-----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, K1PrPv2EW3qrhIzgbUIuqphQbaWZNjonjDm16eoqzFLVaHte1Vy/0cG/DRfdrRZt yZiBFF1z0ZtJU7E6fhpLVw== 0000099106-10-000040.txt : 20100818 0000099106-10-000040.hdr.sgml : 20100818 20100818163247 ACCESSION NUMBER: 0000099106-10-000040 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20100630 FILED AS OF DATE: 20100818 DATE AS OF CHANGE: 20100818 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: 101026001 BUSINESS ADDRESS: STREET 1: 26 PEARL STREET CITY: NORWALK STATE: CT ZIP: 06850-1647 BUSINESS PHONE: 2038534321 MAIL ADDRESS: STREET 1: 26 PEARL STREET CITY: NORWALK STATE: CT ZIP: 06850-1647 10-Q 1 jun1010q.txt JUNE 2010 10-Q 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, 2010 ------------- 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.) 26 Pearl Street, Norwalk, CT 06850-1647 - ---------------------------------------- ---------- (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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (s232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to file and post such files). Yes No --- --- Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (check one) Large accelerated filer Accelerated filer Non-accelerated filer --- --- --- Smaller reporting company X --- Indicate by check mark whether the Registrant is a shell company (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 - -------- ------------------------------ ------------------ 08/17/10 Common Stock - $1.00 Par Value 2,442,923 TRANS-LUX CORPORATION AND SUBSIDIARIES Table of Contents Page No. -------- Part I - Financial Information (unaudited) Item 1. Condensed Consolidated Balance Sheets - June 30, 2010 and December 31, 2009 1 Condensed Consolidated Statements of Operations - Three and Six Months Ended June 30, 2010 and 2009 2 Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2010 and 2009 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3. Quantitative and Qualitative Disclosures about Market Risk 22 Item 4. Controls and Procedures 23 Part II - Other Information Item 1. Legal Proceedings 23 Item 1A. Risk Factors 24 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24 Item 3. Defaults upon Senior Securities 24 Item 4. (Removed and Reserved) 25 Item 5. Other Information 25 Item 6. Exhibits 25 Signatures 26 Exhibits
Part I - Financial Information ------------------------------ TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS June 30 December 31 In thousands, except share data 2010 2009 - ----------------------------------------------------------------------------------------- (unaudited) (see Note 1) ASSETS Current assets: Cash and cash equivalents $ 707 $ 541 Cash in escrow 337 403 Receivables, less allowance of $1,368 - 2010 and $1,393 - 2009 2,642 1,743 Unbilled receivables - 29 Inventories 5,289 5,149 Prepaids and other 498 619 Current assets associated with discontinued operations 1 55 ---------------------- Total current assets 9,474 8,539 ---------------------- Rental equipment 58,481 58,164 Less accumulated depreciation 36,434 34,015 ---------------------- 22,047 24,149 ---------------------- Property, plant and equipment 6,773 7,206 Less accumulated depreciation 4,491 4,667 ---------------------- 2,282 2,539 Asset held for sale 924 920 Goodwill 810 810 Other assets 691 926 ---------------------- TOTAL ASSETS $36,228 $37,883 - ----------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,841 $ 1,410 Accrued liabilities 7,751 5,658 Current portion of long-term debt 16,401 16,990 Liabilities associated with discontinued operations 404 487 ---------------------- Total current liabilities 26,397 24,545 Long-term debt: Notes payable 2,490 2,193 Deferred credits, deposits and other 4,107 3,852 ---------------------- Total liabilities 32,994 30,590 ---------------------- Stockholders' equity: Common - $1 par value - 5,500,000 shares authorized, 2,826,424 shares issued in 2010 and 2009 2,827 2,827 Additional paid-in-capital 14,267 14,657 Accumulated deficit (9,014) (4,989) Accumulated other comprehensive loss (1,783) (1,739) ---------------------- 6,297 10,756 Less treasury stock - at cost - 383,596 common shares in 2010 and 433,596 common shares in 2009 (3,063) (3,463) ---------------------- Total stockholders' equity 3,234 7,293 ---------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $36,228 $37,883 - ----------------------------------------------------------------------------------------- The accompanying notes are an integral part of these condensed consolidated financial statements.
