-----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, BH5e2W8S4seKVPU7Mgy9WCpu5ov7N2xIPMVrvkKPcyK8/2gVjWL56VR00Y3PsA4b HPpyBbyzxpZ/WNl80KMSNw== 0000099106-02-000014.txt : 20021113 0000099106-02-000014.hdr.sgml : 20021113 20021113173010 ACCESSION NUMBER: 0000099106-02-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANS LUX CORP CENTRAL INDEX KEY: 0000099106 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS MANUFACTURING INDUSTRIES [3990] IRS NUMBER: 131394750 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02257 FILM NUMBER: 02821063 BUSINESS ADDRESS: STREET 1: 110 RICHARDS AVE CITY: NORWALK STATE: CT ZIP: 06856-5090 BUSINESS PHONE: 2038534321 MAIL ADDRESS: STREET 1: 110 RICHARDS AVENUE CITY: NORWALK STATE: CT ZIP: 06856-5090 10-Q 1 sep0210q.txt 10Q FOR PERIOD END SEP 30,2002 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, 2002 ------------------ 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) 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 - -------- ------------------------------- ------------------ 11/12/02 Common Stock - $1.00 Par Value 973,243 11/12/02 Class B Stock - $1.00 Par Value 287,505 (Immediately convertible into a like number of shares of Common Stock.) TRANS-LUX CORPORATION AND SUBSIDIARIES Table of Contents Page No. Part I - Financial Information -------- Item 1. Consolidated Balance Sheets -September 30, 2002 and December 31, 2001 (unaudited) 1 Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2002 and 2001 (unaudited) 2 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2002 and 2001 (unaudited) 3 Notes to Consolidated Financial Statements (unaudited) 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Quantitative and Qualitative Disclosures about Market Risk 11 Item 4. Controls and Procedures 11 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 Certifications 14 Part I - Financial Information ------------------------------ TRANS-LUX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited)
September 30 December 31 In thousands, except share data 2002 2001 - ----------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 5,667 $ 5,699 Available-for-sale securities 526 530 Receivables, less allowance of $1,403 in 2002 and $465 in 2001 10,900 9,503 Unbilled receivables 2,425 830 Inventories 7,010 6,837 Prepaids and other 865 762 ------ ------ Total current assets 27,393 24,161 ------ ------ Rental equipment 90,197 86,147 Less accumulated depreciation 44,915 39,328 ------ ------ 45,282 46,819 ------ ------ Property, plant and equipment 48,377 47,944 Less accumulated depreciation and amortization 12,396 10,729 ------ ------ 35,981 37,215 Intangible assets 41 67 Goodwill 1,264 1,264 Other assets 4,081 4,371 ------ ------ $114,042 $113,897 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,805 $ 4,614 Accrued liabilities 5,753 6,230 Current portion of long-term debt 5,471 3,331 ------ ------ Total current liabilities 15,029 14,175 ------ ------ Long-term debt: 7 1/2% convertible subordinated notes due 2006 30,177 30,177 9 1/2% subordinated debentures due 2012 1,057 1,057 Notes payable 35,768 38,016 ------ ------ 67,002 69,250 Deferred revenue, deposits and other 3,047 2,930 Deferred income taxes 5,199 3,974 ------ ------ Stockholders' equity: Capital stock Common - $1 par value - 5,500,000 shares authorized 2,452,900 shares issued in 2002 and 2001 2,453 2,453 Class B - $1 par value - 1,000,000 shares authorized 287,505 shares issued in 2002 and 2001 287 287 Additional paid-in-capital 13,901 13,901 Retained earnings 19,519 19,360 Accumulated other comprehensive loss (558) (596) ------ ------ 35,602 35,405 Less treasury stock - at cost - 1,479,688 shares in 2002 and 2001 (excludes additional 287,505 shares held in 2002 and 2001 for conversion of Class B stock) 11,837 11,837 ------ ------ Total stockholders' equity 23,765 23,568 ------ ------ $114,042 $113,897 ======= ======= - ------------------------------------------------------------------------------------------------------ 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 2002 2001 2002 2001 - ----------------------------------------------------------------------------------------------------- Revenues: Equipment rentals and maintenance $ 5,103 $ 5,900 $15,885 $18,456 Equipment sales 13,448 9,358 31,461 25,111 Theatre receipts and other 3,465 3,477 10,818 9,641 ------- ------- ------- ------- Total revenues 22,016 18,735 58,164 53,208 ------- ------- ------- ------- Operating expenses: Cost of equipment rentals and maintenance 3,582 3,319 10,340 10,033 Cost of equipment sales 9,524 6,496 22,903 17,505 Cost of theatre receipts and other 2,828 2,816 8,313 7,697 ------- ------- ------- ------- Total operating expenses 15,934 12,631 41,556 35,235 ------- ------- ------- ------- Gross profit from operations 6,082 6,104 16,608 17,973 General and administrative expenses 4,988 4,655 13,499 13,716 ------- ------- ------- ------- 1,094 1,449 3,109 4,257 Interest income 29 37 147 113 Interest expense (1,164) (1,412) (3,469) (4,306) Other income 27 354 85 370 Income from joint venture 341 117 657 290 ------- ------- ------- ------- Income before income taxes 327 545 529 724 Provision for income taxes 147 246 238 326 ------- ------- ------- ------- Net income $ 180 $ 299 $ 291 $ 398 ======= ======= ======= ======= Earnings per share - basic and diluted $ 0.14 $ 0.24 $ 0.23 $ 0.32 Average common shares outstanding - basic and diluted 1,261 1,261 1,261 1,261 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 2002 2001 - --------------------------------------------------------------------------------------------------- Cash flows from operating activities Net income $ 291 $ 398 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,594 7,340 Income from joint venture (657) (290) Deferred income taxes 1,139 326 Writedown of assets held for sale - 56 Gain on sale of fixed assets - (364) Gain on repurchase of Company's 7 1/2% convertible subordinated notes - (5) Changes in operating assets and liabilities: Receivables (2,992) (3,255) Inventories (173) 286 Prepaids and other assets (231) 799 Accounts payable and accruals (1,158) 235 Deferred revenue, deposits and other 117 (1,586) ----- ----- Net cash provided by operating activities 3,930 3,940 ----- ----- Cash flows from investing activities Equipment manufactured for rental (4,050) (6,407) Purchases of property, plant and equipment (433) (428) Proceeds from joint venture 761 719 Proceeds from the sale of fixed assets - 375 ----- ----- Net cash used in investing activities (3,722) (5,741) ----- ----- Cash flows from financing activities Repayment of long-term debt (2,208) (2,078) Proceeds from long-term debt 2,100 4,580 Repurchase of Company's 7 1/2% convertible subordinated notes - (15) Cash dividends (132) (133) ----- ----- Net cash provided by (used in) financing activities (240) 2,354 ----- ----- Net increase (decrease) in cash and cash equivalents (32) 553 Cash and cash equivalents at beginning of year 5,699 3,920 ----- ----- Cash and cash equivalents at end of period $ 5,667 $ 4,473 ===== ===== - -------------------------------------------------------------------------------------------------- Interest paid $ 2,642 $ 3,397 Interest received 157 145 Income taxes paid (refunded) (656) 491 - -------------------------------------------------------------------------------------------------- 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, 2002 (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, 2002 consolidated financial statements should 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, 2001. Certain reclassifications of prior years' amounts have been made to conform to the current year's presentation. The Company adopted 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 designate hedging instruments as either fair value, cash flow, or hedges of a net investment in a foreign operation. All derivatives are to be recognized as either assets or liabilities and measured at fair value. Gains or losses resulting from changes in the values of those derivatives are accounted for depending upon its designation and whether it qualifies for hedge accounting. 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 had two interest rate swap agreements effective through August 2002, having a notional value of $4.3 million, to reduce exposure to interest fluctuations on its bank term loans, which were classified as cash flow hedges. The adoption of SFAS 133 at January 1, 2001 resulted in the cumulative effect of an accounting change, net of tax, of approximately $15,000 in other comprehensive loss. At September 30, 2002, the Company did not have any derivative financial instruments. In June 2001, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards No. 141, "Business Combinations," effective July 1, 2001, and No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), effective for fiscal years beginning after December 15, 2001. Under SFAS 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the statements. Goodwill relates primarily to reporting units within the outdoor display segment. Other intangible assets will continue to be amortized over their useful lives. The Company adopted the new rules of accounting for goodwill and other intangible assets beginning in the first quarter of 2002. The Company performed the required impairment tests related to goodwill and indefinite-lived intangible assets recorded on January 1, 2002 which indicated that there was no transitional impairment loss. Accordingly, the adoption of SFAS 142 did not have an impact on the Company's financial statements, other than the reduction of goodwill amortization expense as explained further below. 4 In accordance with SFAS 142, prior period amounts were not restated. Reconciliation of the previously reported net income and earnings per share for the three and nine months ended September 30, 2001 to the amounts adjusted for the reduction of amortization expense, net of related income tax effect, is as follows:
Three months ended Sept. 30 Nine months ended Sept. 30 In thousands 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------ Net income, as reported $ 180 $ 299 $ 291 $ 398 Add back: goodwill amortization, net of income taxes - 9 - 35 --- --- --- --- Net income, adjusted $ 180 $ 308 $ 291 $ 433 === === === === Earnings per share - basic and diluted: Earnings per share, as reported $0.14 $0.24 $0.23 $0.32 Add back: goodwill amortization earnings per share effect - 0.01 - 0.03 ---- ---- ---- ---- Earnings per share, adjusted $0.14 $0.25 $0.23 $0.35 ==== ==== ==== ==== ______________________________________________________________________________________________________
In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections" (SFAS 145), effective for financial statements issued after June 15, 2002. The adoption of SFAS 145, relating to extinguishment of debt and certain lease transactions, did not have an impact on the Company's financial statements. In July 2002, the FASB issued Statement of Financial Accounting Standards No. 146, "Accounting for Exit or Disposal Activities" (SFAS 146). SFAS 146 will be effective for the Company for disposal activities initiated after December 31, 2002. The Company is in the process of evaluating the effect that adopting SFAS 146 will have on its financial statements. Note 2 - Inventories Inventories consist of the following:
Sept. 30 Dec. 31 In thousands 2002 2001 - --------------------------------------------------------- Raw materials and spare parts $4,235 $3,785 Work-in-progress 1,691 1,717 Finished goods 1,084 1,335 ----- ----- $7,010 $6,837 ===== ===== ________________________________________________________
Note 3 - Long-Term Debt For the three and nine months ended September 30, 2002, long-term debt decreased $1.3 million and $2.2 million, respectively, which represented scheduled payments of long-term debt and an increase in the current portion of long-term debt. The Company has a $19.3 million bank Credit Agreement maturing July 2006, having quarterly installments of $1.1 million at variable interest rates ranging from 3.61% to 4.06% at September 30, 2002. The Company is in discussions with lenders to arrange additional working capital availability as well as long-term liquidity. The Credit Agreement requires compliance with certain financial covenants, which, at September 30, 2002, included a defined debt service coverage ratio of 1.40 to 1.0, a defined debt to cash flow ratio of 3.75 to 1.0 and an annual limitation of $750,000 on cash dividends. At September 30, 2002, the Company was in compliance with such financial covenants. 5 Note 4 - Reporting Comprehensive Income (Loss) The components of other comprehensive income (loss) are foreign currency translation adjustments relating to the foreign subsidiaries, unrealized holding gains or losses on the available-for-sale securities, the effect of accounting for hedges under SFAS 133 (see Note 1) and a minimum pension liability adjustment relating to the defined benefit pension plan. Total comprehensive income was $195,000 and $221,000 for the three months ended September 30, 2002 and 2001, respectively; and $329,000 and $308,000 for the nine months ended September 30, 2002 and 2001, respectively. Note 5 - Earnings per Share The following table presents the computation of basic and diluted earnings per common share:
Three months ended Sept. 30 Nine months ended Sept. 30 In thousands, except per share data 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------ Basic and diluted earnings per share computation: Net income $ 180 $ 299 $ 291 $ 398 ----- ----- ----- ----- Weighted average common shares outstanding 1,261 1,261 1,261 1,261 ----- ----- ----- ----- Basic and diluted earnings per common share $ 0.14 $ 0.24 $ 0.23 $ 0.32 ----- ----- ----- ----- _______________________________________________________________________________________________________
