-----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, F7yfWO1dTJrFc+05TURBAx8tgpauWU7vQMingpyOsBgjWn5+6xcNDtB9FO4VC3og upPEEJLCC79vKR6dfV0fNg== 0000099106-03-000026.txt : 20030814 0000099106-03-000026.hdr.sgml : 20030814 20030814142650 ACCESSION NUMBER: 0000099106-03-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030814 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: 03846278 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 jun0310q.txt 10Q FOR PERIOD END JUNE 30,2003 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 June 30, 2003 ------------- 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X --- --- 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 - -------- ------------------------------- ------------------ 8/13/03 Common Stock - $1.00 Par Value 973,243 8/13/03 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 - June 30, 2003 and December 31, 2002 (unaudited) 1 Consolidated Statements of Operations - Three and Six Months Ended June 30, 2003 and 2002 (unaudited) 2 Consolidated Statements of Cash Flows - Six Months Ended June 30, 2003 and 2002 (unaudited) 3 Notes to Consolidated Financial Statements (unaudited) 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures about Market Risk 12 Item 4. Controls and Procedures 12 Part II - Other Information Item 4. Submission of Matters to a Vote of Stockholders 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 15 Exhibits Part I - Financial Information TRANS-LUX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited)
June 30 December 31 In thousands, except share data 2003 2002 - ------------------------------------------------------------------------------------------------------ ASSETS Current assets: Cash and cash equivalents $ 12,027 $ 8,270 Available-for-sale securities 575 522 Receivables, less allowance of $1,539 in 2003 and $1,009 in 2002 5,759 7,617 Unbilled receivables 1,098 966 Inventories 6,107 7,440 Prepaids and other 875 745 --------- --------- Total current assets 26,441 25,560 --------- --------- Rental equipment 90,480 88,374 Less accumulated depreciation 47,330 43,423 --------- --------- 43,150 44,951 --------- --------- Property, plant and equipment 41,315 47,427 Less accumulated depreciation and amortization 11,390 12,170 --------- --------- 29,925 35,257 --------- --------- Goodwill 1,035 1,264 Other assets 3,868 3,942 --------- --------- TOTAL ASSETS $104,419 $110,974 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,407 $ 2,754 Accrued liabilities 6,663 7,189 Current portion of long-term debt 2,979 3,763 --------- --------- Total current liabilities 11,049 13,706 --------- --------- 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 30,413 35,975 --------- --------- 61,647 67,209 Deferred revenue, deposits and other 2,479 2,942 Deferred income taxes 5,228 4,092 --------- --------- Stockholders' equity: Capital stock Common - $1 par value - 5,500,000 shares authorized 2,452,900 shares issued in 2003 and 2002 2,453 2,453 Class B - $1 par value - 1,000,000 shares authorized 287,505 shares issued in 2003 and 2002 287 287 Additional paid-in-capital 13,901 13,901 Retained earnings 20,359 19,612 Accumulated other comprehensive loss (1,147) (1,391) --------- --------- 35,853 34,862 Less treasury stock - at cost - 1,479,688 shares in 2003 and 2002 (excludes additional 287,505 shares held in 2003 and 2002 for conversion of Class B stock) 11,837 11,837 --------- --------- Total stockholders' equity 24,016 23,025 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $104,419 $110,974 ========= ========= - ------------------------------------------------------------------------------------------------------- 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 SIX MONTHS ENDED JUNE 30 JUNE 30 --------------------- -------------------- In thousands, except per share data 2003 2002 2003 2002 - --------------------------------------------------------------------------- -------------------- Revenues: Equipment rentals and maintenance $ 4,498 $ 5,153 $ 9,517 $10,782 Equipment sales 5,940 9,894 13,304 18,013 Theatre receipts and other 3,435 3,939 6,542 7,353 -------- -------- -------- -------- Total revenues 13,873 18,986 29,363 36,148 -------- -------- -------- -------- Operating expenses: Cost of equipment rentals and maintenance 3,560 3,405 7,118 6,758 Cost of equipment sales 4,181 7,432 9,912 13,379 Cost of theatre receipts and other 2,663 2,957 4,983 5,485 -------- -------- -------- -------- Total operating expenses 10,404 13,794 22,013 25,622 -------- -------- -------- -------- Gross profit from operations 3,469 5,192 7,350 10,526 General and administrative expenses 4,016 4,243 8,054 8,511 Interest income 21 95 68 118 Interest expense (997) (1,133) (1,999) (2,305) Gain on sale of assets 2,629 - 4,207 - Other income (expense) (129) 43 (129) 58 -------- -------- -------- -------- Income (loss) before income taxes and income 977 (46) 1,443 (114) from joint venture Provision for income taxes 572 53 869 91 Income from joint venture 163 164 261 316 -------- -------- -------- -------- Net income $ 568 $ 65 $ 835 $ 111 ======== ======== ======== ======== Earnings per share Basic $0.45 $0.05 $0.66 $0.09 Diluted $0.26 $0.05 $0.42 $0.09 Average common shares outstanding Basic 1,261 1,261 1,261 1,261 Diluted 3,418 1,261 3,418 1,261 Cash dividends per share: Common stock $0.035 $0.035 $0.070 $0.070 Class B stock $0.0315 $0.0315 $0.0630 $0.0630 - ----------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements.
2 TRANS-LUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
SIX MONTHS ENDED JUNE 30 ---------------------------- In thousands 2003 2002 - ------------------------------------------------------------------------------------------------------- Cash flows from operating activities Net income $ 835 $ 111 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,081 5,073 Income from joint venture (261) (316) Deferred income taxes 1,063 993 Gain on sale of assets (4,207) - Write down of available-for-sale securities 129 - Changes in operating assets and liabilities: Receivables 1,264 (598) Inventories 540 (275) Prepaids and other assets (580) (114) Accounts payable and accruals (2,115) (1,829) Deferred revenue, deposits and other (463) (379) -------- -------- Net cash provided by operating activities 1,286 2,666 -------- -------- Cash flows from investing activities Equipment manufactured for rental (2,106) (2,276) Purchases of property, plant and equipment (150) (343) Proceeds from joint venture 450 436 Proceeds from sale of assets 6,556 - -------- -------- Net cash provided by (used in) investing activities 4,750 (2,183) -------- -------- Cash flows from financing activities Payments of long-term debt (19,191) (1,580) Proceeds from long-term debt 17,000 2,100 Cash dividends (88) (88) -------- -------- Net cash provided by (used in) financing activities (2,279) 432 -------- -------- Net increase in cash and cash equivalents 3,757 915 Cash and cash equivalents at beginning of year 8,270 5,699 -------- -------- Cash and cash equivalents at end of period $12,027 $ 6,614 ======== ======== - ------------------------------------------------------------------------------------------------------- Interest paid $ 1,861 $ 2,190 Interest received 87 116 Income taxes refunded (119) (724) - ------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements.
