-----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, KoppAkr0+PWHKjbItcq7AAx484aytvFzHnj2mFpcOzJa93kZnsIfrmFQNvvf55yd OpopQFiw7SL1kI3hGB2gbQ== 0000914760-00-000069.txt : 20000327 0000914760-00-000069.hdr.sgml : 20000327 ACCESSION NUMBER: 0000914760-00-000069 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000324 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: SEC FILE NUMBER: 001-05426 FILM NUMBER: 577795 BUSINESS ADDRESS: STREET 1: 4360 BROWNBORO ROAD STREET 2: SUITE 300 CITY: LOUISVILLE STATE: KY ZIP: 40207 BUSINESS PHONE: 5028934600 MAIL ADDRESS: STREET 1: 4360 BROWNBORO ROAD STREET 2: SUITE 300 CITY: LOUISVILLE STATE: KY ZIP: 40207 10-K405 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 1999 ------------------- 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 16. 2000, 15,571,913 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 16, 2000, was approximately $288,080,391. Portions of the Proxy Statement for the Annual Meeting of Shareholders on April 20, 2000, are incorporated by reference in Part III of this report. Portions of the Annual Report to Shareholders for fiscal year ended December 31, 1999, are incorporated by reference in Parts I and II of this report. 1 PART I. ITEM 1. BUSINESS a. General Development of Business. ------------------------------- The company that was eventually to become known as Thomas Industries ("Thomas"or the "Company") was founded in 1928 as the Electric Sprayit Company. Electric Sprayit manufactured spraying machines, blowers, and air compressors in Chicago, Illinois. In 1948, Mr. Lee B. Thomas and a group of investors acquired Moe Brothers Manufacturing of Fort Atkinson, Wisconsin, a manufacturer of residential lighting products. In 1953, Moe Lighting and The Electric Sprayit Company merged to become Thomas Industries Inc. Although its roots are in lighting products and air compressors, Thomas began to diversify further in the 1960's and 1970's, acquiring different types of consumer products along with tools, hardware, and specialty products. A new strategic focus that began in the 1980's was finalized in 1994 and led the Company to divest its non-core businesses and concentrate on Lighting and Compressors & Vacuum Pumps. Significant additions to these businesses on the Lighting side included the Lumec and Day-Brite Lighting acquisitions in 1987 and 1989 and Compressors & Vacuum Pumps acquisitions which included ASF, Pneumotive, Brey, WISA, Welch and Oberdorfer, made from 1987 through 1999. On August 30, 1998, Thomas and The Genlyte Group ("Genlyte") formed a lighting joint venture that combined substantially all of the assets and liabilities of Genlyte and substantially all of the lighting assets and related liabilities of Thomas to create Genlyte Thomas Group LLC, estimated to be the third largest lighting fixture manufacturer in North America. Thomas owns a 32% interest in the joint venture, and Genlyte owns a 68% interest. 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 contained in the Company's Annual Report to Shareholders and incorporated herein by reference. c. Narrative Description of Business. --------------------------------- Compressor & Vacuum Pump Segment -------------------------------- With the lighting joint venture in place, Thomas is now focused on its Compressors & Vacuum Pumps business. Thomas is the leading supplier to the original equipment manufacturer (OEM) market in such applications as medical equipment, gasoline vapor and refrigerant recovery, automotive and transportation applications, printing, tape drives, laboratory equipment, and many other applications for consumer, commercial, and industrial uses. The Company designs, manufactures, markets, and sells these products through operations worldwide. Group headquarters are as 2 ITEM 1. (Continued) follows: North American Group--Sheboygan, Wisconsin; European Group-- Puchheim, Germany; and Asia Pacific Group--Hong Kong, China. The Company has four manufacturing operations in the United States which manufacture rotary vane, linear, piston, and diaphragm compressors and vacuum pumps, and various liquid pump technologies. These products are distributed worldwide to original equipment manufacturers, as well as through industrial distributors. Three German operations manufacture a complementary line of rotary vane, piston, linear, and diaphragm compressors and vacuum pumps, and various liquid pump technologies. These products are distributed worldwide. The Company also maintains sales offices in England, Italy, Switzerland, Hong Kong, Japan, and Taiwan. The Corporate Office is in Louisville, Kentucky. 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. For the OEM market, the Company's compressors and vacuum pumps products are manufactured under the names Thomas in the U.S. and ASF Thomas in Europe. Other products are marketed under the brand names Welch (high vacuum systems for laboratory and chemical markets), Air-Pac (pnueumatic construction equipment), Vakuumatic (leakage detection systems), Medi-Pump (respiratory products), and Oberdorfer (liquid pumps). The medical equipment market, which includes oxygen concentrators, nebulizers, aspirators, and other devices, is important to the Company. Company sales to medical equipment OEM's were approximately $62 million in 1999, $57 million in 1998, and $55 million in 1997. Oxygen concentrator OEM's represent over 50 percent of the Company's sales in the medical equipment market. The Company believes it has the major share in the oxygen concentrator OEM market worldwide. No single customer of the Company accounted for 10 percent or more of the Company's net sales in 1999. The backlog of unshipped orders was $43 million at December 31, 1999, and $47 million at December 31, 1998. The reduction in backlog was due primarily to exchange rate fluctuations regarding our European operations and a shortening of the cycle time for our larger OEM customers between when their orders are received and when we ship their orders. Also, certain OEM customers are ordering smaller quantities more frequently, instead of placing blanket orders with future delivery dates. 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 2000. The Company believes that it has adequate sources of materials and supplies for its business. 3 ITEM 1. (Continued) There is no significant seasonal impact on the business of the Company. Lighting Segment ---------------- On August 30, 1998, Thomas and Genlyte formed a lighting joint venture that combined substantially all of the assets and liabilities of Genlyte and substantially all of the lighting assets and related liabilities of Thomas to create Genlyte Thomas Group LLC ("GTG"), estimated to be the third largest lighting fixture manufacturer in North America. Thomas owns a 32% interest in the joint venture, and Genlyte owns a 68% interest. GTG designs, manufactures, markets, and sells lighting fixtures for a wide variety of applications in the commercial, industrial, and residential markets. The Company operates in these three industry segments through the following divisions: Lightolier, Controls, Wide-Lite, Hadco, Diamond F, Supply (Crescent, ExceLine, and Stonco product lines), Consumer, Indoor, Accent, and Outdoor in the United States and Mexico; and Canlyte, Thomas Lighting Canada, Lumec, Ledalite and ZED in Canada. GTG's products primarily utilize incandescent, fluorescent, and high-intensity discharge (HID) light sources and are marketed primarily to distributors who resell the products for use in new residential, commercial, and industrial construction as well as in remodeling existing structures. Because GTG does not principally sell directly to the end user of its products, it cannot determine precisely the percentage of its revenues derived from the sale of products installed in each type of building or the percentage of its products sold for new construction versus remodeling. GTG's sales, like those of the lighting fixture industry in general, are dependent on the level of activity in new construction and remodeling. GTG designs, manufactures, markets, and sells the following types of products: Indoor fixtures - Incandescent, fluorescent, and HID lighting fixtures and lighting controls for commercial, industrial, institutional, medical, sports, and residential markets, and task lighting for all markets. Outdoor fixtures - HID and incandescent lighting fixtures and accessories for commercial, industrial, institutional, sports, and residential markets. GTG's products are marketed by independent sales representatives and GTG direct sales personnel who sell to distributors, electrical wholesalers, mass merchandisers, and national accounts. In addition, GTG's products are promoted through architects, engineers, contractors, and building owners. The fixtures are principally sold throughout the United States, Canada, and Mexico. 4 ITEM 1. (Continued) d. Other ----- Working capital is financed 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 1999,the Company spent $9,370,000 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 1998, the Company spent $9,085,000 on these activities and during 1997, $14,873,000. The reduction subsequent to 1997 is primarily due to the formation of GTG. 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 1,060 people at December 31, 1999. e. 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 contained in the Company's 1999 Annual Report to Shareholders, and incorporated herein by reference, for financial information about foreign and domestic operations. Export sales for the years 1999, 1998, and 1997, were $29,250,000, $28,500,000, and $45,900,000, respectively. The reduction in export sales from 1997 to 1998 is primarily due to the formation of GTG. f. 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, 49 1984 (A) President, Chief Executive Officer, and Director Cliff C. Moulton Vice President, 52 1993 (B) Business Development Phillip J. Stuecker Vice President of Finance, 48 1984 (C) Chief Financial Officer, and Secretary 5 ITEM 1. (Continued) Year Office or Position First Elected Name with Company Age as an Officer ---- ------------ --- ------------- Bernard R. Berntson Vice President; General 60 1992 (D) Manager, North American Compressor & Vacuum Pump Group Peter H. Bissinger Vice President; General 54 1992 (E) Manager, European Compressor & Vacuum Pump Group (A) Timothy C. Brown was elected Chairman of the Board on April 20, 1995, in addition to his other duties of President and Chief Executive Officer. Prior to this, Mr. Brown held various management positions in the Company including Chief Operating Officer, Executive Vice President, and Vice President and Group Manager of the Specialty Products Group. (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) Phillip J. Stuecker was elected Vice President of Finance, Chief Financial Officer, and Secretary on October 23, 1989. Prior to this, Mr. Stuecker held various management positions in the Company including Vice President and Treasurer. (D) Bernard R. Berntson was elected an officer effective December 14, 1992. Mr. Berntson had held the position of General Manager of the North American Compressor & Vacuum Pump Group since 1987. (E) Peter H. Bissinger was elected an officer effective December 14, 1992, in addition to his position of President of ASF Thomas GmbH, a wholly owned subsidiary of the Company. Mr. Bissinger had held the position of President of ASF GmbH since 1979. 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. 6 ITEM 2. (Continued) The following listing summarizes the Company's properties. Number of Facilities Combined Segment Owned Leased Square Feet Nature of Facilities ------- ----- ------ ----------- -------------------- Compressors and Vacuum 4 4 707,000 Manufacturing plants Pumps 1 5 24,000 Distribution centers Corporate -- 1 5,500 Corporate headquarters 2 -- 160,000 Leased to third parties ITEM 3. LEGAL PROCEEDINGS In the normal course of business, the Company is a party to legal proceedings and claims. When costs can be reasonably estimated, appropriate liabilities for such matters are recorded. While management currently believes the amount of ultimate liability, if any, with respect to these actions will not materially affect the financial position, results of operations, or liquidity of the Company, the ultimate outcome of any litigation is uncertain. Were an unfavorable outcome to occur, the impact could be material to 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 "Common Stock Market Prices and Dividends," and "Notes to Consolidated Financial Statements," which information is contained in the Company's 1999 Annual Report to Shareholders and 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 1999 Annual Report to Shareholders and incorporated herein by reference. 7 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is set forth in Exhibit 13 under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations," which information is contained in the Company's 1999 Annual Report to Shareholders and incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's long-term debt bears interest at fixed rates; therefore, the Company's results of operations and cash flows would only be affected by interest rate changes to the extent that variable rate, short-term notes payable are outstanding. At December 31, 1999, there were no short-term notes payable outstanding. The fair value of the Company's long-term debt is estimated based on current interest rates offered to the Company for similar instruments. The Company believes that the effect, if any, of reasonably possible near-term changes in interest rates on the Company's consolidated financial position would not be significant. The Company has significant operations consisting of sales and manufacturing activities in foreign countries. As a result, the Company's financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which the Company manufactures or distributes its products. Currency exposures are concentrated in Germany but exist to a lesser extent in other parts of Europe and Asia. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements and notes to consolidated financial statements of the registrant and its subsidiaries are 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 1999 Annual Report to Shareholders and incorporated herein by reference. The Report of Independent Auditors is also set forth in Exhibit 13 and hereby incorporated herein by reference. In addition, financial statements of GTG are included in this Form 10-K on pages F-1 to F-18. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 8 PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT a. Directors of the Company ------------------------ The information required by this item is set forth in registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on April 20, 2000, under the headings "Election of Directors" and "Section 16(a), Beneficial Ownership Reporting Compliance," which information is incorporated herein by reference. b. Executive Officers of the Company --------------------------------- Reference is made to "Executive Officers of the Registrant" in Part I, Item 1.f. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is set forth in registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on April 20, 2000, under the headings "Executive Compensation," "Compensation Committee Interlocks and Insider Participation," and "Board of Directors," which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is set forth in registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on April 20, 2000, under the heading "Securities Beneficially Owned by Principal Shareholders and Management," which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is set forth in registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on April 20, 2000, under the headings "Board of Directors" and "Compensation Committee Interlocks and Insider Participation," which information is incorporated herein by reference. 9 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 1999 Annual Report to Shareholders, are included in Part II, Item 8: Consolidated Balance Sheets -- December 31, 1999 and 1998 Consolidated Statements of Income -- Years ended December 31, 1999, 1998, and 1997 Consolidated Statements of Shareholders' Equity -- Years ended December 31, 1999, 1998, and 1997 Consolidated Statements of Cash Flows -- Years ended December 31, 1999, 1998, and 1997 Notes to Consolidated Financial Statements -- December 31, 1999 (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, 1998, hereby incorporated by reference. 3(b) Bylaws, as amended April 15, 1999, filed as Exhibit 3(b) to registrant's report on Form 10-K dated March 29, 1999, hereby incorporated by reference. 4(a) Note Agreement dated January 19, 1990, by and among the Company and Day-Brite Lighting, Inc., Allstate Life Insurance Company, and other investors filed as Exhibit 4 to report on Form 10-K dated March 22, 1990, hereby incorporated by reference. First Amendment to Note Agreement dated April 8, 1992, and Second Amendment to Note Agreement dated July 31, 1992, filed as Exhibit 4 to Form 10-Q filed August 12, 1992, herein incorporated by reference. Third Amendment to Note Agreement dated July 7, 1998, filed as Exhibit 4 to Form 10-Q filed November 16, 1998, herein incorporated by reference. 10 ITEM 14. (Continued) Exhibit No. Exhibit ----------- ------- 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-K dated December 12, 1997, hereby incorporated by reference. 10(a) Employment Agreements with Timothy C. Brown and Phillip J. Stuecker filed as Exhibit 3(j) 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) Trust Agreement, filed as Exhibit 10(1) to registrant's report on Form 10-Q dated November 11, 1988, hereby incorporated by reference. 10(d) 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(e) 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(f) Nonemployee Director Stock Option Plan as Amended and Restated as of February 5, 1997, filed as Exhibit Exhibit 10(h) to registrant's report on Form 10-K dated March 20, 1997, hereby incorporated by reference. 10(g) 1995 Incentive Stock Plan as Amended and Restated as of April 15, 1999, filed as Exhibit 10(h) to registrant's report on Form 10-Q dated November 12, 1999, hereby incorporated by reference. 11 ITEM 14. (Continued) Exhibit No. Exhibit ----------- ------- 10(h) Employment Agreement with Timothy C. Brown dated January 29, 1997, filed as Exhibit 10(j) to registrant's report on Form 10-K dated March 20, 1997, hereby incorporated by reference. 10(i) Master Transaction Agreement by and between Thomas Industries Inc. and The Genlyte Group Incorporated dated April 28, 1998, filed as Exhibit 2.1 to registrant's report on Form 8-K dated July 24, 1998, hereby incorporated by reference. 10(j) Limited Liability Company Agreement of GT Lighting, LLC, dated April 28, 1998, filed as Exhibit 2.2 to registrant's report on Form 8-K dated July 24, 1998, hereby incorporated by reference. 10(k) Capitalization Agreement among GT Lighting, LLC, and Thomas Industries Inc., Tupelo Holdings Inc., Thomas Industries Holdings Inc., Gardco Manufacturing, Inc., Capri Lighting, inc., Thomas Imports, Inc., and TI Industries Corporation dated April 28, 1998, filed as Exhibit 2.3 to registrant's report on Form 8-K dated July 24, 1998, hereby incorporated by reference. 10(l) Capitalization Agreement between GT Lighting, LLC, and The Genlyte Group Incorporated dated April 28, 1998, filed as Exhibit 2.4 to registrant's Form 8-K dated July 24, 1998, hereby incorporated by reference. 13 Certain portions of the Company's 1999 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 Arthur Andersen LLP. 27 Financial Data Schedule. 12 ITEM 14. (Continued) b. Reports on Form 8-K ------------------- During the fourth quarter of 1999, the Company filed the following report on Form 8-K: Form 8-K dated December 14, 1999; (stock repurchase program announced) c. Exhibits -------- The exhibits filed as part of this Annual Report on Form 10-K are as specified in Item 14(a)(3) herein. 13 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 , 2000 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; Timothy C. Brown President; Chief Executive Officer; Director (Principal Executive Officer) /s/ Phillip J. Stuecker Vice President of Finance; Phillip J. Stuecker Chief Financial Officer; Secretary (Principal Financial Officer) /s/ Roger P. Whitton Controller Roger P. Whitton (Principal Accounting Officer) /s/ Wallace H. Dunbar Director Wallace H. Dunbar /s/ H. Joseph Ferguson Director H. Joseph Ferguson /s/ Gene P. Gardner Director Gene P. Gardner /s/ Lawrence E. Gloyd Director Lawrence E. Gloyd 14 Signatures (Continued) Signature Title Date --------- ----- ---- /s/ William M. Jordan Director William M. Jordan /s/ Franklin J. Lunding, Jr. Director Franklin J. Lunding, Jr. /s/ Anthony A. Massaro Director Anthony A. Massaro 15 Report of Independent Auditors The Board of Directors and Shareholders Thomas Industries Inc. We have audited the consolidated balance sheets of Thomas Industries Inc. and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. Our audits also included the 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 audits. The financial statements of Genlyte Thomas Group LLC (GTG), a partnership formed on August 30, 1998 in which the Company has a 32% interest, have been audited by other auditors whose report has been furnished to us; insofar as our opinion on the consolidated financial statements relates to data included for GTG, it is based solely on their report. We conducted our audits in accordance with generally accepted auditing standards in the United States. 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 and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Thomas Industries Inc. and subsidiaries at December 31, 1999 and 1998, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999,in conformity with generally accepted accounting principles in the United States. 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/ Ernst & Young LLP Louisville, Kentucky February 9, 2000 16 Valuation and Qualifying Accounts Thomas Industries Inc. and Subsidiaries December 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------ 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, 1999 Allowance for doubtful accounts $656,000 $192,000 $150,000 (1) $698,000 Allowance for obsolete and slow moving inventory $1,932,000 $174,000 $245,000 (2) $1,861,000 ---------------------------- ------------------------------ $2,588,000 $366,000 $395,000 $2,559,000 ============================ ============================== Year ended December 31, 1998 Allowance for doubtful accounts $2,046,000 $273,000 $1,515,000 (3) $148,000 (1) $656,000 Allowance for obsolete and slow moving inventory $5,518,000 $539,000 $3,841,000 (3) $284,000 (2) $1,932,000 ------------------------------------------------------------------------------ $7,564,000 $812,000 $5,356,000 $432,000 $2,588,000 ============================================================================== Year ended December 31, 1997 Allowance for doubtful accounts $2,243,000 $441,000 $638,000 (1) $2,046,000 Allowance for obsolete and slow moving inventory $8,871,000 $1,420,000 $4,773,000 (2) $5,518,000 ---------------------------- ------------------------------ $11,114,000 $1,861,000 $5,411,000 $7,564,000 ============================ ============================== (1) Uncollectible accounts written off, less recoveries on accounts previously written off and effect of translation in accordance with SFAS No. 52. (2) Disposal of obsolete inventory and effect of translation in accordance with SFAS No. 52. (3) Transfer of lighting reserve to GTG joint venture.
17 EXHIBIT INDEX Exhibit No. Exhibit Page 13 Certain portions of the Company's 1999 19 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 67 23(a) Consent of Ernst & Young LLP 68 23(b) Consent of Arthur Andersen LLP 69 27 Financial Data Schedule 70 18 On August 30, 1998, Thomas and Genlyte formed a lighting joint venture that combined substantially all of the assets and liabilities of Genlyte and substantially all of the lighting assets and related liabilities of Thomas to create Genlyte Thomas Group LLC ("Genlyte Thomas"), estimated to be the third largest lighting fixture manufacturer in North America. Thomas owns a 32% interest in the joint venture, and Genlyte owns a 68% interest. Following are audited financial statements of Genlyte Thomas for the year ended December 31, 1999, and for the period from inception, August 30, 1998, through December 31, 1998. F-1 Report of Independent Public Accountants To the Partners of Genlyte Thomas Group LLC: We have audited the accompanying consolidated balance sheets of Genlyte Thomas Group LLC (a Delaware limited liability company) and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, partners' equity and cash flows for the year ended December 31, 1999 and for the period from inception, August 30, 1998, through December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 financial statements referred to above present fairly, in all material respects, the financial position of Genlyte Thomas Group LLC and subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for the year ended December 31, 1999 and for the period from inception, August 30, 1998, through December 31, 1998 in conformity with accounting principles generally accepted in the United States. /s/ Arthur Andersen LLP Louisville, Kentucky February 2, 2000 F-2 CONSOLIDATED STATEMENTS OF INCOME GENLYTE THOMAS GROUP LLC AND SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 31, 1999, AND FOR THE PERIOD FROM INCEPTION, AUGUST 30, THROUGH DECEMBER 31, 1998 (AMOUNTS IN THOUSANDS) 1999 1998 ------------------------- Net sales $ 978,302 $ 324,111 Cost of sales 648,626 213,305 ------------------------- Gross profit 329,676 110,806 Selling and administrative expenses 241,239 82,029 ------------------------- Operating profit 88,437 28,777 Interest expense, net 4,633 1,252 ------------------------- Income before income taxes 83,804 27,525 Income tax provision 4,841 1,009 ------------------------- Net income $ 78,963 $ 26,516 ========================= The accompanying notes are an integral part of these consolidated financial statements. F-3 CONSOLIDATED BALANCE SHEETS GENLYTE THOMAS GROUP LLC AND SUBSIDIARIES AS OF DECEMBER 31, 1999 AND 1998 (AMOUNTS IN THOUSANDS)
1999 1998 ---------------------------- ASSETS: CURRENT ASSETS: Cash and cash equivalents $ 22,705 $ 8,533 Accounts receivable, less allowance for doubtful accounts of $14,910 and $10,907, respectively 155,428 146,167 Related party receivables - 1,855 Inventories 136,041 137,004 Other current assets 7,614 8,037 ---------------------------- Total current assets 321,788 301,596 Plant and equipment, at cost: Land 6,537 7,290 Buildings and leasehold interests and improvements 87,951 82,856 Machinery and equipment 228,132 218,639 ---------------------------- Total plant and equipment 322,620 308,785 Less: Accumulated depreciation and amortization 217,631 203,106 ---------------------------- Net plant and equipment 104,989 105,679 Cost in excess of net assets of acquired businesses 111,426 61,549 Other assets 15,228 12,632 ---------------------------- TOTAL ASSETS $553,431 $ 481,456 ============================ LIABILITIES & PARTNERS' EQUITY: CURRENT LIABILITIES: Short-term borrowings and current portion of long-term debt $ 1,647 $ 2,134 Accounts payable 86,664 73,797 Related party payables 8,417 587 Accrued expenses 73,750 58,137 ---------------------------- Total current liabilities 170,478 134,655 Long-term debt 53,964 60,852 Accrued pension 13,763 14,908 Deferred income taxes 1,257 597 Other liabilities 4,801 5,916 ---------------------------- Total liabilities 244,263 216,928 PARTNERS' EQUITY: Accumulated other comprehensive income 3,158 (1,075) Other partners' equity 306,010 265,603 ---------------------------- Total partners' equity 309,168 264,528 ---------------------------- TOTAL LIABILITIES AND PARTNERS' EQUITY $553,431 $ 481,456 ============================ The accompanying notes are an integral part of these consolidated financial statements.
F-4 CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY GENLYTE THOMAS GROUP LLC AND SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 31, 1999, AND FOR THE PERIOD FROM INCEPTION, AUGUST 30, THROUGH DECEMBER 31, 1998 (AMOUNTS IN THOUSANDS)
Accumulated Other Other Total Comprehensive Partners' Partners' Income Equity Equity ---------------------------------------------------------- Contribution by Genlyte, August 30, 1998 $ - $168,379 $168,379 Contribution by Thomas, August 30, 1998 - 79,237 79,237 ---------------------------------------------------------- Total contributions - 247,616 247,616 Net income - 26,516 26,516 Increase in minimum pension liability (1,793) - (1,793) Foreign currency translation adjustments 718 - 718 ---------------------------------------------------------- Total comprehensive income (1,075) 26,516 25,441 Distributions to partners - (8,529) (8,529) -------------------- ----------------- ---------------- Partners' equity, December 31, 1998 $(1,075) $265,603 $264,528 Net income - 78,963 78,963 Decrease in minimum pension liability 1,793 - 1,793 Foreign currency translation adjustments 2,440 - 2,440 ---------------------------------------------------------- Total comprehensive income 4,233 78,963 83,196 Adjustment to contribution by Thomas - (1,014) (1,014) Distributions to partners - (37,542) (37,542) ---------------------------------------------------------- Partners' equity, December 31, 1999 $3 ,158 $306,010 $309,168 ========================================================== The accompanying notes are an integral part of these consolidated financial statements.
