10-Q 1 0001.txt TRANS-LUX CORP FORM 10-Q PERIOD ENDING 09/30/00 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 ------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____________to____________ Commission file number 1-2257 ------ TRANS-LUX CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 13-1394750 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 110 Richards Avenue, Norwalk, CT 06856-5090 ---------------------------------------- ---------- (Address of principal executive offices) (Zip code) (203) 853-4321 ---------------------------------------------------- (Registrant's telephone number, including area code) -------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Date Class Shares Outstanding -------- ------------------------------------ ------------------ 11/13/00 Common Stock - $1.00 Par Value 964,905 11/13/00 Class B Stock - $1.00 Par Value 295,843 (Immediately convertible into a like number of shares of Common Stock.) TRANS-LUX CORPORATION AND SUBSIDIARIES Index Part I - Financial Information Page No. -------- Consolidated Balance Sheets - September 30, 2000 (unaudited) and December 31, 1999 1 Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2000 and 1999 (unaudited) 2 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2000 and 1999 (unaudited) 3 Notes to Consolidated Financial Statements (unaudited) 4 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11 Part I - Financial Information ------------------------------ TRANS-LUX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30 December 31 In thousands, except share data 2000 1999 ---------------------------------------------------------------------------------------------------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 3,190 $ 3,651 Available-for-sale securities 1,250 3,666 Receivables 9,122 9,064 Unbilled receivables 1,456 114 Inventories 6,605 6,146 Prepaids and other 671 776 -------- -------- Total current assets 22,294 23,417 -------- -------- Equipment on rental 80,851 75,200 Less accumulated depreciation 36,300 31,487 -------- -------- 44,551 43,713 -------- -------- Property, plant and equipment 50,583 44,411 Less accumulated depreciation and amortization 10,453 8,832 -------- -------- 40,130 35,579 Other assets 6,075 6,449 Construction funds 291 3,290 -------- -------- $113,341 $112,448 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $2,503 $4,688 Accrued liabilities 5,485 5,093 Current portion of long-term debt 2,698 2,381 -------- -------- Total current liabilities 10,686 12,162 -------- -------- Long-term debt: 7 1/2% convertible subordinated notes due 2006 30,397 30,490 9 1/2% subordinated debentures due 2012 1,057 1,057 Notes payable 37,747 34,405 -------- -------- 69,201 65,952 Deferred revenue, deposits and other 3,950 3,715 Deferred income taxes 4,136 4,606 -------- -------- Commitments and contingencies Stockholders' equity: Capital stock Common - $1.00 par value Authorized - 5,500,000 shares Issued - 2,444,562 shares in 2000 and 2,444,400 in 1999 2,444 2,444 Class B - $1.00 par value Authorized - 1,000,000 shares Issued - 295,843 shares in 2000 and 296,005 in 1999 296 296 Additional paid-in-capital 13,901 13,901 Retained earnings 20,683 21,434 Accumulated other comprehensive loss (119) (225) -------- -------- 37,205 37,850 Less treasury stock - at cost 1,479,688 shares in 2000 and 1,479,672 in 1999 (excludes additional 295,843 shares held in 2000 and 296,005 in 1999 for conversion of Class B stock) 11,837 11,837 -------- -------- Total stockholders' equity 25,368 26,013 -------- -------- $113,341 $112,448 ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
1 TRANS-LUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------------- ----------------------- In thousands, except per share data 2000 1999 2000 1999 ------------------------------------------------------------------------------------------------------------------- Revenues: Equipment rentals and maintenance $ 6,052 $ 6,065 $18,073 $17,676 Equipment sales 9,689 9,258 23,741 23,599 Theatre receipts and other 3,152 2,246 8,343 5,782 ------- ------- ------- ------- Total revenues 18,893 17,569 50,157 47,057 ------- ------- ------- ------- Operating expenses: Cost of equipment rentals and maintenance 3,502 3,405 10,119 9,859 Cost of equipment sales 6,122 6,199 15,976 15,355 Cost of theatre receipts and other 2,656 1,735 7,006 4,609 ------- ------- ------- ------- Total operating expenses 12,280 11,339 33,101 29,823 ------- ------- ------- ------- Gross profit from operations 6,613 6,230 17,056 17,234 General and administrative expenses 5,065 4,689 14,292 13,766 ------- -------- ------- ------- 1,548 1,541 2,764 3,468 Interest income 83 112 315 364 Interest expense (1,586) (1,040) (4,350) (3,007) Other income (expense) (28) - (27) 145 Income from joint venture 65 81 170 152 ------- ------- ------- ------- Income (loss) before income taxes 82 694 (1,128) 1,122 Provision (benefit) for income taxes 38 313 (507) 505 ------- ------- ------- ------- Net income (loss) $ 44 $ 381 ($621) $ 617 ======= ======= ======= ======= Earnings (loss) per share: Basic $ 0.04 $ 0.30 ($0.49) $ 0.48 Diluted $ 0.04 $ 0.21 ($0.49) $ 0.48 Average common shares outstanding: Basic 1,261 1,292 1,261 1,292 Diluted 1,261 3,479 1,261 3,518 Cash dividends per share: Common stock $ 0.035 $ 0.035 $ 0.105 $ 0.105 Class B stock $0.0315 $0.0315 $0.0945 $0.0945 The accompanying notes are an integral part of these consolidated financial statements.