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/Real Estate Division owns a chain of motion picture theatres in the western Mountain States, a national film booking service and income-producing properties. 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 general and administrative items relate to costs that are not directly identifiable with a segment. There are no intersegment sales. 6 Information about the Company's operations in its three business segments for the three and nine months ended September 30, 2002 and 2001 is as follows:
Three months ended Sept. 30 Nine months ended Sept. 30 In thousands 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------ Revenues: Indoor display $ 4,884 $ 5,894 $16,599 $19,292 Outdoor display 13,667 9,364 30,747 24,275 Entertainment/real estate 3,465 3,477 10,818 9,641 ------ ------ ------ ------ Total revenues $22,016 $18,735 $58,164 $53,208 ------ ------ ------ ------ Operating income: Indoor display $ 921 $ 1,647 $ 3,574 $ 6,036 Outdoor display 1,590 871 1,796 1,428 Entertainment/real estate 777 612 2,566 1,629 ------ ------ ------ ------ Total operating income $ 3,288 $ 3,130 $ 7,936 $ 9,093 Other income 27 354 85 370 Corporate general and administrative expenses (1,853) (1,564) (4,170) (4,546) Interest expense-net (1,135) (1,375) (3,322) (4,193) ------ ------ ------ ------ Income before income taxes $ 327 $ 545 $ 529 $ 724 ====== ====== ====== ====== - ------------------------------------------------------------------------------------------------------
Note 7 - Legal Proceedings and Claims The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Trans-Lux is a full service provider of integrated multimedia systems for today's communications environments. The essential elements of these systems are the real-time, programmable electronic information displays we manufacture, distribute and service. Designed to meet the evolving communications needs of both the indoor and outdoor markets, these displays are used primarily in applications for the financial, banking, gaming, corporate, transportation, entertainment and sports industries. In addition to its display business, the Company owns and operates a chain of motion picture theatres in the western Mountain States, as well as a national film booking service. The Company operates in three reportable segments: Indoor Display, Outdoor Display, and Entertainment/Real Estate. The Indoor Display segment includes worldwide revenues and related expenses from the rental, maintenance and sale of indoor displays. This segment includes the financial, gaming, government and corporate markets. The Outdoor Display segment includes worldwide revenues and related expenses from the rental, maintenance and sale of outdoor displays. Included in this segment are the custom sports, catalog sports, retail and commercial markets. The Entertainment/Real Estate segment includes the operations of the motion picture theatres in the western Mountain States, a national film booking service and income-producing real estate properties. Results of Operations Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30, 2001 Total revenues for the nine months ended September 30, 2002 increased 9.3% to $58.2 million from $53.2 million for the nine months ended September 30, 2001. Indoor display revenues decreased $2.7 million 7 or 14.0%. Of this decrease, indoor display equipment rentals and maintenance revenues decreased $1.7 million or 13.7%, primarily due to disconnects and non-renewals of equipment on rental on existing contracts in the financial services market, and indoor display equipment sales decreased $976,000 or 14.5%, also primarily in the financial services market. The financial services market continues to be negatively impacted due to the consolidation within that industry resulting mainly from the current economic recession. Outdoor display revenues increased $6.5 million or 26.7%. Of this increase, outdoor display equipment sales increased $7.3 million or 39.9%, primarily in the custom outdoor sports segment. This increase was offset by the decrease in outdoor display equipment rentals and maintenance revenues of $854,000 or 14.5%, primarily due to the continuing expected revenue decline in the older outdoor equipment rentals and maintenance bases previously acquired. Entertainment/real estate revenues increased $1.2 million or 12.2%. This increase is primarily from an increase in overall admissions, ticket prices and concessions, predominantly from `same store' sales. On October 1, 2002, the Company entered into a lease settlement agreement for a net $34,000 with the landlord at its older Lake Dillon, Colorado theatre. The Company will cease to operate the theatre on or before January 31, 2003. In a