F-5 CONSOLIDATED STATEMENTS OF CASH FLOWS GENLYTE THOMAS GROUP LLC AND SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 31, 1999, AND FOR THE PERIOD FROM INCEPTION, AUGUST 30, THROUGH DECEMBER 31, 1998 (AMOUNTS IN THOUSANDS)
1999 1998 ---------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $78,963 $26,516 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 23,835 7,305 Loss (gain) from disposal of plant and equipment (20) 257 Changes in assets and liabilities, net of effect of acquisitions: (Increase) decrease in: Accounts receivable (5,354) 2,435 Related party receivables 1,855 (1,855) Inventories 3,039 1,344 Other current assets 1,018 (68) Other assets (28,736) (3,650) Increase (decrease) in: Accounts payable and accrued expenses 24,453 20,651 Related party payables 7,830 587 Deferred income taxes 536 188 Accrued pension and other liabilities (2,260) 4,730 Minimum pension liability 1,793 (1,793) All other, net 2,948 (359) ----------------------------- Net cash provided by operating activities 109,900 56,288 ----------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, net of cash acquired (30,934) - Purchases of plant and equipment (20,514) (8,086) ----------------------------- Net cash used in investing activities (51,448) (8,086) ----------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in debt, net (9,178) (39,374) Distributions to partners (37,542) (8,529) ----------------------------- Net cash used in financing activities (46,720) (47,903) ----------------------------- Effect of exchange rate changes on cash and cash equivalents 2,440 718 ----------------------------- Net increase in cash and cash equivalents 14,172 1,017 Cash and cash equivalents at beginning of period 8,533 7,516 ----------------------------- Cash and cash equivalents at end of period $22,705 $ 8,533 ============================= The accompanying notes are an integral part of these consolidated financial statements.
F-6 Genlyte Thomas Group LLC Notes to Consolidated Financial Statements (Dollar Amounts in Thousands) (1) DESCRIPTION OF BUSINESS Genlyte Thomas Group LLC ("Genlyte Thomas" or "the Company") is a Delaware limited liability company. Genlyte Thomas designs, manufactures, and sells lighting fixtures and controls for a wide variety of applications in the commercial, residential, and industrial markets. Genlyte Thomas's products are marketed primarily to distributors who resell the products for use in commercial, residential, and industrial construction and remodeling. The Company is the result of the business combination discussed in Note 3. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of Genlyte Thomas and all majority-owned subsidiaries, and also include other entities that are jointly owned by The Genlyte Group Incorporated and Thomas Industries Inc., all of which entities in total operationally comprise Genlyte Thomas. Intercompany accounts and transactions have been eliminated. Investments in affiliates owned less than 50% are accounted for using the equity method, under which the Company's share of these affiliates' earnings is included in income as earned. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. CASH EQUIVALENTS: The Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents. INVENTORIES: Inventories are stated at the lower of cost or market and include materials, labor, and overhead. Inventories at December 31 consisted of the following: 1999 1998 ----------------- -------------- Raw materials and supplies $ 46,717 $ 43,167 Work in process 14,027 14,529 Finished goods 75,297 79,308 ----------------- -------------- Total inventories $ 136,041 $ 137,004 ================= ============== Inventories valued using the last-in, first-out ("LIFO") method represented approximately 83% and 89% of total inventories at December 31, 1999 and 1998, respectively. Inventories not valued at LIFO (primarily inventories of Canadian operations) are valued using the first-in, first-out ("FIFO") method. On a FIFO basis, which approximates current cost, inventories would have been $3,083 and $2,350 lower than reported at December 31, 1999 and 1998, respectively. F-7 ADVERTISING COSTS: The Company expenses advertising costs principally as incurred. Certain catalog and literature costs are amortized over their useful lives, generally 2 to 3 years. Advertising expenses were $13,416 for the year ended December 31, 1999, and $4,323 for the period from inception, August 30, through December 31, 1998. PLANT AND EQUIPMENT: The Company provides for depreciation of plant and equipment, which also includes amortization of assets recorded under capital leases, principally on a straight-line basis over the estimated useful lives of the assets. Useful lives vary among the items in each classification, but fall within the following ranges: Buildings and leasehold interests and improvements 10 to 40 years Machinery and equipment 3 to 10 years When the Company sells or otherwise disposes of plant and equipment, the asset cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in the consolidated statements of income. Leasehold interests and improvements are amortized over the terms of the respective leases, or over their estimated useful lives, whichever is shorter. Maintenance and repairs are expensed as incurred. Renewals and betterments are capitalized and depreciated or amortized over the remaining useful lives of the respective assets. COST IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES: Cost in excess of net assets of businesses acquired prior to 1971 is not amortized since, in the opinion of management, there has been no diminution in value. For businesses acquired subsequent to 1970, the cost in excess of net assets, aggregating $132,587 as of December 31, 1999 and $79,071 as of December 31, 1998, is being amortized on a straight-line basis over periods ranging from 10 to 40 years. Accumulated amortization was $26,083 and $22,445 as of December 31, 1999 and 1998, respectively. The Company periodically evaluates these intangible assets using discounted cash flows to assess recoverability from future operations. Impairment would be recognized as expense if a permanent diminution in value occurred. In the opinion of management, no material diminution in value has occurred during the periods presented in these consolidated financial statements. RESEARCH AND DEVELOPMENT COSTS: Research and development costs are expensed as incurred. These expenses were $8,086 for the year ended December 31, 1999, and $3,792 for the period from inception, August 30, through December 31, 1998. TRANSLATION OF FOREIGN CURRENCIES: Balance sheet accounts of foreign subsidiaries are translated into U.S. dollars at the rates of exchange in effect as of the balance sheet dates. The cumulative effects of such adjustments were $3,158 and $718 at December 31, 1999 and 1998, respectively, and have been credited to partners' equity in the consolidated balance sheets. Income and expenses are translated at the average exchange rates prevailing during the year. Gains or losses resulting from foreign currency transactions are included in net income. F-8 FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying amounts of cash equivalents, short-term borrowings, and long-term debt approximate fair value. RECLASSIFICATIONS: Certain prior year amounts have been reclassified to conform to the current year presentation. These changes had no impact on previously reported net income or partners' equity. (3) FORMATION OF GENLYTE THOMAS GROUP LLC On August 30, 1998, The Genlyte Group Incorporated ("Genlyte") and Thomas Industries Inc. ("Thomas") completed the combination of the business of Genlyte with the lighting business of Thomas ("Thomas Lighting"), in the form of a limited liability company named Genlyte Thomas Group LLC. Genlyte contributed substantially all of its assets and liabilities to Genlyte Thomas and received a 68% interest in Genlyte Thomas. Thomas contributed substantially all of its assets and certain related liabilities comprising Thomas Lighting and received a 32% interest in Genlyte Thomas. The percentage interests in Genlyte Thomas issued to Genlyte and Thomas were based on arms-length negotiations between the parties with the assistance of their financial advisers. Under the purchase method of accounting, Genlyte's majority ownership of Genlyte Thomas requires the assets and liabilities contributed by Thomas Lighting to Genlyte Thomas to be valued at their fair values, as of the acquisition date, in the consolidated financial statements of Genlyte Thomas. The fair values attributed to the Thomas Lighting assets and liabilities result from management's determination of purchase accounting adjustments and are based upon available information and certain assumptions that management considers reasonable under the circumstances. The resulting cost in excess of the fair market value of net assets contributed by Thomas Lighting of $32,412 is being amortized on a straight-line basis over 30 years. The assets contributed by Genlyte to Genlyte Thomas are reflected at their historical cost. To the extent the actual net working capital contributed by Thomas Lighting exceeded the target net working capital, Genlyte Thomas paid Thomas the difference of $35,189. Of this amount, $34,175 was paid in 1998 and $1,014 was paid in 1999, based on an adjustment to the Thomas net working capital. The target net working capital was determined by a formula that considered Genlyte's adjusted net working capital, Thomas Lighting's net working capital, and Genlyte's net working capital as a percentage of net sales as of August 30, 1998. Subject to the provisions in the Genlyte Thomas Group LLC Agreement (the "LLC Agreement") regarding mandatory distributions described below, and the requirement of special approval in certain instances, distributions to Genlyte and Thomas (the "Partners"), respectively, will be made at such time and in such amounts as determined by the Company's Management Board and shall be made in cash or other property in proportion to the Partners' respective percentage interests. Notwithstanding anything to the contrary provided in the LLC Agreement, no distribution under the LLC Agreement shall be permitted to the extent prohibited by Delaware law. F-9 The LLC Agreement requires that Genlyte Thomas make the following distributions to the Partners: (i) a distribution to each Partner, based on its percentage interest, for tax liabilities attributable to its participation as a Partner of Genlyte Thomas based upon the effective tax rate of the Partner having the highest tax rate; and (ii) subject to the provisions of Delaware law and the terms of the primary Genlyte Thomas credit facility, distributions (exclusive of the tax distributions set forth above) to each of the Partners so that Thomas receives at least an aggregate of $3,000 and Genlyte receives at least an aggregate of $6,375 per fiscal year beginning in fiscal year 1999. (4) INVESTMENT IN FIBRE LIGHT AND ACQUISITION OF LEDALITE On May 10, 1999, the Company acquired a 2% interest (with rights to acquire an additional 6%) in Fibre Light International, based in Burleigh Heads, Queensland, Australia. Fibre Light International is in the business of commercializing fiber optic lighting technology. The two companies then formed a jointly owned limited liability company named Fibre Light U.S. LLC, ("Fibre Light"), of which Genlyte Thomas owns 80%. Fibre Light will manufacture, market, and sell fiber optic lighting systems in the U.S. On June 30, 1999, the Company acquired the assets and liabilities of privately held Ledalite Architectural Products Inc. ("Ledalite"), located in Vancouver, Canada. Ledalite designs, manufactures, and sells architectural linear lighting systems for offices, schools, transportation facilities, and other commercial buildings. The purchase prices of these acquisitions totaled $31,469 (including costs of acquisition), consisting of approximately $8.5 million in cash payments and approximately $23 million in borrowings. The Ledalite acquisition has been accounted for using the purchase method of accounting. The preliminary determination of the excess of the purchase price over the fair market value of net assets acquired of $22,392 is being amortized on a straight-line basis over 30 years. The determination of these fair market values as reflected in the balance sheet is subject to change. The operating results of Fibre Light and Ledalite have been included in the Company's consolidated financial statements since the dates of acquisition. On an unaudited pro forma basis, assuming these acquisitions had occurred at the beginning of 1999 and 1998, the Company's results would have been: 1999 1998 ---------------- --------------- Net sales $ 990,326 $ 332,872 Net income 78,432 25,869 F-10 The pro forma results do not purport to state exactly what the Company's results of operations would have been had the acquisitions in fact been consummated as of the assumed dates and for the periods presented, nor are they necessarily indicative of future consolidated results. (5) INCOME TAXES The results of operations are included in the tax returns of the Partners, and accordingly, no provision has been recognized by the Company for U.S. federal income taxes. The Company's foreign subsidiaries are taxable corporations, and current and deferred taxes are provided on their income. The income tax provision also includes $360 in state income taxes in 1999. Cash paid for income taxes was $2,723 for the year ended December 31, 1999 and $469 for the period from inception, August 30, through December 31, 1998. (6) LONG-TERM DEBT Long-term debt at December 31 consisted of the following: 1999 1998 ------------------------------ Revolving credit notes $ - $ 28,000 Canadian dollar notes 20,772 - Industrial revenue bonds 10,500 10,500 Loan payable to Thomas 22,287 22,287 Capital leases and other 2,052 267 ------------------------------ 55,611 61,054 Less: current maturities 1,647 202 ------------------------------ Total long-term debt $ 53,964 $ 60,852 ============================== The Company has a $150,000 revolving credit agreement (the "Facility") with various banks that matures in 2003. Under the most restrictive borrowing covenant, which is the fixed charge coverage ratio, the Company could incur approximately $25,000 in additional fixed charges. Total borrowings under the Facility as of December 31, 1999 and 1998, were $0 and $28,000,respectively. Outstanding borrowings bear interest at the option of the Company based on the bank's base rate or the LIBOR rate plus a spread as determined by total indebtedness. The borrowings as of December 31, 1998 were classified as long-term because of the Company's intention and ability to refinance these obligations on a long-term basis through its revolving credit agreement. In addition, the Company has outstanding approximately $39,400 of letters of credit, which reduce the amount available to borrow under the Facility. The amount outstanding under the Facility is secured, if requested by the banking group, by liens on domestic accounts receivable, inventories, machinery and equipment, as well as the investments in certain subsidiaries of the Company. The net book value of assets subject to a lien at December 31, 1999 was $294,770. F-11 The Company