1 TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended Six Months Ended June 30 June 30 In thousands, except per share data 2010 2009 2010 2009 - ----------------------------------------------------------------------------------------- Revenues: Equipment rentals and maintenance $ 2,181 $ 2,449 $ 4,449 $ 4,912 Equipment sales 4,026 4,935 7,080 10,184 Real estate rentals 66 59 130 116 -------------------------------------------- Total revenues 6,273 7,443 11,659 15,212 -------------------------------------------- Operating expenses: Cost of equipment rentals and maintenance 1,941 2,063 3,820 4,176 Cost of equipment sales 3,156 3,728 5,711 7,723 Cost of real estate rentals 12 15 24 30 -------------------------------------------- Total operating expenses 5,109 5,806 9,555 11,929 -------------------------------------------- Gross profit from operations 1,164 1,637 2,104 3,283 General and administrative expenses (2,348) (2,268) (4,276) (4,619) Restructuring costs (1,042) - (1,042) - Interest expense, net (365) (437) (786) (845) Write-off of note receivable, net - (2,686) - (2,686) Other income - - 3 - -------------------------------------------- Loss before income taxes (2,591) (3,754) (3,997) (4,867) Income tax expense (14) (51) (28) (92) -------------------------------------------- Net loss $(2,605) $(3,805) $(4,025) $(4,959) ============================================ Loss per share - basic and diluted $ (1.07) $ (1.65) $ (1.66) $ (2.15) ============================================ Weighted average common shares outstanding - basic and diluted 2,443 2,307 2,430 2,307 - ----------------------------------------------------------------------------------------- The accompanying notes are an integral part of these condensed consolidated financial statements.
2 TRANS-LUX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Six Months Ended June 30 In thousands 2010 2009 - ----------------------------------------------------------------------------------------- Cash flows from operating activities Net loss $(4,025) $(4,959) Adjustment to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 2,696 3,025 Write-off of note receivable, net - 2,686 Non-cash restructuring costs 895 - Write-off of engineering software, net 456 - Changes in operating assets and liabilities: Receivables (870) 881 Inventories (140) 764 Prepaids and other assets 247 1,118 Accounts payable and accrued liabilities 1,766 (1,185) Deferred credits, deposits and other 255 371 ---------------------- Net cash provided by operating activities 1,280 2,701 ---------------------- Cash flows from investing activities Equipment manufactured for rental (820) (1,059) Purchases of property, plant and equipment (35) (133) Proceeds from sale of available-for-sale securities - 135 ---------------------- Net cash used in investing activities (855) (1,057) ---------------------- Cash flows from financing activities Payments of long-term debt (1,042) (1,340) Proceeds from long-term debt 750 - ---------------------- Net cash used in financing activities (292) (1,340) ---------------------- Cash flows from discontinued operations Cash provided by operating activities of discontinued operations 33 16 ---------------------- Net cash provided by discontinued operations 33 16 ---------------------- Net increase in cash and cash equivalents 166 320 Cash and cash equivalents at beginning of year 541 1,422 ---------------------- Cash and cash equivalents at end of period $ 707 $ 1,742 - ----------------------------------------------------------------------------------------- Supplemental disclosure of cash flow information: Interest paid $ 243 $ 740 Income taxes paid - 20 - ----------------------------------------------------------------------------------------- The accompanying notes are an integral part of these condensed consolidated financial statements.