2 TRANS-LUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
NINE MONTHS ENDED SEPTEMBER 30 ------------------------- In thousands 2000 1999 ---------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) ($621) $ 617 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 7,036 6,441 Net income of joint venture (170) (152) Deferred income taxes (507) (69) Loss on sale of securities 41 -- Gain on repurchase of Company's 7 1/2% convertible subordinated notes (15) (148) Changes in operating assets and liabilities: Receivables (1,400) (2,392) Inventories (459) 103 Prepaids and other assets 154 (554) Accounts payable and accruals (1,812) 1,726 Deferred revenue, deposits and other 135 (757) ------ ------- Net cash provided by operating activities 2,382 4,815 ------ ------- CASH FLOWS FROM INVESTING ACTIVITIES Equipment manufactured for rental (5,651) (5,013) Purchases of property, plant and equipment (7,623) (7,016) Usage of (increase in) construction funds 2,999 (4,694) Payments for acquisitions (net) -- (1,163) Proceeds from joint venture 72 71 Proceeds from sale of securities 2,458 1,056 Proceeds from the sale of fixed assets 1,451 -- ------ ------- Net cash used in investing activities (6,294) (16,759) ------ ------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt 5,249 14,696 Repayment of long-term debt (1,590) (865) Repurchase of Company's 7 1/2% convertible subordinated notes (78) (887) Purchase of treasury stock -- (7) Cash dividends (130) (132) ------ ------- Net cash provided by financing activities 3,451 12,805 ------ ------- Net increase (decrease) in cash and cash equivalents (461) 861 Cash and cash equivalents at beginning of year 3,651 1,298 ------ ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,190 $ 2,159 ====== ======= --------------------------------------------------------------------------------------------------------- Interest paid $3,559 $ 2,486 Interest received 403 412 Income taxes paid 13 782 --------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements.
3 TRANS-LUX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2000 (unaudited) Note 1 - Basis of Presentation Financial information included herein is unaudited, however, such information reflects all adjustments which are, in the opinion of management, necessary for the fair presentation of the consolidated financial statements for the interim periods. The results for the interim periods are not necessarily indicative of the results to be expected for the full year. It is suggested that the September 30, 2000 consolidated financial statements be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report and Form 10-K for the year ended December 31, 1999. Certain reclassifications of prior years' amounts have been made to conform to the current year's presentation. The Company will adopt the provisions of Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133) effective January 1, 2001. The standard requires companies to recognize all derivatives as either assets or liabilities and measure those instruments at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The Company does not expect the adoption of SFAS 133 to have a significant impact on its consolidated financial statements. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in the Financial Statements" (SAB 101). The bulletin addresses the staff's views in applying accounting principles generally accepted in the United States to revenue recognition in financial statements, and must be implemented no later than the fourth quarter of 2000. The Company does not expect SAB 101 to have a significant impact on its consolidated financial statements. Note 2 - Inventories Inventories consist of the following:
September 30 December 31 In thousands 2000 1999 -------------------------------------------------------------------------------- Raw materials and spare parts $4,395 $3,532 Work-in-progress 1,156 1,459 Finished goods 1,054 1,155 ------ ------ $6,605 $6,146 ====== ======
4 Note 3 - Long-Term Debt During the nine months ended September 30, 2000, long-term debt increased $3.2 million, of which $3.9 million represents additional long-term theatre construction mortgages at interest rates ranging from 7.5% to 9.5%, $1.3 million represents borrowings against the revolving credit facility and $1.6 million represents repayment of long-term debt. The Company has a bank Credit Agreement which provides for a $15.0 million revolving credit facility which is available until June 2002. At September 30, 2000, $10.1 million was outstanding leaving $4.9 million of additional borrowing capacity available under such facility. The Credit Agreement contains certain financial covenants, including a defined debt service coverage ratio which was reset as of September 30, 2000 to 1.40 to 1.0. At September 30, 2000 the Company was in compliance with such financial covenants. Note 4 - Reporting Comprehensive Income (Loss) The components of comprehensive income (loss) for the Company are foreign currency translation adjustments relating to the Company's foreign subsidiaries and unrealized holding gains or losses on the Company's available-for-sale securities. Comprehensive income is $83,000 and $341,000 for the three months ended September 30, 2000 and 1999, respectively; and comprehensive (loss) income of ($534,000) and $471,000 for the nine months ended September 30, 2000 and 1999, respectively. Note 5 - Earnings (Loss) per Share The following table represents the computation of basic and diluted earnings (loss) per common share:
Three months ended Sept. 30 Nine months ended Sept. 30 In thousands, except per share data 2000 1999 2000 1999 ----------------------------------------------------------------------------------------------------------------------------------- Basic earnings (loss) per share computation: Net income (loss) $ 44 $ 381 $ (621) $ 617 ------ ------ ------ ------ Weighted average common shares outstanding 1,261 1,292 1,261 1,292 ------ ------ ------ ------ Basic earnings (loss) per common share $ 0.04 $ 0.30 $(0.49) $ 0.48 ====== ====== ====== ====== Diluted earnings (loss) per share computation: Net income (loss) $ 44 $ 381 $ (621) $ 617 Add: After tax interest expense applicable to convertible debt (1) - 344 - 1,055 ------ ------ ------ ------ Adjusted net income (loss) $ 44 $ 725 $ (621) $1,672 ====== ====== ====== ====== Weighted average common shares outstanding 1,261 1,292 1,261 1,292 Assumes exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options (2) - 1 - 33 Assumes conversion of 7 1/2% convertible subordinated notes (1) - 2,186 - 2,193 ------ ------ ------ ------ Total weighted average common shares 1,261 3,479 1,261 3,518 ====== ====== ====== ====== Diluted earnings (loss) per common share $ 0.04 $ 0.21 $(0.49) $ 0.48 ====== ====== ====== ====== (1) The 2000 diluted earnings (loss) per share computation does not include the assumed conversion of the Company's 7 1/2% convertible subordinated notes, as the effect is antidilutive. The 7 1/2% convertible subordinated notes were convertible into 2,169 shares at September 30, 2000 and 2,193 shares at September 30, 1999. (2) Options to purchase 130 shares of common stock with exercise prices ranging from $6.3125 to $15.1875 were outstanding at September 30, 2000, and options to purchase 59 shares of common stock with exercise prices ranging from $8.625 to $15.1875 were outstanding at September 30, 1999. These options were not included in the 2000 calculation because the options' exercise price was greater than the average market price of the common stock.