has CDN$30,000 of borrowings through its Canadian subsidiary Genlyte Thomas Group Nova Scotia ULC. These borrowings will be repaid in installments in each of the next five years. Interest rates on these borrowings can be either the Canadian prime rate or the Canadian LIBOR rate plus a spread of 50 basis points. These borrowings are backed by the letters of credit mentioned above. The Company has $10,500 of variable rate demand Industrial Revenue Bonds that mature during 2009 to 2010. The average borrowing rate on these bonds was 3.3% in 1999 and 3.5% in 1998. These bonds are backed by the letters of credit mentioned above. The loan payable to Thomas accrues interest quarterly based on the 90 day LIBOR rate plus a spread as determined by the Facility. This loan can be prepaid in whole or in part without penalty, ultimately maturing in 2003. The annual maturities of long-term debt are summarized as follows: Year ending December 31 2000 $1,647 2001 2,624 2002 3,402 2003 26,584 2004 10,541 Thereafter 10,813 -------------- Total long-term debt $ 55,611 ============== Cash paid for interest on debt was $4,566 for the year ended December 31, 1999 and $1,693 for the period from inception, August 30, through December 31, 1998. (7) RETIREMENT PLANS The Company has defined benefit plans which cover the majority of its full-time U.S. employees. The Company's policy for funded plans is to make contributions equal to or greater than the requirements prescribed by the Employee Retirement Income Security Act. The plans' assets consist primarily of stocks and bonds. Pension costs for all Company defined benefit plans are actuarially computed. The Company also has other defined contribution plans, including those covering certain former Genlyte and Thomas employees The amounts included in the accompanying consolidated balance sheets based on the funded status of the defined benefit plans at September 30 follow: 1999 1998 ---------------- ---------------- CHANGE IN BENEFIT OBLIGATIONS Benefit obligations, beginning $ 81,097 $ - Service cost 2,310 773 Interest cost 5,358 1,803 Benefits paid (4,101) (663) Obligations assumed by Genlyte Thomas - 80,679 Other - primarily actuarial (gain) (10,737) (1,495) ---------------- ---------------- Benefit obligations, ending $ 73,927 $ 81,097 ================ ================ F-12 CHANGE IN PLAN ASSETS 1999 1998 ---- ---- Plan assets at fair value, beginning $ 68,902 $ - Actual return on plan assets 6,965 4,709 Employer contributions 1,611 425 Benefits paid (4,101) (663) Assets assumed by Genlyte Thomas - 64,431 ---------------- ---------------- Plan assets at fair value, ending $ 73,377 $ 68,902 ================ ================ FUNDED STATUS OF THE PLANS Plan assets (less than) benefit obligations $ (550) $(12,195) Unrecognized transition obligation at adoption 200 487 Unrecognized actuarial (gain) (11,563) (1,143) Unrecognized prior service cost 2,024 4,017 Contributions subsequent to measurement date 946 - ---------------- ---------------- Accrued pension liability $ (8,943) $ (8,834) ================ ================ BALANCE SHEET ASSET (LIABILITY) Accrued pension liability $(13,763) $(14,908) Prepaid pension cost 4,468 1,603 Intangible assets 339 2,961 Accumulated other comprehensive income 13 1,510 ---------------- ----------------- Net (liability) recognized $ (8,943) $ (8,834) ================ ================= WEIGHTED AVERAGE ASSUMPTIONS Discount rate 7.75% 6.75% Rate of compensation increase 4.00% 5.00% Expected return on plan assets 8.50% 8.50% COMPONENTS OF NET PERIODIC BENEFIT COSTS Service cost $ 2,310 $ 773 Interest cost 5,358 1,803 Expected return on plan assets (5,536) (1,724) Amortization of transition amounts 181 18 Amortization of prior service cost 293 154 Recognized actuarial loss 60 104 ---------------- ----------------- Net pension expense of defined benefit plans 2,666 1,128 ---------------- ----------------- Defined contribution plans 671 720 Multi-employer plans 294 116 ---------------- ----------------- Total benefit costs $ 3,631 $ 1,964 ================ =================
A summary of the plans in which benefit obligations and accumulated benefit obligations exceed fair value of assets follows: Benefit obligation $ 6,830 $ 59,669 Accumulated benefit obligation $ 6,569 $ 52,010 Plan assets at fair value $ 3,470 $ 45,091 Effective January 1, 2000, the Company has frozen the salaried pension plan of U.S. employees. These employees will be eligible for Company matching on their 401(k) contributions as well as being a participant in the Genlyte Thomas Retirement Savings and Investment Plan. This will result in a curtailment credit of $603, which will be a reduction of net pension expense in 2000. F-13 The Company also maintains defined benefit plans covering substantially all the employees of a Canadian subsidiary. The amounts included in the accompanying consolidated balance sheets, based on the funded status of these defined benefit plans at September 30, 1999 and December 31, 1998, follow: 1999 1998 --------------- ----------------- CHANGE IN BENEFIT OBLIGATIONS Benefit obligations, beginning $ 4,562 $ - Service cost 252 70 Interest cost 339 102 Benefits paid (221) (72) Amendments 38 - Obligations assumed by Genlyte Thomas - 4,418 Member contributions - 44 Other - primarily actuarial (gain) (440) - --------------- ----------------- Benefit obligations, ending $ 4,530 $ 4,562 =============== ================= CHANGE IN PLAN ASSETS Plan assets at fair value, beginning $ 5,030 $ - Actual return on plan assets 80 468 Employer contributions 123 60 Member contributions 148 45 Benefits paid (221) (72) Assets assumed by Genlyte Thomas - 4,629 Other 336 (100) --------------- ----------------- Plan assets at fair value, ending $ 5,496 $ 5,030 =============== ================= FUNDED STATUS OF THE PLANS Plan assets in excess of benefit obligations $ 966 $ 468 Unrecognized transition obligation at adoption (33) (36) Unrecognized actuarial (gain) (718) (52) Unrecognized prior service cost 110 78 Contributions subsequent to measurement date 259 - --------------- ----------------- Prepaid pension asset $ 584 $ 458 =============== ================= BALANCE SHEET ASSET (LIABILITY) Accrued pension liability $ - $ (12) Prepaid pension cost 584 470 Intangible assets - - Accumulated other comprehensive income - - --------------- ----------------- Net asset recognized $ 584 $ 458 =============== ================= WEIGHTED AVERAGE ASSUMPTIONS Discount rate 7.75% 6.50% Rate of compensation increase 4.00% 4.00% Expected return on plan assets 7.75% 6.50% COMPONENTS OF NET PERIODIC BENEFIT COSTS Service cost $ 252 $ 70 Interest cost 339 102 Expected return on plan assets (368) (103) Amortization of transition amounts (6) (1) Amortization of prior service cost 5 2 Recognized actuarial (gain) (1) - --------------- ----------------- Net benefit costs $ 221 $ 70 =============== =================
F-14 (8) POST-RETIREMENT BENEFIT PLANS The Company provides post-retirement medical and life insurance benefits for certain retirees and employees, and accrues the cost of such benefits during the service lives of such employees. The amounts included in the accompanying consolidated balance sheets for the post-retirement benefit plans based on the funded status at September 30, 1999 and December 31, 1998, follow: 1999 1998 --------------- ----------------- CHANGE IN BENEFIT OBLIGATIONS Benefit obligations, beginning $ 3,657 $ - Service cost 39 8 Interest cost 294 83 Benefits paid (413) (166) Obligations assumed by Genlyte Thomas - 3,638 Other - primarily actuarial loss 574 94 --------------- ----------------- Benefit obligations, ending $ 4,151 $ 3,657 =============== ================= FUNDED STATUS OF THE PLANS Plan assets (less than) benefit obligations $(4,151) $ (3,657) Unrecognized net obligation at adoption - 3,008 Unrecognized actuarial (gain) loss 574 (973) --------------- ----------------- Accrued liability $(3,577) $ (1,622) =============== ================= Employer contributions $ 413 $ 166 Benefits paid (413) (166) COMPONENTS OF NET PERIODIC BENEFIT COSTS Service cost $ 39 $ 8 Interest cost 294 83 Recognized actuarial loss - 69 --------------- ----------------- Net expense of post-retirement plans $ 333 $ 160 =============== =================
The assumed discount rates used in measuring the obligations as of September 30, 1999, and December 31, 1998 were 7.75% and 6.75%, respectively. The assumed health care cost trend rate for 2000 was 7%, declining to 4.5% in 2006. A one-percentage-point increase or decrease in the assumed health care cost trend rate for each year would increase or decrease the obligation at September 30, 1999 by approximately $300, and the 1999 post-retirement benefit expense by approximately $27. (9) ACCRUED EXPENSES Accrued expenses at December 31 consisted of the following: 1999 1998 --------------- ------------ Employee related costs and benefits $ 30,267 $ 30,201 Advertising and sales promotion 8,331 8,168 Income and other taxes payable 4,311 4,227 Other accrued expenses 30,841 15,541 --------------- ------------ Total accrued expenses $ 73,750 $ 58,137 =============== ============ F-15 (10) LEASE COMMITMENTS The Company rents office space, equipment, and computers under non-cancelable operating leases. Rental expense for operating leases during 1999 and for the period from inception, August 30, through December 31, 1998, amounted to $6,184 and $1,398, respectively. One division of the Company also rents manufacturing and computer equipment and software under agreements that are classified as capital leases. Future required minimum lease payments as of December 31, 1999, were as follows: Operating Capital Leases Leases ------------------------- 2000 $ 5,872 $ 746 2001 4,652 582 2002 2,896 448 2003 1,811 232 2004 1,697 300 Thereafter 1,499 - ------------------------------- Total minimum lease payments $ 18,427 2,308 ======== Less amount representing interest 344 ------- Present value of net minimum lease payments $ 1,964 =======
(11) CONTINGENCIES In the normal course of business, the Company is a party to legal proceedings and claims. When costs can be reasonably estimated, appropriate liabilities or reserves for such matters are recorded. While management currently believes the amount of ultimate liability, if any, with respect to these actions will not materially affect the financial condition, results of operations, or liquidity of the Company, the ultimate outcome of any litigation is uncertain. Were an unfavorable outcome to occur, the impact could be material to the Company. Additionally, the Company is a defendant and/or potentially responsible party, with other companies, in actions and proceedings under state and Federal environmental laws, including the Federal Comprehensive Environmental Response Compensation and Liability Act, as amended. Management does not believe that the disposition of the lawsuits and/or proceedings will have a material effect on the Company's financial condition, results of operations, or liquidity. (12) SEGMENT REPORTING In 1998, the Company adopted Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information" (SFAS No. 131). Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company's reportable operating segments include the Commercial Segment, the Residential F-16 Segment,and the Industrial and Other Segment. Intersegment sales are eliminated in consolidation and therefore not presented in the table below. OPERATING SEGMENTS: Industrial 1999 Commercial Residential and Other Total -------------------------------------------------------------------------------------------------------------- Net sales $ 689,167 $ 145,040 $ 144,095 $ 978,302 Operating profit 67,134 8,042 13,261 88,437 Assets 376,343 92,291 84,797 553,431 Depreciation and amortization 16,595 3,532 3,708 23,835 Expenditures for plant and equipment 14,399 3,023 3,092 20,514 Industrial 1998 Commercial Residential and Other Total -------------------------------------------------------------------------------------------------------------- Net sales $ 226,357 $51,081 $46,673 $ 324,111 Operating profit 22,067 2,433 4,277 28,777 Assets 336,246 75,879 69,331 481,456 Depreciation and amortization 5,102 1,151 1,052 7,305 Expenditures for plant and equipment 5,648 1,274 1,164 8,086
(13) GEOGRAPHICAL INFORMATION The Company has operations throughout North America. Information about the Company's operations by geographical area for the year ended December 31, 1999, and for the period from inception, August 30, through December 31, 1998, follows. Foreign balances represent primarily Canada and some Mexico. 1999 United States Foreign Total -------------------------------------------------------------------------------------------------------------- Net sales $ 855,199 $ 123,103 $ 978,302 Operating profit 75,295 13,142 88,437 Assets 418,729 134,702 553,431 Depreciation and amortization 19,178 4,657 23,835 Expenditures for plant and equipment 16,506 4,008 20,514 1998 United States Foreign Total -------------------------------------------------------------------------------------------------------------- Net sales $ 283,052 $ 41,059 $ 324,111 Operating profit 25,393 3,384 28,777 Assets 421,159 60,297 481,456 Depreciation and amortization 6,185 1,120 7,305 Expenditures for plant and equipment 6,357 1,729 8,086
