-----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, TmfqVUzGKhCjX4dtVm1k6LYINqEAcIQrLjv8cqoE9j7ILIg5MunsDMrDOo93CWtR J6IhZQjUYVZxV9q0TObIMQ== 0000914760-02-000034.txt : 20020415 0000914760-02-000034.hdr.sgml : 20020415 ACCESSION NUMBER: 0000914760-02-000034 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020315 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05426 FILM NUMBER: 02575979 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-K 1 t19339k02.txt DECEMBER 31, 2001 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, 2001 --------------------- 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 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] 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. [ ] As of March 11, 2002, 15,251,810 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 11, 2002, was approximately $427,050,680. Portions of the Proxy Statement for the Annual Meeting of Shareholders on April 18, 2002, are incorporated by reference in Part III of this report. Portions of the Annual Report to Shareholders for fiscal year ended December 31, 2001, are incorporated by reference in Parts I and II of this report. 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 paint 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 Pumps and Compressors. Significant additions to these businesses on the Lighting side included the Lumec and Day-Brite Lighting acquisitions in 1987 and 1989 and Pumps and Compressors 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 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. --------------------------------- Pump and Compressor Segment --------------------------- With the lighting joint venture in place, Thomas is now focused on its Pump and Compressor 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 pumps and compressors, and various liquid pump technologies. These products are distributed worldwide to OEM's, as well as through industrial distributors. Three German operations manufacture a complementary line of rotary vane, piston, linear, and diaphragm pumps and compressors, and various liquid pump technologies. These products are distributed worldwide. The Company also maintains sales offices in England, Italy, Switzerland, Hong Kong, Japan, Taiwan, Mexico, and Australia. 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 pump and compressor 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 $70 million in 2001, $65 million in 2000, and $62 million in 1999. Oxygen concentrator OEM's represent over 50 percent of the Company's sales in the medical equipment market. The Company believes it has the leading market 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 2001. The backlog of unshipped orders was $38 million at December 31, 2001, and $42 million at December 31, 2000. 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 the Company ships. 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 2002. The Company believes that it has adequate sources of materials and supplies for its business. There is no significant seasonal impact on the business of the Company. 3 ITEM 1. (Continued) 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. GTG operates in these three industry segments through the following divisions: Lightolier, Day-Brite, Crescent, Capri/Omega, Choride Systems, Controls, Hadco, Gardco, Wide-Lite, Stonco and Thomas Residential in the United States and Mexico; and Canlyte, Thomas Lighting Canada, Lumec, and Ledalite 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's management 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 partly 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. GTG's products are principally sold throughout the United States, Canada, and Mexico. Thomas' investment in GTG is accounted for using the equity method of accounting. At any time on or after January 31, 2002, Thomas has the right (a "put right"), but not the obligation, to require the Joint 4 ITEM 1. (Continued) Venture (GTG) to purchase all, but not less than all, of Thomas' ownership interest in GTG at the applicable purchase price. The purchase price shall be equal to the "Fair Market Value" of GTG multiplied by Thomas' ownership percentage in GTG. The "Fair Market Value"means the value of the total interest in GTG computed as a going concern, including the control premium. d. Other ----- The Company expects to fund working capital requirements from a combination of available cash balances, internally generated funds, and, if necessary, short-term financing arrangements. The Company does not currently have any bank committed lines of credit and management believes, if short-term borrowings were needed to support the sales growth of the business, that competitive financing could be obtained given the current financial position of the Company. The Company has various patents and trademarks but does not consider its business to be materially dependent upon any individual patent or trademark. During 2001, the Company spent $10,369,000 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 2000, the Company spent $9,721,000 on these activities and during 1999, $9,370,000. 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 1,070 people at December 31, 2001. e. Financial Information about Geographic Areas. -------------------------------------------- See Notes to Consolidated Financial Statements, as set forth in Exhibit 13, which information is contained in the Company's 2001 Annual Report to Shareholders, and incorporated herein by reference, for financial information about foreign and domestic operations. 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, 51 1984 (A) President, Chief Executive Officer, and Director 5 ITEM 1. (Continued) Year Office or Position First Elected Name with Company Age as an Officer ---- ------------ --- ------------- Phillip J. Stuecker Vice President of Finance, 50 1984 (B) Chief Financial Officer, and Secretary Bernard R. Berntson Vice President; General 62 1992 (C) Manager, North American Pump and Compressor Group Peter H. Bissinger Vice President; General 56 1992 (D) Manager, European Pump and Compressor 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) 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. (C) Bernard R. Berntson was elected an officer effective December 14, 1992. Mr. Berntson had held the position of General Manager of the North American Pump and Compressor Group since 1987. (D) 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 Thomas 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 ------- ----- ------ ----------- -------------------- Pump and Compressor 4 4 707,000 Manufacturing plants 1 5 30,000 Distribution centers Corporate -- 1 5,300 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 2001 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 2001 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 2001 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, with the exception of the $1.25 million Industrial Revenue Bond that accrues interest at a variable rate. Short-term borrowings are priced at variable interest rates. The Company's results of operations and cash flows, therefore, would only be affected by interest rate changes to the extent of variable rate debt. At December 31, 2001, only the $1.25 million Industrial Revenue Bond was outstanding. A 100 basis point movement in the interest rate on the $1.25 million bond would result in an $12,500 annualized effect on interest expense and cash flows. The Company also has short-term investments of $28.8 million as of December 31, 2001 that bear interest at variable rates. Therefore, a 100 basis point movement in the interest rate would result in an approximate $288,000 annualized effect on interest income and cash flows. The fair value of the Company's long-term debt is estimated based on current interest rates offered to the Company for similar instruments. A 100 basis point movement in the interest rate would result in an approximate $490,000 annualized effect on the fair value of long-term debt. 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 currency exchange rates or changing economic conditions in the foreign markets in which the Company manufactures or distributes its products. Currency exposures for our Pump and Compressor Segment are concentrated in Germany but exist to a lesser extent in other parts of Europe and Asia. Our Lighting Segment currency exposure is primarily in Canada. 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 2001 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-23. 8 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On April 19, 2001, on the recommendation of the Audit Committee, the Board of Directors appointed Arthur Andersen LLP as the Corporation's independent auditors for the 2001 fiscal year, replacing Ernst & Young LLP ("Ernst & Young") which was dismissed from that role. Ernst & Young's reports on the financial statements for the two fiscal years preceding dismissal contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the two fiscal years and interim period preceding the dismissal, there were no disagreements with Ernst & Young on any matter of accounting principles or practices, financial statement disclosure, or audit scope or procedure. 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 18, 2002, 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 18, 2002, 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 18, 2002, under the heading "Securities Beneficially Owned by Principal Shareholders and Management," which information is incorporated herein by reference. 9 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 18, 2002, under the headings "Board of Directors" and "Compensation Committee Interlocks and Insider Participation," which information is incorporated herein by reference. PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K a. (1) Financial Statements -------------------- The following consolidated financial statements of Thomas Industries Inc., included in the Company's 2001 Annual Report to Shareholders, are included in Part II, Item 8: Consolidated Balance Sheets -- December 31, 2001 and 2000 Consolidated Statements of Income -- Years ended December 31, 2001, 2000, and 1999 Consolidated Statements of Shareholders' Equity -- Years ended December 31, 2001, 2000, and 1999 Consolidated Statements of Cash Flows -- Years ended December 31, 2001, 2000, and 1999 Notes to Consolidated Financial Statements -- December 31, 2001 (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 10 ITEM 14. (Continued) Exhibit No. Exhibit ----------- ------- filed as Exhibit 4 to registrant's 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. 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) Amended and Restated Rights Agreement filed as Exhibit 4(b) to registrant's report on Form 10-Q dated August 14, 2000, hereby incorporated by reference. 4(c) First Amendment to Rights Agreement filed as Exhibit 4(c) to registrant's report on Form 10-K dated March 26, 2001, 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) Trust Agreement, filed as Exhibit 10(1) to registrant's report on Form 10-Q dated November 11, 1988, hereby incorporated by reference. 10(c) 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(d) 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(e) Nonemployee Director Stock Option Plan as Amended and Restated as of February 5, 1997, filed as 11 ITEM 14. (Continued) Exhibit No. Exhibit ----------- ------- Exhibit 10(h) to registrant's report on Form 10-K dated March 20, 1997, hereby incorporated by reference. 10(f) 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. 10(g) 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(h) 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(i) 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(j) 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(k) 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 2001 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 Arthur Andersen LLP. 23(b) Consent of Ernst & Young LLP. 12 ITEM 14. (Continued) 23(c) Consent of Arthur Andersen LLP. b. Reports on Form 8-K ------------------- There were no reports on Form 8-K for the three months ended December 31, 2001. 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, thereunto duly authorized. THOMAS INDUSTRIES INC. Date: March 15, 2002 By /s/ Timothy C. Brown ------------------------------------------ Timothy C. Brown, Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /s/ Timothy C. Brown Chairman of the Board; 3/15/02 Timothy C. Brown President; Chief Executive Officer; Director (Principal Executive Officer) /s/ Phillip J. Stuecker Vice President of Finance; 3/15/02 Phillip J. Stuecker Chief Financial Officer; Secretary (Principal Financial Officer) /s/ Roger P. Whitton Controller 3/15/02 Roger P. Whitton (Principal Accounting Officer) /s/ Wallace H. Dunbar Director 3/15/02 Wallace H. Dunbar /s/ H. Joseph Ferguson Director 3/15/02 H. Joseph Ferguson /s/ Gene P. Gardner Director 3/15/02 Gene P. Gardner /s/ Director Director 3/15/02 Lawrence E. Gloyd 14 Signatures (Continued) Signature Title Date --------- ----- ---- /s/ William M. Jordan Director 3/15/02 William M. Jordan /s/ Franklin J. Lunding, Jr. Director 3/15/02 Franklin J. Lunding, Jr. /s/ Anthony A. Massaro Director 3/15/02 Anthony A. Massaro 15 Report of Independent Public Accountants To the Board of Directors and Shareholders of Thomas Industries Inc.: We have audited the accompanying consolidated balance sheet of Thomas Industries Inc. (a Delaware corporation) as of December 31, 2001, and the related consolidated statements of income, shareholders' equity and cash flows for the year then ended. 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 audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Thomas Industries Inc. as of December 31, 2001, and the consolidated results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. /s/ Arthur Andersen LLP Louisville, Kentucky January 25, 2002 16 Report of Independent Auditors The Board of Directors and Shareholders Thomas Industries Inc. We have audited the consolidated balance sheet of Thomas Industries Inc. as of December 31, 2000, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the two years in the period ended December 31, 2000. Our audits also included the information for each of the two years in the period ended December 31, 2000 included in the financial statement schedule listed in the Index at Item 14(a). These financial statements and information included in the schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and information included in the 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 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 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. at December 31, 2000, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the information for each of the two years in the period ended December 31, 2000 included in 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 7, 2001 17 VALUATION AND QUALIFYING ACCOUNTS THOMAS INDUSTRIES INC. AND SUBSIDIARIES DECEMBER 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------ 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, 2001 Allowance for doubtful accounts $752,000 $514,000 $163,000 (1) $1,103,000 Allowance for obsolete and slow moving 1,999,000 880,000 894,000 (2) 1,985,000 inventory ---------------------------------- ---------------------------------- $2,751,000 $1,394,000 $1,057,000 $3,088,000 ================================== ================================== Year ended December 31, 2000 Allowance for doubtful accounts $698,000 $206,000 $152,000 (1) $752,000 Allowance for obsolete and slow moving 1,861,000 624,000 486,000 (2) 1,999,000 inventory ---------------------------------- ---------------------------------- $2,559,000 $830,000 $638,000 $2,751,000 ================================== ================================== Year ended December 31, 1999 Allowance for doubtful accounts $656,000 $192,000 $150,000 (1) $698,000 Allowance for obsolete and slow moving 1,932,000 174,000 245,000 (2) 1,861,000 inventory ---------------------------------- ---------------------------------- $2,588,000 $366,000 $395,000 $2,559,000 ================================== ================================== (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.
