiction. 14. Notices. All notices or other communications hereunder shall be in writing and shall be effectively given when mailed by registered mail, return receipt requested, and directed to the party at the address given herein, or to such other address as either party may hereafter designate to the other in writing. If to Executive: Mr. Timothy C. Brown 1401 Hawkshead Lane Louisville, Kentucky 40220 If to the Company: Thomas Industries Inc. 4360 Brownsboro Road Suite 300 Louisville, Kentucky 40232-5120 Attention: Phillip J. Stuecker 15. Entire Agreement. This letter agreement constitutes the entire agreement between you and the Company relating to your current employment and supersedes all previous agreements or understandings either oral or written with respect thereto, except for the 1988 Agreement which continues in full force and effect. 16. Amendment. The terms and conditions of this Agreement may be amended at any time by written agreement between you and the Company. 17. Continued Employment. If you remain employed by the Company after termination of this letter agreement, your annual salary shall continue at the rate in effect immediately prior to termination and you shall continue to participate in the Company's bonus, incentive and benefit plans (including the Severance Pay Policy for Officers). 18. Enforceability. The invalidity or unenforceability of any provision of this letter Agreement shall not affect its other provisions and this Agreement shall be construed in all respects as if such invalid or unenforceable provision had not been included. Any waiver by the Company of a breach of any provision of this Agreement by you shall not operate or be construed as a waiver of any subsequent breach of the Agreement by you. Very truly yours, ______________________ Chairman Compensation Committee I agree to the above terms and conditions. ____________________________________ Timothy C. Brown Date: ________________________, 1997 EX-13 5 Exhibit 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net income for 1996 was $17.4 million, an increase of $4.6 million, or 36.3% over 1995. Net sales increased 4.0% to $510.1 million in 1996 from $490.6 million in 1995. For 1995, net income was $12.8 million, an increase of $2.2 million, or 21.2% over 1994; while net sales increased 7.4% to $490.6 million from $456.6 million in 1994. The 1994 net income includes an after-tax gain of $3.0 million from the sale of two non-core divisions. The Compressor and Vacuum Pump Segment achieved record net sales of $170.1 million, an increase of 7.8% over 1995, following an increase of 7.8% in 1995 over 1994. The increase in 1996 was due to the acquisition of Welch Vacuum Technology and the continued successful introduction of new products for new applications. The increase in 1995 was attributed to new product applications primarily in the European operations. Operating income for the Segment increased 1.4% in 1996 from 1995 due to the addition of Welch. For 1995, operating income for the Segment decreased by 2.8% from 1994, principally due to competitive pricing pressure in the North American medical market. The Lighting Segment net sales for 1996 of $340.0 million were also a record and represent an increase of 2.2% over 1995 net sales, following an increase of 9.5% in 1995. The increase in 1996 resulted from improvements in the Consumer Division and additional shipments in the Canadian market. For 1995, the increase was principally from improvements in the Commercial and Industrial Division. Operating income for the Lighting Segment improved to $16.3 million in 1996, up from $11.4 million in 1995 and $4.9 million in 1994. The 1996 operating income represents a 43.1% improvement over 1995, while the 1995 level was 135.3% greater than 1994. The improvements were due to the additional volume, improved manufacturing efficiencies and continued implementation of cost containment programs. The 1994 Lighting Segment results include a gain of $2.0 million due to LIFO inventory quantity reductions at certain operating divisions. In 1994, the Company recorded an after-tax gain of $3.0 million from the sales of the Portland Willamette and Builders Brass Works Divisions. The operations, whose products were fireplace screens and accessories and architectural hardware and door controls, were divested as part of the Company's focus on its two core businesses. Interest expense for 1996 declined $.9 million or 11.0% from 1995, while the 1995 interest expense declined $1.0 million, or 10.7%, from 1994. The interest expense reductions in both years were due to the lower levels of long-term and short-term debt. 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 to meet these requirements. 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 1996, the Company employed an average of 3,150 people, compared to 3,100 in 1995. The addition is due primarily to the acquisition of Welch. LIQUIDITY AND SOURCES OF CAPITAL Cash and cash equivalents increased to $18.8 million at December 31, 1996, compared to $18.3 million and $5.1 million at December 31, 1995, and 1994, respectively. Cash flows from operations were $30.1 million in 1996 compared to $39.4 million in 1995 and $20.0 million in 1994. These funds, along with the proceeds from divestitures, have been utilized in funding of capital expenditures and dividends over the three-year period, along with the net pay down of long-term and short-term debt during 1996, 1995, and 1994 totaling $33.4 million. Working capital increased $5.0 million during 1996 from the December 31, 1995 level, which had increased $3.3 million from December 31, 1994. From 1995 to 1996, accounts receivable increased $6.3 million and inventory increased $1.2 million due to the higher sales volume and the Welch acquisition.