3 TRANS-LUX CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2010 (unaudited) Note 1 - Basis of Presentation Financial information included herein is unaudited, however, such information reflects all adjustments (of a normal and recurring nature), which are, in the opinion of management, necessary for the fair presentation of the condensed 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. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission and therefore do not include all information and footnote disclosures required under accounting principles generally accepted in the United States of America. It is suggested that the June 30, 2010 condensed 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, 2009. The Condensed Consolidated Balance Sheet at December 31, 2009 is derived from the December 31, 2009 audited financial statements. There have been no material changes in our significant accounting policies during the three and six months ended June 30, 2010 as compared to the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2009. The Company has evaluated subsequent events through the filing date of this Form 10-Q and has determined that there were no subsequent events to recognize or disclose in these financial statements. Recent Accounting Pronouncements: In February 2010, the Financial Accounting Standards Board issued Accounting Standards Update No. 2010-09, "Subsequent Events: Amendments to Certain Recognition and Disclosure Requirements," which provides updated guidance on subsequent events and removes the requirement to disclose the date though which subsequent events have been evaluated for SEC filers. This guidance became effective upon issuance and its adoption did not have an effect on the Company's condensed consolidated financial statements. Note 2 - Going Concern The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern. The Company has incurred significant recurring losses from continuing operations and has a significant working capital deficiency. The Company incurred a net loss of $4.0 million for the six months ended June 30, 2010 and has a working capital deficiency of $16.9 million as of June 30, 2010. In addition, the Company recorded a loss from continuing operations of $8.8 million for the year ended December 31, 2009. The June 30, 2010 results include a $1.0 million restructuring charge related to the relocation of the 4 manufacturing of the Indoor display equipment from Connecticut to Iowa as further discussed in Note 3 - Plan of Restructuring and a $456,000 charge to write-off engineering software. As further discussed in Note 7 - Long-Term Debt, the Company did not make the required sinking fund payment of $105,700 on its 9 1/2% Subordinated debentures due 2012 (the "Debentures"), which was due on December 1, 2009 and the June 1, 2010 interest payment of $50,200, and did not make the March 1, 2010 interest payment of $417,800 on its 8 1/4% Limited convertible senior subordinated notes due 2012 (the "Notes"). Under the terms of the indenture agreements that govern the Debentures and Notes, the non-payments constitute events of default; accordingly, the trustees or the holders of 25% of the outstanding Debentures and Notes have the right to declare the outstanding principal and interest due and payable immediately. As such, all outstanding debt under the Debentures and Notes has been classified as current in the accompanying Condensed Consolidated Balance Sheets. In the event that the Company receives such notice, the senior lender has the right to demand payment on outstanding amounts on the Credit Agreement. These matters raise substantial doubt about the Company's ability to continue as a going concern. In March 2010, the senior lender agreed to extend the maturity date of the Credit Agreement to May 1, 2011 and has extended payment terms on the term portion of the debt. The senior lender has retained the right to call the Credit Agreement in the event that the holders of the Debentures or Notes demand payment. As of August 1, 2010, the senior lender modified the Credit Agreement to reduce the availability under the revolving loan from $5.0 million to $4.3 million, amend the principal repayment schedule to defer the next three monthly principal payments of $50,000 each until the maturity date and remove the senior debt coverage ratio covenant test for the June 30, 2010 and September 30, 2010 periods. The Company also refinanced its mortgage on its Des Moines, Iowa facility in March 2010, which provided an additional $260,000 for working capital. The Company continues to be involved in discussions with various entities to try to obtain additional debt and/or equity financing including amounts that could be used to settle the Debentures and Notes, however there can be no assurance that the Company will be successful. The Company continues to manage a plan to improve operating results. The plan includes a joint venture agreement with a People's Republic of China company to establish a cooperative venture limited liability company in the People's Republic of China to engage in research, engineering, development, manufacturing, sale and distribution of LED lamps, LED digital signage and LED lighting or similar products. The Company is pursuing new business opportunities in the LED market with energy-saving lighting solutions and supplementing our established digital display and signage businesses with a highly flexible, cost-efficient and creative means for facilities to enhance their environments with LED lighting. The Company intends to feature a comprehensive offering of the latest LED lighting technologies