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 ("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. Following are audited financial statements of GTG for the years ended December 31, 2001, 2000, and 1999. F - 1 Report of Independent Public Accountants To the Members 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 (the Company) as of December 31, 2001 and 2000, and the related consolidated statements of income, members' equity, and cash flows for each of the three years in the period ended December 31, 2001. 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, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. /s/ ARTHUR ANDERSEN LLP Louisville, Kentucky January 18, 2002 F - 2 CONSOLIDATED STATEMENTS OF INCOME GENLYTE THOMAS GROUP LLC AND SUBSIDIARIES FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 (DOLLARS IN THOUSANDS)
2001 2000 1999 ----------------------------------------- Net sales $985,176 $ 1,007,706 $978,302 Cost of sales 636,582 651,304 645,572 ----------------------------------------- Gross profit 348,594 356,402 $332,730 Selling and administrative expenses 248,005 257,583 240,589 Amortization of goodwill and other intangible assets 6,007 4,616 3,704 ----------------------------------------- Operating profit 94,582 94,203 $88,437 Interest expense, net of interest income 3,699 4,184 4,633 Minority interest (54) (140) - ----------------------------------------- Income before income taxes 90,937 90,159 $83,804 Income tax provision 6,064 6,622 4,841 ----------------------------------------- Net income $ 84,873 $ 83,537 $78,963 ========================================= 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, 2001 AND 2000 (DOLLARS IN THOUSANDS) 2001 2000 ---------------------- ASSETS: Current Assets: Cash and cash equivalents $ 59,691 $ 23,817 Accounts receivable, less allowances for doubtful accounts of $10,111 and $11,014, respectively 141,658 142,784 Related-party receivables - 1,204 Inventories 132,932 151,257 Other current assets 8,763 7,564 ---------------------- Total current assets 343,044 326,626 Property, plant and equipment, at cost: Land and land improvements 6,490 6,506 Buildings and leasehold improvements 83,318 83,594 Machinery and equipment 273,154 258,892 ---------------------- Total property, plant and equipment 362,962 348,992 Less: Accumulated depreciation and amortization 252,515 235,991 ---------------------- Net property, plant and equipment 110,447 113,001 Goodwill, net of accumulated amortization 135,417 140,312 Other assets 30,213 34,453 ---------------------- TOTAL ASSETS $ 619,121 $ 614,392 ====================== LIABILITIES & MEMBERS' EQUITY: Current Liabilities: Current maturities of long-term debt $ 3,284 $ 2,661 Accounts payable 82,150 96,794 Related-party payables 19,705 7,022 Accrued expenses 65,406 70,977 ---------------------- Total current liabilities 170,545 177,454 Long-term debt 36,989 66,652 Deferred income taxes 3,991 4,271 Accrued pension 15,666 12,728 Minority interest (194) (140) Other long-term liabilities 6,121 6,121 ---------------------- Total liabilities 233,118 267,086 Commitments and contingencies (See notes (12) and (13)) Members' Equity: Accumulated other comprehensive income (9,076) 875 Other members' equity 395,079 346,431 ---------------------- Total members' equity 386,003 347,306 ---------------------- TOTAL LIABILITIES & MEMBERS' EQUITY $ 619,121 $ 614,392 ====================== The accompanying notes are an integral part of these consolidated financial statements. F - 4 CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY GENLYTE THOMAS GROUP LLC AND SUBSIDIARIES FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 (DOLLARS IN THOUSANDS) Accumulated Other Other Total Comprehensive Members' Members' Income Equity Equity ------------------------------------- Members' 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 members - (37,542) (37,542) ------------------------------------- Members' equity, December 31, 1999 $ 3,158 $ 306,010 $ 309,168 Net income - 83,537 83,537 Increase in minimum pension liability (277) - (277) Foreign currency translation adjustments (2,006) - (2,006) ------------------------------------- Total comprehensive income (2,283) 83,537 81,254 Distributions to members - (43,116) (43,116) ------------------------------------- Members' equity, December 31, 2000 $ 875 $ 346,431 $ 347,306 Net income - 84,873 84,873 Increase in minimum pension liability (6,424) - (6,424) Foreign currency translation adjustments (3,527) - (3,527) ------------------------------------- Total comprehensive income (9,951) 84,873 74,922 Distributions to members - (36,225) (36,225) ------------------------------------- Members' equity, December 31, 2001 $ (9,076) $ 395,079 $ 386,003 ===================================== 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 YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (DOLLARS IN THOUSANDS)
2001 2000 1999 -------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 84,873 $ 83,537 $ 78,963 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 28,172 25,664 23,835 Net (gain) loss from disposals of plant and equipment (807) (77) (20) Provision for doubtful accounts receivable 424 (718) 4,113 Provision (benefit) for deferred income taxes (150) 1,575 642 Changes in assets and liabilities, net of effect of acquisitions: Accounts receivable 1,520 18,899 (9,467) Related-party receivables 1,204 (1,204) 1,855 Inventories 19,419 (10,726) 3,039 Other current assets (1,199) 204 1,018 Other assets 5,017 481 (28,736) Accounts payable and accrued expenses (21,188) 2,173 24,223 Related-party payables 12,683 (1,740) 8,060 Deferred income taxes (130) 1,439 (106) Minority interest (54) (140) - Accrued pension and other long-term liabilities 2,938 228 (2,260) Minimum pension liability (6,424) (277) 1,793 All other, net (79) 566 (3,247) -------------------------------------- Net cash provided by operating activities 126,219 119,884 103,705 -------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of businesses, net of cash received (2,900) (59,145) (30,934) Purchases of property, plant and equipment (20,250) (28,423) (20,514) Proceeds from sales of property, plant and equipment 1,597 1,347 6,195 -------------------------------------- Net cash used in investing activities (21,553) (86,221) (45,253) -------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in short-term borrowings - - (1,932) Proceeds from long-term debt 14,000 47,600 20,956 Reduction of long-term debt (43,040) (35,029) (28,202) Distributions to members (36,225) (43,116) (37,542) -------------------------------------- Net cash used in financing activities (65,265) (30,545) (46,720) -------------------------------------- Effect of exchange rate changes on cash and cash equivalents (3,527) (2,006) 2,440 -------------------------------------- Net increase in cash and cash equivalents 35,874 1,112 14,172 Cash and cash equivalents at beginning of year 23,817 22,705 8,533 -------------------------------------- Cash and cash equivalents at end of year $ 59,691 $ 23,817 $ 22,705 ====================================== The accompanying notes are an integral part of these consolidated financial statements.
F - 6 Genlyte Thomas Group LLC and Subsidiaries Notes to Consolidated Financial Statements (Dollar Amounts in Thousands) (1) DESCRIPTION OF BUSINESS Genlyte Thomas Group LLC ("GTG" or "the Company") is a Delaware limited liability company. The Company designs, manufactures, and sells lighting fixtures and controls for a wide variety of applications in the commercial, residential, and industrial markets in North America. The Company'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) "Formation of Genlyte Thomas Group LLC." (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of GTG 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 GTG. Intercompany accounts and transactions have been eliminated. Investments in affiliates owned less than 50%, and over which the Company does not exercise significant influence, 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 accounting principles generally accepted in the United States 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 the estimates. REVENUE RECOGNITION: In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"), which provides the staff's views in applying generally accepted accounting principles to selected revenue recognition issues. The effective date of SAB 101 for the Company was the fourth quarter of 2000. SAB 101 had no impact on the Company's financial position or results of operations in 2000 because the Company had been in compliance with the guidance of SAB 101. The Company records sales revenue when products are shipped because that is the point when the customer accepts title and the risks and rewards of ownership. A provision for estimated returns and allowances is recorded as a sales deduction. CUSTOMER REBATES: Whereas the Company had been classifying most rebates paid to customers as sales deductions, certain rebates were classified as selling and administrative expenses. In 2001, the Company began classifying all customer rebates as sales deductions. The effect in 2001 was to reclassify $3,007 to net sales (decrease) from selling and administrative expenses (decrease). Prior year statements of income have not been reclassified to conform to the 2001 classification, because the amounts, $3,125 in 2000 and $2,965 in 1999, are not considered material. F - 7 SHIPPING AND HANDLING COSTS: In compliance with Emerging Issues Task Force issue 00-10, "Accounting for Shipping and Handling Fees and Costs," the Company began in 2000 to include in net sales all amounts billed to customers that relate to shipping and handling. Previously, such revenue was netted against the related costs. The effect in 2001 and 2000 was to reclassify $7,502 and $7,664, respectively, to net sales (increase) from selling and administrative expenses (increase). The 1999 statement of income has not been reclassified to conform to the 2001 and 2000 classification, because the amount, $6,016, is not considered material. The amounts of shipping and handling costs included in selling and administrative expenses were $50,552 in 2001, $52,805 in 2000, and $40,814 in 1999. ADVERTISING COSTS: The Company expenses advertising costs principally as incurred. Certain catalog, literature, and display costs are amortized over their useful lives, from 6 to 36 months. Total advertising expenses, classified as selling and administrative expenses, were $10,373 in 2001, $12,221 in 2000, and $13,416 in 1999. RESEARCH AND DEVELOPMENT COSTS: Research and development costs are expensed as incurred. These expenses, classified as selling and administrative expenses, were $9,359 in 2001, $8,510 in 2000, and $8,086 in 1999. CASH EQUIVALENTS: The Company considers all highly liquid investments with a maturity of three months or less from the date of purchase to be cash equivalents. CONCENTRATION OF CREDIT RISK: Assets that potentially subject the Company to concentration of credit risk are cash and cash equivalents and accounts receivable. The Company invests its cash primarily in high-quality institutional money market funds with maturities of less than three months and limits the amount of credit exposure to any one financial institution. The Company provides credit to most of its customers in the ordinary course of business, and generally collateral or other security is not required. The Company conducts ongoing credit evaluations of its customers and maintains allowances for potential credit losses. Concentration of credit risk with respect to accounts receivable is limited due to the wide variety of customers and markets to which the Company sells. As of December 31, 2001, management does not consider the Company to have any significant concentration of credit risk. 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: 2001 2000 ------------------------------------------------------------------------ Raw materials $ 51,595 $55,651 Work in process 13,582 13,484 Finished goods 67,755 82,122 ---------------------------- Total inventories $132,932 $ 151,257 ============================ Inventories valued using the last-in, first-out ("LIFO") method represented approximately 83% of total inventories at December 31, 2001 and 2000. 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 $2,616 and $1,403 lower than reported at December 31, 2001 and 2000, respectively. F - 8 During each of the last three years, certain inventory quantity reductions caused partial liquidations of LIFO inventory layers (in some cases including the base), the effects of which increased 2001 pre-tax income by $1,047, decreased 2000 pre-tax income by $591, and decreased 1999 net pre-tax income by $248. PROPERTY, PLANT AND EQUIPMENT: The Company provides for depreciation of property, plant and equipment, which also includes amortization of assets recorded under capital leases, on a straight-line basis over the estimated useful lives of the assets. Useful lives vary among the items in each classification, but generally fall within the following ranges: Land improvements 10 - 25 years Buildings and leasehold improvements 10 - 40 years Machinery and equipment 3 - 10 years Leasehold improvements are amortized over the terms of the respective leases, or over their estimated useful lives, whichever is shorter. Depreciation and amortization of property, plant and equipment was $22,165 in 2001, $21,048 in 2000, and $20,131 in 1999. Accelerated methods of depreciation are used for income tax purposes, and appropriate provisions are made for the related deferred income taxes for the foreign subsidiaries. When the Company sells or otherwise disposes of property, plant and equipment, the asset cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is recorded in selling and administrative expenses in the consolidated statements of income. Maintenance and repairs are expensed as incurred. Renewals and improvements are capitalized and depreciated or amortized over the remaining useful lives of the respective assets. GOODWILL AND OTHER INTANGIBLE ASSETS: Cost in excess of net assets of businesses acquired (goodwill) prior to 1971 of $4,922 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 $165,928 as of December 31, 2001 and $165,884 as of December 31, 2000, is being amortized on a straight-line basis over periods ranging from 10 to 40 years. Accumulated amortization was $35,433 and $30,494 as of December 31, 2001 and 2000, respectively. Other intangible assets, which consist primarily of license and non-competition agreements, aggregating $23,317 as of December 31, 2001 and $23,096 as of December 31, 2000, are being amortized on a straight- line basis, primarily over 30 years. Accumulated amortization was $1,029 and $234 as of December 31, 2001 and 2000, respectively. The Company periodically evaluates goodwill and other intangible assets for permanent impairment by assessing recoverability from future operating cash flows. An 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. F - 9 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 date. The cumulative effects of such adjustments were a charge of $2,375 at December 31, 2001 and a credit of $1,152 at December 31, 2000, and have been recorded in the foreign currency translation adjustment component of accumulated other comprehensive income in members' equity. Income and expenses are translated at the average exchange rates prevailing during the year. Gains or losses resulting from foreign currency transactions, netting to a gain of $88 in 2001, a loss of $80 in 2000, and a loss of $241 in 1999, are included in selling and administrative expenses. FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying amounts of cash equivalents and long-term debt approximate fair value because of their short-term maturity and/or variable market-driven interest rates. COLLECTIVE BARGAINING AGREEMENTS: As of December 31, 2001, the Company had 2,712 employees, or 51.0% of the total employees, who were members of various collective bargaining agreements. Several of these collective bargaining agreements, covering 294 employees, which is 10.8% of the collective bargaining employees and 5.5% of the total employees, will expire in 2002. Management does not expect the expiration and renegotiation of these agreements to have a significant impact on 2002 production. NEW ACCOUNTING STANDARDS: Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), was issued by the Financial Accounting Standards Board in June 1998 and was effective for the Company beginning in 2001. Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an Amendment of FASB Statement No. 133" was issued in June 2000 and is to be adopted concurrently with SFAS No. 133. The Company did not use any significant derivative financial instruments or participate in any significant hedging activities during 2001. Statements of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS No. 141"), and No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"), were issued in July 2001. SFAS No. 141 eliminates the pooling-of-interests method and requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. It also requires intangible assets acquired in a business combination to be recognized separately from goodwill. SFAS No. 141 has had no impact on the Company's financial position or results of operations with respect to business combination transactions that have occurred prior to June 30, 2001. Accounting for the acquisition of Entertainment Technology has been in compliance with SFAS No. 141. The impact to the Company was in the allocation of the purchase price between goodwill and other intangible assets. See note (6) "Acquisition of Entertainment Technology." SFAS No. 142 addresses how goodwill and other intangible assets should be accounted for upon their acquisition and afterwards. Management of the Company is currently analyzing the impact of this statement, which is effective January 1, 2002. The primary impact of SFAS No. 142 on the Company is that existing goodwill and intangible assets with indefinite lives will no longer be amortized beginning in 2002. The Company has no intangible assets with indefinite lives, but has been amortizing goodwill with a gross book value of $165,928 as of December 31, 2001. F -10 Intangible assets with finite lives will continue to be amortized, and the Company has $23,317 of such assets as of December 31, 2001, consisting primarily of license and non-competition agreements. Instead of amortization, goodwill will be subject to an assessment for impairment on a reporting unit basis by applying a fair-value-based test annually, and more frequently if circumstances indicate a possible impairment. If a reporting unit's net book value is more than its fair value and the reporting unit's net book value of its goodwill exceeds the fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess goodwill value. Management estimates that, based on December 31, 2001 goodwill balances, the Company will report lower amortization of goodwill and higher operating profit of approximately $5,200 annually. Although management does not expect to record a material loss for goodwill impairment upon the adoption of SFAS No. 142 on January 1, 2002, the evaluation is still in process. Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"), was issued in October 2001 and is effective for the Company beginning in 2002. SFAS No. 144 requires that long-lived assets to be disposed of by sale be measured at the lower of net book value or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. SFAS No. 144 also expands the reporting of discontinued operations to include components of an entity that have been or will be disposed of rather than limiting such reporting to discontinued segments of a business. Management is currently analyzing the provisions of SFAS No. 144, but does not expect its adoption to have a significant impact on the Company's financial position or results of operations. However, future plans to dispose of long-lived assets could result in charges against operations to write down long-lived asset values. 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 members' 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 GTG and received a 68% interest in GTG. Thomas contributed substantially all of the assets and certain related liabilities of Thomas Lighting and received a 32% interest in GTG. The percentage interests in GTG 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 GTG required the assets and liabilities contributed by Thomas Lighting to GTG to be valued at their fair values, as of the acquisition date, in the consolidated financial statements of GTG. The resulting cost in excess of the fair market value of net assets contributed by Thomas Lighting (goodwill) of $32,412 is being amortized on a straight-line basis over 30 years. The assets contributed by Genlyte to GTG are reflected at their historical cost. F - 11 To the extent the actual net working capital contributed by Thomas Lighting exceeded the target net working capital, GTG 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 Lighting 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 "Members"), 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 Members' 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. The LLC Agreement requires that GTG make the following distributions to the Members: (i) a distribution to each Member, based on its percentage interest, for tax liabilities attributable to its participation as a Member of GTG based upon the effective tax rate of the Member having the highest tax rate; and (ii) subject to the provisions of Delaware law and the terms of the primary GTG credit facility, distributions (exclusive of the tax distributions set forth above) to each of the Members so that Thomas receives at least an aggregate of $3,000 and Genlyte receives at least an aggregate of $6,375 per year. Also under the terms of the LLC Agreement, at any time on or after January 31, 2002, Thomas has the right (a "Put Right"), but not the obligation, to require GTG to purchase all, but not less than all, of Thomas's 32% interest at the appraised value of such interest. The appraised value shall be the fair market value of GTG as a going concern, taking into account a control premium, and determined by an appraisal process to be undertaken by recognized investment banking firms chosen initially by Genlyte and Thomas. If GTG cannot secure the necessary financing with respect to Thomas's exercise of its Put Right, then Thomas has the right to cause GTG to be sold. Also, at any time after Thomas exercises its Put Right, Genlyte has the right to cause GTG to be sold. Also under the terms of the LLC Agreement, on or after the later to occur of (1) the final settlement or disposition of the litigation described in note (13) "Contingencies" or (2) January 31, 2002, either Member has the right, but not the obligation, to offer to buy the other Member's interest (the "Offer Right"). If the Members cannot agree on the terms, then GTG shall be sold to the highest bidder. Either Member may participate in the bidding for the purchase of GTG. Complete details of the Put Right, Offer Right, and appraisal process can be found in the proxy statement pertaining to the formation of GTG, filed with the Securities and Exchange Commission by Genlyte on July 23, 1998. F - 12 (4) INVESTMENT IN FIBRE LIGHT AND ACQUISITION OF LEDALITE On May 10, 1999, GTG acquired a 2% interest (with rights to acquire an additional 6%) in Fibre Light International, based in 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 GTG owns 80%. Fibre Light manufactures, markets, and sells fiber optic lighting systems in the U.S. On July 5, 2000, GTG acquired an additional 2% interest in Fibre Light International. The investment in Fibre Light is accounted for using the cost method. On June 30, 1999, GTG 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 original purchase prices of these acquisitions totaled $31,469 in 1999 (including costs of acquisition), consisting of approximately $8,500 in cash payments and approximately $23,000 in borrowings. In 2000, an additional $424 was paid to Ledalite's owners based on Ledalite's 1999 earnings performance. The Ledalite acquisition has been accounted for using the purchase method of accounting. The excess of the total purchase price over the fair market value of net assets acquired (goodwill) of $26,463 is being amortized on a straight-line basis over 30 years. The operating results of Fibre Light and Ledalite have been included in the Company's consolidated financial statements since the respective dates of acquisition. On an unaudited pro forma basis, assuming these acquisitions had occurred at the beginning of 1999, the Company's results would have been: Actual Pro Forma 1999 1999 ------------------------------ Net sales $978,302 $990,326 Net income 78,963 78,432 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. (5) ACQUISITIONS OF TRANSLITE SONOMA AND CHLORIDE SYSTEMS On September 14, 2000, the Company acquired Translite Limited ("Translite Sonoma"), a San Carlos, California based manufacturer of low-voltage cable and track lighting systems and decorative architectural glass lighting. Earlier in 2000, Translite Limited had expanded its operations by merging with Sonoma Lighting Limited, which had been a manufacturer of decorative architectural glass lighting. The Company purchased all of the outstanding capital stock of Translite Limited for $6,427 (including costs of acquisition), borrowing $5,000 from the revolving credit facility and funding the remainder from cash on hand. F - 13 On October 1, 2000, the Company acquired the assets of the emergency lighting business of Chloride Power Electronics Incorporated ("Chloride Systems") from the Chloride Group, PLC, in London, England. The purchase included the U.S. Chloride Systems and LightGuard emergency lighting brands. The purchase price was $52,324 in cash plus the assumption of approximately $2,800 in liabilities. The revolving credit facility was used to borrow $35,000 and cash on hand was used to pay the remaining $17,324. The Translite Sonoma and Chloride Systems acquisitions have been accounted for using the purchase method of accounting. The excess of the purchase price over the fair market value of net assets acquired (goodwill) of $6,952 for Translite Sonoma and $23,365 for Chloride Systems is being amortized on a straight-line basis over 30 years. The fair market value of net assets acquired from Chloride Systems included $23,000 in intangible assets for license and non-competition agreements, which are being amortized over 30 years. The operating results of Translite Sonoma and Chloride Systems have been included in the Company's consolidated financial statements since the respective dates of acquisition. On an unaudited pro forma basis, assuming these acquisitions had occurred at the beginning of 2000 and 1999, the Company's results would have been: Actual Pro Forma Actual Pro Forma 2000 2000 1999 1999 --------------------------------------------------- Net sales $1,007,706 $1,035,139 $ 978,302 $1,011,778 Net income 83,537 83,349 78,963 79,773 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. (6) ACQUISITION OF ENTERTAINMENT TECHNOLOGY On August 31, 2001, the Company acquired the assets of Entertainment Technology, Incorporated ("ET"), a subsidiary of privately held Rosco Laboratories, Inc. of Stamford CT. ET is a manufacturer of entertainment lighting equipment and controls. Products include the Intelligent Power System line of theatrical dimming equipment and the family of Horizon lighting controls. The purchase price of $3,000, minus a holdback of $100 to cover potentially unrealizable inventory, plus the assumption of $622 of liabilities, was funded from cash on hand. The ET acquisition is 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 (goodwill) of $1,849 is not being amortized, in accordance with Statement of Financial Accounting Standards No. 141, "Business Combinations." See note (2) "Summary of Significant Accounting Policies - New Accounting Standards." The determination of the fair market value as reflected in the balance sheet is subject to change, with a final determination no later than one year after the acquisition date. The operating results of ET have been included in the Company's consolidated financial statements since the date of acquisition. The pro forma results and other disclosures required by SFAS No. 141 have not been presented because the acquisition of ET is not considered a material acquisition. F - 14 (7) INCOME TAXES The results of operations are included in the tax returns of the Members, and, accordingly, no provision has been recognized by the Company for U.S. federal income taxes payable by the Members. The Company's foreign subsidiaries are taxable corporations, and current and deferred taxes are provided on their income. The income tax provision also includes U.S income taxes (primarily state income taxes) of $710 in 2001, $984 in 2000, and $360 in 1999. Cash paid for income taxes was $6,003 in 2001, $6,964 in 2000, and $2,994 in 1999. (8) LONG-TERM DEBT Long-term debt at December 31 consisted of the following: 2001 2000 - -------------------------------------------------------------------------------- Revolving credit notes $ - $ 8,000 Canadian dollar notes 16,009 19,015 Industrial revenue bonds 23,100 18,100 Loan payable to Thomas - 22,287 Capital leases and other 1,164 1,911 ----------------------------------- 40,273 69,313 Less: current maturities 3,284 2,661 ------------------------------------ Total long-term debt $ 36,989 $ 66,652 ==================================== GTG 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, GTG could incur approximately $28,000 in additional interest charges and still comply with the covenant. Total borrowings under the Facility as of December 31, 2001 and 2000, were $0 and $8,000, respectively. In addition, at December 31, 2001, GTG had outstanding $42,880 of letters of credit, which reduce the amount available to borrow under the Facility. Outstanding borrowings bear interest at the option of GTG based on the bank's base rate or the LIBOR rate plus a spread as determined by total indebtedness. Based upon December 31, 2001 indebtedness, the spread was 0.375% and the interest rate was 2.3%. The commitment fee on the unused portion of the Facility was 0.125%. The amount outstanding under the Facility is secured, if requested by the banking group, by liens on domestic accounts receivable, inventories, and machinery and equipment, as well as the investments in certain subsidiaries of GTG. The net book value of assets subject to lien at December 31, 2001 was $325,767. GTG has $16,009 of borrowings through its Canadian subsidiary Genlyte Thomas Group Nova Scotia ULC. These borrowings will be repaid in installments in each of the next three years. Interest rates on these borrowings can be either the Canadian prime rate or the Canadian LIBOR rate plus a spread of 0.5%. As of December 31, 2001, the weighted average interest rate was 2.6%. These borrowings are backed by the letters of credit mentioned above. F - 15 GTG has $23,100 of variable rate demand Industrial Revenue Bonds that mature during 2009 to 2020. As of December 31, 2001, the weighted average interest rate on these bonds was 1.7%. These bonds are backed by the letters of credit mentioned above. The unsecured loan payable to Thomas accrued interest quarterly based on the 90 day LIBOR rate plus a spread as determined by the Facility. This loan, which would have matured in 2003, was prepaid in whole in November 2001. Interest expense totaled $4,192 in 2001, $5,146 in 2000, and $4,879 in 1999. Offsetting these amounts in the consolidated statements of income were interest income of $493 in 2001, $962 in 2000, and $246 in 1999. Cash paid for interest on debt was $4,158 in 2001, $3,596 in 2000, and $4,566 in 1999. The annual maturities of long-term debt are summarized as follows: Year ending December 31 ------------------------------------------------- 2002 $ 3,284 2003 4,062 2004 9,670 2005 157 2006 - Thereafter 23,100 --------- Total long-term debt $ 40,273 ========= (9) RETIREMENT PLANS The Company has defined benefit plans that cover certain of its full-time employees. The Company uses September 30 as the measurement date for the retirement plan disclosure. 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 for the U.S. and Canadian defined benefit plans, based on the funded status at September 30 of each year, follow: F - 16 U.S. Plans Canadian Plans 2001 2000 2001 2000 - ----------------------------------------------------------------------------------------------------------------------- CHANGE IN BENEFIT OBLIGATIONS Benefit obligations, beginning $ 78,626 $ 73,927 $ 4,658 $ 4,530 Service cost 1,782 1,348 159 169 Interest cost 5,893 5,412 377 359 Benefits paid (4,990) (5,179) (205) (364) Member contributions - - 142 153 Plan amendments 505 1,426 210 - Curtailment gain - (1,146) - - Actuarial loss 4,205 2,838 430 - Foreign currency exchange rate change - - (278) (189) ------------------------------------------------------------------- Benefit obligations, ending $ 86,021 $ 78,626 $ 5,493 $ 4,658 =================================================================== CHANGE IN PLAN ASSETS Plan assets at fair value, beginning $ 79,084 $ 73,377 $ 6,403 $ 5,496 Actual return (loss) on plan assets (6,734) 7,837 (699) 887 Employer contributions 3,729 3,049 299 534 Member contributions - - 142 153 Benefits paid (4,990) (5,179) (205) (364) Foreign currency exchange rate change - - (298) (303) ------------------------------------------------------------------- Plan assets at fair value, ending $ 71,089 $ 79,084 $ 5,642 $ 6,403 =================================================================== FUNDED STATUS OF THE PLANS Plan assets in excess of (less than) benefit obligations $ (14,932) $ 458 $ 150 $ 1,745 Unrecognized transition obligation (4) - (26) (30) Unrecognized actuarial (gain) loss 7,351 (10,371) 531 (1,139) Unrecognized prior service cost 2,923 2,759 284 102 Contributions subsequent to measurement date 222 862 53 72 ------------------------------------------------------------------- Net pension asset (liability) $ (4,440) $ (6,292) $ 992 $ 750 =================================================================== BALANCE SHEET ASSET (LIABILITY) Accrued pension (liability) $ (15,925) $ (12,728) $ - $ - Prepaid pension cost 2,019 4,242 992 750 Intangible asset 2,765 1,917 - - Accumulated other comprehensive income 6,701 277 - - ------------------------------------------------------------------- Net asset (liability) recognized $ (4,440) $ (6,292) $ 992 $ 750 =================================================================== WEIGHTED AVERAGE ASSUMPTIONS Discount rate 7.30% 7.75% 7.10% 7.75% Rate of compensation increase 4.00% 4.00% 4.00% 4.00% Expected return on plan assets 9.00% 9.00% 7.75% 7.75%
