-----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, Pw/f4gZhs/ACz9+W4hy+3GXhNHt8OtArbtwD8JC9BworXOQa3Yj/qA/aH+Px+7zM UGd7DpuB4LkbOUX2FsORJQ== 0000099106-04-000062.txt : 20040816 0000099106-04-000062.hdr.sgml : 20040816 20040816144219 ACCESSION NUMBER: 0000099106-04-000062 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040816 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: 04977995 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 jun0410q.txt TRANS-LUX 10Q FOR QUARTER ENDED JUNE 30,2004 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, 2004 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 - --------- ------------------------------ ------------------ 08/13/04 Common Stock - $1.00 Par Value 973,217 08/13/04 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 (unaudited) Item 1. Consolidated Balance Sheets - June 30, 2004 and December 31, 2003 1 Consolidated Statements of Operations - Three and Six Months Ended June 30, 2004 and 2003 2 Consolidated Statements of Cash Flows - Six Months Ended June 30, 2004 and 2003 3 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures about Market Risk 14 Item 4. Controls and Procedures 14 Part II - Other Information Item 4. Submission of Matters to a Vote of Stockholders 15 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 17 Exhibits
Part I - Financial Information TRANS-LUX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited)
June 30 December 31 In thousands, except share data 2004 2003 - ------------------------------------------------------------------------------------------------------------ ASSETS Current assets: Cash and cash equivalents $ 13,827 $ 12,022 Available-for-sale securities 506 393 Receivables, less allowance of $953 - 2004 and $1,092 - 2003 6,193 5,170 Unbilled receivables 1,115 729 Inventories 5,054 5,647 Prepaids and other 760 956 Assets of discontinued operation - 1,930 -------- -------- Total current assets 27,455 26,847 -------- -------- Rental equipment 91,524 89,560 Less accumulated depreciation 52,474 48,654 -------- -------- 39,050 40,906 -------- -------- Property, plant and equipment 37,419 41,742 Less accumulated depreciation and amortization 8,901 11,763 -------- -------- 28,518 29,979 Goodwill 1,004 1,035 Other assets 6,074 3,255 -------- -------- TOTAL ASSETS $102,101 $102,022 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,965 $ 1,535 Accrued liabilities 7,181 6,578 Current portion of long-term debt 2,654 2,637 Liabilities of discontinued operation - 414 -------- -------- Total current liabilities 11,800 11,164 -------- -------- Long-term debt: 7 1/2% convertible subordinated notes due 2006 12,309 30,177 8 1/4% limited convertible senior subordinated notes due 2012 17,868 - 9 1/2% subordinated debentures due 2012 1,057 1,057 Notes payable 24,478 29,271 -------- -------- 55,712 60,505 Deferred credits, deposits and other 4,652 2,052 Deferred income taxes 5,029 4,265 -------- -------- Stockholders' equity: Capital stock Common - $1 par value - 5,500,000 shares authorized 2,452,900 shares issued in 2004 and 2003 2,453 2,453 Class B - $1 par value - 1,000,000 shares authorized 287,505 shares issued in 2004 and 2003 287 287 Additional paid-in-capital 13,901 13,901 Retained earnings 21,278 20,490 Accumulated other comprehensive loss (1,173) (1,258) -------- -------- 36,746 35,873 Less treasury stock - at cost - 1,479,714 and 1,479,688 shares in 2004 and 2003 (excludes additional 287,505 shares held in 2004 and 2003 for conversion of Class B stock) 11,838 11,837 -------- -------- Total stockholders' equity 24,908 24,036 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $102,101 $102,022 ======== ======== - -------------------------------------------------------------------------------------------------------------- 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 2004 2003 2004 2003 - ----------------------------------------------------------------------------------------------------------------------- Revenues: Equipment rentals and maintenance $ 4,371 $ 4,451 $ 8,619 $ 9,433 Equipment sales 5,242 5,645 10,102 12,749 Theatre receipts and other 3,499 3,435 6,720 6,542 ------- ------- ------- ------- Total revenues 13,112 13,531 25,441 28,724 ------- ------- ------- ------- Operating expenses: Cost of equipment rentals and maintenance 3,393 3,502 6,544 7,004 Cost of equipment sales 3,623 4,026 6,878 9,632 Cost of theatre receipts and other 2,651 2,663 4,949 4,983 ------- ------- ------- ------- Total operating expenses 9,667 10,191 18,371 21,619 ------- ------- ------- ------- Gross profit from operations 3,445 3,340 7,070 7,105 General and administrative expenses 3,972 4,298 6,784 8,477 Interest income 19 4 52 33 Interest expense (941) (997) (1,889) (1,999) Gain on sale of assets 2,536 2,629 2,536 4,207 Other income (expense) 32 (129) 44 (129) Income from continuing operations before income taxes, ------- ------- ------- ------- income from joint venture and discontinued operation 1,119 549 1,029 740 Provision for income taxes 515 412 534 658 Income from joint venture 123 163 255 261 ------- ------- ------- ------- Income from continuing operations 727 300 750 343 Income from discontinued operation, net of income taxes 112 268 127 492 ------- ------- ------- ------- Net income $ 839 $ 568 $ 877 $ 835 ======= ======= ======= ======= Earnings per share continuing operations Basic $0.58 $0.24 $0.60 $0.27 Diluted $0.28 $0.18 $0.40 $0.27 Earnings per share discontinued operation Basic $0.09 $0.21 $0.10 $0.39 Diluted $0.03 $0.08 $0.03 $0.14 Total earnings per share Basic $0.67 $0.45 $0.70 $0.66 Diluted $0.31 $0.26 $0.43 $0.42 Average common shares outstanding Basic 1,261 1,261 1,261 1,261 Diluted 4,022 3,418 3,725 3,418 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 2004 2003 - ------------------------------------------------------------------------------------------------------------- Cash flows from operating activities Net income $ 877 $ 835 Income from discontinued operation 127 492 -------- -------- Income from continuing operations 750 343 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,845 4,962 Income from joint venture (255) (261) Deferred income taxes 780 1,063 Gain on sale of assets (2,536) (4,207) Write down of available-for-sale securities - 129 Gain on sale of securities (11) - Changes in operating assets and liabilities: Receivables (1,409) 870 Inventories 593 554 Prepaids and other assets (121) (511) Accounts payable and accruals 832 (1,007) Deferred revenue, deposits and other 383 (463) -------- -------- Net cash provided by operating activities 3,851 1,472 -------- -------- Cash flows from investing activities Equipment manufactured for rental (1,964) (1,917) Purchases of property, plant and equipment (1,811) (110) Purchases of available-for-sale securities (239) - Proceeds from sale of securities 100 - Proceeds from joint venture 150 450 Proceeds from sale of assets 7,112 6,556 -------- -------- Net cash provided by investing activities 3,348 4,979 -------- -------- Cash flows from financing activities Proceeds from long-term debt 19,481 17,000 Payments of long-term debt (24,257) (19,191) Cash dividends (88) (88) Purchase of treasury stock (1) - -------- ------- Net cash used in financing activities (4,865) (2,279) -------- -------- Net cash used in discontinued operation (529) (415) -------- -------- Net increase in cash and cash equivalents 1,805 3,757 Cash and cash equivalents at beginning of year 12,022 8,270 -------- -------- Cash and cash equivalents at end of period $ 13,827 $ 12,027 ======== ======== - --------------------------------------------------------------------------------------------------------------- Interest paid $ 1,768 $ 1,861 Interest received 63 87 Income taxes refunded 167 119 - --------------------------------------------------------------------------------------------------------------- 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, 2004 (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, 2004 consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2003. Certain reclassifications of prior years' amounts have been made to conform to the current year's presentation. In December 2003, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 46R, "Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51 (revised December 2003)" ("FIN 46R"), which addresses how a business enterprise should evaluate whether it has a controlling interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, which was issued in January 2003. Before concluding that it is appropriate to apply Accounting Research Bulletin No. 51 voting interest consolidation model to an entity, an enterprise must first determine that the entity is not a variable interest entity. The adoption of FIN 46R on March 31, 2004, did not have a material impact on the Company's consolidated financial statements. The Company records compensation expense for its stock-based employee compensation plans in accordance with the intrinsic-value method prescribed by Accounting Principles Board 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 with a strike price equal to the market price of the underlying stock at date of grant and, accordingly, no compensation cost has been recognized for its stock option plans. In December 2002, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting for Stock-Based Compensation - - Transition and Disclosure," that amends SFAS 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 months ended June 30, 2004 and 2003 if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation:
Three months ended June 30 Six months ended June 30 In thousands, except per share data 2004 2003 2004 2003 - ---------------------------------------------------------------------------------------------------------- Net income, as reported $ 839 $ 568 $ 877 $ 835 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax 4 2 6 12 ----- ----- ----- ----- Pro forma net income $ 835 $ 566 $ 871 $ 823 ----- ----- ----- ----- Earnings per share: As reported Basic $0.67 $0.45 $0.70 $0.66 ----- ----- ----- ----- Diluted $0.31 $0.26 $0.43 $0.42 ----- ----- ----- ----- Pro forma Basic $0.66 $0.45 $0.69 $0.65 ----- ----- ----- ----- Diluted $0.31 $0.26 $0.43 $0.42 ----- ----- ----- -----
4 Note 2 - Inventories Inventories consist of the following:
June 30 December 31 In thousands 2004 2003 - ----------------------------------------------------------------- Raw materials and spare parts $3,416 $3,767 Work-in-progress 1,075 1,234 Finished goods 563 646 ------ ------ $5,054 $5,647 ------ ------
Note 3 - Long-Term Debt During the six months ended June 30, 2004, long-term debt, including current portion, decreased $4.8 million, primarily due to the use of the proceeds received from the sale of the Company's Australian subsidiary and from the sale of the Company's Norwalk, Connecticut headquarters to pay down debt and regular scheduled payments of long-term debt, offset by $1.6 million of advances on a construction loan to expand the Company's movie theatre in Durango, Colorado. 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% (3.41% at June 30, 2004) and maturing September 30, 2005. At June 30, 2004, 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 0.25%, 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 $20.0 million, plus 50% of annual net income. At June 30, 2004, the Company was in compliance with such financial covenants. On April 14, 2004, the Company successfully completed its offer to exchange $1,000 principal amount of its new 8 1/4% Limited Convertible Senior Subordinated Notes due 2012 ("New Notes") for each $1,000 principal amount of its 7 1/2% Convertible Subordinated Notes due 2006 ("Old Notes"). The exchange offer commenced March 2, 2004 and expired on April 14, 2004. A total of $17.9 million principal amount of Old Notes were exchanged, leaving $12.3 million principal amount of Old Notes outstanding. The New Notes provide for a higher interest rate, have a longer term, will be convertible into Common Stock at a lower conversion price of $9.00 per share until March 1, 2007 and are senior to the Old Notes and the Company's 9 1/2% Subordinated Debentures due 2012. Note 4 - Sale of Assets and Discontinued Operation Sale of Assets 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 $876,000, net of tax, on the sale. As part of the sale, the Company recorded bonuses to certain continuing employees of $75,000, which was included in the recorded gain. As a result of the sale, the Company is reporting lower revenues. The operations and cash flows of the custom sports business were not clearly distinguishable from other components of the outdoor display segment and therefore have not been reported as a discontinued operation. 