5 Note 6 - Business Segment Data The Company evaluates segment performance and allocates resources based upon operating income. The Company's operations are managed in three reportable business segments. The Display Division comprises two operating segments, indoor display and outdoor display. Both design, produce, lease, sell and service large-scale, multi-color, real-time electronic information displays. Both operating segments are conducted on a global basis, primarily through operations in the U.S. The Company also has operations in Canada and Australia. The indoor display and outdoor display segments are differentiated primarily by the customers they serve. The Entertainment and Real Estate Division owns a chain of motion picture theatres in the western Mountain States and owns real estate used for both corporate and income-producing purposes in the U.S. and Canada. Segment operating income is shown after general and administrative expenses directly associated with the segment and includes the operating results of the joint venture activities. Corporate items relate to resources and costs which are not directly identifiable with a segment. There are no intersegment sales. Information about the Company's operations in its three business segments is as follows:
Three months ended September 30 Nine months ended September 30 In thousands 2000 1999 2000 1999 ---------------------------------------------------------------------------------------------------------------------------- Revenues: Indoor display $ 6,627 $ 5,884 $17,955 $17,442 Outdoor display 9,113 9,439 23,859 23,833 Entertainment and real estate 3,153 2,246 8,343 5,782 ----- ----- ----- ----- Total revenues $18,893 $17,569 $50,157 $47,057 ------ ------ ------ ------ Operating income: Indoor display $ 2,123 $ 1,842 $ 5,801 $ 5,178 Outdoor display 784 982 1,028 2,319 Entertainment and real estate 329 366 810 682 --- --- --- --- Total operating income $ 3,236 $ 3,190 $ 7,639 $ 8,179 Other income (expense) (28) - (27) 145 Corporate general and administrative expenses (1,623) (1,568) (4,705) (4,559) Interest expense-net (1,503) (928) (4,035) (2,643) ----- --- ----- ----- Income (loss) before income taxes $ 82 $ 694 $(1,128) $ 1,122 == === ===== =====
Note 7 - Litigation The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. The Company is appealing a 1999 verdict in a state of New Mexico court which awarded a former employee of the Company $15,000 in damages for lost wages and emotional distress and $393,000 in punitive damages on a retaliatory discharge claim. The Company denied the charges on the basis that the termination was proper. The Company believes it has made adequate provisions to cover such matters. The appeal is currently pending. In January 2000, a second former employee of the Company commenced a retaliatory discharge action seeking compensatory and punitive damages in an unspecified amount. The Company has denied such allegations and has asserted defenses including that the former employee resigned following her failure to timely report to work. This case is in the early stages and has yet to go to trial. Certain of the amounts are subject to insurance recoveries. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30, 1999 The Company's total revenues for the nine months ended September 30, 2000 increased 6.6% to $50.2 million from $47.1 million for the nine months ended September 30, 1999. Indoor display revenues increased $513,000 or 2.9%. Of this increase, $688,000 or 6.1% was due to the indoor display equipment rental and maintenance revenues, primarily due to new rental and maintenance contracts and renewal of existing contracts, offset by a decrease of $175,000 or 2.8% in indoor display equipment sales due to lower volume, mainly as a result of the advent of electronic trading on trading floors and consolidation within the financial industry. Outdoor display revenues remained level. Outdoor display equipment sales increased $317,000 or 1.8%, primarily in the outdoor sports segment, offset by a decrease of $291,000 or 4.5% in outdoor display equipment rental and maintenance revenues, primarily due to the continued expected decline in the outdoor lease and maintenance bases previously acquired. Entertainment and real estate revenues increased $2.6 million or 44.3% in 2000. This increase is primarily from the revenues from four newly constructed multiplex theatres consisting of 26 screens in Dillon, CO, Espanola, NM, Los Lunas, NM and Sahuarita, AZ which opened between August 1999 and May 2000, and the acquisition of two theatres in Laramie, WY in May 1999. Total operating income for the nine months ended September 30, 2000 decreased 6.6% to $7.6 million from $8.2 million for the nine months ended September 30, 1999. Indoor display operating income increased $623,000 or 12.0%. The cost of indoor displays represented 44.7% of related revenues for the nine months ended September 30, 2000 and 45.6% in 1999. Indoor display cost of equipment sales decreased $269,000 or 9.0% due to lower volume. This decrease was offset by the increase in indoor display cost of equipment rental and maintenance of $342,000 or 6.9%, primarily due to additional depreciation expense. The indoor display general and administrative expenses decreased $183,000 or 4.2%, primarily due to increased efforts to reduce expenses. Outdoor operating income decreased $1.3 million or 55.7%. The cost of outdoor displays represented 75.7% of related revenues for the nine months ended September 30, 2000 and 72.4% in 1999. Due