that provide facilities and public infrastructure with "green" lighting solutions that emit less heat, save energy and enable creative designs. The Company continues to seek ways to reduce costs of components used in its products and other expenses to improve sales margins, and continues to look at ways to lower overhead costs, such as compensation and benefits. There can be no assurance that the Company will achieve higher sales, improved margins or lower costs. Because substantially all of the Company's eligible accounts receivable, inventory and other assets are secured by the Credit Agreement, management cannot provide any assurance that the Company 5 would have sufficient cash and liquid assets to fund normal operations during the period of time when it is required to repay amounts outstanding under the Credit Agreement. Further, if the Company is unable to obtain waivers or cure the defaults on the Debentures and Notes, the Debentures and Notes could be called and be immediately due. Such notice would trigger a default in the Credit Agreement. If the Credit Agreement, Debentures and Notes are called, the Company would need to obtain new financing; there can be no assurance that the Company will be able to do so. If the debt is called and new financing cannot be arranged it is unlikely the Company will be able to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that may result from the outcome of this uncertainty. See Note 7 - Long-Term Debt for further details. Note 3 - Plan of Restructuring In the second quarter, the Company decided to take certain actions to reduce operating costs. These actions included the elimination of approximately 50 positions from our operations and the closing of our Stratford, Connecticut manufacturing facility. For the six months ended June 30, 2010, we incurred one-time restructuring costs of approximately $1.0 million, consisting of employee severance pay, facility closing costs, representing primarily lease termination and asset write-off costs, and other fees directly related to the restructuring plan. The costs associated with the restructuring are included in a separate line item, Restructuring costs, in the Condensed Consolidated Statement of Operations. We expect that the majority of these costs will be paid over the next 12 months. The following table shows the amounts expensed and paid for restructuring costs that were incurred during the three and six months ended June 30, 2010 and the remaining accrued balance of restructuring costs as of June 30, 2010, which is included in Accrued liabilities in the Condensed Consolidated Balance Sheets. - --------------------------------------------------------------------------- Payments and Balance Provision Other Adjustments June 30, 2010 - --------------------------------------------------------------------------- Severance costs (1) $ 365 $ 54 $311 Facility closing costs (2) 596 171 425 Other fees 81 - 81 ------------------------------------------ $1,042 $225 $817 - --------------------------------------------------------------------------- (1) Represents salaries for employees separated from the Company. (2) Represents costs associated with the closing of the Stratford, Connecticut facility (primarily lease termination costs) and leasehold improvement and equipment write-offs.
6 The following table shows by reportable segment, the restructuring costs incurred during the three and six months ended June 30, 2010 and the remaining accrued balance of restructuring costs as of June 30, 2010. - --------------------------------------------------------------------------- Payments and Balance Provision Other Adjustments June 30, 2010 - --------------------------------------------------------------------------- Indoor display $ 935 $197 $738 Outdoor display 107 28 79 ------------------------------------------ $1,042 $225 $817 - ---------------------------------------------------------------------------
Note 4 - Fair Value The Company carries its money market funds and cash surrender value of life insurance related to its deferred compensation arrangements at fair value. The fair value of these instruments is determined using a three-tier fair value hierarchy. Based on this hierarchy, the Company determined the fair value of its money market funds using quoted market prices, a Level 1 or an observable input, and the cash surrender value of life insurance, a Level 2 based on observable inputs primarily from the counter party. At June 30, 2010, the Company's money market funds and the cash surrender value of life insurance had carrying amounts of $9,000 and $71,000, respectively. The carrying amounts of cash equivalents, receivables, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these items. At June 30, 2010, the fair value of the Company's Notes and Debentures, using observable inputs, was $0.8 million and $0.1 million, respectively. At June 30, 2010, the fair value of the Company's remaining long-term-debt, including current portion, approximates its carrying value of $7.7 million. Note 5 - Inventories Inventories are stated at the lower of cost or market and consist of the following: - -------------------------------------------- June 30 December 31 In thousands 2010 2009 - -------------------------------------------- Raw materials $3,945 $3,695 Work-in-progress 877 1,044 Finished goods 467 410 -------------------- $5,289 $5,149 - --------------------------------------------