5 On June 3, 2004, the Company entered into a sale/leaseback of its Norwalk, Connecticut headquarters for a sales price of $8.1 million, of which $5.5 million was paid in cash and the balance of $2.6 million is payable, with interest, four years from closing. The Company leased back the property for four years, after which a three-year lease for part of the building will take effect. In accordance with SFAS No. 28 "Accounting for Sales with Leasebacks," the Company recorded a gain of approximately $2.5 million ($1.5 million, net of tax), on the sale and deferred $2.2 million of the gain for a total gain of $4.7 million. The deferred gain represents the present value of the lease payments over the term of the leaseback and will be recognized proportionately to the rental charge over the next seven years. The $2.6 million balance of the purchase price, included in other assets in the consolidated balance sheets, is secured by a purchase money mortgage subordinate to a $3.5 million first mortgage in favor of the purchaser's lender. In conjunction with the sale, the Company prepaid $4.9 million of its long-term debt with its senior lenders. Discontinued Operation On April 28, 2004, the Company completed an agreement to sell the capital stock of its Australian subsidiary, Trans-Lux Pty Limited ("PTY"), for $1.7 million in cash, and the operating results were assumed by the buyer effective as of February 29, 2004. In accordance with the provisions of SFAS No. 144, "Accounting For the Impairment or Disposal of Long-lived Assets," the Company has accounted for PTY as a discontinued operation. The consolidated financial statements reflect the assets and liabilities of the discontinued operation and the operations for the current and prior periods are reported as a discontinued operation. The following table presents the financial results of the discontinued operation:
Three months ended June 30 Six months ended June 30 In thousands, 2004 2003 2004 2003 - ------------------------------------------------------------------------------------------------------------- Revenues $ - $ 342 $ 135 $ 639 Operating expenses - 213 126 394 ----- ----- ----- ----- Gross profit - 129 9 245 General and administrative expenses - (111) (126) (219) Foreign currency gain - 393 141 642 Interest income - 17 3 35 Gain on sale of assets 112 - 112 - Income tax provision - (160) (12) (211) ----- ----- ----- ----- Income from discontinued operation $ 112 $ 268 $ 127 $ 492 ----- ----- ----- ----- Earnings per share: Basic $0.09 $0.21 $0.10 $0.39 ----- ----- ----- ----- Diluted $0.03 $0.08 $0.03 $0.14 ----- ----- ----- -----
The following table presents the principal assets and liabilities of the discontinued operation:
December 31 In thousands 2003 - --------------------------------------------------------------- Accounts receivable $ 870 Inventories 114 Property and equipment, net 690 Other assets 256 ------ Total assets of discontinued operation 1,930 Accrued expenses, accounts and income taxes payable 414 Intercompany payable (eliminated in consolidation) $1,924
6 Note 5 - Reporting Comprehensive Income Total comprehensive income for the three and six months ended June 30, 2004 and 2003 is as follows:
Three months ended June 30 Six months ended June 30 In thousands 2004 2003 2004 2003 - ---------------------------------------------------------------------------------------------------------------- Net income $839 $568 $877 $ 835 ---- ---- ---- ------ Other comprehensive income: Unrealized foreign currency translation gain 90 88 106 134 Unrealized holding gain (loss) on securities (38) 18 (37) 53 Reclassification adjustment on securities - 129 - 129 Income tax benefit (expense) related to other comprehensive income items 16 (58) 16 (72) ---- ---- ---- ------ Total other comprehensive income, net of taxes 68 177 85 244 ---- ---- ---- ------ Comprehensive income $907 $745 $962 $1,079 ---- ---- ---- ------
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. 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 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. Information about the Company's operations in its three business segments for the three and six months ended June 30, 2004 and 2003 is as follows:
Three months ended June 30 Six months ended June 30 In thousands 2004 2003 2004 2003 - ---------------------------------------------------------------------------------------------------------------- Revenues: Indoor display $ 4,384 $ 4,760 $ 8,517 $ 9,569 Outdoor display 5,229 5,336 10,204(1) 12,613 Entertainment/real estate 3,499 3,435 6,720 6,542 ------- ------- ------- ------- Total revenues 13,112 13,531 25,441 28,724 ------- ------- ------- ------- Operating income (loss): Indoor display 434 439 1,128 1,420 Outdoor display 254 (251) 565 (772) Entertainment/real estate 802 748 1,746 1,423 ------- ------- ------- ------- Total operating income from continuing operations 1,490 936 3,439 2,071 Other income 2,568 2,500 2,580 4,078 Corporate general and administrative expenses (1,894) (1,731) (2,898) (3,182) Interest expense-net (922) (993) (1,837) (1,966) Income tax provision (515) (412) (534) (658) -------- ------- ------- ------- Income from continuing operations 727 300 750 343 Income from discontinued operation, net of income taxes 112 268 127 492 ------- ------- ------- ------- Net income $ 839 $ 568 $ 877 $ 835 ------- ------- ------- ------- (1) Decrease primarily related to the sale of the custom sports business in March 2003.
7 Note 7 - Components of Net Periodic Pension Cost In December 2003, the FASB issued SFAS No. 132R, "Employers' Disclosures about Pensions and Other Postretirement Benefits" ("SFAS 132R"). SFAS 132R revises the financial statement disclosures required for pension and postretirement obligations, including new interim disclosures. As of December 31, 2003, the benefit service under the pension plan has been frozen and, accordingly, there is no service cost for the period ended June 30, 2004. The following table presents the components of net periodic pension cost:
Three months ended June 30 Six months ended June 30 In thousands 2004 2003 2004 2003 - ---------------------------------------------------------------------------------------------------------------- Service cost $ - $ 127 $ - $ 254 Interest cost 152 148 304 296 Expected return on plan assets (148) (134) (296) (268) Amortization of prior service cost 5 5 10 10 Amortization of net actuarial loss 61 55 122 110 Curtailment - 16 - 32 ----- ----- ----- ----- Net periodic pension cost $ 70 $ 217 $ 140 $ 434 ----- ----- ----- -----
The Company previously disclosed in its financial statements for the year ended December 31, 2003, that it expected to contribute $166,000 to its pension plan in 2004. The Company has elected to contribute an increased amount of $524,000, which was contributed in July 2004. Note 8 - 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. Note 9 - Joint Venture The Company has a 50% ownership in a joint venture partnership, MetroLux Theatres ("MetroLux"), accounted for by the equity method. The following results of operations summary information relates to MetroLux for the three and six months ended June 30, 2004 and 2003, and summary balance sheet information relates to MetroLux as of June 30, 2004 and December 31, 2003.