F - 17 U.S. Plans 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------- COMPONENTS OF NET PERIODIC BENEFIT COSTS Service cost $ 1,782 $ 1,348 $2,310 Interest cost 5,893 5,412 5,358 Expected return on plan assets (6,585) (5,898) (5,536) Amortization of transition amounts 10 102 181 Amortization of prior service cost 342 220 293 Recognized actuarial (gain) loss (197) (295) 60 Net gain due to curtailment and settlement - (580) - --------------------------------------------- Net pension expense of defined benefit plans 1,245 309 2,666 Defined contribution plans 3,185 2,665 1,574 Multi-employer plans for certain union employees 289 327 274 -------------------------------- ------------ Total benefit costs $ 4,719 $ 3,301 $4,514 ================================ ============
Canadian Plans 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------- COMPONENTS OF NET PERIODIC BENEFIT COSTS Service cost $ 159 $ 169 $ 252 Interest cost 377 359 339 Expected return on plan assets (484) (427) (368) Amortization of transition amounts (3) (3) (6) Amortization of prior service cost 13 7 5 Recognized actuarial (gain) loss (14) (10) (1) --------------------------------------------- Net pension expense of defined benefit plans 48 95 221 Defined contribution plans 284 196 152 --------------------------------------------- Total benefit costs $ 332 $ 291 $ 373 =============================================
A summary of the plans in which benefit obligations and accumulated benefit obligations exceed fair value of assets follows: 2001 2000 - -------------------------------------------------------------------------------- Benefit obligation $79,594 $13,230 Accumulated benefit obligation 76,677 13,230 Plan assets at fair value 63,687 9,929 Effective January 1, 2000 the Company froze the defined benefit plan of certain U.S. salaried employees. This resulted in a curtailment credit of $603, which was a reduction of net pension expense in 2000. These employees are eligible for Company matching on their 401(k) contributions as well as being participants in the GTG Retirement Savings and Investment defined contribution plan. F - 18 (10) 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 of each year, follow: 2001 2000 - -------------------------------------------------------------------------------- CHANGE IN BENEFIT OBLIGATIONS Benefit obligations, beginning $ 4,019 $ 4,151 Service cost 46 36 Interest cost 358 303 Benefits paid (403) (472) Actuarial loss 1,010 1 -------------------------------- Benefit obligations, ending $ 5,030 $ 4,019 ================================ FUNDED STATUS OF THE PLANS Plan assets less than benefit obligations $(5,030) $(4,019) Unrecognized actuarial loss 1,512 564 -------------------------------- Accrued liability $(3,518) $(3,455) ================================ Employer contributions $ 403 $ 472 Benefits paid $ (403) $ (472) 2001 2000 1999 - -------------------------------------------------------------------------------- COMPONENTS OF NET PERIODIC BENEFIT COSTS Service costs $ 46 $ 36 $ 39 Interest costs 358 303 294 Recognized actuarial loss 62 10 - ----------------------------------- Net expense of post-retirement plans $ 466 $ 349 $ 333 =================================== The assumed discount rate used in measuring the obligations was 7.30% as of September 30, 2001 and 7.75% as of September 30, 2000. The assumed health care cost trend rate for 2001 was 10%, declining to 5.5% 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, 2001 by approximately $360, and the 2001 post-retirement benefit expense by approximately $33. (11) ACCRUED EXPENSES Accrued expenses at December 31 consisted of the following: 2001 2000 - ------------------------------------------------------------------------------- Employee related costs and benefits $27,881 $30,038 Advertising and sales promotion 8,635 10,018 Income and other taxes payable 4,144 4,448 Other accrued expenses 24,746 26,473 ---------------------------- Total accrued expenses $65,406 $70,977 ============================ F - 19 (12) LEASE COMMITMENTS The Company rents office space, equipment, and computers under non-cancelable operating leases. Rental expenses for operating leases amounted to $9,128 in 2001, $7,764 in 2000, and $6,184 in 1999. Offsetting the rental expenses were sublease rentals of $303 in 2001, $139 in 2000, and $233 in 1999. Two divisions of the Company also rent manufacturing and computer equipment and software under agreements that are classified as capital leases. Future required minimum lease payments as of December 31, 2001 were as follows: Operating Capital Leases Leases ----------------------------------------------------------------------- 2002 $ 6,690 $ 400 2003 4,638 204 2004 3,092 149 2005 2,136 127 2006 1,496 - Thereafter 7,102 - ----------------------------- Total minimum lease payments $25,154 $ 880 ================ Less amount representing interest 99 ------------- Present value of minimum lease payments $ 781 ============= Total minimum lease payments on operating leases have not been reduced by minimum sublease rentals of $1,063 due in the future under non-cancelable subleases. In 2000, GTG entered into a $1.3 million bridge synthetic lease agreement to finance the land for a manufacturing facility in San Marcos, Texas. GTG is currently negotiating a new synthetic lease agreement for $20 million to finance construction of a 300,000 square foot facility. As of December 31, 2001, approximately $1.2 million had been advanced under the bridge agreement. However, construction is being delayed at the election of management, pending improvement in the economic outlook and forecast sales volume. In the event that the synthetic lease agreement is not completed and entered into, the bridge lease shall expire and GTG shall, at its option, either purchase the land and reimburse the lessor for its costs associated with the land's purchase, or just reimburse the lessor for its costs. A synthetic lease is accounted for as an operating lease. (13) 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. F - 20 (14) ACCUMULATED OTHER COMPREHENSIVE INCOME Accumulated other comprehensive income at December 31 consisted of the following: 2001 2000 - -------------------------------------------------------------------------------- Minimum pension liability $(6,701) $ (277) Foreign currency translation adjustments (2,375) 1,152 ----------------------------- Total accumulated other comprehensive income $(9,076) $ 875 ============================= (15) 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 (8) "Long-term Debt" and reimbursement for shared corporate expenses such as rent, office services, professional services, and shared personnel. In addition, while the distributions to Members discussed in note (3) "Formation of Genlyte Thomas Group LLC" are paid to Thomas entirely in cash, such distributions are not paid to Genlyte entirely in cash. Portions are still owed and have been recorded as related-party payables to Genlyte or Genlyte Canadian Holdings, LLC, a wholly-owned subsidiary of Genlyte. These payables bear interest at a rate of 2.0% at December 31, 2001. Related-party receivables and payables at December 31 consisted of the following: 2001 2000 ----------------------------------------------------------------------- Receivable from Genlyte $ - $ 1,204 ---------------------------- Payable to Genlyte $ 4,628 $ - Payable to Genlyte Canadian Holdings, LLC 15,040 6,823 Payable to Thomas 37 199 ---------------------------- Total related-party payables $ 19,705 $ 7,022 ============================ For the years ended December 31 the Company had the following related-party transactions: 2001 2000 1999 ----------------------------------------------------------------------- Payments to Thomas for: Interest under the loan agreement $1,012 $1,543 $1,281 Reimbursement of corporate expenses 387 515 496 Payments from Genlyte for: Reimbursement of corporate expenses 111 103 36 F - 21 (16) SEGMENT REPORTING The Company's reportable operating segments include the Commercial Segment, the Residential Segment, and the Industrial and Other Segment. Intersegment sales are eliminated in consolidation and therefore are not presented in the table below. Corporate assets and expenses are allocated to the segments. Information about the Company's segments as of and for the years ended December 31 follows: Industrial 2001 Commercial Residential and Other Total - ---------------------------------------------------------------------------------------------------------------------- Net sales $712,662 $134,269 $138,245 $ 985,176 Operating profit 69,405 13,219 11,958 94,582 Assets 454,569 89,605 74,947 619,121 Depreciation and amortization 20,564 3,692 3,916 28,172 Expenditures for plant & equipment 15,634 1,663 2,953 20,250 Industrial 2000 Commercial Residential and Other Total - ---------------------------------------------------------------------------------------------------------------------- Net sales $724,350 $137,838 $145,518 $ 1,007,706 Operating profit 69,114 11,083 14,006 94,203 Assets 437,678 89,419 87,295 614,392 Depreciation and amortization 18,197 3,739 3,728 25,664 Expenditures for plant & equipment 20,389 3,424 4,610 28,423 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 & equipment 14,399 3,023 3,092 20,514
F - 22 (17) GEOGRAPHICAL INFORMATION The Company has operations throughout North America. Foreign amounts represent primarily Canada and some Mexico. Information about the Company's operations by geographical area as of and for the years ended December 31 follows: 2001 U.S. Foreign Total - ----------------------------------------------------------------------------------------------------------------------- Net sales $836,754 $148,422 $ 985,176 Operating profit 77,740 16,842 94,582 Assets 485,276 133,845 619,121 Depreciation and amortization 22,019 6,153 28,172 Expenditures for plant & equipment 14,451 5,799 20,250 2000 U.S. Foreign Total - ------------------------------------------------------------------------------------------------------------------------ Net sales $870,209 $137,497 $1,007,706 Operating profit 78,011 16,192 94,203 Assets 482,812 131,580 614,392 Depreciation and amortization 19,749 5,915 25,664 Expenditures for plant & equipment 19,923 8,500 28,423 1999 U.S. 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 & equipment 16,506 4,008 20,514
F - 23 EXHIBIT INDEX Exhibit No. Exhibit Page - ---------- ------- ---- 13 Certain portions of the Company's 2001 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 43 21 Subsidiaries of the Registrant 87 23(a) Consent of Arthur Andersen LLP 88 23(b) Consent of Ernst & Young LLP 89 23(c) Consent of Arthur Andersen LLP 90 42 EX-13 3 t19339x13.txt THOMAS ANNUAL REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CRITICAL ACCOUNTING POLICIES AND ESTIMATES Thomas' discussion and analysis of its financial condition and results of operations are based upon Thomas' consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. When preparing these consolidated financial statements, the Company is required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company evaluates its estimates, including, but not limited to, those related to product warranties, bad debts, inventories, equity investments, income taxes, pensions and other post-retirement benefits, contingencies, and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. In response to the Securities and Exchange Commission's (SEC) Release No. 33-8040, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies", the Company identified the following critical accounting policies which affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. Based on the SEC's suggestions, included with the accounting policies are potential adverse results which could occur if different assumptions or conditions were to prevail. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of Thomas' customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Thomas provides for the estimated cost of product warranties. While the Company engages in extensive product quality programs and processes, should actual product failure rates differ from estimates, revisions to the estimated warranty liability would be required. Thomas writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Thomas holds a 32 percent minority interest in the Genlyte Thomas Group LLC (GTG) joint venture, which comprises Thomas' lighting segment and is accounted for using the equity method. If future adverse changes in market conditions or poor operating results of GTG occurred, it could result in losses or an inability to recover the carrying value of the Company's investment, thereby possibly requiring an impairment charge in the future. GTG's critical accounting policies are determined separately by The Genlyte Group Incorporated, which owns 68 percent of GTG and consolidates the GTG results. RESULTS OF OPERATIONS The Company's net income of $28.2 million in 2001, was the second highest level in the Company's history. The 2001 net income came in 6.4% below the 2000 record net income of $30.1 million, which included non-recurring, after-tax gains of $1.3 million related to the proceeds from a life insurance policy and sale of securities that were partially offset in 2000 by an after-tax charge of $.6 million related to environmental costs. The net impact of these items in 2000 was $.05 per share. Net income in 2000 was $3.9 million or 15.0% over the 1999 net income of $26.2 million. PUMP AND COMPRESSOR SEGMENT Net sales for the Pump and Compressor Segment in 2001 were $184.4 million, which represents a decrease of $4.4 million, or 2.4%, from the 2000 net sales of $188.8 million. The shortfall in sales came primarily from the North American operations, due to lower levels of demand and some cancellation of projects. The softness in North America came in the industrial, environmental and construction markets. Our medical market, which comprises approximately 35 percent of our revenues, showed modest growth. This was due to continued strength in our single largest application, the oxygen concentrator, which represents over 50 percent of the Company's sales in the medical equipment market. Sales for 2001 in our European operation were basically flat in U.S. dollars, but would have been $2.1 million higher, if measured in constant exchange rates. This increase in sales, at constant exchange