7 Note 6 - Other Receivable The Company had a $2.6 million note receivable that was due June 2008, relating to the sale/leaseback of the Company's Norwalk, Connecticut facility in 2004. The receivable was secured by a purchase money mortgage subordinated to a $3.5 million first mortgage in favor of the purchaser's bank. The purchaser defaulted on this payment and the Company pursued legal remedies. After the negative results of a foreclosure by sale by the first mortgagee, the Company wrote off this note receivable and related expense for a total of $2.7 million in the second quarter of 2009. Note 7 - Long-Term Debt The Company has $10.1 million of 8 1/4% Limited convertible senior subordinated notes due 2012 (the "Notes") which are no longer convertible into common shares; interest is payable semi-annually and the Notes may be redeemed, in whole or in part, at par. The Company did not remit the March 1, 2010 semi-annual interest payment of $417,800 to the trustee, which non-payment continued for more than 30 days. The non-payment constitutes an event of default under the indenture governing the Notes and the trustee, by notice to the Company, or the holders of 25% of the principal outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately. When such notice is received by the Company, no payment shall be made by the Company to the holders or trustee until the earlier of such non-payment event of default is cured or waived or 179 days since receipt by the trustee of notice of such event, unless the holder of Senior Indebtedness has accelerated the due date thereof. If the holder of Senior Indebtedness accelerates the due date at any time, then no payment may be made on the Notes until the default is cured or waived. At June 30, 2010 and December 31, 2009, the total amount outstanding is classified as Current portion of long-term debt. The Company has $1.1 million of 9 1/2% Subordinated debentures due 2012 (the "Debentures") which are due in annual sinking fund payments of $105,700 beginning in 2009, which payment has not been remitted by the Company, with the remainder due in 2012; interest is payable semi-annually and the Debentures may be redeemed, in whole or in part, at par. The Company did not remit the June 1, 2010 semi-annual interest payment of $50,200 to the trustee, which non-payment continued for more than 30 days. The non-payments constitute an event of default under the indenture governing the Debentures and the trustee, by notice to the Company, or the holders of 25% of the principal outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately. During the continuation of any event which, with notice or lapse of time or both, would constitute a default under any agreement under which Senior Indebtedness is issued, if the effect of such default is to cause or permit the holder of Senior Indebtedness to become due prior to its stated maturity, no payment (including any required sinking fund payment) of principal, premium or interest shall be made on the Debentures unless and until such default shall have been remedied, if written notice of such default has been given to the trustee by the Company or the holder of Senior Indebtedness. The failure to make the sinking fund payment is an event of default under the Credit Agreement since it involves indebtedness over $500,000 and no payment can be made to the trustee or the holders at this time as such event has not been waived. 8 Likewise, the failure to pay the interest on the Notes is an event preventing payments on the Debentures, as the Notes are Senior Indebtedness with respect to the Debentures. At June 30, 2010 and December 31, 2009, the total amount outstanding is classified as Current portion of long-term debt. The Company has a bank Credit Agreement, which provides for a term loan of $10.0 million, a non-revolving line of credit of up to $6.2 million (which is no longer available) to finance the redemption of one-half of the 7 1/2% Subordinated notes due 2006 (which were redeemed in June 2006 and no longer outstanding), and a revolving loan of up to $4.3 million, based on eligible accounts receivable and inventory, at a variable rate of interest of Prime plus 2.00%, with a floor of 6.00% (6.00% at June 30, 2010), which was due to mature April 1, 2010. On April 13, 2010, the maturity of the Credit Agreement was extended to May 1, 2011. As of August 1, 2010, the senior lender modified the Credit Agreement to reduce the availability under the revolving loan from $5.0 million to $4.3 million, amend the principal repayment schedule to defer the next three monthly principal payments of $50,000 each until the maturity date and remove the senior debt coverage ratio covenant test for the June 30, 2010 and September 30, 2010 periods. As of June 30, 2010, the Company has drawn $4.0 million against the revolving loan facility and none was available for additional borrowing. The Credit Agreement, as amended, requires an annual facility fee on the unused commitment of 0.25% and requires compliance with certain financial covenants, as defined in the Credit Agreement, which include a senior debt coverage ratio of not less than 1.25 to 1.0, a loan-to-value ratio of not more than 50% and a $1.0 million cap on capital expenditures per quarter beginning with the quarter ended December 31, 2010. In addition, the April 13, 2010 amendment waived the default on the Notes and Debentures, but in the event that the holders of the Notes or Debentures or trustees declare a default and begin to exercise any of their rights and remedies in connection with the non-payment defaults, this shall constitute a separate and distinct event of default and the senior lender may exercise any and all rights and remedies it may have. In addition, the April 13, 2010 amendment waived the default of