1996 1995 1994 Working capital $85,838 $80,837 $77,558 Current ratio 2.02 1.96 2.00 Long-term debt, less current portion $62,632 $70,791 $79,693 Long-term debt to total capital 28.4 % 33.1 % 37.3 %
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 $28.8 million are not restricted at December 31, 1996. As of December 31, 1996, the Company had available credit of $63.7 million with banks under short-term borrowing arrangements and a revolving line of credit, $60.5 million of which was unused. Anticipated funds from operations, along with available short-term credit, are expected to be sufficient to meet cash requirements in the year ahead. COMMON STOCK MARKET PRICES AND DIVIDENDS The Company's common stock is traded on the New York Stock Exchange (ticker symbol TII). On February 5, 1997, there were 2,198 security holders of record. High and low stock prices and dividends for the last two years were:
1996 1995 CASH Cash MARKET PRICE DIVIDENDS Market Price Dividends QUARTER ENDED HIGH LOW DECLARED High Low Declared March 31 $23-7/8 $20-3/8 $.10 $17 $13-5/8 $.10 June 30 21-3/4 19-1/8 .10 16-7/8 15-1/2 .10 September 30 20-1/8 16-1/2 .10 20-1/4 16-1/8 .10 December 31 21-3/8 18-3/4 .10 24-1/8 18-7/8 .10
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31 (In thousands, except per share data) 1996 1995 1994 Net sales $510,111 $490,573 $456,565 Cost of products sold 358,778 352,551 329,338 GROSS PROFIT 151,333 138,022 127,227 Selling, general and administrative expenses 117,175 108,284 104,091 Interest expense 7,333 8,242 9,225 Interest income and other (863) 443 (4,287) 123,645 116,969 109,029 INCOME BEFORE INCOME TAXES 27,688 21,053 18,198 Income taxes 10,272 8,278 7,656 NET INCOME $ 17,416 $ 12,775 $ 10,542 NET INCOME PER SHARE $ 1.63 $ 1.25 $ 1.05 See accompanying notes.
CONSOLIDATED BALANCE SHEETS
December 31 (In thousands, except share data) 1996 1995 Assets Current assets: Cash and cash equivalents $ 18,826 $ 18,305 Accounts receivable, less allowance (1996 - $2,243 ; 1995 - $2,014) 68,239 61,975 Inventories 69,247 68,065 Deferred income taxes 7,167 5,775 Other current assets 6,885 10,619 TOTAL CURRENT ASSETS 170,364 164,739 Property, plant and equipment, net 77,795 75,710 Intangible assets, net 58,687 61,379 Other assets 12,804 11,705 TOTAL ASSETS $319,650 $313,533 Liabilities and shareholders' equity Current liabilities: Notes payable to banks $ 6,986 $ 7,679 Accounts payable 27,377 27,778 Accrued expenses and other current liabilities 41,352 38,427 Dividends payable 1,053 1,010 Current portion of long-term debt 7,758 9,008 TOTAL CURRENT LIABILITIES 84,526 83,902 Deferred income taxes 8,603 7,875 Long-term debt, less current portion 62,632 70,791 Other long-term liabilities 6,187 7,788 TOTAL LIABILITIES 161,948 170,356 Shareholders' equity: Preferred stock, $1 par value, 3,000,000 shares authorized - none issued - - Common stock, $1 par value, shares authorized: 60,000,000; shares issued: 1996-11,549,940; 1995-11,485,865 11,550 11,486 Capital surplus 115,206 117,974 Retained earnings 50,420 40,003 Foreign currency translation (1,482) (616) Minimum pension liability (780) (2,690) Less cost of treasury shares: 1996-1,023,646; 1995-1,366,695 (17,212) (22,980) TOTAL SHAREHOLDERS' EQUITY 157,702 143,177 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $319,650 $313,533 See accompanying notes.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31 (In thousands) 1996 1995 1994 Common stock: Beginning of year $ 11,486 $ 11,448 $ 11,416 Stock options exercised 64 38 32 END OF YEAR 11,550 11,486 11,448 Capital surplus: Beginning of year 117,974 117,557 117,264 Treasury stock retired (3,866) - - Welch pooling of interests 347 - - Stock options exercised 751 417 293 END OF YEAR 115,206 117,974 117,557 Retained earnings: Beginning of year 40,003 31,264 24,746 Welch pooling of interests (928) - - Net income 17,416 12,775 10,542 Treasury stock retired (1,902) - - Cash dividends of $.40 per share (4,169) (4,036) (4,024) END OF YEAR 50,420 40,003 31,264 Foreign currency translation: Beginning of year (616) (2,478) (2,156) Adjustment (866) 1,862 (322) END OF YEAR (1,482) (616) (2,478) Minimum pension liability: Beginning of year (2,690) (1,045) (3,241) Adjustment 1,910 (1,645) 2,196 END OF YEAR (780) (2,690) (1,045) Treasury stock: Beginning of year (22,980) (22,980) (22,980) Treasury stock retired 5,768 - - END OF YEAR (17,212) (22,980) (22,980) TOTAL SHAREHOLDERS' EQUITY $157,702 $143,177 $133,766 See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31 (In thousands) 1996 1995 1994 Operating activities Net income $ 17,416 $ 12,775 $ 10,542 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,682 14,803 15,524 Deferred income taxes 198 75 1,391 Provision for losses on accounts receivable 451 519 705 Loss (gain) on asset disposals, net 99 123 (4,223) Changes in operating assets and liabilities net of effect of acquisitions/divestitures: Accounts receivable (5,434) (1,037) (3,412) Inventories 766 4,312 (4,739) Other current assets 998 1,282 1,004 Accounts payable (174) 1,779 1,565 Accrued expenses and other liabilities (366) 4,366 1,037 Other 479 404 560 NET CASH PROVIDED BY OPERATING ACTIVITIES 30,115 