rates, was due to strength in our medical and automotive markets in Europe. Sales in our Asia Pacific operations increased $1.1 million, or 11.7%, when measured in U.S. dollars. If measured at constant exchange rates, the Asia Pacific sales would have increased an additional $1.1 million in 2001. The increase in Asia Pacific was due primarily to strength in the medical, environmental, and industrial markets. The 2000 net sales for the Pump and Compressor Segment of $188.8 million were $11.0 million, or 6.2%, over 1999. The increase was due primarily to the growth in our Asia Pacific operation and to the October 1999 acquisition of Oberdorfer Pumps. Operating income in 2001 for the Pump and Compressor Segment decreased to $28.5 million, or 9.9% lower than the $31.6 million level in 2000. The 2001 decrease was due to several factors including pricing pressures, unfavorable manufacturing variances due to lower plant utilization, $1.0 million in unfavorable exchange rate effects when measured in constant exchange rates, and overall general softness in the economy. Additionally, SG&A expenses increased $.9 million in 2001 in the Pump and Compressor business primarily due to increasing our presence in Asia Pacific and by continuing to invest in engineering efforts, which management believes should benefit our company in the future. The 2000 operating income of $31.6 million increased 6.9% over the 1999 level of $29.6 million. The 2000 operating income was a record for the Pump and Compressor Segment, and the increase was primarily due to increased sales. LIGHTING SEGMENT As disclosed in the notes to the consolidated financial statements, the Lighting Segment's operating income includes our 32% interest in the GTG joint venture, our amortization of Thomas' excess investment in GTG, and expenses related to Thomas Industries stock options issued to GTG employees. The Lighting Segment's operating income was $24.8 million in 2001 compared to $24.6 million in 2000. This 0.8% increase was due in part to the full year favorable impact in 2001 of the acquisitions by GTG of Chloride Systems and Translite during the fourth quarter of 2000, which were partially offset by lower operating income due to lower sales levels in the stock and flow goods businesses, which experienced intense competitive pressures due to the softness in commercial construction. Operating income was $24.6 million in 2000 compared to $23.1 million in 1999. This increase was due in part to the acquisitions noted above, improved margins due to mix, cost reductions, and synergies realized due to the formation of the joint venture. At any time on or after January 31, 2002, Thomas has the right (a "put right"), but not the obligation, to require the Joint Venture (GTG) to purchase all, but not less than all, of Thomas' ownership interest in GTG at the applicable purchase price. The purchase price shall be equal to the "Fair Market Value" of GTG multiplied by Thomas' ownership percentage in GTG. The "Fair Market Value" means the value of the total interests in GTG computed as a going concern, including the control premium. Further explanation can be found in our Joint Proxy Statement dated July 23, 1998, which is on file with the SEC. The Company will continue to review alternatives with respect to the GTG put right. CORPORATE Interest expense for 2001 decreased $.4 million, or 9.1%, from 2000, due primarily to the lower levels of long-term debt, which were partially offset by higher levels of short-term borrowings during 2001. On January 31, 2001, the Company made a $7.7 million payment on our private placement long-term debt, which bears interest at 9.36%. Income tax provisions were $16.9 million, $18.2 million, and $16.1 million in 2001, 2000, and 1999, respectively. The effective income tax rate was 37.5% in 2001, compared to 37.7% in 2000 and 38.1% in 1999. 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, 2001, the Company employed approximately 1,075 people. LIQUIDITY AND SOURCES OF CAPITAL Cash and cash equivalents increased $15.6 million to $29.5 million at December 31, 2001, compared to $13.9 million and $16.5 million at December 31, 2000 and 1999, respectively. This increase was primarily due to the collection of a $22.3 million note from GTG in November 2001. Cash flows from operations were $21.9 million in 2001 compared to $28.0 million in 2000 and $26.7 million in 1999. The reduction in cash flows from operations in 2001 were primarily due to lower earnings, lower tax distributions from GTG, and to higher compensation incentive payments in 2001 for the 2000 results. 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 2001, 2000, and 1999, totaling $23.5 million, and treasury stock purchases in 2001, 2000, and 1999, totaling $17.3 million. Dividends paid in 2001 were $5.0 million compared with $4.7 million, in both 2000 and 1999. In February 2001, the Company increased its quarterly dividend per share from $.075 to $.085, effective with the April 1, 2001 dividend. The following summarizes the Company's contractual obligations at December 31, 2001, and the effect such obligations are expected to have on its liquidity and cash flow in future periods. Less than 1-3 After December 31 (In Thousands) Total 1 year years 3 years - ---------------------------------------------------------------------------------------------------------- Contractual Obligations: Long-term debt $ 32,726 $ 7,788 $ 15,586 $ 9,352 Non-cancelable operating lease obligations 7,656 2,017 2,089 3,550 Other long-term obligations 577 119 238 220 --------------------------------------------------- Total contractual obligations $ 40,959 $ 9,924 $ 17,913 $ 13,122 ===================================================
As of December 31, 2001, the Company had standby letters of credit totaling $4,518,000 with expiration dates during 2002. The Company anticipates that these letters of credit will be renewed at their expiration dates. The Company announced in December 1999 that it planned 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. During 2001, the Company purchased an additional 3,300 shares at a cost of $67,000. Through December 31, 2001, the Company has purchased, on a cumulative basis, 879,189 shares at a cost of $17.3 million, or an average cost of $19.72 per share. The Company plans to fund any purchase of Company stock through a combination of cash flows generated from operating activities and uncommitted borrowing arrangements. The Company's long-term debt bears interest at fixed rates, with the exception of the $1.25 million Industrial Revenue Bond that accrues interest at a variable rate. Short-term borrowings are priced at variable interest rates. The Company's results of operations and cash flows, therefore, would only be affected by interest rate changes to the extent of variable rate debt. At December 31, 2001, only the $1.25 million Industrial Revenue Bond was outstanding. A 100 basis point movement in the interest rate on the $1.25 million bond would result in an $12,500 annualized effect on interest expense and cash flows. The Company also has short-term investments of $28.8 million as of December 31, 2001 that bear interest at variable rates. Therefore, a 100 basis point movement in the interest rate would result in an approximate $288,000 annualized effect on interest income and cash flows. The fair value of the Company's long-term debt is estimated based on current interest rates offered to the Company for similar instruments. A 100 basis point movement in the interest rate would result in an approximate $490,000 annualized effect on the fair value of long-term debt. 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 currency exchange rates or changing economic conditions in the foreign markets in which the Company manufactures or distributes its products. Currency exposures for our Pump and Compressor Segment are concentrated in Germany but exist to a lesser extent in other parts of Europe and Asia. Our Lighting Segment currency exposure is primarily in Canada. Working capital increased from $30.6 million at December 31, 2000, to $46.0 million at December 31, 2001, primarily due to proceeds received from GTG's note payment. This was partially offset by long-term debt payments. Working capital decreased from $32.2 million at December 31, 1999, to $30.6 million at December 31, 2000, primarily due to the stock repurchase program. December 31 ------------------------------------------------ (Dollars in Thousands) 2001 2000 1999 - ------------------------------------------------------------------------------------------------- Working capital $ 45,978 $ 30,677 $ 32,244 Current ratio 2.52 1.94 2.06 Long-term debt, less current portion $ 24,938 $ 40,727 $ 40,513 Long-term debt to total capital 9.5% 15.8% 16.2%
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 $83.2 million are not restricted at December 31, 2001. Thomas is in compliance with all covenants or other requirements set forth in its borrowing agreements. In the event of non-compliance or if Thomas prepays the debt, then Thomas would incur a penalty. At December 31, 2001, the prepayment penalty would have been approximately $2.5 million on a pre-tax basis. As of December 31, 2001, the Company had no short-term borrowing arrangements. Thomas currently expects to fund expenditures for capital requirements as well as liquidity needs from a combination of available cash balances, internally generated funds, and, if necessary, short-term financing arrangements. The Company does not have any bank committed lines of credit and management believes, if short-term borrowings were needed to support the sales growth of the business, that competitive financing could be obtained given the current financial position of the Company. Cash in excess of operating requirements will continue to be invested in high grade, short-term securities. As disclosed in the footnotes to the consolidated financial statements, the Company does have a 32 percent interest in the GTG joint venture, which is accounted for using the equity method, and therefore, is an unconsolidated entity. At December 31, 2001 and 2000, except as described above, management was aware of no relationships with any other unconsolidated entities, financial partnerships, structured finance entities, or special purpose entities which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. NEW EUROPEAN CURRENCY Twelve European countries (the European Monetary Union) have adopted a common currency. The new currency (Euro) replaced the existing currencies of the participating countries. The transition from the various currencies to the Euro occurred over a three-year period and became effective in 2002. While management currently believes the Company has accommodated any required changes in its operations, there can be no assurance that its customers, suppliers, 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. At this time, we have had no significant problems related to the Euro conversion that has affected our Company. NEW ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" (SFAS 141) and SFAS No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). These statements established new accounting and reporting standards for business combinations and associated goodwill and intangible assets. SFAS 141, effective July 1, 2001, eliminates the pooling of interest method of accounting and amortization of goodwill for business combinations initiated after June 30, 2001. SFAS 142, effective January 1, 2002, requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually. The estimated pre-tax benefit to the Company as a result of not recording goodwill amortization in 2002 is $4,265,000. This is a preliminary estimate and includes $483,000 of amortization related to the pump and compressor segment and $3,782,000 related to the lighting segment. On an after-tax basis this would be $3,339,000 or $.21 per share. The Company has not completed its assessment of the additional effects of adopting SFAS 142, but at this time the Company does not anticipate a significant effect on its results of operations or financial position. The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS 144), dated August 2001. This statement supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," and the accounting and reporting provisions of Accounting Principles Board (APB) Opinion No. 30, "Reporting Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS 144 requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired, and it broadens the presentation of discontinued operations to include more disposal transactions. We will adopt the provisions of SFAS 144 as of January 1, 2002 and we are currently evaluating the impact SFAS 144 may have on our financial position and results of operations. 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: 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 Pump and Compressor 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 its customers' products. o The Pump and Compressor Segment has several key customers, none of which are 10% or more of our consolidated sales. However, the loss of any of these key customers could have a negative affect on the Company's results. o On an annual basis, the Company negotiates renewals for property, casualty, workers compensation, general liability, product liability, and health insurance coverages. Due to conditions within these insurance markets and other factors beyond the Company's control, future coverages and the amount of the related premiums could have a negative affect on the Company's results. o The Pump and Compressor Segment has the leading market share in the oxygen concentrator OEM market worldwide. The Company's market share could be reduced significantly due to a competitor, the vertical integration by our customers, or new technology replacing compressed air in oxygen concentrators. The loss of market share in the oxygen concentrator OEM market could have a significant affect on the Company's results. o GTG, which 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 in North America. Changes in interest rates, consumer preferences, office and plant occupancy rates, 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 currency exchange rates and fluctuations in those rates. The Company could also be affected by nationalizations; unstable governments, economies, or legal systems; terrorist attacks; 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 and expectations as a result of being positively or negatively affected by the factors as described above, as well as other unexpected, unanticipated, or unforeseen factors. COMMON STOCK MARKET PRICES AND DIVIDENDS The Company's common stock is traded on the New York Stock Exchange (ticker symbol TII). On January 25, 2002, there were 2,056 security holders of record. High and low stock prices and dividends for the last two years were: 2001 2000 - ---------------------------------------------------------------------------------------------------- Market Price Cash Market Price Cash -------------------------- Dividends --------------------- Dividends Quarter Ended High Low Declared High Low Declared - --------------------------------------------------------------------------------------------------- March 31 $ 27.30 $ 20.19 $ .085 $ 20.00 $ 17.50 $ .075 June 30 29.50 20.65 .085 20.63 17.69 .075 September 30 28.90 20.20 .085 20.88 17.88 .075 December 31 27.22 20.98 .085 23.25 18.56 .075
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31 ------------------------------------------------ (In thousands, except share data) 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------- Net sales $ 184,382 $ 188,824 $ 177,802 Cost of products sold 118,625 120,835 113,752 ------------------------------------------------ Gross profit 65,757 67,989 64,050 Selling, general and administrative expenses 43,411 44,070 41,914 Equity income from GTG 24,835 24,575 23,147 ------------------------------------------------ Operating income 47,181 48,494 45,283 Interest expense 3,630 3,995 4,601 Interest income and other 1,489 3,799 1,527 ------------------------------------------------ Income before income taxes 45,040 48,298 42,209 Income taxes 16,870 18,213 16,059 ------------------------------------------------ Net income $ 28,170 $ 30,085 $ 26,150 ================================================ Net income per share - Basic $ 1.86 $ 1.95 $ 1.66 Net income per share - Diluted $ 1.80 $ 1.91 $ 1.62 See accompanying notes.