separate unrelated transaction, the Company entered into a 15-year non-compete agreement for $450,000, to be paid in 2003, relating to its newer six-plex theatre in Dillon, Colorado. Total operating income for the nine months ended September 30, 2002 decreased 12.7% to $7.9 million from $9.1 million for the nine months ended September 30, 2001. Indoor display operating income decreased $2.5 million or 40.8%, primarily as a result of the decrease in revenues in the financial services market. The cost of indoor displays represented 53.1% of related revenues in 2002 compared to 45.8% in 2001. The cost of indoor displays as a percentage of related revenues increased primarily due to the reduction of field service cost of equipment rentals and maintenance not decreasing in relation to the reduction in revenues. The Company continues to address the reduction in field service costs. Indoor display cost of equipment rentals and maintenance increased $292,000 or 5.4%, largely due to an increase in depreciation expense. Indoor display cost of equipment sales decreased $319,000 or 9.4%, primarily due to the decrease in volume. Indoor display general and administrative expenses decreased $204,000 or 4.6%, due to continued reduction of certain overhead costs. Outdoor display operating income increased $368,000 or 25.8%, primarily as a result of the increase in sales in the custom outdoor sports segment. The cost of outdoor displays represented 79.4% of related revenues in 2002 compared to 77.0% in 2001. Outdoor display cost of equipment sales increased $5.7 million or 40.6%, principally due to the increase in volume and the competitive nature of the sports sector of the outdoor division. Outdoor display cost of equipment rentals and maintenance remained level. Outdoor display general and administrative expenses increased $372,000 or 9.0%, primarily due to increased sales expenses and commissions resulting from an increase in custom sports revenues and an increase in the reserve for doubtful accounts. Cost of indoor and outdoor equipment rentals and maintenance includes field service expenses, plant repair costs, maintenance and depreciation expense. Entertainment/real estate operating income increased $937,000 or 57.5%, primarily due to the increase in revenues and the increase in income from the MetroLux Theatre joint venture due primarily to the sale of a parcel of land. The cost of entertainment/real estate represented 76.8% of related revenues in 2002 compared to 79.8% in 2001. Cost of entertainment/real estate, which includes film rental costs and depreciation expense, increased $616,000 or 8.0%, due to the increase in overall admissions. Entertainment/real estate general and administrative expenses remained level. 8 Corporate general and administrative expenses decreased $376,000 or 8.3%, principally due to a $218,000 positive impact of the effect of foreign currency rates in 2002 compared to a $282,000 negative impact in 2001, offset by an increase in general insurance costs and pension expense. Net interest expense decreased $871,000, which is primarily attributable to the decrease in variable interest rates in 2002 vs. 2001. Other income primarily relates to the earned income portion of municipal forgivable loans. The income from joint venture relates to the operations of the theatre joint venture, MetroLux Theatre in Loveland, Colorado, and includes a gain from the sale of a parcel of land. The effective tax rate for the nine months ended September 30, 2002 and 2001 was 45.0%. Three Months Ended September 30, 2002 Compared to Three Months Ended September 30, 2001 Total revenues for the three months ended September 30, 2002 increased 17.5% to $22.0 million from $18.7 million for the three months ended September 30, 2001. Indoor display revenues decreased $1.0 million or 17.1%. Of this decrease, indoor display equipment rentals and maintenance revenues decreased $560,000 or 14.0%, primarily due to disconnects and non-renewals of equipment on rental on existing contracts in the financial services market, and indoor display equipment sales decreased $450,000 or 23.9%, also primarily in the financial services market. The financial services market continues to be negatively impacted due to the consolidation within that industry resulting mainly from the current economic recession. Outdoor display revenues increased $4.3 million or 46.0%. Of this increase, outdoor display equipment sales increased $4.5 million or 60.7%, primarily in the custom outdoor sports segment. This increase was offset by the decrease in outdoor display equipment rentals and maintenance revenues of $237,000 or 12.6%, primarily due to