F-17 (14) Related-Party Transactions The Company in the normal course of business has transactions with Genlyte and Thomas. These transactions consist primarily of interest payments to Thomas under the loan discussed in Note 6 and reimbursement for shared corporate expenses such as rent, office services, professional services, and shared personnel. Related party receivables and payables as of December 31, 1999 and 1998 were comprised of the following: 1999 1998 ---------------- ----------- Receivable from Genlyte $ - $ 1,855 Payable to Genlyte 8,110 - Payable to Thomas 307 587 ---------------- ----------- Total related party payables $ 8,417 $ 587 ================ =========== For the year ended December 31, 1999, and for the period from inception August 30, through December 31, 1998, the Company had the following related party transactions: 1999 1998 ------------- ----------- Payments to Thomas for: Interest under the loan agreement $ 1,281 $ 461 Reimbursement of corporate expenses 412 170 Payments from Genlyte for: Reimbursement of corporate expenses 36 31 (15) Subsequent Event On February 8, 2000, the Company announced that it has reached a tentative agreement to acquire Translite Systems, Inc., a San Carlos, California based manufacturer and marketer of low-voltage cable and track lighting systems. Translite Systems, Inc. is one of the leading designers and manufacturers of accent track systems for commercial, retail, and residential applications. F-18 EX-13 2 COMMON STOCK MARKET PRICES AND DIVIDENDS The Company's common stock is traded on the New York Stock Exchange (ticker symbol TII). On February 9, 2000, there were 2,260 security holders of record. High and low stock prices and dividends for the last two years were: 1999 1998 ------------------------------------------------------- Cash Cash Market Price Dividend Market Price Dividends Quarter Ended High Low Declared High Low Declared - ------------------------------------------------------------------------------- March 31 $19.69 $16.13 $.075 $23.75 $18.88 $.075 June 30 22.31 18.75 .075 26.38 22.19 .075 September 30 22.25 18.63 .075 26.63 18.56 .075 December 31 20.44 16.13 .075 21.19 17.06 .075 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Basis of Presentation Effective August 30, 1998, Thomas Industries and The Genlyte Group formed the Genlyte Thomas Group (GTG), combining the Thomas Lighting business and Genlyte. Genlyte has a 68% interest in GTG, and Thomas holds a 32% interest that is accounted for using the equity method of accounting. Thomas changed its method of accounting for the Lighting business contributed to GTG to the equity method effective January 1, 1998, the beginning of Thomas' fiscal year. This change had no effect on Thomas' net income or common shareholders' equity but did reduce its revenues, costs, assets, and liabilities, and changed certain components of cash flow (See Note 2). Financial statements for years prior to 1998 were not restated; therefore, Thomas' financial statements for 1999 and 1998 are not comparable to 1997. Results of Operations The Company achieved record net income in 1999 of $26.2 million, which represents an increase of $1.6 million, or 6.7%, over 1998. Net income for 1998 was $24.5 million, an increase of $2.0 million, or 9.1%, over 1997. Compressors and Vacuum Pumps Net sales in 1999 for the Compressors and Vacuum Pumps Segment were $176.4 million, which was slightly lower than the 1998 record net sales level of $177.2 million. The decrease in net sales in 1999 was due primarily to softness in our European operations where several of our major OEM customers reduced orders due to slack demand in their end markets. We also experienced competitive pressures in selling our European product lines in North America. To help bolster these sales, late in the fourth quarter we consolidated the U.S. sales and marketing function for our European products with the North American sales and marketing arm. The 1999 net sales also included sales related to our Oberdorfer Pump acquisition (see Note 12) as of October 25, 1999, which served to partially offset the decreases noted above. The 1998 net sales of $177.2 million were 2.1% higher than the $173.6 million in 1997. The 1998 increase was due to the continued successful introduction of new products for new applications that offset pricing pressure in the medical markets. The 1999 operating income for the Segment decreased to $29.6 million, or 3.9% below 1998. Operating income for 1999 included a charge in the fourth quarter of $.2 million related to the consolidation of sales and marketing organizations as noted in the previous paragraph. The decrease in operating income was also due to continued pricing pressures in our major markets and volume decreases in our European business. Operating income in 1998 decreased slightly to $30.7 million from the record $30.9 million achieved in 1997, primarily due to pricing pressures in the medical markets and the general weakness in OEM and distributor business. Lighting Segment The Lighting Segment's operating income was $23.1 million in 1999 compared to $20.3 million in 1998. Results for 1998 include the operating income of the former Thomas Lighting Group for the period ended August 29 prior to the formation of GTG, Thomas' 32% interest in GTG for the four months ended December 31, 1998, and amortization of Thomas' excess investment in GTG. The 1999 increase was due to volume increases, improved efficiencies, and synergies realized due to the formation of the joint venture. Operating income was $20.3 million in 1998 compared to $22.4 million in 1997. The decrease in operating income of $2.1 million in 1998 was offset by a $5.7 million reduction of Corporate expenses formerly needed to support the Lighting operations. Corporate Interest expense for 1999 declined $1.6 million, or 25.8%, from 1998, due primarily to the lower levels of long-term debt and significantly lower levels of short-term borrowings in 1999 compared to 1998. Interest expense for 1998 declined $.3 million, or 4.3%, from 1997, due principally to the lower levels of long-term debt, offset partially by higher levels of short-term borrowings in the first half of 1998. Income tax provisions were $16.1 million, $14.9 million, and $13.2 million in 1999, 1998, and 1997, respectively. The effective income tax rate was 38.1% in 1999, compared to 37.8% in 1998 and 37.0% in 1997. The Company, like other 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. The Company does not believe that the ultimate resolution of environmental matters will have a material adverse effect on its financial position, results of operations, or liquidity. At December 31, 1999, the Company employed approximately 1,060 people. Liquidity and Sources of Capital Cash and cash equivalents decreased by $1.7 million to $16.5 million at December 31, 1999, compared to $18.2 million and $17.4 million at December 31, 1998 and 1997, respectively. Cash flows from operations were $26.7 million in 1999 compared to $24.9 million in 1998 and $32.3 million in 1997. The reduction in cash flows from operations after 1997 reflects changes resulting from the formation of GTG. Our 32% interest in GTG is accounted for on the equity method; and, as a result, Thomas' share of GTG's investing and financing cash flows are inherently reflected in the Company's cash flows from operations. Cash flows from operations have exceeded Thomas' capital requirements for net property additions and dividends for the last three years, providing additional funds for the 1999 acquisition of Oberdorfer Pumps, Inc., the net reductions of long-term and short-term debt during 1999, 1998, and 1997, totaling $28.2 million, and treasury stock purchases in 1999 and 1998. Dividends paid in 1999 were $4.7 million compared with $4.8 million in 1998 and $4.2 million in 1997. In October 1997, the Board of Directors declared a cash dividend of 7.5 cents per share, a 12.5% increase in the cash dividend. The Company announced in December 1999 that it plans to repurchase, from time to time depending on market conditions and other factors, up to 15 percent, or 2,373,000 shares, of its outstanding Common Stock in the open market or through privately negotiated transactions at the prevailing market prices. At December 31, 1999, the Company had purchased 64,500 shares for approximately $1.3 million. The Company plans to fund the purchase of Company stock through a combination of cash flows generated from operating activities and short-term borrowing arrangements. The Company's long-term debt bears interest at fixed rates; therefore, the Company's results of operations would only be affected by interest rate changes to the extent that variable rate short-term notes payable are outstanding. At December 31, 1999, there were no short-term notes payable outstanding. The Company has significant operations consisting of sales and manufacturing activities in foreign countries. As a result, the Company's financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which the Company manufactures or distributes its products. Currency exposures are concentrated in Germany but exist to a lesser extent in other parts of Western Europe and Asia. Liquidity and Sources of Capital (Continued) Working capital decreased slightly from $31.6 million at December 31, 1998, to $29.7 million at December 31, 1999. Working capital decreased to $31.6 million at December 31, 1998, from $92.3 million at December 31, 1997, principally due to the transfer of working capital to GTG. Dollars in Thousands 1999 1998 1997 - -------------------------------------------------------------------------------- Working capital $29,738 $31,564 $92,258 Current ratio 1.89 1.97 2.09 Long-term debt, less current portion $40,513 $48,298 $55,006 Long-term debt to total capital 16.2% 20.2% 24.1% 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 $66.4 million are not restricted at December 31, 1999. As of December 31, 1999, the Company had available credit of $6.0 million with banks under short-term borrowing arrangements, 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. Cash in excess of operating requirements will continue to be invested in high grade, short-term securities. Year 2000 Issue During 1999, the Company completed the process of preparing for the Year 2000 date change. To date, the Company has had no material Year 2000 issues. Although considered unlikely, unanticipated problems could still occur. The Company will continue to monitor all business processes, including third parties, throughout 2000 to address any issues and to ensure that all processes continue to function properly. Through 1999, the cost for the Year 2000 project was approximately $2.4 million, which was incurred over the 1996-1999 time frame. We anticipate no material costs to be incurred in 2000 and beyond that are related to the Year 2000 project. The Company has a minority interest in GTG, which has advised the Company that it had no material Year 2000 issues. Although we believe it is unlikely, if GTG has future problems related to the Year 2000 project, this could have an impact on the Company's financial results and condition. New European Currency Eleven European countries (the European Monetary Union) have implemented a single currency zone as of January 1, 1999. The new currency (Euro) will eventually replace the existing currencies of the participating countries. It is expected that this transition from the various currencies to the Euro will occur over a two-year period. The software used by our European operations has been modified to accommodate the dual currencies during the transition period. A team is in place to monitor any changing EMU requirements and to establish the final conversion timetable for the single EMU currency. While management currently believes the Company has accommodated any required changes in its operations, there can be no assurance that its customers, suppliers, and service providers, or government agencies will all meet the Euro currency requirements in a timely manner. Such failure to complete the necessary work on a timely basis could result in material financial risk. Forward-Looking Statements 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," as well as other statements contained in this Annual Report and 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: Forward-Looking Statements (Continued) 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 Compressors & Vacuum Pumps 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 GTG, of which Thomas Industries owns 32% and comprises the Company's Lighting Segment, participates in a highly competitive market that is dependent on the level of residential, commercial, and industrial construction activity. Changes in interest rates, consumer preferences and acceptance of new products affect the Lighting Segment. 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, economies, or legal systems; or inter-governmental disputes. These currency, economic, and political uncertainties may affect the Company's results. The forward-looking statements made by the Company are based on estimates that 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. CONSOLIDATED STATEMENTS OF INCOME Years ended December 31 ----------------------- (In thousands, except share data) 1999 1998 1997 - -------------------------------------------------------------------------------- Net sales $176,382 $177,220 $547,702 Cost of products sold 112,332 112,318 378,746 - -------------------------------------------------------------------------------- Gross profit 64,050 64,902 168,956 Selling, general and administrative expenses 41,914 40,805 127,969 Equity income from Lighting 23,147 20,323 -- - -------------------------------------------------------------------------------- Operating income 45,283 44,420 40,987 Interest expense 4,601 6,199 6,480 Interest income and other 1,527 1,185 1,137 - -------------------------------------------------------------------------------- Income before income taxes 42,209 39,406 35,644 Income taxes 16,059 14,896 13,174 - -------------------------------------------------------------------------------- Net income $ 26,150 $ 24,510 $ 22,470 - -------------------------------------------------------------------------------- Net income per share - Basic $ 1.66 $ 1.54 $ 1.42 - Diluted 1.62 1.50 1.38 See accompanying notes. CONSOLIDATED BALANCE SHEETS
December 31 ---------------------- (In thousands) 1999 1998 - ------------------------------------------------------------------------------------------ Assets Current assets: Cash and cash equivalents $ 16,487 $ 18,205 Accounts receivable, net 20,869 19,205 Inventories, net 19,751 20,186 Deferred income taxes 2,634 2,997 Other current assets 3,370 3,650 - ------------------------------------------------------------------------------------------ Total current assets 63,111 64,243 Property, plant and equipment, net 36,152 35,257 Investment in GTG 158,865 147,386 Note receivable from GTG 22,287 22,287 Intangible assets, net 10,677 8,248 Other assets 2,884 4,938 - ------------------------------------------------------------------------------------------ Total assets $293,976 $282,359 - ------------------------------------------------------------------------------------------ Liabilities and shareholders' equity Current liabilities: Accounts payable $ 7,794 $ 5,794 Accrued expenses and other current liabilities 16,608 17,908 Dividends payable 1,187 1,195 Current portion of long-term debt 7,784 7,782 - ------------------------------------------------------------------------------------------ Total current liabilities 33,373 32,679 Deferred income taxes 6,027 5,863 Long-term debt, less current portion 40,513 48,298 Other long-term liabilities 4,581 4,832 - ------------------------------------------------------------------------------------------ Total liabilities 84,494 91,672 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: 1999 - 17,567,104; 1998 - 17,485,909 17,567 17,486 Capital surplus 110,988 110,412 Retained earnings 109,689 88,277 Accumulated other comprehensive income (loss) (6,385) (4,351) Less cost of treasury shares: 1,807,650 shares in 1999; 1,744,400 shares in 1998 (22,377) (21,137) - ------------------------------------------------------------------------------------------ Total shareholders' equity 209,482 190,687 - ------------------------------------------------------------------------------------------ Total liabilities and shareholders' equity $293,976 $282,359 - ------------------------------------------------------------------------------------------ See accompanying notes.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31 ----------------------------------- (In thousands) 1999 1998 1997 - ---------------------------------------------------------------------------------------- Common stock: Beginning of year $ 17,486 $ 17,394 $ 17,325 Stock options exercised 81 92 69 - ---------------------------------------------------------------------------------------- End of year 17,567 17,486 17,394 Capital surplus: Beginning of year 110,412 109,750 109,431 Stock options exercised 569 650 319 Other 7 12 -- - ---------------------------------------------------------------------------------------- End of year 110,988 110,412 109,750 Retained earnings: Beginning of year 88,277 68,533 50,420 Net income 26,150 24,510 22,470 Cash dividends declared (4,738) (4,766) (4,357) - ---------------------------------------------------------------------------------------- End of year 109,689 88,277 68,533 Accumulated other comprehensive income (loss): Beginning of year (4,351) (5,060) (2,262) Other comprehensive income (loss) (1) (2,034) 709 (2,798) - ---------------------------------------------------------------------------------------- End of year (6,385) (4,351) (5,060) Treasury stock: Beginning of year (21,137) (17,212) (17,212) Treasury stock purchased (1,255) (3,938) -- Treasury stock retired and other 15 13 -- - ---------------------------------------------------------------------------------------- End of year (22,377) (21,137) (17,212) - ---------------------------------------------------------------------------------------- Total shareholders' equity $ 209,482 $ 190,687 $ 173,405 - ---------------------------------------------------------------------------------------- (1) A reconciliation of net income to total comprehensive income follows