39,401 19,954 Investing activities nvesting activities Purchases of property, plant and equipment (15,071) (12,288) (16,301) Proceeds from sales of property, plant and equipment and other assets 159 1,458 12,747 NET CASH USED IN INVESTING ACTIVITIES (14,912) (10,830) (3,554) Financing activities Financing activities Payments on notes payable to banks, net (704) (1,231) (8,615) Payments on long-term debt (12,458) (8,914) (1,508) Dividends paid (4,127) (4,033) (4,022) Other 925 287 169 NET CASH USED IN FINANCING ACTIVITIES (16,364) (13,891) (13,976) EFFECT OF EXCHANGE RATE CHANGE 1,682 (1,425) 262 Net increase in cash and cash equivalents 521 13,255 2,686 Cash and cash equivalents at beginning of year 18,305 5,050 2,364 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 18,826 $ 18,305 $ 5,050 See accompanying notes.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE ONE - DESCRIPTION OF BUSINESS Thomas Industries Inc. and subsidiaries (the Company) operate two core businesses: lighting and compressors and vacuum pumps. The Company designs, manufactures, markets and sells these products. Manufacturing facilities are located in North America and Europe with additional sales operations located in South America and Asia. Lighting products are sold principally in North America for commercial, industrial and consumer applications. Compressor and vacuum pump products are sold worldwide with principal markets in North America and Europe, primarily for applications of original equipment manufacturers. NOTE TWO - ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company. Affiliates not required to be consolidated are 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 78% and 74% of consolidated inventories at December 31, 1996, and 1995, respectively. Inventories not on LIFO are valued using the first-in, first-out (FIFO) method. Inventories consisted of the following:
(In thousands 1996 1995 Finished goods $33,072 $29,951 Raw materials 21,622 25,107 Work in process 14,553 13,007 Total inventories $69,247 $68,065
On a current cost basis, inventories would have been $11,505,000 and $12,727,000 higher than reported at December 31, 1996, and 1995, respectively. Inventory quantities at certain operating units decreased in 1994. As a result, cost of products sold included 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. PROPERTY, PLANT AND EQUIPMENT The cost of property, plant and equipment is depreciated principally by the straight-line method over the asset's estimated useful life. Property, plant and equipment consisted of the following:
(In thousands) 1996 1995 Land $ 6,331 $ 6,258 Buildings 31,470 30,950 Leasehold improvements 11,627 11,005 Machinery and equipment 100,292 98,690 149,720 146,903 Accumulated depreciation and amortization 71,925 71,193 Total property, plant and equipment, net $ 77,795 $ 75,710
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 $18,368,000 and $16,548,000 at December 31, 1996, and 1995, respectively. The excess is being amortized over 40 years by the straight-line method. NET INCOME PER SHARE Net income per share is based on the weighted daily average number of common shares outstanding during the year, adjusted for the dilutive effect of common stock equivalents, consisting of stock options, calculated using the treasury stock method. RESEARCH AND DEVELOPMENT COSTS Research and development costs, which include costs of product improvements and design, are expensed as incurred ($14,338,000 in 1996, $13,405,000 in 1995 and $12,705,000 in 1994). FAIR VALUES OF FINANCIAL INSTRUMENTS Various methods and assumptions are used by the Company in estimating its fair value disclosures for significant financial instruments. Fair values of cash equivalents approximate their carrying amounts because they are highly liquid investments with a maturity of less than three months when purchased. Fair values of notes payable to banks and the current portion of long-term debt approximate their carrying amounts. 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. FOREIGN CURRENCY TRANSLATION The local currency is the functional currency for the Company's foreign subsidiaries. Results are translated into U.S. dollars using monthly average exchange rates, while balance sheet accounts are translated using year-end exchange rates. The resulting translation adjustments are included as a foreign currency translation adjustment in shareholders' equity. USE OF ESTIMATES Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from these estimates. OTHER Certain prior year amounts have been reclassified to conform to the current year presentation. NOTE THREE - ACQUISITIONS AND DIVESTITURES On March 15, 1996, the Company acquired Welch Vacuum Technology, Inc., of Skokie, Illinois, a manufacturer of high vacuum systems for laboratory and chemical markets. Welch was acquired in exchange for 343,049 shares of common stock of Thomas Industries Inc. in a transaction accounted for as a pooling of interests. Due to immateriality, prior-year financial statements have not been restated. In 1994, the Company sold various non-core operations resulting in a pre- tax 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 notes receivable of $4,500,000. NOTE FOUR - INCOME TAXES A summary of the provision for income taxes follows:
(In thousands) 1996 1995 1994 Current: Federal $ 6,946 $5,138 $3,614 State 630 300 850 Foreign 2,498 2,765 1,801 10,074 8,203 6,265 Deferred: Federal and state 128 211 1,366 Foreign 70 (136) 25 198 75 1,391 Total provision for income taxes $10,272 $8,278 $7,656
Deferred income taxes are provided for significant income and expense items recognized in different years for tax and financial reporting purposes. Temporary differences which gave rise to significant deferred tax assets and liabilities follow:
(In thousands) 1996 1995 Deferred tax assets: Net operating loss carryforwards $ 3,060 $2,045 Allowance for uncollectible accounts receivable 680 610 Inventory reserves 2,786 2,060 Accrued compensation expenses 2,731 2,661 Other 2,740 2,116 11,997 9,492 Less valuation allowance 3,060 2,045 Net deferred tax assets 8,937 7,447 Deferred tax liabilities: Depreciation of property, plant and equipment 6,705 6,406 Inventory valuation 1,858 1,397 Pension expense 1,140 1,026 Other 881 443 10,584 9,272 Net deferred tax liability 1,647 1,825 Classification: Current asset 7,167 5,775 Long-term asset 1,770 1,672 Current liability 1,981 1,397 Long-term liability 8,603 7,875 Net deferred tax liability $ 1,647 $1,825
Deferred tax assets and liabilities are classified according to the related asset and liability classification on the consolidated balance sheet. The valuation allowance is provided for income tax loss carryforwards in U.S. and foreign jurisdictions, the realization of which is not assured within the carryforward periods. The U.S. and foreign components of income before income taxes follow:
(In thousands) 1996 1995 1994 United States $20,731 $14,973 $13,628 Foreign 6,957 6,080 4,570 Income before income taxes $27,688 $21,053 $18,198
A reconciliation of the normal statutory federal income tax rate to the Company's effective income tax rate follows:
1996 1995 1994 U.S. statutory rate 35.0% 35.0% 35.0% State income taxes, net of federal tax benefits 1.5 .9 3.0 Nondeductible amortization of intangible assets 2.0 2.6 3.1 Foreign losses (1.4) (1.1) (1.4) Foreign tax rates 1.8 2.3 1.9 Other (1.8) (.4) .5 Effective income tax rate 37.1% 39.3% 42.1%
The Company's foreign subsidiaries have accumulated undistributed earnings ($26,962,000 at December 31, 1996) 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, 1996, the Company had U.S. net operating loss carryforwards for income tax purposes of $1,580,000, of which $465,000, $595,000 and $520,000 expire on January 1, 2007, 2009 and 2010, respectively. At December 31, 1996, the Company had foreign net operating loss carryforwards for income tax purposes of $2,840,000, of which $1,990,000 and $850,000 expire on January 1, 2000, and 2001, respectively. The Company made federal, state and foreign income tax payments of $13,179,000 in 1996, $7,200,000 in 1995 and $7,025,000 in 1994. NOTE FIVE - LONG-TERM DEBT AND CREDIT ARRANGEMENTS Long-term debt consists principally of 9.36% senior notes with annual maturities through 2005 ($61,810,000 and $69,540,000 at December 31, 1996, and 1995, respectively). The fair value of the Company's long-term debt (excluding the current portion) at December 31, 1996, and 1995 was $66,700,000 and $78,400,000, respectively. Maturities of long-term debt for the next five years are as follows: 1997 - $7,758,000; 1998 - $7,782,000; 1999 - $7,784,000; 2000 - $7,786,000; and 2001 - $7,788,000. 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 $28,800,000 were not restricted at December 31, 1996. As of December 31, 1996, the Company had available credit of $63,700,000 with banks under short-term borrowing arrangements and a revolving line of credit; $60,500,000 of which was unused. Cash paid for interest was $7,591,000 in 1996, $8,533,000 in 1995 and $9,253,000 in 1994. The weighted average interest rates on short-term borrowings at December 31, 1996, and 1995 were 4.04% and 5.22%, respectively. NOTE SIX - SHAREHOLDERS' EQUITY STOCK INCENTIVE PLANS At the April 20, 1995 Annual Meeting, the Company's shareholders approved the Company's 1995 Incentive Stock Plan. An aggregate of 600,000 shares of common stock, plus all shares remaining under the Company's 1987 Incentive Stock Plan, were reserved for issuance under this Plan. Under this Plan, options may be granted to employees at not less than market value at date of grant. All options granted have 10-year terms and vest and become fully exercisable at the end of five years of continued employment. The Company's 1987 Incentive Stock Plan was terminated, except with respect to outstanding options which may be exercised through 2005. At the April 21, 1994 Annual Meeting, the Company's shareholders approved the Nonemployee Director Stock Option Plan. Under this Plan, each continuing non-employee director in office on the date of each annual meeting is awarded options to purchase 2,000 shares of common stock at not less than market value at date of grant. All options granted have 10-year terms, and vest and become fully exercisable six months after grant. This Plan provides for