the continuing expected revenue decline in the older outdoor equipment rentals and maintenance bases previously acquired. Entertainment/real estate revenues decreased slightly due to one less screen operating in 2002 compared to 2001. Revenues from 'same store' sales increased slightly. Total operating income for the three months ended September 30, 2002 increased 5.0% to $3.3 million from $3.1 million for the three months ended September 30, 2001. Indoor display operating income decreased $726,000 or 44.1%, primarily as a result of the decrease in revenues in the financial services market. The cost of indoor displays represented 54.1% of related revenues in 2002 compared to 47.0% in 2001. The cost of indoor displays as a percentage of related revenues increased primarily due to the reduction of field service cost of equipment rentals and maintenance not decreasing in relation to the reduction in revenues. The Company continues to address the reduction in field service costs. Indoor display cost of equipment rentals and maintenance increased $174,000 or 9.9%, largely due to increased depreciation expense. Indoor display cost of equipment sales decreased $303,000 or 30.1%, primarily due to the decrease in volume. Indoor display general and administrative expenses decreased $155,000 or 10.5%, due to continued reduction of certain overhead costs. Outdoor display operating income increased $719,000 or 82.5%, primarily as a result of an increase in sales revenues. The cost of outdoor displays represented 76.6% of related revenues in 2002 compared to 75.2% in 2001. Outdoor display cost of equipment sales increased $3.3 million or 60.7%, principally due to the increase in volume and the competitive nature of the sports sector of the outdoor division. Outdoor display cost of equipment rentals and maintenance increased $89,000 or 5.7%, primarily due to an increase in depreciation expense. Outdoor display general and administrative expenses increased $164,000 or 11.3%, 9 primarily due to increased sales expenses and commissions resulting from an increase in custom sports revenues and an increase in the reserve for doubtful accounts. Entertainment/real estate operating income increased $165,000 or 27.0%, primarily due to the increase in income from the MetroLux Theatre joint venture due primarily to the sale of a parcel of land. The cost of entertainment/real estate represented 81.6% of related revenues in 2002 compared to 81.0% in 2001. Cost of entertainment/real estate remained level. Entertainment/real estate general and administrative expenses increased slightly. Corporate general and administrative expenses increased $289,000 or 18.5%, principally due to a $182,000 negative impact of the effect of foreign currency rates in 2002 compared to a $107,000 negative impact in 2001, and an increase in general insurance costs and pension expense. Net interest expense decreased $240,000, which is primarily attributable to the decrease in variable interest rates in 2002 vs. 2001. Other income primarily relates to the earned income portion of municipal forgivable loans. The income from joint venture relates to the operations of the theatre joint venture, MetroLux Theatre in Loveland, Colorado, and includes a gain from the sale of a parcel of land. The effective tax rate for the three months ended September 30, 2002 and 2001 was 45.0%. Liquidity and Capital Resources The regular quarterly cash dividend for the third quarter of 2002 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 26, 2002 payable to stockholders of record as of October 8, 2002 and was paid October 24, 2002. The Company's current principal source of cash to fund liquidity needs are net cash provided by operating activities. In order to fund on-going and potential new business, the Company is currently in discussions with lenders to arrange additional near-term working capital availability as well as long-term liquidity. The Company believes it will be successful in arranging additional working capital availability, and in addition, continues to examine measures that will allow for the cash and cash equivalents on hand to be sufficient to fund its requirements. The Company has a $19.3 million bank Credit Agreement maturing July 2006, having quarterly installments of $1.1 million at variable interest rates ranging from 3.61% to 4.06% at September 30, 2002. The Credit Agreement requires compliance with certain financial covenants, which at September 30, 2002 included a defined debt service coverage ratio of 1.40 to 1.0, a defined debt to cash flow ratio of 3.75 to 1.0 and an annual limitation of $750,000 on cash dividends. At September 30, 2002 the Company was in compliance with such financial covenants. Payments of long-term debt due and the future minimum lease payments due under operating leases for the remainder of 2002 and the next four years are as follows:
Remainder of In thousands 2002 2003 2004 2005 2006 - ------------ ---- ---- ---- ---- ---- Long-Term Debt $1,301 $5,485 $5,533 $8,142 $4,494 Operating Leases 207 850 737 723 624 ----- ----- ----- ----- ----- Total $1,508 $6,335 $6,270 $8,865 $5,118 ===== ===== ===== ===== ===== The above amounts do not include any principal payments related to the 7.5% convertible subordinated notes that mature December 1, 2006.
Cash and cash equivalents decreased $32,000 for the nine months ended September 30, 2002 compared 10 to an increase of $553,000 in 2001. The decrease in 2002 is primarily attributable to the investment in equipment manufactured for rental and other equipment purchases of $4.5 million and from financing activities of $0.2 million, offset by operating activities of $3.9 million. Cash flows from financing activities also increased $0.8 million from the MetroLux Theatre joint venture. The increase in 2001 was primarily attributable to cash flows from operating activities of $3.9 million and from financing activities of $2.4 million offset by the investment in equipment manufactured for rental and other equipment purchases of $6.5 million. Cash flows from financing activities also increased $0.7 million from the MetroLux Theatre joint venture. 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, interest rate and foreign exchange fluctuations, terrorist acts and war. Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company is subject to interest rate risk on certain of its long-term debt. The Company manages its exposure to changes in interest rates by the use of variable and fixed interest rate debt. In addition, the Company had hedged its exposure to changes in interest rates on a portion of its variable debt by entering into interest rate swap agreements to lock in fixed interest rates for a portion of these borrowings. In addition, the Company is exposed to foreign currency exchange rate risk mainly as a result of investments in its Australian and Canadian subsidiaries. The Company does not enter into derivatives for trading or speculative purposes. At September 30, 2002, the Company was not involved in any derivative financial instruments. However, the Company may consider certain interest rate risk strategies in the future. The two interest rate swap agreements the Company had expired August 27, 2002. A one percentage point change in interest rates would result in an annual interest expense fluctuation of approximately $356,000. A 10% change in the Australian and Canadian dollar relative to the U.S. dollar would result in a currency exchange expense fluctuation of approximately $433,000. The fair value is based on dealer quotes, considering current exchange rates. Item 4. Controls and Procedures (a) Evaluation of disclosure controls and procedures. The Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of a date within 90 days of the filing date of this quarterly report. The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that are filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Based on this evaluation, Michael R. Mulcahy, the Company's President and Co-Chief Executive Officer, Thomas Brandt, the Company's Executive Vice President and Co-Chief Executive 11 Officer, and Angela D. Toppi, the Company's Executive Vice President and Chief Financial Officer, have concluded that these controls and procedures are effective. (b) Changes in internal controls. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of the Company's evaluation, and there were no significant deficiencies and material weaknesses requiring corrective action. Part II - Other Information --------------------------- Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 99.1 Statement Furnished Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Michael R. Mulcahy, President and Co-Chief Executive Officer 99.2 Statement Furnished Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Thomas Brandt, Executive Vice President and Co-Chief Executive Officer 99.3 Statement Furnished Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Angela D. Toppi, Executive Vice President and Chief Financial Officer (b) No reports on Form 8-K were filed during the quarter covered by this report. 