CONSOLIDATED BALANCE SHEETS
December 31 ------------------------------- (In thousands) 2001 2000 - ---------------------------------------------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ 29,500 $ 13,941 Accounts receivable, net 21,026 22,255 Inventories 20,696 22,288 Deferred income taxes 2,497 2,713 Other current assets 2,442 2,251 ------------------------------- Total current assets 76,161 63,448 Property, plant and equipment, net 39,770 39,521 Investment in GTG 179,219 168,954 Note receivable from GTG - 22,287 Intangible assets, net 9,244 10,111 Other assets 2,320 1,791 ------------------------------- Total assets $ 306,714 $ 306,112 =============================== Liabilities and shareholders' equity Current liabilities: Accounts payable $ 6,861 $ 7,340 Accrued expenses and other current liabilities 11,738 13,530 Dividends payable 1,295 1,129 Income taxes payable 2,501 2,986 Current portion of long-term debt 7,788 7,786 ------------------------------- Total current liabilities 30,183 32,771 Deferred income taxes 5,349 7,776 Long-term debt, less current portion 24,938 40,727 Other long-term liabilities 8,531 7,436 ------------------------------- Total liabilities 69,001 88,710 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: 2001 - 17,855,511; 2000 - 17,670,342 17,856 17,670 Capital surplus 114,342 112,027 Deferred compensation 739 401 Treasury stock held for deferred compensation (739) (401) Retained earnings 158,161 135,153 Accumulated other comprehensive income (loss) (14,189) (9,058) Less cost of treasury shares: 2,622,339 shares in 2001; 2,619,039 shares in 2000 (38,457) (38,390) ------------------------------- Total shareholders' equity 237,713 217,402 ------------------------------- Total liabilities and shareholders' equity $ 306,714 $ 306,112 =============================== See accompanying notes.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31 ------------------------------------------------ (In thousands) 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------- Common stock Beginning of year $ 17,670 $ 17,567 $ 17,486 Stock options exercised and other 171 76 81 Shares issued to deferred share trust 14 20 - Other 1 7 - ------------------------------------------------ End of year 17,856 17,670 17,567 Capital surplus: Beginning of year 112,027 110,988 110,412 Stock options exercised 1,278 480 569 Tax benefit from options exercised and other 691 183 7 Shares issued to deferred share trust 346 376 - ------------------------------------------------ End of year 114,342 112,027 110,988 Deferred compensation: Beginning of year 401 - - Deferred compensation 338 401 - ------------------------------------------------ End of year 739 401 - Treasury stock held for deferred compensation: Beginning of year (401) - - Increase in treasury stock held for deferred compensation (338) (401) - ------------------------------------------------ End of year (739) (401) - Retained earnings: Beginning of year 135,153 109,689 88,277 Net income 28,170 30,085 26,150 Cash dividends declared (5,162) (4,621) (4,738) ------------------------------------------------ End of year 158,161 135,153 109,689 Accumulated other comprehensive income (loss): Beginning of year (9,058) (6,385) (4,351) Other comprehensive (loss)(1) (5,131) (2,673) (2,034) ------------------------------------------------ End of year (14,189) (9,058) (6,385) Treasury stock: Beginning of year (38,390) (22,377) (21,137) Treasury stock purchased (67) (16,013) (1,255) Treasury stock retired and other - - 15 ------------------------------------------------ End of year (38,457) (38,390) (22,377) ------------------------------------------------ Total shareholders' equity $ 237,713 $ 217,402 $ 209,482 ================================================
(1) A reconciliation of net income to total comprehensive income follows. Years ended December 31 ------------------------------------------------ (In thousands) 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------- Net income $ 28,170 $ 30,085 $ 26,150 Other comprehensive income (loss): Minimum pension liability (3,032) (89) 706 Related tax benefit (expense) 1,137 34 (268) Foreign currency translation (3,236) (2,618) (2,472) ------------------------------------------------ Total comprehensive income $ 23,039 $ 27,412 $ 24,116 ================================================ At December 31, 2001, accumulated other comprehensive income was a loss of $14,189,000 comprised of foreign currency translation losses of $12,239,000 and a minimum pension liability of $1,950,000. See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31 ------------------------------------------------ (In thousands) 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------- Operating activities Net income $ 28,170 $ 30,085 $ 26,150 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,364 7,907 7,671 Deferred income taxes (1,045) 1,010 503 Equity income from GTG (24,835) (24,575) (23,147) Distributions from GTG 11,592 13,797 12,013 Other items 495 216 801 Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable 255 (2,076) (1,849) Inventories 761 (3,467) 671 Accounts payable (383) (325) 1,917 Income taxes payable 136 1,546 (1,417) Accrued expenses and other liabilities (2,028) 1,890 510 Other 417 1,985 2,861 ------------------------------------------------ Net cash provided by operating activities 21,899 27,993 26,684 Investing activities Purchases of property, plant and equipment (8,548) (10,888) (7,953) Sales of property, plant and equipment 42 131 46 Proceeds from GTG note receivable 22,287 - - Purchase of company (net of cash acquired) - - (6,466) ------------------------------------------------ Net cash provided by (used in) investing activities 13,781 (10,757) (14,373) Financing activities Payments on notes payable to banks, net - - (138) Payments on long-term debt (17,787) (7,784) (7,782) Proceeds from long-term debt 2,000 8,000 - Treasury stock purchased (67) (16,013) (1,255) Dividends paid (4,997) (4,679) (4,747) Other 1,449 1,097 327 ------------------------------------------------ Net cash used in financing activities (19,402) (19,379) (13,595) Effect of exchange rate changes (719) (403) (434) ------------------------------------------------ Net increase (decrease) in cash and cash equivalents 15,559 (2,546) (1,718) Cash and cash equivalents at beginning of year 13,941 16,487 18,205 ------------------------------------------------ Cash and cash equivalents at end of year $ 29,500 $ 13,941 $ 16,487 ================================================ See accompanying notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS Thomas Industries Inc. and subsidiaries (The Company or Thomas) and affiliates operate in two business segments: the pump and compressor segment and the lighting segment. The Company designs, manufactures and sells pumps and compressors for use in global original equipment manufacturing applications as well as construction equipment, leakage detection systems and laboratory equipment. Manufacturing facilities and sales and distribution operations are located in North America and Europe, with additional sales and distribution operations located in Asia and Australia. The Company operates in the lighting segment through its 32% interest in the Genlyte Thomas Group LLC (GTG). GTG, which was formed August 30, 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. At December 31, 2001, Thomas' investment in GTG exceeded its underlying equity in net assets by $55,699,000. For each of the years ended December 31, 2001, 2000 and 1999, equity income was reduced by $2,116,000 for straight-line amortization of the excess investment (see Note 2, New Accounting Pronouncements). 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. Cash and Cash Equivalents Cash and cash equivalents consist of liquid investments with initial maturities of three months or less. Inventories Inventories are valued at the lower of cost or market. Inventories valued using the last-in, first-out (LIFO) method represented approximately 37% and 40% of consolidated inventories at December 31, 2001 and 2000, respectively. Inventories not on LIFO are valued using the first-in, first-out (FIFO) method. Inventories at December 31 consist of the following: (In thousands) 2001 2000 - ------------------------------------------------------------------------------ Finished goods $ 6,311 $ 7,046 Raw materials 10,882 11,032 Work in process 3,503 4,210 ------------------------------- Total inventories $ 20,696 $ 22,288 =============================== On a current cost basis, inventories would have been $4,472,000 and $4,466,000 higher than reported at December 31, 2001 and 2000, 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 ranging from 4 to 31.5 years. Property, plant and equipment consisted of the following: (In thousands) 2001 2000 - ------------------------------------------------------------------------------ Land $ 771 $ 792 Buildings 16,283 15,605 Leasehold improvements 3,245 3,220 Machinery and equipment 72,079 67,939 ------------------------------- 92,378 87,556 Accumulated depreciation and amortization (52,608) (48,035) ------------------------------- Total property, plant and equipment, net $ 39,770 $ 39,521 =============================== Depreciation expense relating to property, plant and equipment was approximately $7,881,000, $7,447,000 and $7,256,000 during 2001, 2000 and 1999, respectively. 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 $4,715,000 and $4,419,000 at December 31, 2001 and 2000, 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 (see Note 2, New Accounting Pronouncements). 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 (see Note 2, New Accounting Pronouncements). Research and Development Costs Research and development costs, which include costs of product improvements and design, are expensed as incurred ($10,369,000 in 2001, $9,721,000 in 2000 and $9,370,000 in 1999). 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. Shipping and Handling Costs In September 2000, the Emerging Issues Task Force (EITF) reached a consensus on Issue 00-10, "Accounting for Shipping and Handling Fees and Costs." The EITF requires that all shipping and handling amounts billed to a customer in a sale transaction be classified as revenue. The EITF also states that a company cannot net the shipping and handling costs against the shipping and handling revenues in the financial statements. In addition to shipping and handling costs included in cost of products sold, the Company also has shipping and handling costs included in selling, general and administrative expenses totaling $1,303,000, $1,309,000 and $1,535,000 for 2001, 2000 and 1999, respectively. Revenue Recognition Revenue from product sales is recognized upon title transfer, which generally occurs upon shipment. Credit is extended based on local business customs and practices, and collateral is generally not required. New Accounting Pronouncements In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" (SFAS 141) and SFAS No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). These statements establish new accounting and reporting standards for business combinations and associated goodwill and intangible assets. SFAS 141, effective July 1, 2001, eliminates the pooling of interest method of accounting and amortization of goodwill for business combinations initiated after June 30, 2001. SFAS 142, effective January 1, 2002, requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually. The estimated pre-tax benefit to the Company as a result of not recording goodwill amortization in 2002 is $4,265,000. This is a preliminary estimate and includes $483,000 of amortization related to the pump and compressor segment and $3,782,000 related to the lighting segment. On an after-tax basis the impact is $3,339,000 or $0.21 per share. The Company has not completed its assessment of the additional effects of adopting SFAS 142, but at this time the Company does not anticipate a significant effect on its results of operations or financial position. The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS 144), dated August 2001. This statement supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", and the accounting and reporting provisions for Accounting Principles Board (APB) Opinion No. 30, "Reporting Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions". SFAS 144 requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired, and it broadens the presentation of discontinued operations to include more disposal transactions. We will adopt the provisions of SFAS 144 as of January 1, 2002, and we are currently evaluating the impact SFAS 144 may have on our financial position and results of operations. Other Accounts receivable at December 31, 2001 and 2000 was net of an allowance for doubtful accounts of $1,103,000 and $752,000, respectively. 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) 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------- Numerator: Net income $ 28,170 $ 30,085 $ 26,150 ================================================ Denominator: Weighted average shares outstanding 15,168 15,405 15,796 Effect of dilutive securities: Director and employee stock options 441 331 344 Employee performance shares 12 41 42 ------------------------------------------------ Dilutive potential common shares 453 372 386 ------------------------------------------------ Denominator for diluted earnings per share-- adjusted weighted average shares and assumed conversions 15,621 15,777 16,182 ================================================