3 TRANS-LUX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2003 (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 June 30, 2003 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, 2002. Certain reclassifications of prior years' amounts have been made to conform to the current year's presentation. On January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). Under SFAS 142, goodwill and indefinite-lived intangible assets are no longer amortized, but are reviewed annually for impairment, or more frequently if indications of potential impairment exist. The Company performed the requisite transitional impairment tests for goodwill as of January 1, 2002, which indicated that there was no transitional impairment loss. The Company performed the annual impairment tests for goodwill as of October 1, 2002 and had determined that goodwill was not impaired as of that date. All other intangible assets continue to be amortized over their useful lives and are evaluated when indicators of impairment exist. During the six months ended June 30, 2003, the Company wrote off $229,000 of goodwill relating to the sale of assets (see Note 4). In addition, during the six months ended June 30, 2003, the Company paid $450,000 for a 15-year non-compete agreement in Dillon, Colorado, where the Company operates a six-plex theatre in the same community. The Company records compensation expense for its stock-based employee compensation plans in accordance with the intrinsic-value method prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees". Intrinsic value is the amount by which the market price of the underlying stock exceeds the exercise price of the stock option or award on the measurement date, generally the date of grant. The Company's options are issued at fair market value, accordingly, no compensation cost has been recognized for its stock option plans. In December 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure" (SFAS 148), that amends Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation". The following table illustrates the effect on net income and earnings per share for the three and six month periods ended June 30, 2003 and 2002 if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation: 4
Three months ended June 30 Six months ended June 30 In thousands, except per share data 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------- Net income, as reported $ 568 $ 65 $ 835 $ 111 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax 2 13 12 16 ----- ----- ----- ----- Pro forma net income $ 566 $ 52 $ 823 $ 95 ----- ----- ----- ----- Earnings per share: As reported Basic $0.45 $0.05 $0.66 $0.09 ----- ----- ----- ----- Diluted $0.26 $0.05 $0.42 $0.09 ----- ----- ----- ----- Pro forma Basic $0.45 $0.04 $0.65 $0.08 ----- ----- ----- ----- Diluted $0.26 $0.04 $0.42 $0.08 ----- ----- ----- -----
Note 2 - Inventories Inventories consist of the following:
June 30 December 31 In thousands 2003 2002 - --------------------------------------------------------- Raw materials and spare parts $4,212 $4,663 Work-in-progress 1,316 1,384 Finished goods 579 1,393 ------ ------ $6,107 $7,440 ====== ======
Note 3 - Long-Term Debt For the six months ended June 30, 2003, long-term debt, including current portion, decreased $6.3 million. The decrease primarily results from the assumption of $4.2 million in Industrial Revenue Bonds by the purchaser of the Company's custom sports business in Logan, Utah (see Note 4), and other regular scheduled payments of long-term debt. During the first quarter of 2003, the Company completed a refinancing of its senior debt with two term loans totaling $17.0 million and a revolving credit facility of up to $5.0 million at variable interest rates ranging from LIBOR plus 1.75% to Prime plus 0.25% (3.79% at June 30, 2003) and maturing September 30, 2005. At June 30, 2003, the entire revolving credit facility was available as none had been drawn. The bank credit agreement requires an annual facility fee on the unused commitment of .30%, and requires compliance with certain financial covenants, which include a fixed charge coverage ratio of 1.0 to 1.0, a total funded debt ratio of 5.0 to 1.0, a leverage ratio of 3.0 to 1.0 and maintaining a tangible net worth of not less than $19.5 million. At June 30, 2003, the Company was in compliance with such financial covenants. 5 Note 4 - Sale of Assets On June 30, 2003, the Company sold a parcel of vacant land adjacent to its corporate headquarters in Norwalk, Connecticut for a cash price of $3.0 million. The Company recorded a gain of approximately $1.3 million, net of tax, on the sale. On March 28, 2003, the Company sold its custom sports business located in Logan, Utah for $7.9 million, of which $3.7 million was paid in cash and $4.2 million was in assumption of two Industrial Revenue Bonds. The Company recorded a gain of approximately $745,000, net of tax, on the sale. As part of the sale, the Company recorded bonuses to certain continuing employees of $75,000, which was offset against the gain. As part of the asset purchase agreement, the Company provided standard representations and warranties with respect to the assets sold and guaranteed indemnification of up to $400,000, provided notification of the claim is made by the purchaser prior to December 30, 2003, and the Company would reacquire any sold accounts receivable greater than 90 days old. As of June 30, 2003, the Company reacquired $0.1 million of sold accounts receivable greater than 90 days old. The Company believes it will not incur any liability with respect to the guarantee, and accordingly does not believe the fair value of the guarantee is significant. As of August 13, 2003, the purchaser has not notified the Company of any claims relating to such guarantee. Note 5 - Reporting Comprehensive Income Total comprehensive income for the three and six months ended June 30, 2003 and 2002 is as follows:
Three months ended June 30 Six months ended June 30 In thousands 2003 2002 2003 2002 - ----------------------------------------------------------------------------------------------------------------- Net income $568 $ 65 $ 835 $111 Unrealized foreign currency translation gain (loss) 89 13 134 (19) Unrealized holding gain (loss) on securities, net of tax 11 (10) 32 (12) Reclassification adjustment on securities, net of tax 78 - 78 - Unrealized derivative gain, net of tax - 26 - 54 ---- ---- ------ ---- Comprehensive income $746 $ 94 $1,079 $134 ---- ---- ------ ----
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 segment owns a chain of motion picture theatres in the western Mountain States, a national film booking service and income-producing real estate 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 six months ended June 30, 2003 and 2002 is as follows:
Three months ended June 30 Six months ended June 30 In thousands 2003 2002 2003 2002 - ----------------------------------------------------------------------------------------------------------------- Revenues: Indoor display $ 5,102 $ 6,028 $10,208 $11,715 Outdoor display (1) 5,336 9,019 12,613 17,080 Entertainment/real estate 3,435 3,939 6,542 7,353 ------- ------- ------- ------- Total revenues $13,873 $18,986 $29,363 $36,148 ------- ------- ------- ------- Operating income (loss): Indoor display $ 458 $ 1,242 $ 1,446 $ 2,653 Outdoor display (1) (251) 23 (772) 206 Entertainment/real estate 748 955 1,423 1,789 ------- ------- ------- ------- Total operating income $ 955 $ 2,220 $ 2,097 $ 4,648 Other income 2,500 43 4,078 58 Corporate general and administrative expenses (1,339) (1,107) (2,540) (2,317) Interest expense-net (976) (1,038) (1,931) (2,187) Income tax provision (572) (53) (869) (91) ------- ------- ------- ------- Net income $ 568 $ 65 $ 835 $ 111 ======= ======= ======= ======= (1) Decrease is primarily related to the sale of the custom sports business, see Note 4.