12 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 13, 2002 by /s/ Angela D. Toppi -------------------- Angela D. Toppi Executive Vice President and Chief Financial Officer by /s/ Robert P. Bosworth ----------------------- Robert P. Bosworth Vice President and Chief Accounting Officer 13 CERTIFICATION I, Michael R. Mulcahy, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Trans-Lux Corporation, the "registrant"; 2. Based on my knowledge, the quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have; a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function); a) all significant deficiencies in the design or operation of the internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 14 6. The registrant's other certifying officers and I have indicated in this quarterly report there were no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, and there were no significant deficiencies and material weaknesses requiring corrective action. /s/ Michael R. Mulcahy ________________________________________ Date: November 13, 2002 President and Co-Chief Executive Officer Michael R. Mulcahy 15 CERTIFICATION I, Thomas Brandt, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Trans-Lux Corporation, the "registrant"; 2. Based on my knowledge, the quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have; a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function); a) all significant deficiencies in the design or operation of the internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 16 6. The registrant's other certifying officers and I have indicated in this quarterly report there were no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, and there were no significant deficiencies and material weaknesses requiring corrective action. /s/ Thomas Brandt _____________________________________ Date: November 13, 2002 Executive Vice President and Co-Chief Executive Officer Thomas Brandt 17 CERTIFICATION I, Angela D. Toppi, certify, that: 1. I have reviewed this quarterly report on Form 10-Q of Trans-Lux Corporation, the "registrant"; 2. Based on my knowledge, the quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have; a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function); a) all significant deficiencies in the design or operation of the internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 18 6. The registrant's other certifying officers and I have indicated in this quarterly report there were no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, and there were no significant deficiencies and material weaknesses requiring corrective action. /s/ Angela D. Toppi _________________________________ Date: November 13, 2002 Executive Vice President and Chief Financial Officer Angela D. Toppi 19 EX-99 3 ex990902.txt CERTIFICATIONS Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned, Michael R. Mulcahy, is the President and Co-Chief Executive Officer of Trans-Lux Corporation (the "Company"). This statement is being furnished in connection with the filing by the Company of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (the "Report"). By execution of this statement, I certify that, to the best of my knowledge: A) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and B) the information contained in the Report fairly presents, in all materials respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report. Dated: November 13, 2002 /s/ Michael R. Mulcahy ----------------------- Michael R. Mulcahy Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned, Thomas Brandt, is the Executive Vice President and Co-Chief Executive Officer of Trans-Lux Corporation (the "Company"). This statement is being furnished in connection with the filing by the Company of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (the "Report"). By execution of this statement, I certify that, to the best of my knowledge: A) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and B) the information contained in the Report fairly presents, in all materials respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report. Dated: November 13, 2002 /s/ Thomas Brandt ------------------ Thomas Brandt Exhibit 99.3 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned, Angela D. Toppi, is the Executive Vice President and Chief Financial Officer of Trans-Lux Corporation (the "Company"). This statement is being furnished in connection with the filing by the Company of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (the "Report"). By execution of this statement, I certify that, to the best of my knowledge: A) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and B) the information contained in the Report fairly presents, in all materials respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report. Dated: November 13, 2002 /s/ Angela D. Toppi -------------------- Angela D. Toppi -----END PRIVACY-ENHANCED MESSAGE-----