Three months ended June 30 Six months ended June 30 In thousands 2004 2003 2004 2003 - ----------------------------------------------------------------------------------------------------------------- Revenues $ 931 $ 998 $1,888 $1,848 Gross profit 528 591 1,073 1,064 Net income 246 327 510 523 Company's share of partnership net income 123 163 255 261 June 30 December 31 In thousands 2004 2003 - ------------------------------------------------------------------------------- Current assets $ 386 $ 341 Noncurrent assets 3,840 3,937 ------ ------ Total assets 4,226 4,278 ------ ------ Current liabilities 515 653 Noncurrent liabilities 1,733 1,859 ------ ------ Total liabilities 2,248 2,512 ------ ------ Company's equity in partnership net assets $ 989 $ 888 ------ ------
The Company's equity in partnership net assets is reflected in other assets in the consolidated balance sheets. 8 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. 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. In addition, on April 28, 2004, the Company sold its Australian operations, effective as of February 29, 2004. The Company has accounted for the Australian operations as a discontinued operation. Accordingly, the consolidated financial statements reflect the assets and liabilities of the discontinued operation and the operations for the current and prior periods are reported as a discontinued operation (see Note 4). Also, on June 3, 2004, the Company entered into a sale/leaseback of its Norwalk, Connecticut headquarters. The Entertainment/Real Estate segment includes the operations of the motion picture theatres in the western Mountain States and income-producing real estate properties. Results of Operations Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003 Total revenues for the six months ended June 30, 2004 decreased 11.4% to $25.4 million from $28.7 million for the six months ended June 30, 2003, principally due to the sale of the custom sports business during the first quarter of 2003. As a result of the sale, the Company is reporting lower revenues (see Note 4). The operations and cash flows of the custom sports business were not clearly distinguishable from other components of the outdoor display segment and therefore have not been reported as a discontinued operation. Indoor display revenues decreased $1.1 million or 11.0%. Of this decrease, Indoor display equipment rentals and maintenance revenues decreased $861,000 or 13.9%, primarily due to disconnects and non-renewals of equipment on rental and maintenance on existing contracts in the financial services and energy markets, and Indoor display equipment sales decreased $191,000 or 5.7%, due to a decline in sales in the transportation market. The financial services market continues to be negatively impacted due to the downturn in the economy, resulting in consolidation within that industry. Although the market conditions appear to be improving, installations of new equipment tend to lag any economic turnaround. Outdoor display revenues decreased $2.4 million or 19.1%. Of this decrease, Outdoor display equipment sales decreased $2.5 million or 26.2%, in the custom outdoor sports sector, which decrease was primarily a result of the sale of the custom sports business during the first quarter of 2003. Outdoor display equipment rentals and maintenance revenues increased $47,000 or 1.5%, primarily due to new equipment maintenance contracts. 9 Entertainment/real estate revenues increased $178,000 or 2.7%. This increase is primarily from an increase in overall admissions and concessions. In April 2004, the Company expanded its Durango, Colorado theatre to a seven-plex. In January 2003, the Company closed its older non-profitable Lake Dillon theatre for a net payment of $34,000 to the landlord. In connection with its newer six-plex theatre in Dillon, Colorado, which currently is in the process of a two screen expansion, the Company entered into a 15-year non-compete agreement for $450,000, which was paid in 2003. Total operating income for the six months ended June 30, 2004 increased 66.1% to $3.4 million from $2.1 million for the six months ended June 30, 2003, principally due to the sale of the custom sports business during the first quarter of 2003, which operated at a loss, and certain cost savings measures initiated by the Company during the second quarter of 2003. Indoor display operating income decreased $292,000 or 20.6%, primarily as a result of the decrease in revenues in the financial services and energy markets. The cost of indoor displays represented 63.2% of related revenues in 2004 compared to 58.3% in 2003. 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 decreasing and the revenues from indoor equipment rentals and maintenance also decreasing but not at the same rate. The Company initiated certain cost saving measures in 2003 to reduce field service costs and continues to strategically address the field service costs. Field service costs in the first six months of 2004 compared to the first six months of 2003 were reduced by approximately $87,000. Indoor display cost of equipment sales decreased $148,000 or 8.5%, primarily due to volume mix. Indoor display cost of equipment rentals and maintenance decreased $47,000 or 1.2%, largely due to certain cost savings measures initiated during the second quarter of 2003, such as a reduction in field service costs payroll, benefits and overhead expenses. Indoor display general and administrative expenses decreased $565,000 or 22.0% due to continued reduction of certain overhead costs such as sales salaries and travel expenses. Cost of indoor equipment rentals and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. Outdoor display operating income increased $1.3 million to $565,000 from a loss of $772,000, primarily as a result of a decrease in outdoor display equipment sales attributable to the sale of the custom outdoor sports business, which was sold during the first quarter of 2003, which operated at a loss. The cost of outdoor displays represented 78.8% of related revenues in 2004 compared to 87.7% in 2003. This improvement is due to a reduction in field service costs of approximately $402,000 primarily due to the sale of the custom outdoor sports business, a reduction in the cost of raw materials and an improvement in collections. Outdoor display cost of equipment sales decreased $2.6 million or 33.0%, principally due to the decrease in volume, as a result of the sale of the custom sports business during the first quarter of 2003. Outdoor display cost of equipment rentals and maintenance decreased $413,000 or 13.0%, primarily due to a decrease in field service costs payroll, benefits and overhead expenses. Outdoor display general and administrative expenses decreased $727,000 or 31.3%, primarily due to sale of the custom sports business during the first quarter of 2003. Cost of outdoor equipment rentals and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. Entertainment/real estate operating income increased $323,000 or 22.7%, primarily due to an increase in overall admissions and a decrease in operating expenses. The cost of entertainment/real estate represented 73.6% of related revenues in 2004 compared to 76.2% in 2003. Cost of entertainment/real estate, which includes film rental costs and depreciation expense, decreased $34,000 or 0.7%. Entertainment/real estate general and administrative expenses decreased $117,000 due to continued reduction of certain overhead costs such as salaries and travel expenses. 10 Corporate general and administrative expenses decreased $284,000 or 8.9%, principally resulting from certain cost saving measures initiated during the second quarter of 2003 and reduction in certain overhead costs primarily in pension and benefit costs offset by a $88,000 negative impact of the effect of foreign currency rates in 2004 compared to a $126,000 positive impact in 2003. Net interest expense decreased $129,000, which is primarily attributable to a decrease in long-term debt due to the assumption of debt by the purchaser of the custom sports business, use of proceeds from the sale of its Australian subsidiary in April 2004, the sale/leaseback of its headquarters facility in June 2004 and regular scheduled payments of long-term debt. The gain on sale of assets in 2004 relates to the sale/leaseback of its Norwalk, Connecticut headquarters. The gain on sale of assets in 2003 relates to the sale of the custom sports business and the sale of vacant land. 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, 2004 and 2003 was 41.0% and 51.0%, respectively. The higher rate in 2003 was due principally to the non-deductibility of a $229,000 write-off of goodwill resulting from the sale of the custom sports business. Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003 Total revenues for the three months ended June 30, 2004 decreased 3.1% to $13.1 million from $13.5 million for the three months ended June 30, 2003. Indoor display revenues decreased $376,000 or 7.9%. Of this decrease, Indoor display equipment rentals and maintenance revenues decreased $85,000 or 2.9%, primarily due to disconnects and non-renewals of equipment on rental and maintenance on existing contracts in the financial services and energy markets, and Indoor display equipment sales decreased $291,000 or 15.7%, due to a decline in sales in the transportation market. The financial services market continues to be negatively impacted due to the downturn in the economy, resulting in consolidation within that industry. Although the market conditions appear to be improving, installations of new equipment tend to lag any economic turnaround. Outdoor display revenues decreased $107,000 or 2.0%. Of this decrease, Outdoor display equipment sales decreased $113,000 or 3.0%, primarily in the custom outdoor commercial business. Outdoor display equipment rentals and maintenance revenues increased $6,000 or 0.4%, primarily due to new equipment maintenance contracts. Entertainment/real estate revenues increased $64,000 or 2.0%. This increase is primarily from an increase in overall admissions and concessions. In April 2004, the Company expanded its Durango, Colorado theatre to a seven-plex. Total operating income for the three months ended June 30, 2004 increased 59.4% to $1.5 million from $935,000 for the three months ended June 30, 2003, principally due to certain cost savings measures, such as field service costs, initiated by the Company during the second quarter of 2003. Indoor display operating income decreased $5,000 or 1.1%, primarily as a result of the decrease in revenues in the financial services and energy markets. The cost of indoor displays represented 63.0% of related revenues in 2004 compared to 59.6% in 2003. 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 decreasing and the revenues from indoor equipment rentals and maintenance also decreasing, but not at the same rate. The Company initiated certain cost saving measures in 2003 to reduce field 11 service costs and continues to strategically address the field service costs. Indoor display cost of equipment sales decreased $98,000 or 10.5%, primarily due to volume mix. Indoor display cost of equipment rentals and maintenance increased slightly. Indoor display general and administrative expenses decreased $298,000 or 20.1% due to continued reduction of certain overhead costs such as sales salaries and travel expenses. Cost of indoor equipment rentals and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. Outdoor display operating income increased $505,000 to $254,000 from a loss of $251,000. The principal factors contributing to such increase were a reduction in field service costs of approximately $127,000, a reduction in the cost of raw materials and an improvement in collections. The cost of outdoor displays represented 81.3% of related revenues in 2004 compared to 87.9% in 2003. Outdoor display cost of equipment sales decreased $306,000 or 9.9%, principally due to the decrease in volume. Outdoor display cost of equipment rentals and maintenance decreased $134,000 or 8.4%, primarily due to a decrease in field service costs payroll, benefits and overhead expenses. Outdoor display general and administrative expenses decreased $172,000 or 19.2%, primarily due to a reduction in overhead costs such as sales expenses. Cost of outdoor equipment rentals and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. Entertainment/real estate operating income increased $55,000 or 7.4%, primarily due to an increase in overall admissions and a decrease in operating expenses. The cost of entertainment/real estate represented 75.8% of related revenues in 2004 compared to 77.5% in 2003. Cost of entertainment/real estate, which includes film rental costs and depreciation expense, decreased $11,000 or 0.4%. Entertainment/real estate general and administrative expenses decreased $20,000 due to continued reduction of certain overhead costs such as salaries and travel expenses. Corporate general and administrative expenses increased $164,000 or 9.5%, principally resulting from a $92,000 negative impact of the effect of foreign currency rates in 2004 compared to a $31,000 positive impact in 2003. Net interest expense decreased $71,000, which is primarily attributable to a decrease in long-term debt due to the assumption of debt by the purchaser of the custom sports business, use of proceeds from the sale of its Australian subsidiary in April 2004, the sale/leaseback of its headquarters facility in June 2004 and regular scheduled payments of long-term debt. The gain on sale of assets in 2004 relates to the sale/leaseback of its Norwalk, Connecticut headquarters. The gain on sale of assets in 2003 relates to the sale of vacant land. 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, 2004 and 2003 was 41.0% and 50.2%, respectively. The higher rate in 2003 was due principally to the non-deductibility of a $229,000 write-off of goodwill resulting from the sale of the custom sports business. Liquidity and Capital Resources The regular quarterly cash dividend for the second quarter of 2004 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 27, 2004, payable to stockholders of record as of June 30, 2004, and was paid July 23, 2004. 12 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, 2004, $9.3 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 $20.0 million, plus 50% of net income. At June 30, 2004, the Company was in compliance with such financial covenants. The Company continues to evaluate the need and availability of long-term capital. The Company successfully completed its offer to exchange $1,000 principal amount of its new 8 1/4% Limited Convertible Senior Subordinated Notes due 2012 for each $1,000 principal amount of its 7 1/2% Convertible Subordinated Notes due 2006. The exchange offer commenced March 2, 2004 and expired on April 14, 2004. A total of $17.9 million principal amount of Old Notes were exchanged. The New Notes provide for a higher interest rate, have a longer term, will be convertible into Common Stock at a lower conversion price of $9.00 per share until 2007 and are senior to the Old Notes and the Company's 9 1/2% Subordinated Debentures due 2012. Payments of long-term debt due, including the $9.3 million term loans that mature September 30, 2005, and the 7 1/2% convertible subordinated notes not exchanged that mature December 1, 2006, employment and consulting agreement payments and the future minimum lease payments due under operating leases for the remainder of 2004 and the next four years are as follows:
Remainder of In thousands 2004 2005 2006 2007 2008 - ------------ ---- ---- ---- ---- ---- Long-term debt $1,148 $10,074 $13,598 $1,310 $3,013 Employment and consulting agreement obligations 868 1,085 463 393 393 Operating leases 367 710 675 516 383 ------ ------- ------- ------ ------ Total $2,383 $11,869 $14,736 $2,219 $3,789 ------ ------- ------- ------ ------
Cash and cash equivalents increased $1.8 million for the six months ended June 30, 2004 compared to an increase of $3.8 million in 2003. The increase in 2004 is primarily attributable to cash provided by operating activities from continuing operations of $3.9 million, proceeds from the sale of assets of $7.1 million, proceeds received from construction loan borrowings of $1.6 million and proceeds from the Company's joint venture of $0.2 million, offset by investment in equipment for rental of $2.0 million, purchases of property, plant and equipment including expansion of the Company's movie theatre in Durango, Colorado of $1.8 million, purchases of available-for-sale securities of $0.2 million, payments of long-term debt of $6.4 million, payments of dividends of $0.1 million and cash used by discontinued operation of $0.5 million. The increase in 2003 is primarily attributable to proceeds received from the sale of the custom sports business, offset by investment in equipment for rental and a repayment 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. 13 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 investment in its Canadian subsidiary and previously, its Australian subsidiary. 