options to be awarded at each annual meeting through 2004 or until 250,000 options have been granted. At December 31, 1996, there were eight non-employee directors in office, and 52,000 options had been awarded under this Plan. In 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). In accordance with SFAS 123, the Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related Interpretations, in accounting for its stock based compensation because, as discussed below, the alternative fair value accounting provided for under SFAS 123 requires use of option valuation models that were not developed for use in valuing stock options. Under APB 25, because the exercise price of the Company's stock options equaled the market price of the underlying stock on the date of grant, no compensation expense was recognized. Pro forma information regarding net income and earnings per share is required by SFAS 123, which also requires that the information be determined as if the Company has accounted for its employee stock options granted subsequent to December 31, 1994, under the fair value method of SFAS 123. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate of 6.5%; dividend yield of 2%; volatility factors of the expected market price of the Company's common stock of .273 and a weighted average expected life of the options of eight years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restriction and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows:
(In thousands, except per share data) 1996 1995 Net income As reported $17,416 $12,775 Pro forma 17,024 12,669 Earnings per share As reported 1.63 1.25 Pro forma 1.59 1.24
Because SFAS 123 is applicable only to options granted subsequent to December 31, 1994, its pro forma effect will not be fully reflected until 1999. A summary of stock option activity for all plans follows:
1996 1995 1994 WEIGHTED Weighted Weighted OPTIONS AVERAGE PRICE Options Average Price Options Average Price Beginning of year 684,192 $15.02 558,051 $12.88 412,801 $12.25 Granted 179,000 $20.97 179,000 $21.20 205,500 $13.48 Exercised (65,283) $12.89 (44,108) $15.38 (32,083) $10.12 Forfeited or expired (15,169) $16.79 (8,751) $12.87 (28,167) $11.29 End of year 782,740 $16.52 684,192 $15.02 558,051 $12.88 Exercisable at end of year 337,593 $13.11 315,190 $12.69 292,967 $12.78
The weighted average fair value of options granted was $7.59 in 1996 and $7.72 in 1995 using a Black-Scholes option pricing model. Options outstanding at December 31, 1996, had option prices ranging from $9.87 to $21.87 and expire at various dates between December 17, 1997, and December 11, 2006 (with a weighted-average remaining contractual life of 7.65 years). There are 534,610 shares reserved for future grant, of which 198,000 shares are reserved for the Non-Employee Director Stock Option Plan. In addition to the options listed above, 8,810 performance share awards were granted on December 11, 1996. Awards may be earned based on the total shareholder return of the Company during the three-year period commencing January 1, 1997. SHAREHOLDER RIGHTS PLAN The Board of Directors of the Company has adopted a shareholder rights plan (the Rights Plan) pursuant to which preferred stock purchase rights (the Rights) were declared and distributed to the holders of the Company's common stock. The Rights Plan, as adopted in 1987 and amended in 1990, 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 SEVEN - 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 substantially covering all U.S. employees whose compensation is not determined by collective bargaining. Annual contributions are determined by the Board of Directors. A summary of pension expense follows:
(In thousands) 1996 1995 1994 Defined benefit plans: Service cost-benefits earned during the period $ 502 $ 362 $ 503 Interest cost on accumulated benefit obligation 1,806 1,598 1,492 Actual return on plan assets (3,130) (4,368) (3) Net amortization and deferral 1,283 3,264 (1,394) Net pension cost of defined benefit plans 461 856 598 Defined contribution plans 3,206 2,685 2,540 Multi-employer plans for certain union employees and other 154 217 264 Total pension expense $ 3,821 $ 3,758 $ 3,402
The assumptions used in the accounting for the funded status of defined benefit plans follow:
1996 1995 1994 Weighted average discount rates 8.00% 7.15% 9.00% Expected long-term rates of return on assets 9.00% 9.00% 9.00%
The following table sets forth the funded status and amounts recognized in the consolidated balance sheets for the Company's defined benefit pension plans:
(In thousands) 1996 1995 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 $16,775 $ 8,067 $5,925 $16,630 Accumulated benefit obligation 17,245 8,266 6,212 16,984 Plan assets at fair value 19,012 7,062 6,396 15,157 Accumulated benefit obligation less than (in excess of) plan assets 1,767 (1,204) 184 (1,827) Unrecognized net (gain) loss (172) 780 575 2,718 Unrecognized net obligation, net of amortization 716 1,374 248 802 Additional minimum liability - (2,154) - (3,520) Prepaid pension asset (liability) $ 2,311 $ (1,204) $1,007 $ (1,827) The plans' assets consist primarily of listed stocks and bonds.