non-payment of certain pension plan contributions, but in the event that any government agency takes any enforcement action or otherwise exercises any rights and remedies it may have, this shall constitute a separate and distinct event of default and the senior lender may exercise any and all rights and remedies it may have. The amounts outstanding under the Credit Agreement are collateralized by all of the Display division assets. At June 30, 2010 and December 31, 2009, the total amount outstanding under the Credit Agreement is classified as Current portion of long-term debt. On March 1, 2010, the Company refinanced its existing mortgage on its facility located in Des Moines, Iowa, which was scheduled to mature in 2009. The refinancing was for $650,000 at a fixed rate of interest of 6.50% payable in monthly installments, which matures on March 1, 2015 and requires a compensating balance of $200,000. The Company used proceeds of $390,000 to settle the prior debt and will use the $260,000 balance for working capital needs. On February 25, 2010, the Company took out a mortgage on land located in Silver City, New Mexico. The financing was for $100,000 at a fixed rate of interest of 7.80% payable in monthly interest only payments, which matures on February 25, 2012. 9 The Company also has a mortgage on its real estate rental property located in Santa Fe, New Mexico at a variable rate of interest of Prime, with a floor of 6.75%, which was the interest rate in effect at June 30, 2010, payable in monthly installments through December 12, 2012. Note 8 - Comprehensive Loss Total comprehensive loss is as follows: - ---------------------------------------------------------------------------------------------------------- Three Months Ended June 30 Six Months Ended June 30 In thousands 2010 2009 2010 2009 - ---------------------------------------------------------------------------------------------------------- Net loss, as reported $(2,605) $(3,805) $(4,025) $(4,959) ------------------------------------------------- Other comprehensive (loss) income: Unrealized foreign currency translation (loss) gain (162) 159 (44) 144 ------------------------------------------------- Total other comprehensive (loss) income, net of tax (162) 159 (44) 144 ------------------------------------------------- Comprehensive loss $(2,767) $(3,646) $(4,069) $(4,815) - ----------------------------------------------------------------------------------------------------------
Note 9 - Pension Plan As of December 31, 2003, the benefit service under the pension plan had been frozen and, accordingly, there is no service cost. As of April 30, 2009, the compensation increments have been frozen and, accordingly, no additional benefits are being accrued under the plan. The following table presents the components of net periodic pension cost: - --------------------------------------------------------------------------------------- Three Months Ended June 30 Six Months Ended June 30 In thousands 2010 2009 2010 2009 - --------------------------------------------------------------------------------------- Interest cost $ 135 $ 150 $ 270 $ 300 Expected return on plan assets (104) (119) (208) (238) Amortization of prior service cost - 4 - 8 Amortization of net actuarial loss 76 105 152 210 --------------------------------------------- Net periodic pension cost $ 107 $ 140 $ 214 $ 280 - ---------------------------------------------------------------------------------------
As of June 30, 2010, the Company has recorded a current pension liability of $0.1 million, which is included in Accrued liabilities on the Condensed Consolidated Balance Sheets, and a long-term pension liability $4.0 million, which is included in Deferred credits, deposits and other on the Condensed Consolidated Balance Sheets. The minimum required contribution for 2010 is expected to be $0.1 million. The Company will seek a waiver for the minimum required contribution for 2010 to defer the May 15, 2010 and August 15, 2010 quarterly payments of $90,000. The pension plan asset information included below is presented at fair value. ASC 820 establishes a framework for measuring fair value and required disclosures about assets and liabilities measured at fair value. The fair value of these assets is determined using a three-tier fair value hierarchy. Based on this hierarchy, the Company determined the fair value of its money market funds, equity and index funds and guaranteed investment contracts using quoted market prices, a Level 1 or an observable input, and bonds, a Level 2 based on observable inputs and quoted prices in markets that are not active. The Company does not have any Level 3 pension assets, which such valuation would be based on unobservable measurements and management's estimates. 10 The following table presents the pension plan assets by level within the fair value hierarchy as of June 30, 2010: - ----------------------------------------------------------------------- In thousands Level 1 Level 2 Level 3 Total - ----------------------------------------------------------------------- Guaranteed investment contracts $2,466 $ - $ - $2,466 Equity and index funds 2,461 - - 2,461 Bonds - 51 - 51 Money market funds 17 - - 17 ------------------------------------ Total pension plan assets $4,944 $51 $ - $4,995 - -----------------------------------------------------------------------