The deferred compensation obligation discussed in Note 7 is funded with shares of the Company's common stock, which are included in the calculation of basic and diluted earnings per share. 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. At any time on or after January 31, 2002, Thomas has the right (a "put right"), but not the obligation, to require the Joint Venture (GTG) to purchase all, but not less than all, of Thomas' ownership interest in GTG at the applicable purchase price. The purchase price shall be equal to the "Fair Market Value" of GTG multiplied by Thomas' ownership percentage in GTG. The "Fair Market Value" means the value of the total interests in GTG computed as a going concern, including the control premium. Summarized financial information reported by the affiliate and a summary of the amounts recorded in Thomas' consolidated financial statements follow. GTG is organized as 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 foreign income taxes and certain U.S. franchise taxes. At December 31, 2001, Thomas' retained earnings include $30,122,000 of after-tax undistributed earnings from GTG accounted for on the equity method. December 31 ------------------------------ GTG Balance Sheets 2001 2000 - ----------------------------------------------------------------------------- (In thousands) Cash and cash equivalents $ 59,691 $ 23,817 Accounts receivable, net 141,703 143,988 Inventories 132,932 151,257 Other current assets 8,718 7,564 ------------------------------ Total current assets 343,044 326,626 Property, plant and equipment, net 110,447 113,001 Intangible assets, net 135,417 140,312 Other assets 30,213 34,453 ------------------------------ Total assets $ 619,121 $ 614,392 ============================== Total current liabilities $ 170,545 $ 177,454 Other liabilities 25,584 22,980 Note payable to Thomas(3) - 22,287 Long-term debt, less current portion 36,989 44,365 Shareholders' equity 386,003 347,306 ------------------------------ Total liabilities and shareholders' equity $ 619,121 $ 614,392 ============================== Years Ended December 31 ------------------------------ GTG Income Statements 2001 2000 - ----------------------------------------------------------------------------- (In thousands) Net sales $ 985,176 $ 1,007,706 Cost of products sold 636,582 651,304 ------------------------------ Gross profit 348,594 356,402 SG&A expense 248,005 257,583 Amortization 6,007 4,616 ------------------------------ Operating profit 94,582 94,203 Interest expense, net 3,699 4,184 Minority interest (54) (140) ------------------------------ Income before taxes 90,937 90,159 Income taxes(1) 6,064 6,622 ------------------------------ Net income $ 84,873 $ 83,537 ============================== Amounts recorded by Thomas: Investment(2) $ 179,219 $ 168,954 Note receivable(3) - 22,287 Equity income 24,835(4) 24,575(5) Distributions received 11,592 13,797 (1) 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 foreign income taxes and certain U.S. franchise taxes. (2) Thomas' investment in GTG exceeded its underlying equity in net assets by $55,699,000 at December 31, 2001 and $57,815,000 at December 31, 2000. For each of the years ended December 31, 2001 and December 31, 2000, equity income was reduced by $2,116,000 representing straight-line amortization of the excess investment. (3) 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 accrued at a variable rate and was payable on a quarterly basis. The note was paid off on November 21, 2001. (4) Consists of $27,159,000 of equity income from GTG less $2,116,000 of amortization of Thomas' excess investment and $208,000 of expense for Thomas Industries stock options issued to GTG employees. (5) Consists of $26,732,000 of equity income from GTG less $2,116,000 of amortization of Thomas' excess investment and $41,000 of expense for Thomas Industries' stock options issued to GTG employees. 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. Receivables due from GTG as of December 31, 2001 and 2000 were $37,000 and $199,000, respectively. For the years ended December 31, 2001, 2000 and 1999, the Company recorded interest on the note receivable of $1,012,000, $1,543,000 and $1,281,000, respectively, and recorded $387,000, $515,000 and $496,000, respectively, related to the reimbursement of shared corporate expenses. 5. INCOME TAXES A summary of the provision for income taxes follows: (In thousands) 2001 2000 1999 - -------------------------------------------------------------------------------- Current: Federal $ 13,287 $ 12,638 $ 10,746 State 1,647 1,952 1,961 Foreign 2,981 2,613 2,849 ---------------------------------------- 17,915 17,203 15,556 Deferred: Federal and state (1,158) 659 663 Foreign 113 351 (160) ---------------------------------------- (1,045) 1,010 503 ---------------------------------------- Total provision for income taxes $ 16,870 $ 18,213 $ 16,059 ======================================== The U.S. and foreign components of income before income taxes follow: (In thousands) 2001 2000 1999 - -------------------------------------------------------------------------------- United States $ 38,090 $ 41,175 $ 35,392 Foreign 6,950 7,123 6,817 ---------------------------------------- Income before income taxes $ 45,040 $ 48,298 $ 42,209 ======================================== A reconciliation of the normal statutory federal income tax rate to the Company's effective income tax rate follows: 2001 2000 1999 - -------------------------------------------------------------------------------- U.S. statutory rate 35.0% 35.0% 35.0% State income taxes, net of federal tax benefits 2.4 2.7 3.0 Nondeductible amortization of intangible assets 1.2 1.2 1.3 Effect of foreign tax rates .5 1.2 1.2 GTG foreign equity earnings recorded net of tax (2.4) (2.0) (2.0) Other .8 (.4) (.4) ------------------------------ Effective income tax rate 37.5% 37.7% 38.1% ============================== 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) 2001 2000 - -------------------------------------------------------------------------------- Deferred tax assets: Employee benefit obligations $ 2,640 $ 1,496 Net operating loss carryforwards 354 601 Allowance for doubtful accounts receivable 270 231 Inventory reserves 772 753 Compensation accruals 626 830 Accrued liabilities and other 1,246 1,411 ------------------------- 5,908 5,322 Less valuation allowance (354) (601) ------------------------- Net deferred tax asset 5,554 4,721 Deferred tax liabilities: Accelerated depreciation 4,494 4,217 Undistributed foreign earnings 2,064 1,953 Investment in GTG 971 2,809 Other 877 805 ------------------------- 8,406 9,784 ------------------------- Net deferred tax liability $ 2,852 $ 5,063 ========================= Classification: Net current assets $ 2,496 $ 2,713 Net long-term liabilities 5,348 7,776 ------------------------- Net deferred tax liabilities $ 2,852 $ 5,063 ========================= 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 that the Company will realize the benefits of its deferred tax assets, net of the valuation allowance of $354,000. The valuation allowance is provided for income tax loss carryforward benefits for state income tax purposes (NOLs) which expire over a two-year period beginning in 2009. Management believes that based on a number of factors the available evidence creates sufficient uncertainty regarding the realizability of these NOLs. The Company's foreign subsidiaries have accumulated undistributed earnings ($20,649,000 at December 31, 2001). Under current tax regulations and with the availability of certain tax credits, it is management's belief, based on current estimates which could change, that the likelihood of the Company incurring significant taxes on any distribution of such accumulated earnings in excess of amounts provided for is remote. The Company made federal, state and foreign income tax payments of $18,828,000 in 2001, $12,496,000 in 2000 and $15,964,000 in 1999. 6. LONG-TERM DEBT INCLUDING THE CURRENT PORTION Long-term debt, including the current portion, consists principally of 9.36% senior notes ($30,890,000 and $38,620,000 at December 31, 2001 and 2000, respectively) with annual maturities through 2005. The remainder ($1,836,000 and $9,893,000 at December 31, 2001 and 2000, respectively) consists of other debt instruments at various interest rates and maturities. The fair value of the Company's long-term debt, including the current portion, at December 31, 2001 and 2000 was $35,969,000 and $50,815,000, respectively. Maturities of long-term debt for the next five years are as follows: 2002-$7,788,000; 2003-$7,792,000; 2004-$7,794,000, 2005-$7,766,000 and 2006-$69,000. 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 $83,228,000 were not restricted at December 31, 2001. Cash paid for interest was $3,916,000 in 2001, $4,316,000 in 2000 and $4,867,000 in 1999. 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, 2001, Thomas had repurchased 879,189 shares at a cost of approximately $17,334,000. 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. 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 as of 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, 2001, there were seven non-employee directors in office, and 189,000 options had been awarded under this Plan. The Company has adopted SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). In accordance with SFAS 123, the Company has elected to follow APB 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 for options granted to employees and non-employee directors. 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 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: 2001 2000 1999 - ------------------------------------------------------------------------------ Risk-free interest rate 4.7% 5.1% 6.6% Expected life, in years 6.5 6.5 6.5 Expected volatility 0.313 0.283 0.284 Expected dividend yield 1.5% 1.5% 1.6% 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) 2001 2000 1999 - -------------------------------------------------------------------------------- Net income As reported $ 28,170 $ 30,085 $ 26,150 Pro forma 27,373 29,143 25,269 Net income per share-- As reported 1.86 1.95 1.66 Basic Pro forma 1.80 1.89 1.60 Net income per share-- As reported 1.80 1.91 1.62 Diluted Pro forma 1.75 1.84 1.56 A summary of stock option activity for all plans follows: 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Options Price Options Price Options Price ------------------------------------------------------------------------------- Beginning of year 1,580,670 $ 16.07 1,498,696 $ 15.12 1,497,583 $ 14.49 Granted 225,350 25.40 185,700 20.68 207,450 18.30 Exercised (212,246) 12.03 (85,295) 8.74 (106,442) 10.88 Forfeited or expired (66,360) 19.53 (18,431) 19.16 (99,895) 16.85 ------------------------------------------------------------------------------- End of year 1,527,414 $ 17.86 1,580,670 $ 16.07 1,498,696 $ 15.12 =============================================================================== Exercisable at end of year 903,663 $ 15.34 921,575 $ 13.87 778,439 $ 12.26
The weighted average fair value of options granted was $6.42 in 2001, $6.02 in 2000 and $5.90 in 1999 using a Black-Scholes option pricing model. Options outstanding at December 31, 2001 had option prices ranging from $6.67 to $25.87 and expire at various dates between December 10, 2002 and December 10, 2011 (with a weighted-average remaining contractual life of 6.4 years). There are 638,010 shares reserved for future grant, of which 172,881 shares are reserved for the Non-Employee Director Stock Option Plan. Included in the summary of stock option activity above, are options granted to GTG employees, which in accordance with SFAS 123, the Company has recorded compensation expense based on using a Black-Scholes option pricing model. This expense was $208,000 and $41,000 for 2001 and 2000, respectively, and is netted with the Company's equity income from GTG (see Note 4, Equity Investments). Since an expense is recorded related to these GTG options, there is no pro forma adjustment necessary. In addition to the options listed above, 11,000 performance share awards were granted in December 2001,10,600 performance share awards were granted in December 2000, and 11,800 performance share awards were granted in December 1999. 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 1,000 shares were issued for 2001 from awards granted in December 1998,11,827 shares were earned in 2000 from awards granted in December 1997, and 13,841 shares were earned in 1999 from awards granted in 1996. Deferred Share Trust Employees who earn performance share awards as discussed above may elect to defer receipt of such shares until termination of employment. Nonemployee Directors are permitted to receive part or all of their director fees in the form of common stock of the Company and to defer receipt of such shares until retirement or other termination of service. In April 2000, the Company established a deferred share trust (the "Trust") to maintain the shares deferred for these obligations. The Trust qualifies as a rabbi trust for income tax purposes as the assets of the Trust are subject to the claims of general creditors of the Company. Dividends payable on the shares held by the Trust are reinvested in additional shares of common stock of the Company on behalf of the participants. Since there is no provision for diversification of the Trust's assets and settlement can only be made with a fixed number of shares of the Company's common stock, the deferred compensation obligation is classified as a component of shareholders' equity and the common stock held by the Trust is classified as treasury stock. Subsequent changes in the fair value of the common stock are not reflected in earnings or shareholders' equity of the Company. 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 generally 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. Other Postretirement Pension Benefits Benefits --------------------------------------------------- (In thousands) 2001 2000 2001 2000 - ---------------------------------------------------------------------------------------------------------- Change in benefit obligations Benefit obligations at beginning of year $ 6,710 $ 5,982 $ 692 $ 677 Service cost 273 166 46 24 Interest cost 486 467 71 48 Plan amendments - 65 - - Benefits paid (642) (529) (42) (15) Actuarial (gain) loss 134 559 294 (42) --------------------------------------------------- Benefit obligations at end of year $ 6,961 $ 6,710 $ 1,061 $ 692 =================================================== CHANGE IN PLAN ASSETS Value of plan assets at beginning of year $ 7,079 $ 7,339 $ - $ - Actual return on plan assets (353) 322 - - Employer contributions 250 150 42 15 Benefits paid (642) (529) (42) (15) Reversion of plan assets - (203) - - ---------------------------------------------------- Value of plan assets at end of year $ 6,334 $ 7,079 $ - $ - ====================================================