Note 7 - Legal Proceedings and Claims The Company is subject to legal proceedings and claims, which arise in the ordinary course of its business. The Company is not a party to any pending legal proceedings and claims that it believes will have a material adverse effect on the consolidated financial position or operations of the Company. 7 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 (which the Company sold during the first quarter of 2003), 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 Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002 Total revenues for the six months ended June 30, 2003 decreased 18.8% to $29.4 million from $36.1 million for the six months ended June 30, 2002. Indoor display revenues decreased $1.5 million or 12.9%. Of this decrease, indoor display equipment rentals and maintenance revenues decreased $1.1 million or 14.9%, primarily due to disconnects and non-renewals of equipment on rental and maintenance on existing contracts in the financial services market, and indoor display equipment sales decreased $405,000 or 9.4%, 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 slowdown. Outdoor display revenues decreased $4.5 million or 26.2%. Of this decrease, outdoor display equipment sales decreased $4.3 million or 31.5%, primarily in the custom outdoor sports business, which decrease resulted mainly from the sale of the custom sports business during the first quarter of 2003 (see Note 4). Outdoor display equipment rentals and maintenance revenues decreased $163,000 or 4.8%, primarily due to the continued expected revenue decline in the outdoor equipment rentals and maintenance bases previously acquired. Entertainment/real estate revenues decreased $811,000 or 11.0%. This decrease is primarily from a decrease in overall admissions and concessions, mainly related to fewer high grossing films. The Company closed its older non-profitable Lake Dillon theatre at the end of January 2003 for a net payment of $34,000 to the landlord. In connection with its newer six-plex theatre in Dillon, Colorado, the Company entered into a 15-year non-compete agreement for $450,000, which was paid in installments during January and April 2003. 8 Total operating income for the six months ended June 30, 2003 decreased 54.9% to $2.1 million from $4.6 million for the six months ended June 30, 2002. Indoor display operating income decreased $1.2 million or 45.5%, primarily as a result of the decrease in revenues in the financial services market. The cost of indoor displays represented 58.5% of related revenues in 2003 compared to 52.7% in 2002. The cost of indoor displays as a percentage of related revenues increased primarily due to higher depreciation expense and the relationship between field service costs of equipment rentals and maintenance increasing and the revenues from indoor equipment rentals and maintenance decreasing. The Company continues to strategically address the field service costs, and recently consolidated its field service center from Norcross, Georgia to its Norwalk, Connecticut headquarters. In addition, the Company initiated certain cost saving measures and recorded a charge for lay-offs and early retirement incentives of approximately $19,000. Indoor display cost of equipment sales decreased $369,000 or 15.5%, primarily due to the decrease in volume. Indoor display cost of equipment rentals and maintenance increased $164,000 or 4.3%, largely due to an increase in depreciation expense. Indoor display general and administrative expenses decreased $95,000 or 3.3% due to continued reduction of certain overhead costs such as sales salaries and travel expenses. Outdoor display operating income decreased $978,000 to a loss of $772,000, as a result of a decrease in outdoor display equipment sales primarily in the custom outdoor sports business, which was sold during the first quarter of 2003 (see Note 4), the continuing expected revenue decline in outdoor equipment rentals and maintenance bases from previous acquisitions and field service costs increasing despite the reduction in revenues from outdoor equipment rentals and maintenance. The Company initiated certain cost saving measures and recorded a charge for lay-offs and early retirement incentives of approximately $47,000. The cost of outdoor displays represented 87.7% of related revenues in 2003 compared to 81.7% in 2002. Outdoor display cost of equipment sales decreased $3.1 million or 28.2%, principally due to the decrease in volume, offset by increased costs associated with the sale of the custom sports business in March 2003 (see Note 4). Outdoor display cost of equipment rentals and maintenance increased $196,000 or 6.6%, primarily due to an increase in field service costs. Outdoor display general and administrative expenses decreased $587,000 or 20.2%, primarily due to sale of the custom sports business during the first quarter of 2003 (see Note 4). Cost of indoor and outdoor equipment rentals and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. Entertainment/real estate operating income decreased $366,000 or 20.5%, primarily due to the decrease in revenues. The cost of entertainment/real estate represented 76.2% of related revenues in 2003 compared to 74.6% in 2002. Cost of entertainment/real estate, which includes film rental costs and depreciation expense, decreased $502,000 or 9.2%, due to the decrease in overall admissions. Entertainment/real estate general and administrative expenses remained level. Corporate general and administrative expenses increased $223,000 or 9.6%, principally resulting from a charge for lay-offs and early retirement incentives of approximately $46,000, increases in certain overhead costs due to pension, medical and insurance costs and benefits, offset by a $768,000 positive impact of the effect of foreign currency rates in 2003 compared to a $400,000 positive impact in 2002. Net interest expense decreased $256,000, which is primarily attributable to the decrease in variable interest rates in 2003 vs. 2002 and a decrease in long-term debt due to the assumption of debt by the purchaser of the custom sports business and regular scheduled payments of long-term debt. The gain on sale of assets relates to the sale of vacant land and the custom sports business (see Note 4). The income from joint venture relates to the operations of the theatre joint venture, MetroLux Theatres, in Loveland, Colorado. The effective tax rate for the six months ended June 30, 2003 and 2002 was 51.0% and 45.0%, respectively. The change in rate is due principally to the non-deductibility of the $229,000 goodwill write- 9 off as a result of the sale of the custom sports business. Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002 Total revenues for the three months ended June 30, 2003 decreased 26.9% to $13.9 million from $19.0 million for the three months ended June 30, 2002. Indoor display revenues decreased $926,000 or 15.4%. Of this decrease, indoor display equipment rentals and maintenance revenues decreased $594,000 or 16.8%, primarily due to disconnects and non-renewals of equipment on rental and maintenance on existing contracts in the financial services market, and indoor display equipment sales decreased $332,000 or 13.4%, 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 slowdown. Outdoor display revenues decreased $3.7 million or 40.8%. Of this decrease, outdoor display equipment sales decreased $3.6 million or 48.9%, primarily in the custom outdoor sports business, which decrease resulted mainly from the sale of the custom sports business during the first quarter of 2003 (see Note 4). Outdoor display equipment rentals and maintenance revenues decreased $62,000 or 3.9%, primarily due to the continued expected revenue decline in the outdoor equipment rentals and maintenance bases previously acquired. Entertainment/real estate revenues decreased $504,000 or 12.7%. This decrease is primarily from a decrease in overall admissions and concessions, mainly related to fewer high grossing films. In connection with its newer six-plex theatre in Dillon, Colorado, the Company entered into a 15-year non-compete agreement for $450,000, which was paid in installments during January and April 2003. Total operating income for the three months ended June 30, 2003 decreased 57.0% to $1.0 million from $2.2 million for the three months ended June 30, 2002. Indoor display operating income decreased $784,000 or 63.1%, primarily as a result of the decrease in revenues in the financial services market. The cost of indoor displays represented 59.8% of related revenues in 2003 compared to 55.3% in 2002. The cost of indoor