In March 2010, the Company submitted to the Internal Revenue Service a request for waiver of the minimum funding standard for its defined benefit plan. The waiver request was submitted as a result of the current economic climate and the current business hardship that the Company is experiencing. The waiver, if granted, will defer payment of $285,000 of the minimum funding standard for the 2009 plan year. If the waiver is not granted, the Pension Benefit Guaranty Corporation and the Internal Revenue Service have various enforcement remedies they can implement to protect the participant's benefits, such as termination of the plan and require the Company to make the unpaid contributions. The senior lender has waived the default of non-payment of certain pension plan contributions. In the event that any government agency takes any enforcement action or otherwise exercises any rights and remedies it may have, this shall constitute a separate and distinct event of default and the senior lender may exercise any and all rights and remedies it may have. At this time, the Company is not anticipating making its required contributions for the 2010 plan year. Note 10 - Stock Option Plans The Company did not issue any stock options during the three and six months ended June 30, 2010. The Company issued options for 2,000 shares with an exercise price of $1.05 per share under the Non-Employee Director Stock Option Plan in June 2009. The unrecognized compensation costs related to unvested stock options granted under the Company's stock option plans was nominal. The following table summarizes the activity of the Company's stock options for the six months ended June 30, 2010: - ----------------------------------------------------------------------------------------- Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Options Price ($) Term (Yrs) Value ($) - ----------------------------------------------------------------------------------------- Outstanding at beginning of year 26,000 4.57 Granted - - Exercised - - Terminated - - ------ Outstanding at end of period 26,000 4.57 2.6 =============================== Vested and expected to vest at end of period 24,500 4.81 2.4 - =============================== Exercisable at end of period 24,500 4.81 2.4 - - -----------------------------------------------------------------------------------------
In February 2010, the Board granted Mr. Jean-Marc Allain, the Company's new President and Chief Executive Officer, 50,000 shares of restricted stock from treasury shares which vest 50% after one year and the remaining 50% after two years. 11 Note 11 - Loss Per Common Share Basic and diluted loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. In periods when the Company reports net income, diluted per common share amounts are calculated by adjusting net income by the weighted average number of common shares outstanding, adjusted for shares that would be assumed outstanding after convertible debt conversion and stock options vested under the treasury stock method. At June 30, 2010 and 2009, there were outstanding stock options to purchase 26,000 and 31,500 shares of Common Stock, respectively, which were excluded from the calculation of diluted loss per share because their impact would have been anti-dilutive. Note 12 - Legal Proceedings and Claims The Company is subject to legal proceedings and claims which arise in the ordinary course of its business and/or which are covered by insurance that it believes individually and in the aggregate will not have a material adverse effect on the consolidated financial position or operations of the Company. Note 13 - Business Segment Data The Company evaluates segment performance and allocates resources based upon operating income. The Company's operations are managed in four 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 new LED lighting segment intends to sell energy-saving lighting solutions that provide facilities and public infrastructure with "green" lighting solutions that emit less heat, save energy and enable creative designs. The Real estate rental segment owns an income-producing property. Segment operating income is shown after operating expenses and sales, general and administrative expenses directly associated with the segment. Corporate general and administrative expenses relate to costs that are not directly identifiable with a segment. There are no intersegment sales. Of the total goodwill of $0.8 million, $0.7 million relates to the Outdoor display segment and $0.1 million relates to the Indoor display segment. Foreign revenues represent less than 10% of the Company's revenues and therefore are not separately disclosed. The foreign operation does not manufacture its own equipment; the domestic operation provides the equipment that the foreign operation leases or sells. The foreign operation operates similarly to the domestic operation and has similar profit margins. 12 Information about the Company's operations in its four business segments for the three and six months ended June 30, 2010 and 2009 is as follows: - ------------------------------------------------------------------------------------ Three Months Ended June 30 Six Months Ended June 30 In thousands 2010 2009 2010 2009 - ------------------------------------------------------------------------------------ Revenues: Indoor display $ 2,142 $ 2,216 $ 3,825 $ 4,591 Outdoor display 4,065 5,168 7,704 10,505 LED lighting - - - - Real estate rental 66 59 130 116 ---------------------------------------------- Total revenues $ 6,273 $ 7,443 $11,659 $15,212 ---------------------------------------------- Operating (loss) income: Indoor display $(1,135) $ (350) $(1,455) $ (569) Outdoor display (429) 703 (242) 1,040 LED lighting (78) - (78) - Real estate rental 52 39 101 78 ---------------------------------------------- Total operating (loss) income (1,590) 392 (1,674) 549 Other (expense) income - (2,686) 3 (2,686) Corporate general and administrative expenses (636) (1,023) (1,540) (1,885) Interest expense, net (365) (437) (786) (845) ---------------------------------------------- Loss before income taxes (2,591) (3,754) (3,997) (4,867) Income tax expense (14) (51) (28) (92) ---------------------------------------------- Net loss $(2,605) $(3,805) $(4,025) $(4,959) - ------------------------------------------------------------------------------------