to the competitive nature of the outdoor display market, primarily in the sports segment, the Company expects this erosion in the gross profit percentage to continue as it attempts to increase its market share in the sports segment of the outdoor display market. Outdoor display cost of equipment sales increased $890,000 or 7.2% due to increased volume and a higher content of raw materials, primarily due to the new LED technology, and installation costs. Outdoor display cost of equipment rental and maintenance decreased slightly. The outdoor display general and administrative expenses increased $509,000 or 12.0%, primarily due to expanded sales and marketing efforts related to the sports segment and the operating costs related to the new 55,000 square foot manufacturing facility in Logan Utah. Cost of indoor and outdoor equipment rentals and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. The entertainment and real estate operating income increased $128,000 or 18.8%. The cost of entertainment and real estate represented 84.0% of related revenues for the nine months ended September 30, 2000 and 79.7% in 1999. Cost of entertainment and real estate, which includes film rental costs and depreciation expense, increased $2.4 million or 52.0% in 2000, mainly as a result of the expansion of theatre operations and theatre start-up expenses for new theatre locations. The entertainment and real estate general and administrative expenses increased $54,000 or 8.4%, due to the expansion of theatre operations. 7 Corporate general and administrative expenses increased $146,000 or 3.2%, primarily due to a $511,000 negative impact of the effect of foreign currency exchange rates in 2000 versus a $168,000 positive impact in 1999 (a net change of $679,000) offset by increased efforts to reduce costs. Before the negative impact of the foreign currency exchange, corporate general and administrative expenses would have decreased $533,000 or 11.3%. The 1999 corporate general and administrative expenses included a special litigation charge of $408,000 on a retaliatory discharge claim (see Note 7). Net interest expense increased $1.4 million, which is primarily attributable to the increase in long-term debt due to the expansion of theatre operations and the new outdoor display manufacturing facility in Logan, Utah, and an increase in interest rates. The 1999 other income relates to the gain on the purchase of $1.0 million principal amount of the Company's 7 1/2% convertible subordinated notes at a discount. The income from joint venture relates to the operations of the theatre joint venture, MetroLux Theatre in Loveland, CO. The effective tax rate at September 30, 2000 and 1999 was 45.0%. The Company has filed certain amended tax returns seeking additional refunds of state income taxes. Three Months Ended September 30, 2000 Compared to Three Months Ended September 30, 1999 The Company's total revenues for the three months ended September 30, 2000 increased 7.5% to $18.9 million from $17.6 million for the three months ended September 30, 1999. Indoor display revenues increased $743,000 or 12.6%. Of this increase, indoor display sales increased $649,000 or 33.0% due to increased volume in the corporate and international exchange markets and the indoor display rental and maintenance revenues increased $94,000 or 2.4%, primarily due to new rental and maintenance contracts and renewal of existing contracts. Outdoor display revenues decreased $326,000 or 3.4%. Of this decrease, outdoor display sales decreased $219,000 or 3.0%, primarily in the outdoor sports segment and outdoor display rental and maintenance revenues decreased $107,000 or 5.0%, due to the continued expected decline in the outdoor lease and maintenance bases previously acquired. Entertainment and real estate revenues increased $907,000 or 40.4% in 2000. This increase is primarily from the revenues from four newly constructed multiplex theatres consisting of 26 screens in Dillon, CO, Espanola, NM, Los Lunas, NM and Sahuarita, AZ, which opened between August 1999 and May 2000, partially offset by a decline in revenues from existing theatres resulting from the industry wide slump in attendance. Total operating income for the three months ended September 30, 2000 remained level at $3.2 million. Indoor display operating income increased $281,000 or 15.3%. The cost of indoor displays represented 45.0% of related revenues for the three months ended September 30, 2000 and 44.5% in 1999. Indoor display cost of equipment sales increased $167,000 or 17.8%, due to higher volume, and indoor display cost of equipment rental and maintenance increased $192,000 or 11.4%, primarily due to additional depreciation expense. The indoor display general and administrative expenses increased $103,000 or 7.2%, primarily due to increased sales expenses. Outdoor operating income decreased $198,000 or 20.2%. The cost of outdoor displays represented 72.9% of related revenues for the three months ended September 30, 2000 and 74.0% in 1999. Due to the competitive nature of the outdoor display market, primarily in the sports segment, the Company expects this erosion in the gross profit percentage to continue as it attempts to increase its market share in the sports segment of the outdoor display market. Outdoor display cost of equipment sales decreased $243,000 or 4.6% due to decreased volume and outdoor display cost of equipment rental and maintenance decreased $95,000 or 5.5% due to decreased volume. The outdoor display general and administrative