displays as a percentage of related revenues increased primarily due to the relationship between field service costs of equipment rentals and maintenance increasing and the revenues from indoor equipment rentals and maintenance decreasing. The Company continues to strategically address the field service costs, and recently consolidated its field service center from Norcross, Georgia to its Norwalk, Connecticut headquarters. In addition, the Company initiated certain cost saving measures and recorded a charge for lay-offs and early retirement incentives of approximately $19,000. Indoor display cost of equipment sales decreased $283,000 or 8.5%, primarily due to the change in volume mix. Indoor display cost of equipment rentals and maintenance increased $64,000 or 3.4%, largely due to increased depreciation expense. Indoor display general and administrative expenses increased $140,000 or 9.6%, primarily due to lay-offs and early retirement incentives. Outdoor display operating income decreased $274,000 to a loss of $251,000, as a result of a decrease in outdoor display equipment sales primarily in the custom outdoor sports business, which was sold during the first quarter of 2003 (see Note 4), the continuing expected revenue decline in outdoor equipment rentals and maintenance bases from previous acquisitions and field service costs increasing despite the reduction in revenues from outdoor equipment rentals and maintenance. The Company initiated certain cost saving measures and recorded a charge for lay-offs and early retirement incentives of approximately $47,000. The cost of outdoor displays represented 87.9% of related revenues in 2003 compared to 83.2% in 2002. Outdoor display cost of equipment sales decreased $2.9 million or 48.4%, principally due to the decrease in volume from the sale of the custom outdoor sports business, during the first quarter of 2003 (see Note 4). 10 Outdoor display cost of equipment rentals and maintenance increased $91,000 or 6.0%, primarily due to field service costs. Outdoor display general and administrative expenses decreased $595,000, primarily due to the sale of the custom outdoor sports business during the first quarter of 2003. Entertainment/real estate operating income decreased $207,000 or 21.7%, primarily due to the decrease in revenues. The cost of entertainment/real estate represented 77.5% of related revenues in 2003 compared to 75.1% in 2002. Cost of entertainment/real estate decreased $294,000 or 9.9%, due to the decrease in overall admissions. Entertainment/real estate general and administrative expenses remained level. Corporate general and administrative expenses increased $232,000 or 21.0%, principally resulting from increases in certain overhead costs due to pension, medical and insurance costs and benefits, offset by a $424,000 positive impact of the effect of foreign currency rates in 2003 compared to a $240,000 positive impact in 2002. Net interest expense decreased $62,000, which is primarily attributable to the decrease in variable interest rates in 2003 vs. 2002 and a decrease in long-term debt due to the assumption of debt by the purchaser of the custom sports business in March 2003 and regular scheduled payments. The gain on sale of assets relates to the sale of vacant land (see Note 4). The income from joint venture relates to the operations of the theatre joint venture, MetroLux Theatres, in Loveland, Colorado. The effective tax rate for the three months ended June 30, 2003 and 2002 was 50.2% and 45.0%, respectively. The change in rate is due principally to an increase in state taxes. Liquidity and Capital Resources The regular quarterly cash dividend for the second quarter of 2003 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 May 29, 2003, payable to stockholders of record as of June 30, 2003 and was paid July 25, 2003. During the first quarter of 2003, the Company refinanced its senior debt. The refinancing consisted of two term loans totaling $17.0 million and a revolving line of credit of up to $5.0 million at variable interest rates ranging from LIBOR plus 1.75% to Prime plus 0.25% and matures September 30, 2005. At June 30, 2003, $16.5 million was outstanding under the term loans and the entire revolving credit facility was available as none had been drawn. The bank credit agreement contains certain financial covenants, which include a fixed charge coverage ratio of 1.0 to 1.0, a total funded ratio of 5.0 to 1.0, a leverage ratio of 3.0 to 1.0 and maintaining a tangible net worth of not less than $19.5 million. At June 30, 2003 the Company was in compliance with such financial covenants. Payments of long-term debt due, including the $17.0 million term loans that mature September 30, 2005, and the 7.5% convertible subordinated notes that mature December 1, 2006, and the future minimum lease payments due under operating leases for the remainder of 2003 and the next four years are as follows:
Remainder of In thousands 2003 2004 2005 2006 2007 - ------------ ---- ---- ---- ---- ---- Long-Term Debt $1,505 $2,982 $14,781 $31,307 $1,135 Operating Leases 242 428 359 292 118 ------ ------ ------- ------- ------ Total $1,747 $3,410 $15,140 $31,599 $1,253 ====== ====== ======= ======= ======
Cash and cash equivalents increased $3.8 million for the six months ended June 30, 2003 compared to a decrease of $915,000 in 2002. The increase in 2003 is primarily attributable to cash received on the sale of vacant land and the custom sports business, offset by investment in equipment and a repayment of long- 11 term debt. Cash flows from investing activities also increased $450,000 from the theatre joint venture. The increase in 2002 is primarily attributable to cash flows from operating activities and from financing activities offset by the investment in equipment manufactured for rental and other equipment purchases. The Company reduced its long-term debt, including the current portion, during the six months ended June 30, 2003 by $6.3 million, principally from the assumption of $4.2 million of Industrial Revenue Bonds by the purchaser of the custom sports business and scheduled payments of long-term debt. 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 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 is exposed to foreign currency exchange rate risk mainly as a result of investments in its Australian and Canadian subsidiaries. The Company may, from time to time, enter into derivative contracts to manage its interest risk. The Company does not enter into derivatives for trading or speculative purposes. At June 30, 2003, the Company was not involved in any derivative financial instruments. A one percentage point change in interest rates would result in an annual interest expense fluctuation of approximately $316,000. 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 $398,000, based on dealer quotes, considering current exchange rates. Item 4. Controls and Procedures Disclosure Controls and Procedures. The Company's President and Co-Chief Executive Officer, Michael R. Mulcahy, the Company's Executive Vice President and Co-Chief Executive Officer, Thomas Brandt and the Company's Executive Vice President and Chief Financial Officer, Angela D. Toppi evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by 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 Officer, and Angela D. Toppi, the Company's Executive Vice President and Chief Financial Officer, have concluded that these controls and procedures are effective as of the end of the period covered by this quarterly report. Changes in Internal Control over Financial Reporting. During the fiscal quarter ended June 30, 2003, there have been no changes in the Company's internal control over financial reporting, identified in connection with our evaluation thereof, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 12 Part II - Other Information Item 4. Submission of Matters to a Vote of Stockholders The Annual Meeting of Stockholders of Trans-Lux Corporation was held on May 29, 2003 for the purpose of electing directors and approving the appointment of auditors as set forth below. All of management's nominees for directors for a three-year term as listed in the proxy statement were elected by the following vote: For Not For --- ------- Steven Baruch 3,679,366 92,097 Thomas Brandt 3,677,961 93,502 Howard M. Brenner 3,679,366 92,097 The following directors are continuing their terms as directors: Matthew Brandt, Two-Years Remaining Richard Brandt, One-Year Remaining Jean Firstenberg, One-Year Remaining Robert B. Greenes, Two-Years Remaining Gene Jankowski, One-Year Remaining Victor Liss, One-Year Remaining Howard S. Modlin, Two-Years Remaining Michael R. Mulcahy, Two-Years Remaining The recommendation to retain Deloitte & Touche LLP as the independent auditors for the Corporation was approved by the following vote: For Against Abstain --- ------- ------- Totals 3,700,694 23,063 47,706 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10 Consulting Agreement with Richard Brandt dated as of June 1, 2003. 