The defined benefit plans' assets at December 31, 2001 consisted primarily of listed stocks and bonds, including 14,430 shares of Company common stock having a market value of $360,000 at that date. The reversion of plan assets of $203,000 in 2000 relates to the termination in 1999 of Thomas' Pension Floor Plan. Other Postretirement Pension Benefits Benefits --------------------------------------------------- (In thousands) 2001 2000 2001 2000 - ---------------------------------------------------------------------------------------------------------- Funded status of the plans Assets less accumulated obligations $ (627) $ 369 $ (1,061) $ (692) Unrecognized actuarial loss (gain) 1,002 (39) 161 (131) Unrecognized transition gain 9 11 - - Unrecognized prior service cost 523 530 205 224 --------------------------------------------------- Net asset (liability) recognized at end of year $ 907 $ 871 $ (695) $ (599) ===================================================
The accumulated benefit obligation and plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $6,598,000 and $5,961,000 as of December 31, 2001. Plan assets exceeded accumulated benefit obligations for all plans as of December 31, 2000. Other Postretirement Pension Benefits Benefits (In thousands) 2001 2000 2001 2000 - ---------------------------------------------------------------------------------------------------------- Balance sheet assets (liabilities) Prepaid benefit costs $ 38 $ 871 $ - $ - Accrued benefit liabilities (636) - (695) (599) Intangible assets 531 - - - Accumulated other comprehensive income 974 55 - - --------------------------------------------------- Net asset (liability) recognized at end of year $ 907 $ 926 $ (695) $ (599) =================================================== Assumptions as of December 31 Discount rate 7.25% 7.50% 7.25% 7.50% Expected return on plan assets 9.00% 9.00% - - Initial health care cost trend rate - - 10.00% 8.00% Ultimate health care cost trend rate - - 5.50% 4.50% Year ultimate rate is achieved - - 2008 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) 2001 2000 1999 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------- Service cost $ 273 $ 166 $ 208 $ 46 $ 24 $ 22 Interest cost 486 467 685 71 48 47 Expected return on plan assets (611) (618) (981) - - - Curtailment loss recognized - - 462 - - - Other amortization and deferral 66 50 44 19 19 19 ---------------------------------------------------------------------------- $ 214 $ 65 $ 418 $ 136 $ 91 $ 88 ============================================================================
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 $1,106,000 in 2001, $1,183,000 in 2000 and $1,143,000 in 1999. 9. LEASES, COMMITMENTS AND CONTINGENCIES Rental expense for building, machinery and equipment was $2,702,000 in 2001, $2,562,000 in 2000 and $2,514,000 in 1999. Future minimum rentals under non-cancelable operating leases are as follows: 2002-$2,017,000; 2003-$1,270,000; 2004-$819,000; 2005-$712,000; 2006-$638,000 and thereafter-$2,200,000. The Company had letters of credit outstanding in the amount of $4,518,000 at December 31, 2001. 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. The Management 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. 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) 2001 2000 - -------------------------------------------------------------------------------- Accrued wages, taxes and withholdings $ 3,701 $ 5,138 Accrued insurance 1,543 1,223 Accrued interest 1,347 1,633 Accrued warranty expense 1,018 1,080 Other current liabilities 4,129 4,456 ----------------------- Total accrued expenses and other current liabilities $ 11,738 $ 13,530 ======================= 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) 2001 2000 2001 2000 2001 2000 - ---------------------------------------------------------------------------------------------------------- 1st Quarter $ 49,696 $ 50,811 $ 18,301 $ 17,799 $ 7,280 $ 7,158 2nd Quarter 46,915 48,436 16,753 17,829 7,328 8,412(1) 3rd Quarter 44,008 45,048 15,395 16,545 6,605 7,571 4th Quarter 43,763 44,529 15,308 15,816 6,957 6,944(2) ------------------------------------------------------------------------------- $ 184,382 $ 188,824 $ 65,757 $ 67,989 $ 28,170 $ 30,085 ===============================================================================
Basic Net Income Diluted Net Income Per Share Per Share ----------------------------------------------------- 2001 2000 2001 2000 - -------------------------------------------------------------------------------- 1st Quarter $ 0.48 $ 0.46 $ 0.47 $ 0.45 2nd Quarter 0.48 0.54(1) 0.47 0.53(1) 3rd Quarter 0.43 0.49 0.42 0.48 4th Quarter 0.46 0.46(2) 0.45 0.45(2) ----------------------------------------------------- $ 1.86 $ 1.95 $ 1.80 $ 1.91 ===================================================== (1) The second quarter of 2000 included a non-taxable gain of $793,000 or $.05 per share from the proceeds of a life insurance policy. (2) The fourth quarter of 2000 included pre-tax gains of $839,000 from the sale of securities. On an after-tax basis, the gain totaled $522,000, or $.04 per share. The fourth quarter of 2000 also included a pre-tax charge of $1,000,000 related to environmental costs. On an after-tax basis, this charge was $623,000, or $.04 per share. 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 (see Note 2, New Accounting Pronouncements). 13. INDUSTRY SEGMENT INFORMATION Industry segment information follows: (In thousands) 2001 2000 1999 Revenues Sales and operating revenues- Pump and Compressor $ 184,382 $ 188,824 $ 177,802 ================================================ Operating income (loss) Pump and Compressor $ 28,488 $ 31,607 $ 29,556 Lighting (GTG) 24,835 24,575 23,147 Corporate (6,142) (7,688) (7,420) ------------------------------------------------ $ 47,181 $ 48,494 $ 45,283 ================================================ Assets Pump and Compressor $ 107,386 $ 107,577 $ 95,416 Lighting (GTG) 179,219 168,954 158,865 Corporate 20,109 29,581 38,117 ------------------------------------------------ $ 306,714 $ 306,112 $ 292,398 ================================================ Investment in equity affiliates Lighting (GTG) $ 179,219 $ 168,954 $ 158,865 ================================================ Depreciation and amortization Pump and Compressor $ 8,156 $ 7,682 $ 7,452 Corporate 208 225 219 ------------------------------------------------ $ 8,364 $ 7,907 $ 7,671 ================================================ Additions to property, plant and equipment Pump and Compressor $ 8,514 $ 10,849 $ 7,555 Corporate 34 39 398 ------------------------------------------------ $ 8,548 $ 10,888 $ 7,953 ================================================
Intersegment and interlocation sales are not significant and have been eliminated from the above tabulation. Operating income by segment is gross profit less operating expenses, excluding interest, general corporate expenses, other income and income taxes. Information by geographic area follows: (In thousands) 2001 2000 1999 Revenues(1) Total net sales including intercompany sales North America $ 133,997 $ 139,775 $ 128,806 Europe 55,715 55,263 55,920 Asia Pacific 10,385 9,300 3,810 ------------------------------------------------ $ 200,097 $ 204,338 $ 188,536 ================================================ Intercompany sales North America $ (8,748) $ (9,115) $ (4,981) Europe (6,967) (6,399) (5,753) ------------------------------------------------ $ (15,715) $ (15,514) $ (10,734) ================================================ Net sales to unaffiliated customers North America $ 125,249 $ 130,660 $ 123,825 Europe 48,748 48,864 50,167 Asia Pacific 10,385 9,300 3,810 ------------------------------------------------ $ 184,382 $ 188,824 $ 177,802 ================================================ Property, plant and equipment North America $ 32,914 $ 32,189 $ 29,328 Europe 6,601 6,951 6,746 Asia Pacific 255 381 78 ------------------------------------------------ $ 39,770 $ 39,521 $ 36,152 ================================================ (1) Revenues are attributed to geographic areas based on the location of the selling entity.
Report of Independent Auditors Board of Directors and Shareholders of Thomas Industries Inc.: We have audited the accompanying consolidated balance sheet of Thomas Industries Inc. (a Delaware corporation) and subsidiaries as of December 31, 2001, and the related consolidated statements of income, shareholders' equity and cash flows for the year then ended. 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 audit. The financial statements of Thomas Industries Inc. as of December 31, 2000 and for the years ended December 31, 2000 and 1999, were audited by other auditors whose report dated February 7, 2001, expressed an unqualified opinion on those statements. We conducted our audit 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 audit provides 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 Thomas Industries Inc. and subsidiaries as of December 31, 2001, and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. /s/ Arthur Andersen LLP Louisville, Kentucky January 25, 2002 FIVE YEAR SUMMARY OF OPERATIONS AND STATISTICS
Years ended December 31 ------------------------------------------------------------------- (Dollars in thousands, except per share) 2001(A) 2000(A) 1999(A) 1998(A) 1997 - ----------------------------------------------------------------------------------------------------------------------- Earnings Statistics Net sales(B) $ 184,382 $ 188,824 $ 177,802 $ 178,836 $ 547,702 Cost of products sold(B) 118,625 120,835 113,752 113,934 378,746 Selling, general, and administrative expenses 43,411 44,070 41,914 40,805 127,969 Equity income from lighting 24,835 24,575 23,147 20,323 - Interest expense 3,630 3,995 4,601 6,199 6,480 Income before income taxes 45,040 48,298(D) 42,209 39,406 35,644 As a percentage of net sales 24.4% 25.6% 23.7% 22.0% 6.5% Income taxes 16,870 18,213 16,059 14,896 13,174 Effective tax rate 37.5% 37.7% 38.1% 37.8% 37.0% Net income 28,170 30,085(E) 26,150 24,510 22,470 ------------------------------------------------------------------- Financial Position Working capital $ 45,978 $ 30,677 $ 32,244 $ 31,564 $ 92,258 Current ratio 2.5 to 1 1.9 to 1 2.1 to 1 2.0 to 1 2.1 to 1 Property, plant and equipment - net 39,770 39,521 36,151 35,215 80,197 Total assets 306,714 306,112 292,398 281,179 324,098 Return on ending assets 9.2% 9.8% 8.9% 8.7% 6.9% Long-term debt, less current portion 24,938 40,727 40,513 48,298 55,006 Long-term debt to capital 9.5% 15.8% 16.2% 20.2% 24.1% Shareholders' equity 237,713 217,402 209,482 190,687 173,405 Return on beginning shareholders' equity 13.0% 14.4% 13.7% 14.1% 14.2% ------------------------------------------------------------------- Data Per Common Share(C) Net income $ 1.80 $ 1.91(E) $ 1.62 $ 1.50 $ 1.38 Cash dividends declared 0.34 0.30 0.30 0.30 0.28 Shareholders' equity 15.16 14.10 12.97 11.73 10.59 Price range 29.50 23.25 22.31 26.63 22.33 to to to to to 20.19 17.50 16.13 17.06 13.67 Closing price 25.00 23.25 20.44 19.625 19.75 Price / earnings ratio 13.9 12.2 12.6 13.1 14.3 ------------------------------------------------------------------- Other Data Cash dividends declared $ 5,162 $ 4,621 $ 4,738 $ 4,766 $ 4,357 Expenditures for property, plant and equipment 8,548 10,888 7,953 7,687 17,696 Depreciation and amortization 8,364 7,907 7,671 7,619 16,049 Average number of employees 1,110 1,085 1,030 1,050 3,300 Average sales per employee 166.1 174.0 172.6 170.3 166.0 Number of shareholders of record 2,064 2,193 2,248 1,950 2,057 Average number common shares outstanding(C) 15,621,000 15,777,492 16,181,507 16,382,928 16,271,678 ------------------------------------------------------------------- Segment Information Net Sales(B) Pumps and Compressors $ 188,824 $ 188,824 $ 177,802 $ 178,836 $ 173,637 Lighting - - - - 374,065 ------------------------------------------------------------------- Total Net Sales $ 188,824 $ 188,824 $ 177,802 $ 178,836 $ 547,702 =================================================================== Operating Income Pumps and Compressors $ 28,488 $ 31,607 $ 29,556 $ 30,743 $ 30,879 Lighting 24,835 24,575 23,147 20,323 22,423 Corporate expenses (6,142) (7,688) (7,420) (6,646) (12,315) ------------------------------------------------------------------- Total Operating Income $ 47,181 $ 48,494 $ 45,283 $ 44,420 $ 40,987 =================================================================== 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 1998 through 2001 is not comparable to 1997. (B) Freight expense related to shipments to customers, which previously has been netted in net sales, has been reclassed from net sales to cost of products sold for 1998, 1999, 2000, and 2001. (C) Adjusted for 1997 stock splits. (D) Includes $1,632,000 of pre-tax gains related to insurance proceeds and sale of securities; also includes a $1,000,000 pre-tax charge related to environmental costs. (E) Includes $1,315,000, or $.09 per share, of after-tax gains related to insurance proceeds and sale of securities; also includes a $623,000, or $.04 per share, after-tax charge related to environmental costs.
EX-21 4 t19339x21.txt SUBSIDIARIES OF THE REGISTRANT Exhibit 21. ---------- SUBSIDIARIES OF THE REGISTRANT Place of Percentage Place of of Voting Name of Company Incorporation 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 Industries Schweiz GmbH Switzerland 100% Blue Grass Holdings Inc. Nevada 100% T.I. Industries Corporation Delaware 100% TI Pneumotive, Inc. Delaware 100% Thomas Canadian Holdings 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 Australia Pty. Ltd. Australia 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% 87 EX-23.A 5 t19339x23a.txt THOMAS AA CONSENT Exhibit No. 23(a) 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) of Thomas Industries Inc. of our report dated January 18, 2002, 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, 2001. /s/ Arthur Andersen LLP Louisville, Kentucky March 14, 2002 EX-23.B 6 t19339x23b.txt THOMAS E&Y CONSENT Exhibit No. 23(b) Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-54689, No. 33-59099, No. 333-34175, No. 333-92757, No. 333-30306 and No. 333-83707) of Thomas Industries Inc. of our report dated February 7, 2001, with respect to the consolidated financial statements and schedule of Thomas Industries Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 2001. /s/ Ernst & Young LLP Louisville, Kentucky March 14, 2002 EX-23.C 7 t19339x23c.txt GTG AA CONSENT Exhibit No. 23(c) 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) of Thomas Industries Inc. of our report dated January 18, 2002, 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, 2001. /s/ Arthur Andersen LLP Louisville, Kentucky March 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----