NOTE EIGHT - OTHER POSTRETIREMENT BENEFIT PLANS The Company provides postretirement medical and life insurance benefits for certain retirees and employees, and accrues the cost of such benefits during the service lives of such employees. A summary of postretirement benefit cost follows:
(In thousands) 1996 1995 1994 Service cost on benefits earned during the period $ 50 $ 42 $ 93 Interest cost on benefit obligation 356 439 491 Net amortization and deferral 233 344 294 Net periodic postretirement benefit cost $639 $825 $878
The following table sets forth the status and amounts recognized in the consolidated balance sheets for the Company's postretirement benefit plans:
(In thousands) 1996 1995 Retiree participants $ 3,834 $ 4,910 Fully eligible active participants 239 229 Other active participants 701 794 Accumulated postretirement benefit obligation 4,774 5,933 Unrecognized prior service cost (38) (40) Unrecognized net gain (loss) 725 (371) Unrecognized transition obligation (3,699) (3,931) Accrued postretirement benefit liability $ 1,762 $ 1,591
Assumptions used to measure expected health care costs follow:
1996 1995 1994 Discount rate 8.00% 7.15% 9.00% Initial health care cost trend rate 9.00% 9.00% 10.00% Ultimate health care cost trend rate 5.00% 5.50% 5.00% Year ultimate trend rate is achieved 2004 2004 2004
The healthcare cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed healthcare cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1996, by $410,000 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year ended December 31, 1996, by $39,000. NOTE NINE - LEASES, COMMITMENTS AND CONTINGENCIES Total rental expense was $4,664,000 in 1996; $4,554,000 in 1995 and $4,840,000 in 1994. Future minimum rentals for the five years ending December 31, 2001, and in the aggregate thereafter, are as follows: 1997 - $3,154,000; 1998 - $2,563,000; 1999 - $1,900,000; 2000 - $1,237,000; 2001 - $1,035,000 and thereafter - $6,192,000. The Company has letters of credit outstanding in the amount of $6,096,000 at December 31, 1996. 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 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. In the normal course of business, the Company is party to legal proceedings. When costs can be reasonably estimated, the Company records appropriate liabilities for such matters. NOTE TEN - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES A summary of accrued expenses and other current liabilities follows:
(In thousands) 1996 1995 Accrued wages, taxes and withholdings $10,173 $ 9,420 Accrued insurance 4,952 5,338 Accrued sales expense 5,447 4,937 Income taxes payable 3,565 5,126 Other current liabilities 17,215 13,606 Total accrued expenses and other current liabilities $41,352 $38,427
NOTE ELEVEN - SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) Unaudited quarterly results of operations follow (In thousands, except per share data):
NET INCOME NET SALES GROSS PROFIT NET INCOME PER SHARE 1996 1995 1996 1995 1996 1995 1996 1995 1st Qtr. $123,524 $117,609 $ 35,119 $ 31,228 $ 2,625 $ 1,588 $0.25 $0.16 2nd Qtr. 127,868 127,367 37,209 36,499 4,448 3,876 0.42 0.38 3rd Qtr. 129,611 128,750 39,188 36,908 5,902 4,702 0.55 0.46 4th Qtr. 129,108 116,847 39,817 33,387 4,441 2,609 0.41 0.25 $510,111 $490,573 $151,333 $138,022 $17,416 $12,775 $1.63 $1.25
NOTE TWELVE - INDUSTRY SEGMENT INFORMATION Industry segment information follows:
COMPRESSORS & (In thousands) LIGHTING VACUUM PUMPS OTHER CORPORATE CONSOLIDATED 1996 Net sales $340,047 $170,064 $ - $ - $510,111 Operating income 16,348 28,857 - - 45,205 General corporate expenses - - - 11,047 11,047 Identifiable assets 211,173 86,259 - 22,218 319,650 Depreciation and amortization expense 8,934 6,537 - 211 15,682 Capital expenditures 7,675 7,122 - 274 15,071 1995 Net sales $332,842 $157,731 $ - $ - $490,573 Operating income 11,425 28,446 - - 39,871 General corporate expenses - - - 10,133 10,133 Identifiable assets 204,707 82,299 - 26,527 313,533 Depreciation and amortization expense 8,784 5,803 - 216 14,803 Capital expenditures 5,849 6,241 - 198 12,288 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
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, excluding interest, general corporate expenses, other income and income taxes. Information by geographic area follows:
UNITED (In thousands) STATES CANADA EUROPE ELIMINATIONS CONSOLIDATED 1996 Net sales to unaffiliated customers $421,758 $38,704 $49,649 $ - $510,111 Inter-area sales 12,387 674 7,009 (20,070) - Total net sales 434,145 39,378 56,658 (20,070) 510,111 Operating income 38,432 750 6,023 - 45,205 Identifiable assets 260,661 28,107 30,882 - 319,650 1995 Net sales to unaffiliated customers $403,955 $35,051 $51,567 $ - $490,573 Inter-area sales 10,484 541 6,630 (17,655) - Total net sales 414,439 35,592 58,197 (17,655) 490,573 Operating income 32,765 729 6,377 - 39,871 Identifiable assets 253,438 26,336 33,759 - 313,533 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
REPORTS OF MANAGEMENT AND INDEPENDENT AUDITORS
RESPONSIBILITY FOR FINANCIAL REPORTING REPORT OF INDEPENDENT AUDITORS THE BOARD OF DIRECTORS AND SHAREHOLDERS THE BOARD OF DIRECTORS AND SHAREHOLDERS THOMAS INDUSTRIES INC. THOMAS INDUSTRIES INC. The financial statements herein have been prepared under We have audited the consolidated balance sheet management direction from accounting records which management of Thomas Industries Inc. and subsidiaries as of December 31, believes present fairly the transactions and financial 1996, and the related consolidated statements of income, position of the Company. They were developed in accordance shareholders' equity, and cash flows for the year then ended. with generally accepted accounting principles appropriate in These financial statements are the responsibility of the the circumstances. Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The Management has established internal controls systems and financial statements of Thomas Industries Inc. and procedures, including an internal audit function, to provide subsidiaries for the years ended December 31, 1995, and 1994 reasonable assurance that assets are maintained and accounted were audited by other auditors whose report dated February 7, for in accordance with its authorizations and that 1996, expressed an unqualified opinion on those statements. transactions are recorded in a manner to ensure reliable financial information. The Company has a formally stated and We conducted our audit in accordance with generally accepted communicated policy demanding of employees high ethical auditing standards. Those standards require that we plan and standards in their conduct of its business. perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An The Audit Committee of the Board of Directors is composed of audit includes examining, on a test basis, evidence supporting outside directors who meet regularly with management, internal the amounts and disclosures in the financial statements. An auditors and independent auditors to review audit plans and audit also includes assessing the accounting principles used fees, independence of auditors, internal controls, financial and significant estimates made by management, as well as reports and related matters. The Committee has unrestricted evaluating the overall financial statement presentation. We access to the independent and internal auditors with or believe that our audit provides without management attendance. a reasonable basis for our opinion. In our opinion, the 1996 financial statements referred to Timothy C. Brown above present fairly, in all material respects, the Chairman of the Board consolidated financial position of Thomas Industries Inc. and President subsidiaries at December 31, 1996, and the consolidated Chief Executive Officer results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. Phillip J. Stuecker /s/ Ernst & Young LLP Vice President of Finance Chief Financial Officer Louisville, Kentucky February 5, 1997 Louisville, Kentucky February 5, 1997
FIVE-YEAR SUMMARY OF OPERATIONS AND STATISTICS Year ended December 31 (Dollars in thousands, except per share data) 1996 1995 1994 1993 1992 EARNINGS STATISTICS Net sales $510,111 $490,573 456,565 $450,149 $420,754 Cost of products sold 358,778 352,551 329,338 326,396 303,428 Selling, general and administrative expenses 117,175 108,284 104,091 102,440 101,473 Interest expense 7,333 8,242 9,225 10,279 10,428 Income before income taxes 27,688 21,053 18,198 7,820 248 As a percentage of net sales 5.4% 4.3% 4.0% 1.7% 0.1% Income taxes 10,272 8,278 7,656 4,015 2,280 Effective tax rate 37.1% 39.3% 42.1% 51.3% n/a Net income (loss) 17,416 12,775 10,542(A) 3,805(B) (2,032) (C) FINANCIAL POSITION Working capital $ 85,838 $ 80,837 $ 77,558 $ 78,466 $ 70,448 Current ratio 2.0 to 1 2.0 to 1 2.0 to 1 2.1 to 1 2.0 to 1 Property, plant and equipment - net 77,795 75,710 75,962 76,587 79,799 Total assets 319,650 313,533 305,071 302,760 294,453 Return on ending assets 5.4% 4.1% 3.5% 1.3% (0.7)% Long-term debt, less