Years ended December 31 ----------------------------------- (In thousands) 1999 1998 1997 - -------------------------------------------------------------------------------- Net income $ 26,150 $ 24,510 $ 22,470 Other comprehensive income (loss): Minimum pension liability 706 57 495 Related tax expense (268) (22) (188) Foreign currency translation (2,472) 674 (3,105) - -------------------------------------------------------------------------------- Total comprehensive income $ 24,116 $ 25,219 $ 19,672 - -------------------------------------------------------------------------------- At December 31, 1999, accumulated other comprehensive income was a loss of $6,385,000, comprised entirely of foreign currency translation losses. See accompanying notes. CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31 -------------------------------- (In thousands) 1999 1998 1997 - --------------------------------------------------------------------------------------------- Operating activities Net income $ 26,150 $ 24,510 $ 22,470 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,671 7,619 16,049 Deferred income taxes 503 74 1,410 Equity income from Lighting (23,147) (20,323) -- Distributions from Lighting 12,013 19,053 -- Other items 801 182 (397) Changes in operating assets and liabilities net of effect of acquisitions: Accounts receivable (1,849) (1,700) (3,492) Inventories 671 2,249 (6,048) Accounts payable 1,917 (4,032) 3,687 Accrued expenses and other liabilities (862) (1,232) 100 Other 2,816 (1,494) (1,514) - --------------------------------------------------------------------------------------------- Net cash provided by operating activities 26,684 24,906 32,265 Investing activities Purchases of property, plant and equipment (7,953) (7,687) (17,696) Sales of property, plant and equipment 46 367 1,117 Purchase of companies (net of cash acquired) (6,466) -- (1,371) - --------------------------------------------------------------------------------------------- Net cash used in investing activities (14,373) (7,320) (17,950) Financing activities Payments on notes payable to banks, net (138) (2,408) (3,721) Payments on long-term debt, net (7,782) (6,530) (7,638) Treasury stock purchased (1,255) (3,938) -- Dividends paid (4,747) (4,760) (4,221) Other 327 767 388 - --------------------------------------------------------------------------------------------- Net cash used in financing activities (13,595) (16,869) (15,192) Effect of exchange rate change (434) 136 (597) - --------------------------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents (1,718) 853 (1,474) Cash and cash equivalents at beginning of year 18,205 17,352 18,826 - --------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 16,487 $ 18,205 $ 17,352 - --------------------------------------------------------------------------------------------- See accompanying notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of Business Thomas Industries Inc. and subsidiaries (the Company or Thomas) and af filiates operate in two business segments: the compressors and vacuum pumps segment and the lighting segment. The Company designs, manufactures and sells compressors and vacuum pumps for use in global original equipment manufacturing applications as well as construction equipment, leakage detection systems and laboratory equipment. Manufacturing facilities are located in North America and Europe, with additional sales and distribution operations located in Asia. The Company operates in the lighting segment through its 32% interest in the Genlyte Thomas Group LLC (GTG). GTG, which was formed during 1998 as discussed below, designs, manufactures, markets and sells lighting products principally in North America for consumer, commercial and industrial applications. 2. Accounting Policies Basis of Presentation Effective August 30, 1998, the Company and The Genlyte Group (Genlyte) formed GTG, combining Thomas' and Genlyte's lighting businesses. Genlyte has a 68% interest in GTG, and Thomas holds a 32% interest, which is accounted for using the equity method of accounting. Thomas changed its method of accounting for its lighting business to the equity method effective January 1, 1998. This change had no effect on Thomas' net income or common shareholders' equity but did reduce its revenues, costs, assets and liabilities. Financial statements for years prior to 1998 were not restated; therefore, Thomas' financial statements for 1999 and 1998 are not comparable to 1997. At December 31, 1999, Thomas' investment in GTG exceeded its underlying equity in net assets by $59,931,000. For the years ended December 31, 1999 and 1998, equity income was reduced by $2,116,000 and $733,000, respectively, for straight-line amortization of the excess investment. 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. 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. Inventories Inventories are valued at the lower of cost or market. Inventories valued using the last-in, first-out (LIFO) method represented approximately 41% and 46% of consolidated inventories at December 31, 1999 and 1998, respectively. Inventories not on LIFO are valued using the first-in, first-out (FIFO) method. Inventories at December 31 consist of the following: 2. Accounting Policies (continued) (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Finished goods $ 4,965 $ 5,352 Raw materials 10,209 9,196 Work in process 4,577 5,638 - -------------------------------------------------------------------------------- Total inventories $19,751 $20,186 - -------------------------------------------------------------------------------- On a current cost basis, inventories would have been $4,466,000 and $4,341,000 higher than reported at December 31, 1999 and 1998, respectively. Property, Plant, and Equipment The cost of property, plant and equipment is depreciated principally by the straight-line method over their estimated useful lives. Property, plant and equipment consisted of the following: (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Land $ 817 $ 722 Buildings 14,056 13,466 Leasehold improvements 3,194 3,581 Machinery and equipment 60,836 58,224 - -------------------------------------------------------------------------------- 78,903 75,993 Accumulated depreciation and amortization (42,751) (40,736) - -------------------------------------------------------------------------------- Total property, plant and equipment, net $36,152 $35,257 - -------------------------------------------------------------------------------- Long-lived and 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 $4,146,000 and $4,187,000 at December 31, 1999 and 1998, respectively. Excess of cost over the fair value of net assets acquired (or goodwill) generally is amortized on a straight-line basis over 30 to 40 years. Long-lived and intangible assets are periodically reviewed for recoverability when impairment indicators are present. If this review indicates that long-lived assets would not be recoverable, as determined based on the estimated undiscounted cash flows of the asset over the remaining amortization period, the carrying amount of long-lived assets would be written down to current fair value, which is generally determined from estimated discounted future net cash flows (assets held for use) or net realizable value (assets held for sale). In the opinion of management, no significant impairment indicators were present during the periods presented in these consolidated financial statements. Research and Development Costs Research and development costs, which include costs of product improvements and design, are expensed as incurred ($9,370,000 in 1999, $9,085,000 in 1998 and $14,873,000 in 1997). The reduction subsequent to 1997 is primarily due to the formation of GTG. 2. Accounting Policies (continued) 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 amount because they are highly liquid investments with a maturity of less than three months when purchased. 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 component of accumulated other comprehensive income (loss) in shareholders' equity. Other Accounts receivable at December 31, 1999 and 1998 was net of an allowance for doubtful accounts of $698,000 and $656,000, respectively. Revenue is recognized upon shipment of goods to customers. Certain prior year amounts have been reclassified to conform to the current year presentation. 3. Net Income Per Share The computation of the numerator and denominator in computing basic and diluted net income per share follows: (In thousands) 1999 1998 1997 - -------------------------------------------------------------------------------- Numerator: Net income $26,150 $24,510 $22,470 - -------------------------------------------------------------------------------- Denominator: Weighted average shares outstanding 15,796 15,877 15,837 Effect of dilutive securities: Director and employee stock options 344 474 422 Employee performance shares 42 32 13 - -------------------------------------------------------------------------------- Dilutive potential common shares 386 506 435 - -------------------------------------------------------------------------------- Denominator for diluted earnings per share-- adjusted weighted average shares and assumed conversions 16,182 16,383 16,272 - -------------------------------------------------------------------------------- 4. Equity Investment Genlyte Thomas Group LLC (GTG) is an affiliated company accounted for on the equity method. See Notes 1 and 2 for a description of GTG, as well as a discussion of the adoption of the equity method of accounting. Summarized financial information reported by the affiliate and a summary of the amounts recorded in Thomas' consolidated financial statements follow. GTG is organized as 4. Equity Investment (Continued) a limited liability corporation (LLC) that has elected to be taxed as a partnership for U.S. income tax purposes. Therefore, Thomas and Genlyte are responsible for income taxes applicable to their share of GTG's taxable income. The net income reflected below for GTG does not include any provision for U.S. income taxes which will be incurred by Thomas and Genlyte; however, amounts have been provided for certain foreign income taxes and U.S. franchise taxes. At December 31, 1999, Thomas' retained earnings include $11,684,000 of after-tax undistributed earnings from GTG accounted for on the equity method. December 31 --------------------------------- (In thousands) 1999 1998 - -------------------------------------------------------------------------------- GTG Balance Sheets Cash and cash equivalents $ 22,705 $ 8,533 Accounts receivable, net 155,428 146,167 Inventory, net 136,041 137,004 Other current assets 7,614 9,892 - -------------------------------------------------------------------------------- Total current assets 321,788 301,596 Property, plant and equipment, net 104,989 105,679 Goodwill, net 111,426 61,549 Other assets 15,228 12,632 - -------------------------------------------------------------------------------- Total assets $553,431 $481,456 - -------------------------------------------------------------------------------- Total current liabilities $170,478 $134,655 Other liabilities 19,821 21,421 Note payable to Thomas 22,287 22,287 Long-term debt 31,677 38,565 Shareholders' equity 309,168 264,528 - -------------------------------------------------------------------------------- Total liabilities and shareholders' equity $553,431 $481,456 - -------------------------------------------------------------------------------- December 31 --------------------------------- 1999 1998 - -------------------------------------------------------------------------------- GTG Income Statements Net sales $978,302 $324,111 Cost of sales 648,626 213,305 - -------------------------------------------------------------------------------- Gross profit 329,676 110,806 SG&A expense 241,239 82,029 - -------------------------------------------------------------------------------- Operating profit 88,437 28,777 Interest expense,net 4,633 1,252 - -------------------------------------------------------------------------------- Income before taxes 83,804 27,525 Income taxes(2) 4,841 1,009 - -------------------------------------------------------------------------------- Net income $ 78,963 $ 26,516 - -------------------------------------------------------------------------------- Amounts recorded by Thomas: Investment(3) $158,865 $147,386 Note receivable(4) 22,287 22,287 Equity income 23,147(5) 20,323(6) Distributions received 12,013 19,053(7) (1) Amounts represent results of operations for GTG for the four months ended December 31, 1998 (since inception). (2) GTG is organized as a limited liability corporation (LLC) that has elected to be taxed as a partnership for U.S. income tax purposes. GTG is subject to certain foreign income taxes and U.S. franchise taxes. (3) Thomas' investment in GTG exceeded its underlying equity in net assets by $59,931,000 at December 31, 1999 and $62,737,000 at December 31, 1998. For the year ended December 31, 1999 and the four months ended December 31, 4. Equity Investment (Continued) 1998, equity income was reduced by $2,116,000 and $733,000, respectively, representing straight-line amortization of the excess investment. (4) The note receivable from GTG represents a debt equalization note issued to Thomas at the formation of GTG. Interest on the principal amount outstanding under the note accrues at a variable rate and is payable on a quarterly basis. The principal amount of the note is due on August 29, 2003, and may be prepaid in whole or in part at any time without premium or penalty. (5) Consists of $25,268,000 of equity income from GTG less $2,116,000 of amortization of Thomas' excess investment and $5,000 of other expense. (6) Consists of $12,571,000 of income from Thomas' former lighting operations for the eight months ended August 30, 1998 (which were restated to the equity method) and $8,485,000 of equity income from GTG for the four months ended December 31, 1998 less $733,000 of amortization of Thomas' excess investment. (7) Consists of $16,324,000 of cash flows from Thomas' former lighting operations and distributions of $2,729,000 