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, 2004, the Company did not hold any derivative financial instruments. A one percentage point change in interest rates would result in an annual interest expense fluctuation of approximately $256,000. A 10% change in the Canadian dollar relative to the U.S. dollar would result in a currency exchange expense fluctuation of approximately $212,000, based on dealer quotes, considering current exchange rates. Item 4. Controls and Procedures Evaluation of 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, have 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 material 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, the Company's Co-Chief Executive Officers and Chief Financial Officer have concluded that these controls and procedures are effective. Changes in Internal Control over Financial Reporting. There has been no change in the Company's internal control over financial reporting, that occurred in the first fiscal quarter, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 14 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 27, 2004 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 Withheld --- -------- Richard Brandt 3,525,056 179,059 Jean Firstenberg 3,578,923 125,192 Gene Jankowski 3,578,923 125,192 Victor Liss 3,572,056 132,059 The following directors are continuing their terms as directors: Steven Baruch, Two-Years Remaining Matthew Brandt, One-Year Remaining Thomas Brandt, Two-Years Remaining Howard M. Brenner, Two-Years Remaining Robert B. Greenes, One-Year Remaining Howard S. Modlin, One-Year Remaining Michael R. Mulcahy, One-Year 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 3,653,635 5,358 45,122 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10 Employment Agreement with Angela D. Toppi dated as of March 24, 2004, filed herewith. 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. 15 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 11, 2004, press release pertaining to the financial performance for the first quarter of 2004 and sale of Australian subsidiary. Form 8-K dated May 19, 2004, pertaining to Trans-Lux Corporation board of directors' adoption of a Code of Business Conduct and Ethics Guidelines. Form 8-K dated June 3, 2004, pertaining to the sale/leaseback of the Company's Norwalk, Connecticut headquarters. 16 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 16, 2004 by /s/ Angela D. Toppi -------------------- Angela D. Toppi Executive Vice President and Chief Financial Officer 17 EX-10 2 ex10at.txt EMPLOYMENT AGREEMENT - A. TOPPI EXHIBIT 10 AGREEMENT made March 24, 2004 effective as of the 1st day of January, 2003 by and between TRANS-LUX CORPORATION, a Delaware corporation having an office at 110 Richards Avenue, Norwalk, Connecticut 06856-5090 (hereinafter called "Employer"), and ANGELA TOPPI residing at 105 Cedar Lane, Ridgefield, Connecticut 06877 (hereinafter called, "Employee"). W I T N E S S E T H: 1. Employer hereby employs Employee, and Employee hereby accepts employment, upon the terms and conditions hereinafter set forth. 2. (a) The term ("Term") of the Agreement shall be the period commencing on January 1, 2003 and terminating March 31, 2006. (b) In the event that Employee remains or continues in the employ of Employer after the Term, such employment, in the absence of a further written agreement, shall be on an at-will basis, terminable by either party hereto on thirty (30) days' notice to the other and, upon the 30th day following such notice the employment of Employee shall terminate. (c) Upon expiration of the Term of this Agreement, neither party shall have any further obligations or liabilities to the other except as otherwise specifically provided in this Agreement. 3. Employee shall be employed in an executive capacity of Employer (and such of its affiliates, divisions and subsidiaries as Employer shall designate). Employer shall use its best efforts to cause Employee to be elected and continue to be elected a Chief Financial Officer and an Executive Vice President of Employer during the Term of this Agreement. The precise services of Employee may be designated or assigned from time to time at the direction of the Board of Directors, the Chairman of the Board, President or Chief Executive Officer, and all of the services to be rendered hereunder by Employee shall at all times be subject to the control, direction and supervision of the Board of Directors of Employer, to which Employee does hereby agree to be bound. Employee shall devote her entire time, attention and energies during usual business hours (subject to Employer's policy with respect to holidays and illnesses for comparable executives of Employer) to the business and affairs of Employer, its affiliates, divisions and subsidiaries, as Employer shall from time to time direct. Employee further agrees during the Term of this Agreement to serve as an officer or director of Employer or of any affiliate or subsidiary of Employer as Employer may request, and if Employee serves as such officer or a director she will do so without additional compensation, other than director's fees or honoraria, if any. Employer agrees that during the Term of this Agreement Employee's principal office of employment shall be within a seventy-five (75) mile radius of Norwalk, Connecticut. Nothing herein shall prohibit Employee from residing within a seventy-five (75) mile radius of another significant office of Employer or its significant subsidiaries. During the Term of this Agreement and during any subsequent employment of Employee by Employer, Employee shall use her best efforts, skills and abilities in the performance of her services hereunder and to promote the interests of Employer, its affiliates, divisions and subsidiaries. Employee shall not, during the Term and during any subsequent employment of Employee by Employer, be engaged in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage. The foregoing shall not be construed as preventing Employee from investing her assets in such form or manner as will not require any services on the part of Employee in the operation of the affairs of the companies in which such investments are made, provided, however, that Employee shall not, either directly or indirectly, be a director of or make any investments in any company or companies which are engaged in businesses competitive with those conducted by Employer or by any of its subsidiaries or affiliates except where such investments are in stock of a company listed on a national securities exchange, and such stock of Employee does not exceed one percent (1%) of the outstanding shares of stock of such listed company. Employee shall not at any time during or after the Term of this Agreement use (except on behalf of Employer), divulge, furnish or make accessible to any third person or organization any confidential information concerning Employer or any of its subsidiaries or affiliates or the businesses of any of the foregoing including, without limitation, confidential methods of operations and organization, confidential sources of supply, identity of employees, customer lists and confidential financial information. In addition, Employee agrees that all lists, materials, books, files, reports, correspondence, records and other documents and information ("Employer Materials") used, prepared or made available to Employee, shall be and shall remain the property of Employer. Upon the termination of employment of Employee or the expiration of this Agreement, whichever is earlier, all Employer Materials shall be immediately returned to Trans-Lux Corporation, and Employee shall not make or retain any copies thereof, nor disclose or otherwise use any information relating to said Employer Materials to any other party. As used herein the term Employer shall include Employer, Employer's subsidiaries and affiliates, and any individuals employed or formerly employed by any of them. 4. (a) For all services rendered by Employee during the Term of this Agreement, Employer shall pay Employee a salary at the rate of ONE HUNDRED FORTY THOUSAND DOLLARS ($140,000) per annum during the period January 1, 2003 to March 31, 2003; at the rate of ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000) per annum during the period April 1, 2003 to March 31, 2004; at the rate of ONE HUNDRED SIXTY THOUSAND DOLLARS ($160,000) per annum during the period April 1, 2004 to March 31, 2005 and at the rate of ONE HUNDRED SEVENTY THOUSAND DOLLARS ($170,000.00) during the period April 1, 2005 to March 31, 2006. Such salary shall be payable weekly, or monthly, or in accordance with the payroll practices of Employer for its executives. The Employee shall also be entitled to all rights and benefits for which she shall be eligible