31.1 Certification of Michael R. Mulcahy, President and Co-Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Thomas Brandt, Executive Vice President and Co-Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.3 Certification of Angela D. Toppi, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 13 32.1 Certification of Michael R. Mulcahy, President and Co-Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Thomas Brandt, Executive Vice President and Co-Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.3 Certification of Angela D. Toppi, Executive Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K. During the quarter for which this report on Form 10-Q is filed, the registrant filed the following: Form 8-K dated May 14, 2003, press release pertaining to the financial performance for the first quarter of 2003 results. Form 8-K dated June 2, 2003, press release pertaining to the election of a new chairman. 14 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: August 14, 2003 by /s/ Angela D. Toppi -------------------- Angela D. Toppi Executive Vice President and Chief Financial Officer 15 EX-10 3 jun03ex10.txt EXHIBIT 10 CONSULTING AGREEMENT Exhibit 10 CONSULTING AGREEMENT made as of June 1, 2003, by and between TRANS-LUX CORPORATION, a Delaware corporation, transacting business at 110 Richards Avenue, Norwalk, Connecticut (hereinafter referred to as "Company"), and RICHARD BRANDT, residing at P.O. Box 839, Tesuque, New Mexico 87574 (hereinafter referred to as "Brandt"). WHEREAS, the parties have heretofore entered into an employment and consulting agreement dated as of September 1, 2000, as amended; and WHEREAS, the parties desire to enter into a new agreement; and WHEREAS, Brandt for approximately fifty-three (53) years has been continuously engaged as an employee, officer, consultant and/or director of the Company, and for approximately thirty-seven (37) years and thirty-two (32) years respectively has been an executive officer and chief executive manager of the affairs of the Company and its subsidiaries and affiliates; and WHEREAS, Brandt has had a long, continuously successful experience and performance in the business operations of the Company and has a unique and deep knowledge of the management, needs, trade secrets, know-how and affairs of the Company and its subsidiaries and affiliates; and WHEREAS, by reason of all of the aforesaid, Brandt's services are uniquely valuable and advantageous to the Company; and WHEREAS, it is the considered judgment of the Board of Directors of the Company that it is in the best interests and to the advantage of the Company that it secure to itself additional commitments from Brandt for the performance of consulting services to the Company to the extent and upon the terms hereinafter provided; NOW, THEREFORE, in consideration of the mutual premises herein contained, the parties agree with each other that the following is their agreement ("Agreement") in its entirety effective June 1, 2003: 1 1. The Company hereby engages Brandt to perform consulting services to the Company on the terms and conditions hereinafter set forth, and Brandt hereby accepts such engagement with the Company for a term ("Term") of eight years and seven months commencing on June 1, 2003 and ending on December 31, 2011. Notwithstanding the foregoing, (i) Brandt may terminate the Term of this Agreement at any time, on no less than sixty (60) days prior written notice. 2. (a) During the Term, Brandt will render to the Company such consulting services as may be reasonably assigned to him from time to time by the Board of Directors of the Company, or by the Executive Committee of the Company, provided that such services are of a type, dignity and nature appropriate to the former Chairman of the Board, chief executive officer and executive manager of the Company and further provided that: (i) such consulting services shall be required to be rendered by him only in Santa Fe, New Mexico or such other location in the United States designated by Brandt, (ii) Brandt's inability to act as such consultant by reason of illness, disability or lack of capacity shall not be deemed a breach of this Agreement, and (iii) in Brandt's sole opinion the rendition of such services shall not be detrimental or injurious to his health. It is further agreed that such services shall not require more than sixty (60) hours service during any month; that Brandt's unavailability at any particular time shall not constitute a breach of this Agreement; that Brandt may, in his sole opinion, determine that such services may be rendered by telephone, mail or other means of communication; and that Brandt's failure to render such services because of his absence from Santa Fe, New Mexico or such other location in the United States designated by Brandt shall not be deemed a breach of this Agreement. Brandt shall be the sole and absolute judge of his ability to render such consulting services, and Brandt's conclusion that the rendition thereof would be harmful to him shall absolve and excuse Brandt from the rendition of such consulting services, 2 but the payments and/or benefits to Brandt shall continue to be made as provided in Paragraph 3(f). (b) During the Term the Company shall use its best efforts to nominate and elect Brandt from year to year as a director, and a member of the Executive Committee of the Company. In the event that Brandt shall not be elected at all times during the Term hereof, as a member of its Board of Directors, and as a member of the Executive Committee, unless Brandt in writing declines to so serve or resigns as a director or member of the Executive Committee, the same shall, at Brandt's option, constitute a material breach of this Agreement by the Company unless the Company shall completely cure such breach within thirty (30) days from receiving notice from Brandt specifically setting forth the claimed breach. Upon (i) failure of the Company to cure such breach within such thirty (30) day period, or (ii) in the event there is a "Change-in-Control" as hereinafter defined, Brandt, at his option, shall at any time thereafter be entitled to terminate his obligations hereunder by notice ("Notice") to the Company, specifically including the rendition of any services by him to the Company. After the giving of the Notice, the Company shall pay to Brandt, notwithstanding such termination, all sums payable or otherwise provided to Brandt under this Agreement for the balance of the Term, including, but not limited to: (i) the fees, Profit Participation and Bonus payments provided to be paid to him pursuant to Paragraphs 3(a), (b) and (c) for the period from the date of such Notice of termination through December 31, 2011; and (ii) the insurance and other benefits provided under this Agreement. The aforesaid sums and benefits shall be paid or provided to Brandt as follows: (i) the aggregate fees provided to be paid for the balance of the Term pursuant to Paragraph 3(a) shall be paid to Brandt in one lump sum ten (10) days after such Notice of termination, in the same aggregate amounts as are so provided in said Paragraph 3(a) to be paid for the balance of the Term (adjusted for the CPI Adjustment, as hereinafter defined, to the date of such payment); and (ii) the sums provided to be paid pursuant to Paragraphs 3(b) 3 and (c) and the insurance and other benefits provided under this Agreement, shall be paid or provided to Brandt in the same manner, at the same times, and in the same amounts as is provided in the said Paragraphs (b) and (c) and in Paragraph 4 and elsewhere in the Agreement to be paid or provided during the balance of the Term. (c) Nothing contained in this Agreement shall in any way limit or prevent Brandt from: (i) being connected with, in any manner whatsoever, including, without limiting the generality of the foregoing, as owner, investor, executive or director or otherwise in any business whatsoever, including, without limiting the generality thereof, the business of producing, distributing or exhibiting motion pictures, or the business of film booking and buying, so long as the business is not directly competitive with any business of the Company; (ii) owning or dealing in the stock or securities of