expenses increased $212,000 or 14.4%, primarily due to expanded sales and marketing efforts related to the sports segment and the increase in operating costs related to the new 55,000 square foot manufacturing facility in Logan Utah. 8 The entertainment and real estate operating income decreased $37,000 or 10.1%. The cost of entertainment and real estate represented 84.3% of related revenues for the three months ended September 30, 2000 and 77.2% in 1999. The cost of entertainment and real estate increased $921,000 or 53.1% in 2000, mainly as a result of the expansion of the theatre operations and theatre start-up expenses for new theatre locations. The entertainment and real estate general and administrative expenses remained level. Corporate general and administrative expenses increased $55,000 or 3.5%. The 2000 corporate general and administrative expenses included a $239,000 negative impact of the effect of foreign currency exchange rates offset by increased efforts to reduce costs. Before the negative impact of the foreign currency exchange, corporate general and administrative expenes would have decreased $144,000 or 9.4%. Net interest expense increased $575,000, which is primarily attributable to the increase in long-term debt due to expansion of theatre operations and the new outdoor display manufacturing facility in Logan, Utah, and an increase in interest rates. The income from joint venture relates to the operations of the theatre joint venture, MetroLux Theatre in Loveland, CO. Liquidity and Capital Resources The regular quarterly cash dividend for the third quarter of 2000 of $0.035 per share on the Company's Common Stock and $0.0315 per share on the Company's Class B Stock was declared by the Board of Directors on September 12, 2000 payable to stockholders of record as of October 9, 2000 and was paid October 20, 2000. The Company has a $15.0 million revolving credit facility under its Credit Agreement which is available until June 2002, and requires an annual facility fee on the total commitment of .375%. The Company has the option to convert the outstanding balance into a four-year term loan. At September 30, 2000, $10.1 million was outstanding leaving $4.9 million of additional borrowing capacity available under such facility. The Credit Agreement contains certain financial covenants, including a defined debt service coverage ratio which was reset as of September 30, 2000 to 1.40 to 1.0. At September 30, 2000 the Company was in compliance with such financial covenants. The Company is currently in discussion with the bank to reset certain financial covenants beyond September 30, 2000. The Company does not expect these discussions to have an impact in its existing borrowing capacity. The Company believes that cash generated from operations together with the cash and cash equivalents on hand and the availability under the revolving credit facility will be sufficient to fund its anticipated near term cash requirements. Cash and cash equivalents decreased $461,000 for the nine months ended September 30, 2000 compared to an increase of $861,000 in 1999. The decrease in 2000 is primarily attributable to cash utilized for investment in rental equipment and construction of theatres, the decrease in accounts payable and accruals, and the increase in receivables. The Company utilizes its revolving credit facility to finance the expansion of its theatre operations until long-term financing is in place. The $5.2 million proceeds from long-term debt for the nine months ended September 30, 2000 relate to construction borrowings for the new theatres, and borrowings under the revolving credit facility for purchases of equipment for rental and working capital use. The Company has limited involvement with derivative financial instruments and does not use them for trading purposes; they are only used to manage and fix well-defined interest rate risks. The Company has two interest rate swap agreements having a notional value of $7.5 million to reduce exposure to interest fluctuations. (See Note 1.) 9 Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 The Company may, from time to time, provide estimates as to future performance. These forward looking statements will be estimates, and may or may not be realized by the Company. The Company undertakes no duty to update such forward looking statements. Many factors could cause actual results to differ from these forward looking statements, including loss of market share through competition, introduction of competing products by others, pressure on prices from competition or purchasers of the Company's products, and interest rate and foreign exchange fluctuations such as the decline in the value of the Australian dollar. Part II - Other Information --------------------------- Item 6. Exhibits and Reports on Form 8-K ------ -------------------------------- (a) Exhibits 10(a) Employment Agreement with Richard Brandt dated as of September 1, 2000. 27 Financial Data Schedule, which is submitted electronically to the Securities and Exchange Commission for information only and not filed. (b) No reports on Form 8-K were filed during the quarter covered by this report 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TRANS-LUX CORPORATION --------------------- (Registrant) Date: November 14, 2000 by /s/ Angela D. Toppi ------------------------- Angela D. Toppi Senior Vice President and Chief Financial Officer by /s/ Robert P. Bosworth ------------------------- Robert P. Bosworth Vice President and Chief Accounting Officer 11