under any stock option plan, bonus, participation or extra compensation plans, pensions, group insurance or other benefits which Employer presently provides, or may provide for her and for its employees generally. This Agreement shall not be deemed abrogated or terminated if Employer, in its discretion, shall determine to increase the compensation of Employee for any period of time, or if the Employee shall accept such increase. In addition to the group insurance set forth above, Employer also agrees to reimburse Employee $2,500 per annum for the total cost of (i) long term disability insurance currently obtained through the American Institute of Certified Public Accountants ("AICPA"), or any replacement thereof, and (ii) the cost of life insurance currently obtained though the AICPA or any replacement thereof. All payments under this Agreement are in United States dollars unless otherwise specified. (b) Employer may make appropriate deductions from the said payments required to be made in this Section 4 to Employee to comply with all governmental withholding requirements. (c) If, during the Term of this Agreement and if the Employee is still in the employ of Employer, Employee shall be prevented from performing or be unable to perform, or fail to perform, her duties by reason of illness or any other incapacity for four (4) consecutive months (excluding normal vacation time) during the Term hereof, Employer agrees to pay Employee thereafter during the Term for the duration of such incapacity or 18 months, whichever is greater, 40% of the base salary which Employee would otherwise have been entitled to receive if not for the illness or other incapacity, provided, however, if such incapacity ceases following the end of the Term, then any such payments shall cease. To the extent such 18 month period continues after the end of the Term and Employee is entitled to payments under Section 7, then the payments under this Section 4(c) shall terminate and Section 7 shall apply. If Employee dies during the Term while receiving payments under this Section 4(c), then Section 4(e) shall apply and the payments under this Section 4(c) shall terminate. (d) The Board upon the recommendation of the Compensation Committee of the Board shall consider no later than May 31, 2004, 2005, 2006 and 2007, respectively the grant of a bonus to Employee based on Employee's performance for the immediately preceding fiscal year. In the event of Employee's death on or after January 1 of 2003, 2004 or 2005 or April 1, 2006, on a pro rata basis (one-quarter of the amount) as to 2006, any Bonus to which she is otherwise granted for the prior fiscal year or 2006, as the case may be, shall be paid to Employee's beneficiary designated in writing by Employee from time to time or in the event such beneficiary pre-deceases Employee or if there is no beneficiary designated, Employee's estate (whichever is applicable shall be deemed the "Beneficiary"). Such Bonus shall be paid at the same time Employer pays bonuses to other executive officers of Employer based on their performance for such fiscal year. (e) In the event Employee dies during the Term of this Agreement while the Employee is still in the employ of Employer, Employer shall pay to Employee's Beneficiary for the balance of the Term of the Agreement, or eighteen (18) months, whichever is greater, annual death benefits payable weekly or in accordance with Employer's payroll practices in an amount equal to 40% of Employee's then annual base salary rate. (f) So long as Employer's Common Stock is publicly traded, on the date of signing this Agreement, Employer shall grant Employee pursuant to Employer's 1995 Stock Option Plan ("Plan"), the option ("Option") to purchase 5,000 shares of Common Stock at a price per share equal to the fair market value of Common Stock of Employer on the date thereof in accordance with paragraph 5 of the Plan and upon the other terms and conditions set forth in the form of the option agreement annexed hereto as Exhibit A. Such option agreement shall be executed by Employee as of such date. 5. During the Term of this Agreement, Employer will reimburse Employee for traveling or other out-of-pocket expenses and disbursements incurred by Employee with Employer's approval in furtherance of the businesses of Employer, its affiliates, divisions or subsidiaries, upon presentation of such supporting information as Employer may from time to time request. 6. During the Term of this Agreement, Employee shall be entitled to a vacation during the usual vacation period of Employer in accordance with such vacation schedules as Employer may prescribe. 7. Both parties recognize that the services to be rendered by Employee pursuant to this Agreement are extraordinary and unique. During the Term of this Agreement, and during any subsequent employment of Employee by Employer, Employee shall not, directly or indirectly, enter into the employ of or render any services to any person, partnership, association or corporation engaged in a business or businesses in any way, directly or indirectly, competitive to those now or hereafter engaged in by Employer or by any of its subsidiaries during the Term of this Agreement and during any subsequent employment of Employee by Employer and Employee shall not engage in any such business, directly or indirectly on her own account and, except as permitted by Section 3 of this Agreement, Employee shall not become interested in any such business, directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any other relationship or capacity. For a period of two (2) years following termination of employment for any reason, Employee shall not directly or indirectly (i) engage or otherwise be involved in the recruitment or employment of any Employer employee or, (ii) solicit or render any service directly or indirectly to any other person or entity with regard to soliciting any customer of the Employer during the two (2) year period prior to termination of employment with respect to products or services competitive with products or services of Employer. Employee shall at no time during or after employment disclose to any person, other than Employer, or otherwise use any information of or regarding Employer except on behalf of Employer, nor communicate, publish, or otherwise transmit, in any manner whatsoever, untrue information or negative, competitive, personal or other information or comments regarding Employer. The restriction in (ii) above shall not apply if following the end of the Term (x) Employee's employment is terminated without cause by Employer or (y) Employee resigns because Employee is not offered a replacement contract for a term of at least two (2) years and otherwise having at least the same terms and conditions as in effect on March 31, 2006, or at the end of any subsequent renewal contract, provided no such renewal contract will continue past Employee's 65th birthday and will automatically terminate on such date unless the parties otherwise mutually agree in writing, unless in either case of (x) or (y) above Employer pays to Employee weekly or bi-weekly in accordance with Employer's payroll practices as severance pay, an amount equal to Employee's base salary in effect at the time of termination of employment (i.e., at a rate of $170,000 per annum if termination is April 1, 2006) for a period of one (1) year, subject to credit to Employer for any new compensation received by Employee during such one (1) year period, such credit not to exceed any weekly or bi-weekly payment hereunder. Employee shall certify to Employer at least bi-weekly the amount of any such compensation with reasonable back- up, i.e., copy of pay slip. If Employee dies during the one (1) year severance period, the balance of the severance payments shall be payable to Employee's Beneficiary; provided, however, if Employee was receiving payments under Section 4(c) because of disability which disability payments terminated because of the payments made under this Section 7, then the payments under this Section 7 shall cease and the balance of the disability payments under Section 4(c) shall be made as provided therein without duplication for the number of months payments were made under this Section 7 (i.e., if Employee was disabled and received six monthly disability payment under Section 4(c), the Term expired and Employee received six months of payments under Section 7 and died, then six more months of disability payments under Section 4(c) would be made. Employer shall be entitled, if it so elects, to institute and prosecute proceedings in any court of competent jurisdiction, either in law or in equity, to obtain damages for any breach of this Agreement, or to enjoin Employee from any breach of this Agreement, but nothing herein contained shall be construed to prevent Employer from pursuing such other remedies as Employer may elect to invoke. In addition to the obligations of the Employee contained in this Agreement, Employee agrees to be bound by the provisions contained in Exhibit B to this Agreement. 