any corporation whose stocks or securities are traded on any public market provided that such holdings of Brandt in any individual corporation that is a direct competitor of the Company shall not exceed five (5%) percent of the outstanding securities of any class of any such corporation. (d) A "Change-in-Control" shall occur if, after the date hereof (i) any Person is or becomes the beneficial owner, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions of shares of capital stock of the Company entitling such Person to exercise 20% or more of the total voting power of all shares of capital stock of the Company entitled to vote generally in the election of directors; (ii) the Company sells or transfers all or substantially all of the assets of the Company to another Person; (iii) there occurs any consolidation of the Company with, or merger of the Company into, any other 4 Person, any merger of another Person into the Company other than (a) a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock and Class B Stock, (b) a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock, or (c) a transaction in which the stockholders of the Company immediately prior to such transaction owned, directly or indirectly, immediately following such transaction, a majority of the combined voting power of the voting capital stock of the corporation resulting from the transaction, such stock to be owned by such stockholders in substantially the same proportion as their ownership of the voting stock of the Company immediately prior to such transaction; (iv) a change in the Board of Directors in which the individuals who constituted the Board of Directors at the beginning of the 24-month period immediately preceding such change (together with any other director whose election by the Board of Directors or whose nomination for election by the stockholders of the Company was approved by a vote of at least a majority of the directors then in office either who were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office; or (v) the Common Stock is the subject of a "Rule 13e-3 transaction" as defined under the Securities Exchange Act of 1934 ("Exchange Act"). For purposes of this Section 2, the term "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. Such term also (i) includes any syndicate or group deemed to be a "Person" under Section 13(d)(3) of the Exchange Act, but (ii) excludes Brandt, the Company, any Subsidiary, any existing Person (including, directly or indirectly, the immediate family (parents, spouse, children, stepchildren, brothers or sisters) of any such Person), who currently beneficially owns shares of the Company's capital stock with 5 20% or more of the voting power as described above, or any current or future employee or director benefit plan of the Company or any Subsidiary of the Company or any entity holding capital stock of the Company for or pursuant to the terms of such plan, or any underwriter engaged in a firm commitment underwriting in connection with a public offering of capital stock of the Company. "Subsidiary" means a corporation of which more than 50% of the issued and outstanding stock entitled to vote for the election of directors (otherwise than by reason of default in dividends) is at the time owned or controlled, directly or indirectly, by the Company. 3. (a) During the Term the Company agrees to pay Brandt, in addition to Directors' fees and fees as a member of the Executive Committee and other Committees, if any, of the Board of Directors of the Company (such fees to be paid in the same amounts as non-employee directors are paid), a sum at the rate of $377,464.83 per annum, subject to the CPI Adjustment for each future calendar year from 2003 CPI, as hereinafter provided. (b) During the Term the Company also agrees to pay Brandt (i) an amount equal to one and one-half percent (1-1/2%) of the Company's pre-tax consolidated earnings, as hereinafter defined, in each calendar year (including the full 2003 calendar year) during the Term hereof, (hereinafter the amounts payable under this Paragraph 3(b) are collectively referred to as the "Profit Participation"). Such pre-tax consolidated earnings shall be fixed and determined by the independent certified public accountants regularly employed by the Company. Such independent certified public accountants, in ascertaining such pre-tax consolidated earnings, shall apply all accounting practices and procedures heretofore applied by the Company's independent certified public accountants in arriving at such annual pre-tax consolidated earnings as disclosed in the Company's annual statement for that year of profit and loss released to its stockholders. The determination by such independent certified public accountants shall be final, absolute and controlling upon the parties. Payment of such amount, if 6 any is due, shall be made for each year by the Company to Brandt within thirty (30) days after such accountant shall have furnished an opinion on such statement to the Company disclosing the Company's pre-tax consolidated earnings for such calendar year. The Company undertakes to use its reasonable efforts to cause said accountants to prepare and furnish such opinion within one hundred thirty (130) days from the close of each such fiscal year and to cause said independent certified public accountants, concomitantly with the delivery of such opinion by said accountants to it, to deliver a copy of such statement to Brandt. The Company shall not have any liability to Brandt arising out of any delays with respect to the foregoing. (c) The Board of Directors of the Company, upon the recommendation of the Compensation Committee of the Board of Directors, shall consider no later than May of each year the grant of a bonus ("Bonus") to Brandt based upon the performance of Brandt during the immediate preceding year during the Term. In determining whether to grant any such Bonus and the amount thereof, consideration may be given to the performance of the Company in light of competitive and economic conditions. Notwithstanding the foregoing, the Company shall pay to Brandt the highest Bonus applicable for each calendar year ending December 31, commencing December 31, 2003, in the respective amounts hereinafter set forth, in the event the Company's pre-tax consolidated earnings for any year during the Term determined in accordance with Paragraph 3(b), meets or exceeds the respective amounts hereinafter set forth. If Pre-Tax Consolidated Annual Non-Cumulative Level of Earnings in Any Year Exceed Bonus Payable $ 250,000 5,000 500,000 10,000 750,000 15,000 1,000,000 20,000 1,250,000 31,250 1,500,000 37,500 1,750,000 43,750 2,000,000 50,000 7 Over 2,000,000 $ 50,000 plus 2-1/2% of each full increment of $250,000 over $2,000,000, the total annual bonus not to exceed $140,310 (e.g., if $2,900,000, $50,000 plus 2-1/2% of $750,000 or $50,000 plus $18,750 = $68,750). The maximum of $140,310 payable hereunder for 2003 shall be subject to the CPI Adjustment for years following 2003 as hereinafter provided. (d) Notwithstanding Paragraphs 3(b) and 3(c) of this Agreement, for purposes of Paragraphs 3(b) and 3(c) of this Agreement, there shall be excluded from the calculation of pre-tax consolidated earnings during the Term of this Agreement (i) the amount by which (x) any item or items of unusual or extraordinary gain in the aggregate exceeds 20% of the Company's net book value as at the end of the immediate preceding calendar year or (y) any item of unusual or extraordinary loss in the aggregate exceeds 20% of the Company's net book value as at the end of the immediate preceding calendar year, in each case in (x) and (y) above as determined in accordance with generally accepted accounting principles, and items of gain and loss shall not be netted against each other for purpose of the above 20% calculation, (ii) any direct effect on pre-tax consolidated earnings of write-offs of existing prepaid financing costs prior to the normal amortization schedule of such financings provided however that for the purposes of this Paragraph 3(d), such financing costs shall thereafter be amortized in accordance with such normal amortization schedule of such financings, or (iii) any contractual Bonuses and/or Profit Participations accrued or paid to Brandt and employees. Each Bonus payment shall be made in accordance with the time provisions set forth in Paragraph 3(b). Notwithstanding the foregoing, the Board may, in any event, even if any of the aforesaid pre-tax consolidated earnings levels are not exceeded, grant Brandt the aforesaid Bonus or any portion thereof for any such year or any other