received from GTG. The Company in the normal course of business has transactions with GTG. These transactions consist primarily of interest received from GTG under the note receivable discussed above and reimbursement for other shared corporate expenses. Related party receivables with GTG as of December 31, 1999 and 1998 were $307,000 and $587,000, respectively. For year ended December 31, 1999 and for the period from inception (August 30, 1998) through December 31, 1998, the Company had the following related party transactions: (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Receipts from GTG for: Interest on the note receivable $ 1,281 $ 461 Reimbursement of corporate expenses $ 412 $ 170 5. Income Taxes A summary of the provision for income taxes follows: (In thousands) 1999 1998 1997 - -------------------------------------------------------------------------------- Current: Federal $10,746 $ 9,937 $ 7,977 State 1,961 1,508 780 Foreign 2,849 3,377 3,007 - -------------------------------------------------------------------------------- 15,556 14,822 11,764 Deferred: Federal and state 663 61 1,594 Foreign (160) 13 (184) - -------------------------------------------------------------------------------- 503 74 1,410 - -------------------------------------------------------------------------------- Total provision for income taxes $16,059 $14,896 $13,174 - -------------------------------------------------------------------------------- The U.S. and foreign components of income before income taxes follow: (In thousands) 1999 1998 1997 - -------------------------------------------------------------------------------- United States $35,392 $29,687 $27,360 Foreign 6,817 9,719 8,284 - -------------------------------------------------------------------------------- Income before income taxes $42,209 $39,406 $35,644 - -------------------------------------------------------------------------------- 5. Income Taxes (continued) A reconciliation of the normal statutory federal income tax rate to the Company's effective income tax rate follows: 1999 1998 1997 ------------------------------ U.S. statutory rate 35.0% 35.0% 35.0% State income taxes, net of federal tax benefits 3.0 2.5 1.4 Nondeductible amortization of intangible assets 1.3 1.4 1.6 Benefits of foreign loss carry over - (.4) (.9) Effect of foreign tax rates 1.2 .9 1.0 GTG foreign equity earnings recorded net of tax (2.0) (.6) - Other (.4) (1.0) (1.1) - -------------------------------------------------------------------------------- Effective income tax rate 38.1% 37.8% 37.0% - -------------------------------------------------------------------------------- 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) 1999 1998 - -------------------------------------------------------------------------------- Deferred tax assets: Net operating loss carryforwards $ 889 $ 939 Allowance for doubtful accounts receivable 177 119 Inventory reserves 640 535 Accrued compensation expense 1,342 1,201 Other 1,645 1,869 - -------------------------------------------------------------------------------- 4,693 4,663 Less valuation allowance (889) (939) - -------------------------------------------------------------------------------- Net deferred tax asset 3,804 3,724 Deferred tax liabilities: Accelerated depreciation 3,821 3,701 Inventory valuation 422 453 Pension expense 299 315 Investment in unconsolidated affiliates 1,734 1,504 Other 159 343 - -------------------------------------------------------------------------------- 6,435 6,316 - -------------------------------------------------------------------------------- Net deferred tax liability $ 2,631 $ 2,592 - -------------------------------------------------------------------------------- Classification: Current asset $ 2,634 $ 2,997 Long-term asset 1,170 727 Current liability 408 453 Long-term liability 6,027 5,863 - -------------------------------------------------------------------------------- Net deferred tax liability $ 2,631 $ 2,592 - -------------------------------------------------------------------------------- Deferred tax assets and liabilities are classified according to the related asset and liability classification on the consolidated balance sheet. Management believes it is more likely than not the Company will realize the benefits of its deferred tax assets, net of the valuation allowance of $889,000. The valuation allowance is provided for income tax loss carryforward benefits for federal and state income tax purposes which expire over a 5. Income Taxes (continued) five-year period beginning in 2006, the realization of which is not assured within the carryforward periods. The Company's foreign subsidiaries have accumulated undistributed earnings ($28,819,000 at December 31, 1999) 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. The Company made federal, state, and foreign income tax payments of $15,964,000 in 1999, $14,476,000 in 1998 and $13,911,000 in 1997. 6. Long-Term Debt Including the Current Portion and Credit Arrangements Long-term debt, including the current portion, consists principally of 9.36% senior notes ($46,350,000 and $54,080,000 at December 31, 1999 and 1998, respectively) with annual maturities through 2005. The fair value of the Company's long-term debt at December 31, 1999 and 1998 was $50,380,000 and $61,530,000, respectively. Maturities of long-term debt for the next five years are as follows: 2000-$7,784,000; 2001-$7,787,000; 2002-$7,789,000; 2003-$7,791,000 and 2004-$7,794,000. 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 $66,400,000 were not restricted at December 31, 1999. As of December 31, 1999, the Company had available credit of $6,000,000 with banks under short-term borrowing arrangements which was unused. Cash paid for interest was $4,867,000 in 1999, $6,426,000 in 1998 and $6,805,000 in 1997. 7. Shareholders' Equity Stock Repurchase Program Thomas' Board of Directors in 1999 authorized the purchase of up to 2,373,000 shares of Thomas common stock in the open market. Through December 31, 1999, Thomas had repurchased 64,500 shares at a cost of approximately $1,255,000. 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 900,000 shares of common stock, plus all shares remaining under the Company's 1987 Incentive Stock Plan, were reserved for issuance under this Plan. At the April 15, 1999 Annual Meeting, the Company's shareholders approved a 750,000 share increase in the number of shares reserved for issuance under the 1995 Incentive Stock 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 has been terminated, except with respect to outstanding options which may be exercised through 2005. 7. Shareholders' Equity (Continued) At the April 21, 1994 Annual Meeting, the Company's shareholders approved the Non-Employee 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 3,000 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 from the date granted. This Plan provides for options to be awarded at each annual meeting through 2004 or until 375,000 options have been granted. At December 31, 1999, there were seven non-employee directors in office, and 147,000 options had been awarded under this Plan. The Company has 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 equals the market price of the underlying stock on the date of grant, no compensation expense is 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: 1999 1998 1997 ---------------------------------------- Risk-free interest rate 6.6% 4.8% 5.5% Expected life, in years 6.5 6.5 6.5 Expected volatility 0.284 0.280 0.264 Expected dividend yield 1.6% 1.7% 1.8% 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 share data) 1999 1998 1997 - -------------------------------------------------------------------------------- Net income As reported $26,150 $24,510 $22,470 Pro forma 25,269 23,668 21,882 Net income per share As reported 1.66 1.54 1.42 Basic Pro forma 1.60 1.49 1.38 Net income per share As reported 1.62 1.50 1.38 Diluted Pro forma 1.56 1.44 1.34 Because SFAS 123 is applicable only to options granted subsequent to December 31, 1994, its pro forma effect is not fully reflected prior to 1999. 7. Shareholders' Equity (continued) A summary of stock option activity for all plans follows: 1999 1998 1997 -------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Options Price Options Price Options Price - --------------------------------------------------------------------------------------------------------------- Beginning of year 1,497,583 $ 14.49 1,345,400 $ 13.22 1,174,110 $ 11.02 Granted 207,450 18.30 263,500 19.04 269,000 21.31 Exercised (106,442) 10.88 (108,867) 9.70 (95,211) 8.92 Forfeited or expired (99,895) 16.85 (2,450) 18.19 (2,499) 12.49 - --------------------------------------------------------------------------------------------------------------- End of year 1,498,696 $ 15.12 1,497,583 $ 14.49 1,345,400 $ 13.22 - --------------------------------------------------------------------------------------------------------------- Exercisable at end of year 778,439 $ 12.26 654,576 $ 10.95 559,481 $ 9.69
The weighted average fair value of options granted was $5.90 in 1999, $5.98 in 1998 and $6.67 in 1997 using a Black-Scholes option pricing model. Options outstanding at December 31, 1999 had option prices ranging from $6.58 to $23.63 and expire at various dates between October 18, 2000 and December 12, 2009 (with a weighted-average remaining contractual life of 6.9 years). There are 941,295 shares reserved for future grant, of which 217,618 shares are reserved for the Non-Employee Director Stock Option Plan. In addition to the options listed above, 11,800 performance share awards were granted in December 1999 and 1998, and 13,215 performance share awards were granted in December 1997. Awards may be earned based on the total shareholder return of the Company during the three-year periods commencing January 1 following the grant date. A total of 13,841 shares were earned in 1999 from awards granted in December 1996. Shareholder Rights Plan On December 10, 1997, the Board of Directors of the Company 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 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. 8. Employee Benefit Plans The Company has noncontributory defined benefit pension plans and contributory defined contribution plans covering its hourly union employees. The defined benefit plans primarily provide flat benefits of stated amounts for each year of service. The Company's policy is to fund pension costs deductible for income tax purposes. The Company also sponsors defined contribution pension plans covering substantially all U.S. employees whose compensation is not determined by collective bargaining. Annual contributions are determined by the Board of Directors. Pension benefits Other postretirement benefits ------------------------------------------------------- (In thousands) 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------ Change in benefit obligations Benefit obligations at beginning of year $ 10,312 $ 29,260 $ 733 $ 4,898 Service cost 208 193 22 22 Interest cost 685 669 47 47 Plan amendments 81 -- -- -- Benefits paid (2,337) (610) (8) (417) Purchase of annuity (2,510) -- -- -- Obligations assumed by GTG -- (19,563) -- (4,211) Actuarial (gain) loss (457) 363 (117) 394 - ------------------------------------------------------------------------------------------------------ Benefit obligations at end of year $ 5,982 $ 10,312 $ 677 $ 733 - ------------------------------------------------------------------------------------------------------ Change in plan assets Value of plan assets at beginning of year $ 11,203 $ 30,500 $ -- $ Actual return on plan assets 868 1,934 -- -- Employer contributions 115 115 8 417 Benefits paid (2,337) (610) (8) (417) Purchase of annuity (2,510) -- -- -- Assets transferred to GTG -- (20,736) -- -- - ------------------------------------------------------------------------------------------------------ Value of plan assets at end of year $ 7,339 $ 11,203 $ -- $ -- - ------------------------------------------------------------------------------------------------------ The defined benefit plans' assets at December 31, 1999 consisted primarily of listed stocks and bonds, including 14,430 shares of Company common stock having a market value of $295,000 at that date. The purchase of annuity of $2,510,000 relates to the termination in 1999 of Thomas' Pension Floor Plan. Funded status of the plans Assets less accumulated obligations $ 1,357 $ 891 $ (677) $ (733) Unrecognized actuarial (gain) loss (1,026) (302) (90) 66 Unrecognized transition gain 7 4 -- -- Unrecognized prior service cost 448 496 243 262 - ------------------------------------------------------------------------------------------------------ Net asset (liability) recognized at end of year $ 786 $ 1,089 $ (524) $ (405) - ------------------------------------------------------------------------------------------------------ Plan assets exceeded accumulated benefit obligations for all plans as of December 31, 1999. The accumulated benefit obligations and plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $3,251,000 and $2,993,000, respectively, as of December 31, 1998. Balance sheet assets (liabilities) Prepaid benefit costs $ 786 $ 788 $ -- $ -- Accrued benefit liabilities -- (258) (524) (405) Intangible assets -- 427 -- -- Accumulated other comprehensive income -- 132 -- -- - ------------------------------------------------------------------------------------------------------ Net asset (liability) recognized at end of year $ 786 $ 1,089 $(524) $ (405) - ------------------------------------------------------------------------------------------------------ 8. Employee Benefit Plans (continued) Pension benefits Other postretirement benefits - ------------------------------------------------------------------------------------------------------ (In thousands) 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------ Assumptions as of December 31 Discount rate 8.00% 6.75% 8.00% 6.75% Expected return on plan assets 9.00% 9.00% -- -- Initial health care cost trend rate -- -- 8.00% 8.00% Ultimate health care cost trend rate -- -- 4.50% 4.50% Year ultimate rate is achieved -- -- 2006 2006 A one-percentage-point change in the assumed health care cost trend rate would not have a significant effect on the other postretirement benefits amounts reported above.
The following table details the components of pension and other postretirement benefit costs. Pension benefits Other postretirement benefits ---------------------------------------------------------------------- (In thousands) 1999 1998 1997 1999 1998 1997 - --------------------------------------------------------------------------------------------------------- Service cost $ 208 $ 193 $ 482 $ 22 $22 $ 38 Interest cost 685 669 1,994 47 47 359 Expected return on plan assets (981) (853) (2,275) -- -- -- Curtailment loss recognized 462 -- -- -- -- -- Other amortization and deferral 44 46 228 19 (14) 216 - --------------------------------------------------------------------------------------------------------- $ 418 $ 55 $ 429 $ 88 $ 55 $ 613 - --------------------------------------------------------------------------------------------------------- The curtailment loss of $462,000 relates to the termination in 1999 of Thomas' Pension Floor Plan.