current portion 62,632 70,791 79,693 87,509 89,900 Long-term debt to capital 28.4% 33.1% 37.3% 41.2% 41.0% Shareholders' equity 157,702 143,177 133,766 125,049 129,545 Return on average shareholders' equity 11.6% 9.2% 8.1% 3.0% (1.5)% DATA PER COMMON SHARE Net income $ 1.63 $ 1.25 $ 1.05 $ .38 $ (.20) Cash dividends declared .40 .40 .40 .40 .40 Shareholders' equity 14.98 14.15 13.27 12.44 12.94 Price range 23 7/8 - 16 1/2 24 1/8 - 13 5/8 16 3/8 - 12 3/4 14 - 9 1/8 14 1/8 - 8 3/8 Closing price 20 7/8 23 1/2 14 3/8 13 1/8 9 1/8 Price/earnings ratio 12.8 18.8 13.7 34.5 n/a OTHER DATA Cash dividends declared $ 4,169 $ 4,036 $ 4,024 $ 4,014 $ 4,004 Expenditures for property, plant & equipment 15,071 12,288 16,301 13,908 13,152 Depreciation and amortization 15,682 14,803 15,524 16,517 16,339 Average number of employees 3,150 3,100 3,190 3,390 3,480 Average sales per employee 161.9 158.2 143.1 132.8 120.9 Number of shareholders of record 2,232 2,407 2,677 2,903 3,154 Average shares outstanding 10,680,684 10,232,552 10,060,436 10,035,172 10,010,746 SEGMENT INFORMATION Net sales Lighting $340,047 $332,842 $304,047 $298,432 $286,417 Compressors & Vacuum Pumps 170,064 157,731 146,323 127,896 110,022 Other - - 6,195 23,821 24,315 Total net sales $510,111 $490,573 $456,565 $450,149 $420,754 Operating income Lighting $ 16,348 $ 11,425 $ 4,856 $ 120 (B) $ 2,659(C) Compressors & Vacuum Pumps 28,857 28,446 29,252 26,183 19,147 Other - - (263) 710 412 Total operating income $ 45,205 $ 39,871 $ 33,845 $ 27,013 $ 22,218 Note: See accompanying Notes to the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations (A) Divestitures - major divestitures and the effect on net income in the year of divestiture include Builders Brass Works and Portland Willamette in 1994 for a gain of $3,000,000 (B) Includes after-tax charge of $2,040,000 (pre-tax of $3,500,000) restructuring costs and credit of $1,148,000 (pre-tax of $1,900,000) for LIFO accounting change (C) Includes after-tax charge of $3,986,000 (pre-tax of $3,604,000 allocated to lighting) restructuring costs
EX-21 6 Exhibit 21. SUBSIDIARIES OF THE REGISTRANT
Place of Percentage of Name of Company Incorporation Voting Securities ASF Thomas Limited United Kingdom 100% ASF Thomas Industries Holding Deutschland GmbH Germany 100% ASF Thomas Industries GmbH, Puchheim Germany 100% ASF Thomas Industries GmbH, Memmingen Germany 100% ASF Thomas Industries GmbH & Co. KG, Wuppertal Germany 100% ASF Thomas, Inc. Georgia 100% Lighting Center Holdings, Inc. Tennessee 100% Blue Grass 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% Thomas Technologies, Inc. Delaware 100% Welch Vacuum Technology, Inc. Delaware 100%
NON WHOLLY OWNED SUBSIDIARIES
Place of Percentage of Name of Company Incorporation Voting Securities Lumec-Schreder Inc. Province of Quebec, 50% Canada Thomas Americas Industria e Commercio, LTDA Brazil 95% Yamada Day-Brite, Ltd. Japan 50%
EX-23.(A) 7 Exhibit 23(a) CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-05629) and related Prospectus and in the Registration Statements (Form S-8 No. 33-16257, No. 33-51653, No. 33-54689 and No. 33-59099) of Thomas Industries Inc. of our report dated February 5, 1997, with respect to the consolidated financial statements and schedule of Thomas Industries Inc. and subsidiaries included in the Annual Report (Form 10-K) for the year ended December 31, 1996. /S/ Ernst & Young LLP Louisville, Kentucky March 17, 1997 EX-23.(B) 8 Exhibit 23(b) CONSENT OF INDEPENDENT AUDITORS The Board of Directors Thomas Industries Inc.: We consent to incorporation by reference in the registration statements (No. 33- 16257), (No. 33-51653), (No. 33-54689), and (No. 33-59099) on Form S-8 and in the registration statement (No. 333-05629) on Form S-3 of Thomas Industries Inc. of our report dated February 7, 1996, relating to the consolidated balance sheet of Thomas Industries Inc. and subsidiaries as of December 31, 1995, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the years in the two-year period ended December 31, 1995, and the related schedule, which report appears in the December 31, 1996, annual report on Form 10-K of Thomas Industries Inc. /S/ KPMG PEAT MARWICK LLP Louisville, Kentucky March 17, 1997 EX-27 9
5 1,000 YEAR DEC-31-1996 DEC-28-1996 18,826 0 70,482 2,243 69,247 170,364 149,720 71,925 319,650 84,526 62,632 0 0 11,550 146,152 319,650 510,111 510,111 358,778 358,778 115,861 451 7,333 27,688 10,272 17,416 0 0 0 17,416 1.63 1.63
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