bonus based on his performance. In the event Brandt is entitled to or is awarded a Bonus, the Company shall notify Brandt thereof no later than May 31 following such year and Brandt shall have the option of 8 receiving such Bonus in (i) cash, (ii) Common Stock and/or Class A Stock of the Company or (iii) cash and Common Stock and/or Class A Stock in such ratio as Brandt elects. Such election shall be made by Brandt by written notice to the Company and the Company shall pay said Bonus in the form elected by Brandt within fourteen (14) days after receipt of Brandt's written notice thereof. Upon Brandt's failure to make such election within sixty (60) days after notice to Brandt from the Company of the Bonus, such Bonus shall be paid in cash to Brandt on the day following the expiration of said sixty (60) day period. In the event Brandt elects to receive any such Bonus in Common Stock and/or Class A Stock of the Company, the same shall be valued at the latest closing price of such Common Stock and/or Class A Stock, as the case may be, on (i) the American Stock Exchange (or other principal stock exchange on which the Company's Common Stock and/or Class A Stock is listed or, (ii) if not so listed, on the NASDAQ National Market System ("NMS") or any comparable system if listed thereon, or (iii) if not quoted on the NMS or a comparable system, at the mean between the average of the high and low bid and asked prices on the over-the-counter market) on the date of Brandt's election. If there is no trade on such date on any such exchange or market, then the closing price on the date on which it last traded. (e) The Company may make appropriate deductions from the said payments required to be made in this Paragraph 3 to Brandt, to comply with all governmental withholding requirements. The payments provided in Paragraph 3(a) shall be made in equal monthly installments on the 15th day of each month. The payments provided to be made to Brandt pursuant to said Paragraph 3(a) and the maximum Bonus payable under Paragraph 3(c) shall each be appropriately adjusted upward ("CPI Adjustment") for inflation at the beginning of each calendar year commencing in 2004 based on the United States Department of Labor Bureau of Labor Statistics, Consumer Price Index, United States City Average. 9 The CPI Adjustment shall be paid retroactively when determined, for payments already made in the applicable calendar year. Brandt shall also be entitled to reimbursement from the Company for the amount of the social security payments payable by Brandt based on amounts paid to him under this Agreement to the extent such social security payments would have been made by the Company if the fees under Paragraph 3(a) were paid as a salary. Any such reimbursement payable by the Company hereunder shall be grossed up to take into account and reimburse Brandt for any tax consequences resulting therefrom. This Agreement shall not be deemed abrogated or terminated if the Company, in its discretion, shall determine to increase the compensation of Brandt for any period of time, or if Brandt shall accept such increase. (f) If, during the Term of this Agreement, Brandt shall be prevented from performing or be unable to perform, or fail to perform his duties by reason of illness or any other incapacity or disability, the payments and/or benefits provided in Paragraphs 3 and 4 and elsewhere in this Agreement to be made or provided to Brandt, shall continue to be made or provided to Brandt for the balance of the Term, without any reduction whatsoever, at the same times, in the same manner, and in the same amounts as provided in Paragraphs 3 and 4 and elsewhere in this Agreement. If Brandt shall die during the Term, the Company shall pay to Brandt's widow and/or issue, as provided below in this paragraph, an amount equal to the aggregate payments provided to be made under Paragraphs 3 (a), (b) and (c) that otherwise would have been payable to Brandt during the Term but for his death, for the balance of the Term through December 31, 2011, without any reduction whatsoever. In calculating the respective payments hereunder to be made under Paragraphs 3(b) and 3(c), such amounts shall respectively equal (i) the highest Profit Participation provided for in Paragraph 3(b) hereof and (ii) the highest Bonus payment provided for in Paragraph 3(c) hereof, received in each case by 10 Brandt during the seven (7) year period preceding his death (including for this calculation any payments of Profit Participation and Bonus paid to Brandt under any prior employment agreement). Such payments of the amounts provided in Paragraphs 3(a), (b) and (c) shall be made at the same times, in the same manner, and in the same amount as provided in Paragraph 3(a)and for the amounts in Paragraphs 3 (b) and (c) as adjusted herein, as follows: during the first four (4) years subsequent to Brandt's death sixty percent (60%) to Brandt's widow, if she shall survive him, and in such event the remaining forty percent (40%) shall be equally divided among his surviving issue, per stirpes and not per capita. After such four (4) year period the percentages shall be fifty percent (50%) to Brandt's widow and the remaining fifty percent (50%) shall be equally divided among his surviving issue, per stirpes and not per capita. In the event that Brandt's wife shall predecease him or, having survived him, shall die during the balance of the Term ending December 31, 2011, the entire amounts thereafter payable during the balance of the Term shall be payable as provided in Paragraph 3(a), and Paragraphs (b) and (c) as adjusted herein, in equal shares to his surviving issue, per stirpes and not per capita. 4. (a) The Company will continue to furnish to Brandt (provided Brandt is insurable) a policy of life insurance upon Brandt's life, the term of which shall continue during the Term through December 31, 2011. Such policy shall provide that Brandt, upon the expiration of said policy, shall have a conversion right privilege, if same is available. Said policy shall provide for a death benefit of $250,000 payable as follows: Sixty (60%) percent of the death benefit of such policy to Helen K. Brandt, his wife, and in such event the remaining forty (40%) percent of such death benefit shall be equally divided among his surviving issue, per stirpes and not per capita. In the event that Brandt's wife shall predecease him, then such policy shall provide that the entire death benefit payable thereunder shall be payable in equal shares to his surviving issue, per stirpes and not per capita. 11 If Brandt shall not be insurable, or if the amount of such insurance is less than $250,000, then, upon Brandt's death during the Term hereof, the Company shall in every event, pay to Brandt's said widow and/or issue as provided above in this Paragraph 4(a), the amount of such uninsured portion within 30 days after Brandt's said death. For example, if the amount of insurance is $130,000, then $120,000 shall be paid by the Company to Brandt's said widow and/or issue within 30 days after Brandt's death. (b) The Company shall also provide to Brandt and his wife during the Term, at the Company's expense, medical insurance coverage for Brandt and his wife at least at the same levels as in effect for him on the date of the execution of this Agreement, as well as any other group insurance plan, hospitalization plan (subject to Medicare reimbursements), medical service plan or any other benefit plan which the Company may have in effect during the Term. Included in such plans and benefits that the Company will make available or pay to Brandt are travel and accident insurance and Christmas bonuses to the extent the same are made available or paid to the senior executives of the Company. Brandt shall also be entitled to any other insurance and other employee benefits, including life insurance, which are available to senior executives of the Company. Notwithstanding the foregoing, Brandt acknowledges and agrees that (i) Brandt is accepting $50,000 of group term life insurance in place of the larger amount of group term life that Brandt otherwise would be entitled to and (ii) Brandt is not entitled to participate in the Company's existing pension plan. The Company shall continue to pay for and/or reimburse Brandt or his widow for premiums paid (similarly grossed up for tax purposes) for a second to die life insurance policy on their lives which is presently in place. Brandt's widow shall also be entitled to receive health benefits as and to the extent provided by resolution of the Board of Directors adopted on September 23, 1999. 