Thomas sponsors various defined contribution plans to assist eligible employees in providing for retirement or other future needs. Company contributions to these plans amounted to $1,143,000 in 1999, $1,169,000 in 1998 and $3,307,000 in 1997. These contributions decreased after 1997 as a result of the formation of GTG. 9. Leases, Commitments and Contingencies Rental expense was $2,514,000 in 1999, $2,431,000 in 1998 and $4,888,000 in 1997. Future minimum rentals under non-cancelable operating leases are as follows: 2000-$1,765,000; 2001-$1,675,000; 2002-$1,554,000; 2003-$1,072,000; 2004-$699,000 and thereafter-$3,511,000. The reduction in rental expense after 1997 is primarily due to the formation of GTG. The Company had letters of credit outstanding in the amount of $6,250,000 at December 31, 1999. 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. Estimated liabilities are not discounted to present value. The Company does not believe that the ultimate resolution of environmental matters will have a material adverse effect on its financial position, results of operations or liquidity. 9. Leases, Commitments and Contingencies (Continued) In the normal course of business, the Company is a party to legal proceedings and claims. When costs can be reasonably estimated, appropriate liabilities for such matters are recorded. While management currently believes the amount of ultimate liability, if any, with respect to these actions will not materially affect the financial position, results of operations, or liquidity of the Company, the ultimate outcome of any litigation is uncertain. Were an unfavorable outcome to occur, the impact could be material to the Company. 10. Accrued Expenses and Other Current Liabilities A summary of accrued expenses and other current liabilities follows: (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Accrued wages, taxes and withholdings $ 4,210 $ 4,347 Accrued insurance 1,699 1,732 Accrued interest 1,954 2,220 Income taxes payable 3,440 3,865 Other current liabilities 5,305 5,744 - -------------------------------------------------------------------------------- Total accrued expenses and other current liabilities $ 16,608 $17,908 - -------------------------------------------------------------------------------- 11. Summary of Quarterly Results of Operations (Unaudited) Unaudited quarterly results of operations follow: Net Sales Gross Profit Net Income (In thousands ----------------------------------------------------------------------- except share data) 1999 1998 1999 1998 1999 1998 - --------------------------------------------------------------------------------------------- 1st Qtr $ 46,301 $ 48,209 $ 16,808 $ 17,628 $ 5,874 $ 5,250 2nd Qtr 47,467 46,336 17,076 17,278 7,281 6,875 3rd Qtr 39,856 43,146 14,353 15,845 6,748 7,050 4th Qtr 42,758 39,529 15,813 14,151 6,247 5,335 $176,382 $177,220 $ 64,050 $ 64,902 $ 26,150 $ 24,510
Basic Net Income Diluted Net Income Per Share Per Share ------------------------------------------------- 1999 1998 1999 1998 1st Qtr. $ 0.37 $ 0.33 $ 0.36 $ 0.32 2nd Qtr. 0.46 0.43 0.45 0.42 3rd Qtr. 0.43 0.44 0.42 0.43 4th Qtr. 0.40 0.34 0.39 0.33 - -------------------------------------------------------------------------------- $ 1.66 $ 1.54 $ 1.62 $ 1.50 - -------------------------------------------------------------------------------- 12. Acquisition During October 1999, the Company acquired Oberdorfer Pumps, Inc., a manufacturer of centrifugal, rotary gear and rubber impeller liquid pumps located in Syracuse, New York at a cost of approximately $6,400,000. The Company recorded approximately $3,200,000 of goodwill related to this acquisition which is being amortized over 30 years. 13. Industry Segment Information Industry segment information follows: (In thousands) 1999 1998 1997 - -------------------------------------------------------------------------------------- Revenues Sales and operating revenues Compressors & Vacuum Pumps $ 176,382 $ 177,220 $ 173,637 Lighting -- -- 374,065 - -------------------------------------------------------------------------------------- $ 176,382 $ 177,220 $ 547,702 - -------------------------------------------------------------------------------------- Operating income (loss) Compressors & Vacuum Pumps $ 29,556 $ 30,743 $ 30,879 Lighting 23,147 20,323 22,423 Corporate (7,420) (6,646) (12,315) - -------------------------------------------------------------------------------------- $ 45,283 $ 44,420 $ 40,987 - -------------------------------------------------------------------------------------- Assets Compressors & Vacuum Pumps $ 95,416 $ 89,736 $ 85,878 Lighting 158,865 147,386 222,449 Corporate 39,695 45,237 19,312 - -------------------------------------------------------------------------------------- $ 293,976 $ 282,359 $ 327,639 - -------------------------------------------------------------------------------------- Investment in equity affiliates Lighting $ 158,865 $ 147,386 $ -- Expenses not affecting cash Depreciation and amortization Compressors & Vacuum Pumps $ 7,452 $ 7,380 $ 6,530 Lighting -- -- 9,345 Corporate 219 239 174 - -------------------------------------------------------------------------------------- $ 7,671 $ 7,619 $ 16,049 - -------------------------------------------------------------------------------------- Additions to property, plant and equipment Compressors & Vacuum Pumps $ 7,555 $ 7,374 $ 8,441 Lighting -- -- 9,006 Corporate 398 313 249 - -------------------------------------------------------------------------------------- $ 7,953 $ 7,687 $ 17,696 - -------------------------------------------------------------------------------------- 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.
13. Industry Segment Information (continued) Information by geographic area follows: (In thousands) 1999 1998 1997 - ----------------------------------------------------------------------------------------- Revenues Total net sales including intercompany sales United States $ 131,615 $ 131,253 $ 469,984 Canada -- -- 43,460 Europe 55,501 58,877 58,143 - ----------------------------------------------------------------------------------------- $ 187,116 $ 190,130 $ 571,587 - ----------------------------------------------------------------------------------------- Intercompany sales United States $ (4,981) $ (5,698) $ (14,257) Canada -- -- (489) Europe (5,753) (7,212) (9,139) - ----------------------------------------------------------------------------------------- $ (10,734) $ (12,910) $ (23,885) - ----------------------------------------------------------------------------------------- Net sales to unaffiliated customers United States $ 126,634 $ 125,555 $ 455,727 Canada -- -- 42,971 Europe 49,748 51,665 49,004 - ----------------------------------------------------------------------------------------- $ 176,382 $ 177,220 $ 547,702 - ----------------------------------------------------------------------------------------- Long-lived assets United States $ 29,406 $ 27,473 $ 69,879 Canada -- -- 6,666 Europe 6,746 7,784 7,057 - ----------------------------------------------------------------------------------------- $ 36,152 $ 35,257 $ 83,602 - -----------------------------------------------------------------------------------------
REPORTS OF MANAGEMENT AND INDEPENDENT AUDITORS Responsibility for Financial Reporting Board of Directors and Shareholders Thomas Industries Inc. The financial statements herein have been prepared under management direction from accounting records which management believes presents fairly the transactions and financial position of the Company. They were developed in accordance with generally accepted accounting principles appropriate in the circumstances. Management has established internal control systems and procedures to provide reasonable assurance that assets are maintained and accounted for in accordance with its authorizations and that transactions are recorded in a manner to ensure reliable financial information. The Company has a formally stated and communicated policy demanding of employees high ethical standards in their conduct of its business. The Audit Committee of the Board of Directors is composed of outside directors who meet regularly with management, and independent auditors to review audit plans and fees, independence of auditors, internal controls, financial reports and related matters. The Committee has unrestricted access to the independent auditors with or without management attendance. Timothy C. Brown Chairman of the Board President Chief Executive Officer Phillip J. Stuecker Vice President of Finance Chief Financial Officer Secretary Louisville, Kentucky February 9, 2000 Report of Independent Auditors Board of Directors and Shareholders Thomas Industries Inc. We have audited the consolidated balance sheets of Thomas Industries Inc. and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of Genlyte Thomas Group LLC (GTG), a partnership formed on August 30, 1998, in which the Company has a 32% interest, have been audited by other auditors whose report has been furnished to us; insofar as our opinion on the consolidated financial statements relates to data included for GTG, it is based solely on their report. We conducted our audits in accordance with generally accepted auditing standards in the United States. 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 and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Thomas Industries Inc.and subsidiaries at December 31, 1999 and 1998, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles in the United States. Louisville, Kentucky February 9, 2000 FIVE YEAR SUMMARY OF OPERATIONS AND STATISTICS
Years ended December 31 ------------------------------------------------------------------------------ (Dollars in thousands except share data) 1999(A) 1998(A) 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Earnings Statistics Net sales $ 176,382 $ 177,220 $ 547,702 $ 510,111 $ 490,573 Cost of products sold 112,332 112,318 378,746 358,778 352,551 Selling, general, and administrative expenses 41,914 40,805 127,969 117,659 108,284 Equity income from lighting 23,147 20,323 -- -- -- Interest expense 4,601 6,199 6,480 7,333 8,242 Income before income taxes 42,209 39,406 35,644 27,688 21,053 As a percentage of net sales 23.9% 22.2% 6.5% 5.4% 4.3% Income taxes 16,059 14,896 13,174 10,272 8,278 Effective tax rate 38.1% 37.8% 37.0% 37.1% 39.3% Net income 26,150 24,510 22,470 17,416 12,775 - ------------------------------------------------------------------------------------------------------------------------------------ Financial Position Working capital $ 29,738 $ 31,564 $ 92,258 $ 85,838 $ 80,837 Current ratio 1.9 to 1 .0 to 1 22.1 to1 2.0 to 1 2.0 to 1 Property, plant and equipment - net 36,152 5,257 380,197 77,795 75,710 Total assets 293,976 282,359 327,639 319,650 313,533 Return on ending assets 8.9% .7% 86.9% 5.4% 4.1% Long-term debt, less current portion 40,513 8,298 455,006 62,632 70,791 Long-term debt to capital 16.2% 0.2% 224.1% 28.4% 33.1% Shareholders' equity 209,482 90,687 1173,405 157,702 143,177 Return on beginning shareholders' equity 13.7% 4.1% 114.2% 12.2% 9.6% - ------------------------------------------------------------------------------------------------------------------------------------ Data Per Common Share (B) Net income $ 1.62 $ 1.50 $ 1.38 $ 1.09 $ 0.83 Cash dividends declared 0.30 0.30 0.28 0.27 0.27 Shareholders' equity 12.97 11.73 10.59 9.99 9.43 Price range - high 22.31 26.63 22.33 15.92 16.08 low 16.13 17.06 13.67 11.00 9.08 Closing price 20.44 19.625 19.75 13.92 15.67 Price / earnings ratio 12.6 13.1 14.3 12.8 18.8 - ------------------------------------------------------------------------------------------------------------------------------------ Other Data Cash dividends declared $ 4,738 $ 4,766 $ 4,357 $ 4,169 $ 4,036 Expenditures for property, plant and equipment 7,953 7,687 17,696 15,071 12,288 Depreciation and amortization 7,671 7,619 16,049 15,682 14,803 Average number of employees 1,030 1,050 3,300 3,150 3,100 Average sales per employee 171.2 168.8 166.0 161.9 158.2 Number of shareholders of record 2,248 1,950 2,057 2,232 2,407 Average number common shares outstanding (B) 16,181,507 16,382,928 16,271,678 16,021,026 15,348,828 - ------------------------------------------------------------------------------------------------------------------------------------ Segment Information Net Sales Compressors & Vacuum Pumps $ 176,382 $ 177,220 $ 173,637 $ 170,064 $ 157,731 Lighting -- -- 374,065 340,047 332,842 - ------------------------------------------------------------------------------------------------------------------------------------ Total Net Sales $ 176,382 $ 177,220 $ 547,702 $ 510,111 $ 490,573 - ------------------------------------------------------------------------------------------------------------------------------------ Operating Income Compressors & Vacuum Pumps $ 29,556 $ 30,743 $ 30,879 $ 28,857 $ 28,446 Lighting 23,147 20,323 22,423 16,832 11,193 Corporate expenses (7,420) (6,646) (12,315) (11,047) (10,133) - ------------------------------------------------------------------------------------------------------------------------------------ Total Operating Income $ 45,283 $ 44,420 $ 40,987 $ 34,642 $ 29,506 - ------------------------------------------------------------------------------------------------------------------------------------ NOTE: See accompanying Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations. (A) Thomas Industries changed its method of accounting for its lighting business (contributed to GTG) to the equity method, effective January 1, 1998, the beginning of Thomas' fiscal year. This change had no effect on Thomas' net income or common shareholders' equity but did reduce its revenues, costs, assets, liabilities, and number of employees. Financial statements for years prior to 1998 were not restated; therefore, some information in Thomas' financial statements and highlights for 1999 and 1998 is not comparable to prior years. (B) Adjusted for 1997 stock splits.
EX-21 3 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% Blue Grass Holdings Inc. Nevada 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 Asia Pacific, Inc. Delaware 100% Thomas Industries Asia Pacific, Ltd. Hong Kong 100% Thomas Industries Export, Inc. U.S. Virgin Islands 100% Thomas Industries Holdings Inc. Delaware 100% Thomas-Oberdorfer Pumps, Inc. Delaware 100% Tupelo Holdings Inc. Delaware 100% Welch Vacuum Technology, Inc. Delaware 100%
NON WHOLLY OWNED SUBSIDIARIES
Place of Percentage of Name of Company Incorporation Voting Securities --------------- ------------- ----------------- Thomas Americas Industria e Commercio, LTDA Brazil 95%
EX-23.(A) 4 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements (Forms S-8 No. 333-30306, No. 333-92757, No. 333-83707, No. 333-34175, No. 33-59099, No. 33-54689, and No. 33-51653) of Thomas Industries Inc. of our report dated February 9, 2000, 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, 1999. /s/ Ernst & Young LLP Louisville, Kentucky March 22, 2000 EX-23.(B) 5 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in the previously filed Registration Statements (Forms S-8 No. 333-30306, No. 333-92757, No. 333-83707, No. 333-34175, No. 33-59099, No. 33-54689 and No. 33-51653) of Thomas Industries Inc. of our report dated February 2, 2000, with respect to the consolidated financial statements of Genlyte Thomas Group LLC and subsidiaries included in the Form 10-K for the year ended December 31, 1999. /s/ ARTHUR ANDERSEN LLP Louisville, Kentucky March 24, 2000 EX-27 6
5 1,000 YEAR YEAR DEC-31-1999 DEC-31-1998 DEC-31-1999 DEC-31-1998 16,487 18,205 0 0 21,567 19,861 698 656 19,751 10,186 63,111 64,243 78,902 73,115 42,751 39,114 293,976 282,359 33,373 34,403 40,513 48,298 0 0 0 0 17,567 17,486 191,915 173,201 293,976 282,359 176,382 177,220 176,382 177,220 112,332 112,318 112,332 112,318 17,048 19,068 192 229 4,601 6,199 42,209 39,406 16,059 14,896 26,150 24,510 0 0 0 0 0 0 26,150 24,510 1.66 1.54 1.62 1.50
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