8. In the event any provision of Section 7 of this Agreement shall be held invalid or unenforceable by reason of the geographic or business scope or the duration thereof, such invalidity or unenforceability shall attach only to such provision and shall not affect or render invalid or unenforceable any other provision of this Agreement, and this Agreement shall be construed as if the geographic or business scope or the duration of such provision had been more narrowly drawn so as not to be invalid or unenforceable. 9. Employee shall have the right to cancel and terminate this Agreement on 75 days prior written notice from the date of occurrence if there has been a "Change in Control of Employer", as hereinafter defined. Upon such termination becoming effective pursuant to such notice by Employee, (a) Employer and Employee shall be released from all further liability and obligations provided for in the Agreement, except that Employee shall still be subject to and bound by her obligations under Section 7 of the Agreement; (b) Employer shall pay to Employee her Bonus for the prior calendar year (if not previously paid) as and to the extent provided for in Section 4 (d); and (c) Employee shall be paid in a lump sum on the effective date of termination the amount of $450,000. If Employee is incapacitated at the time of her notice under this Section 9, the above payments shall be in lieu of the payments provided under Section 4(c) which payments shall cease and terminate at the end of the 75 day notice period. In the event of Employee's death during the 75 day notice period, if notice of termination has been given, any amounts still payable to Employee by reason of such termination or otherwise payable under this Agreement shall be paid to Beneficiary in lieu of the death benefit payments under Section 4(e). The notice under this Section 9 must be given within 60 days of the occurrence of the applicable event or be deemed waived. To the extent any such payments made pursuant to Section 9 above are deemed to be an "excess parachute payment" under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and are subject to tax pursuant to Section 4999 of the Code, such payments shall be grossed up in such a manner as to offset the effect of such excise tax on such payments. For purpose of this Section 9, the phrase "Change in Control of Employer" shall be deemed to have occurred if (x) any person (as such term is used in Sections 13 (d) and 14 (d) (2) of the Securities Exchange Act of 1934) hereafter becomes the beneficial owner, directly or indirectly, of securities of Employer, representing 25% or more of the combined voting power of the Employer's then outstanding securities (other than members of Richard Brandt's family, directly or indirectly through trusts or otherwise), and (y) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of Employer cease by reason of a contested election to constitute at least a majority thereof, unless Richard Brandt (or, in the event of his death or incapacity, i.e., inability to manage his own affairs, a majority of David Brandt, Matthew Brandt and Thomas Brandt) shall have approved such change in the majority. 10. The waiver by Employer of a breach of any provision of this Agreement by Employee shall not operate or be construed as a waiver of any subsequent breach by Employee. 11. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and served personally or sent by United States certified or registered mail, return receipt requested, or overnight courier such as Federal Express or Airborne to her address as stated on Employer's records, in the case of Employee, or to the office of Trans-Lux Corporation, attention of the Chairman, or President or Chief Executive Officer, 110 Richards Avenue, Norwalk, Connecticut 06856-5090, in the case of Employer, or such other address as designated in writing by the parties. 12. This Agreement shall be construed in accordance with the laws of the State of New York. 13. This instrument contains the entire agreement between the parties and supersedes as of January 1, 2003 the Employment Agreement, as amended, between the parties dated December 22, 1999 effective January 1, 2000 except for any Bonus for 2002 payable in 2003 in accordance with paragraph 4(d) of such agreement. It may not be changed, modified, extended or renewed orally except by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, discharge or extension is sought. IN WITNESS WHEREOF, this Agreement has been duly executed on the day and year above written. TRANS-LUX CORPORATION By: /s/ Michael R. Mulcahy ------------------------ President /s/ Angela D. Toppi ------------------------ Angela Toppi EX-31.1 3 ex31-1.txt CERTIFICATION - M. MULCAHY 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 (the "Report") 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. 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 16, 2004 President and Co-Chief Executive Officer Michael R. Mulcahy EX-31.2 4 ex31-2.txt CERTIFICATION - T. BRANDT 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 (the "Report") 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. 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 16, 2004 Executive Vice President and Co-Chief Executive Officer Thomas Brandt EX-31.3 5 ex31-3.txt CERTIFICATION - A. TOPPI 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 (the "Report") 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. 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 16, 2004 Executive Vice President and Chief Financial Officer Angela D. Toppi EX-32.1 6 ex32-1.txt 906 CERTIFICATION - M. MULCAHY 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 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), I, Michael R. Mulcahy, President and Co-Chief Executive Officer of Trans-Lux Corporation (the "Company"), do hereby certify, to the best of my knowledge that: (1) The Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 being filed with the Securities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; 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 as an exhibit, but shall not be deemed as having been filed for purposes of Section 18 of the Securities Exchange Act of 1934 or as a separate disclosure document of the Company or the certifying officer. /s/ Michael R. Mulcahy ----------------------------------------- Date: August 16, 2004 President and Co-Chief Executive Officer Michael R. Mulcahy EX-32.2 7 ex32-2.txt 906 CERTIFICATION - T. BRANDT 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 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), I, Thomas Brandt, Executive Vice President and Co-Chief Executive Officer of Trans-Lux Corporation (the "Company"), do hereby certify, to the best of my knowledge that: (1) The Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 being filed with the Securities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; 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 as an exhibit, but shall not be deemed as having been filed for purposes of Section 18 of the Securities Exchange Act of 1934 or as a separate disclosure document of the Company or the certifying officer. /s/ Thomas Brandt ----------------------------- Date: August 16, 2004 Executive Vice President and Co-Chief Executive Officer Thomas Brandt EX-32.3 8 ex32-3.txt 906 CERTIFICATION - A. TOPPI 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 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), I, Angela D. Toppi, Executive Vice President and Chief Financial Officer of Trans-Lux Corporation (the "Company"), do hereby certify, to the best of my knowledge that: (1) The Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 being filed with the Securities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; 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 as an exhibit, but shall not be deemed as having been filed for purposes of Section 18 of the Securities Exchange Act of 1934 or as a separate disclosure document of the Company or the certifying officer. /s/ Angela D. Toppi ----------------------------------- Date: August 16, 2004 Executive Vice President and Chief Financial Officer Angela D. Toppi -----END PRIVACY-ENHANCED MESSAGE-----