12 5. The Company agrees that during the Term hereof Brandt shall be provided with appropriate secretarial and administrative support, office space and office equipment in connection with his services under this Agreement. The Company shall also reimburse Brandt for all out-of-pocket expenses incurred by him in furtherance of the business and activities of the Company, including travel, board and hotel expenses. During the Term hereof, Brandt shall be entitled to reasonable periods of sick-leave in each year and vacations not in excess of a total of six (6) weeks in any one year. The Company shall also furnish Brandt with a car and driver, as may be requested by Brandt during the Term hereof. 6. A waiver by either party of any of the terms and conditions of this Agreement in any instance shall be in writing and shall not be deemed or construed to be a waiver of such term or condition for the future, or of any subsequent breach thereof. 7. Any and all notices required or permitted to be given hereunder shall be in writing and shall be deemed to have been given when deposited in the United States mails, certified or registered, addressed as follows: To Brandt: Richard Brandt P.O. Box 839 Tesuque, New Mexico 87574 To Company: Trans-Lux Corporation 110 Richards Avenue Norwalk, Connecticut 06854 Att: President Either party may, by written notice to the other, change the address to which notices are to be addressed. 8. The Company may itself, or through any of its subsidiaries or affiliates, make payment to Brandt of the compensation due him hereunder, provided, however, that if such 13 payment be made by a company other than the Company, that fact shall not relieve the Company of its obligations hereunder, except with respect to the extent of the amounts so paid. 9. The provisions hereof shall be binding upon and shall inure to the benefit of Brandt, his heirs, executors and administrators and the Company and its successors. During the Term of this Agreement, if the Company shall at any time be consolidated or merged into any other corporation, or if substantially all of the assets of the Company are transferred to any other corporation, the provisions of this Agreement shall be binding upon and inure to the benefit of the corporation resulting in such merger, or to which such assets shall have been transferred, and this provision shall apply in the event of any subsequent merger, consolidation or transfer. 10. Whenever in this Agreement the term "issue" is used it shall mean natural issue except in the case of Brandt's grandchildren issue shall include grandchildren legally adopted by Brandt's natural children. 11. This Agreement contains all the understandings and agreements arrived at between the parties in relation to the subject matter and supersedes as of June 1, 2003 the amended and restated agreement between the parties dated as of September 1, 2000. Notwithstanding the foregoing (i) the right of Brandt to change designees was waived and deleted as of July 1, 1998 and (ii) all rights and benefits which accrued or accrue to Brandt on or prior to June 1, 2003 shall not be abrogated by this new Agreement and shall remain in full force and effect and this Agreement shall not affect any agreement other than said September 1, 2000 employment agreement between Brandt and the Company and shall not affect any insurance agreements. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 14 12. This Agreement shall not be varied, altered, modified, changed or in any way amended, except by an instrument in writing, executed by the parties hereto, or their legal representatives. IN WITNESS WHEREOF, Brandt has executed and the Company has caused its President, on its behalf, to execute this Agreement, on the day and year first above written. TRANS-LUX CORPORATION By:/s/ Angela D. Toppi ------------------------------- Title: Executive Vice President /s/ Richard Brandt ------------------------------- Richard Brandt 15 EX-31 4 exhibit31.txt CERTIFCATIONS EXHIBIT 31.1 CERTIFICATION I, Michael R. Mulcahy, President and Co-Chief Executive Officer of Trans-Lux Corporation certify that: 1. I have reviewed this Report on Form 10-Q of Trans-Lux Corporation; 2. Based on my knowledge, this 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 Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Report; 4. The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have; a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b) evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and c) disclosed in this Report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and 5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors: a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. /s/ Michael R. Mulcahy ---------------------------------------- Date: August 14, 2003 President and Co-Chief Executive Officer Michael R. Mulcahy EXHIBIT 31.2 CERTIFICATION I, Thomas Brandt, Executive Vice President and Co-Chief Executive Officer of Trans-Lux Corporation certify that: 1. I have reviewed this Report on Form 10-Q of Trans-Lux Corporation; 2. Based on my knowledge, this 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 Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Report; 4. The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have; a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b) evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and c) disclosed in this Report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and 5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors: a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. /s/ Thomas Brandt ---------------------------- Date: August 14, 2003 Executive Vice President and Co-Chief Executive Officer Thomas Brandt EXHIBIT 31.3 CERTIFICATION I, Angela D. Toppi, Executive Vice President and Chief Financial Officer of Trans-Lux Corporation certify that: 1. I have reviewed this Report on Form 10-Q of Trans-Lux Corporation; 2. Based on my knowledge, this 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 Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Report; 4. The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have; a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b) evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and c) disclosed in this Report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and 5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors: a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. /s/ Angela D. Toppi ---------------------------- Date: August 14, 2003 Executive Vice President and Chief Financial Officer Angela D. Toppi EX-32 5 exhibit32.txt CERTIFICATIONS EXHIBIT 32.1 CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Trans-Lux Corporation (the "Company") for the quarter ended June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael R. Mulcahy, President and Co-Chief Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify to the best of my knowledge that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This Certification accompanies this Form 10-Q and shall not be deemed as having been filed for purposes of Section 18 of the Securities Exchange Act of 1934. /s/ Michael R. Mulcahy ---------------------------------------- Date: August 14, 2003 President and Co-Chief Executive Officer Michael R. Mulcahy EXHIBIT 32.2 CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Trans-Lux Corporation (the "Company") for the quarter ended June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas Brandt, Executive Vice President and Co-Chief Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify to the best of my knowledge that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This Certification accompanies this Form 10-Q and shall not be deemed as having been filed for purposes of Section 18 of the Securities Exchange Act of 1934. /s/ Thomas Brandt ---------------------------- Date: August 14, 2003 Executive Vice President and Co-Chief Executive Officer Thomas Brandt EXHIBIT 32.3 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Trans-Lux Corporation (the "Company") for the quarter ended June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Angela D. Toppi, Executive Vice President and Chief Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify to the best of my knowledge that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This Certification accompanies this Form 10-Q and shall not be deemed as having been filed for purposes of Section 18 of the Securities Exchange Act of 1934. /s/ Angela D. Toppi ---------------------------- Date: August 14, 2003 Executive Vice President and Chief Financial Officer Angela D. Toppi -----END PRIVACY-ENHANCED MESSAGE-----