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, advertising, transportation, entertainment and sports industries. The Company started a new business opportunity in the LED lighting market with energy-saving lighting solutions that will feature a comprehensive offering of the latest LED lighting technologies that provide facilities and public infrastructure with "green" lighting solutions that emit less heat, save energy and enable creative designs. The Company also owns and operates an income producing rental property. The Company operates in four reportable segments: Indoor display, Outdoor display, LED lighting and Real estate rental. The Indoor display segment includes worldwide revenues and related expenses from the rental, maintenance and sale of indoor displays. This segment includes the financial, government/private and gaming 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 catalog sports, retail and commercial markets. The LED lighting segment will include worldwide revenues and related expenses from the sale of LED lighting products. The Real estate rental segment includes the operations of an income-producing real estate property. 13 Going Concern In light of the unprecedented instability in the financial markets and the severe slowdown in the overall economy, we do not have adequate liquidity, including access to the debt and equity capital markets, to operate our business in the manner in which we have historically operated. As a result, our short-term business focus has been to preserve our liquidity position. In April 2010, we were successful in negotiating the renewal of the bank Credit Agreement, which was scheduled to mature on April 1, 2010. The senior lender has reduced the monthly principal payments and modified the maturity of the Credit Agreement to May 1, 2011. As of August 1, 2010, the senior lender modified the Credit Agreement to reduce the availability under the revolving loan from $5.0 million to $4.3 million, amend the principal repayment schedule to defer the next three monthly principal payments of $50,000 each until the maturity date and remove the senior debt coverage ratio covenant test for the June 30, 2010 and September 30, 2010 periods. Substantially all of our eligible accounts receivable, inventory and other assets are secured by the Credit Agreement. We cannot provide any assurance that we would have sufficient cash and liquid assets to fund normal operations during the period of time when we are required to repay amounts outstanding under the Credit Agreement. Unless we are successful in obtaining additional liquidity, we believe that we will not have sufficient cash and liquid assets to fund normal operations for the next 12 months. In addition, the Company has not made the required sinking fund payment of $105,700 on its 9 1/2% Subordinated debentures due 2012 (the "Debentures") which was due on December 1, 2009 and the June 1, 2010 interest payment of $50,200, and did not make the March 1, 2010 interest payment of $417,800 on its 8 1/4% Limited convertible senior subordinated notes due 2012 (the "Notes"). As a result, if the Company is unable to (i) obtain additional liquidity for working capital, (ii) make the required sinking fund payment or interest payments on its Debentures, (iii) make the required interest payment on its Notes and (iv) make the required payments under the Credit Agreement when due, there would be a significant adverse impact on the financial position and operating results of the Company. Moreover, because of the uncertainty surrounding our inability to obtain additional liquidity and the potential of the noteholders and/or trustee to give notice to the Company of a default on either the Debentures or the Notes, our independent registered public accounting firm for the year ended December 31, 2009 issued an opinion on our consolidated financial statements that states that the consolidated financial statements were prepared assuming we will continue as a going concern, however the opinion further states that the uncertainty regarding the inability to make the required sinking fund payment on the Debentures and the interest payment on the Notes and the potential of the senior lender accelerating the payments on the Credit Agreement due to an event of default on the Debentures and Notes raises substantial doubt about our ability to continue as a going concern. 14 Results of Operations Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009 Total revenues for the six months ended June 30, 2010 decreased $3.6 million or 23.4% to $11.7 million from $15.2 million for the six months ended June 30, 2009, primarily due to a decrease in the Outdoor display sales revenues. Indoor display revenues decreased $766,000 or 16.7%. Of this decrease, Indoor display equipment sales decreased $348,000 or 23.9%, primarily due to a decrease in sales from the financial services and gaming markets. Indoor display equipment rentals and maintenance revenues decreased $418,000 or 13.3%, primarily due to disconnects and non-renewals of equipment on rental on existing contracts in the financial services market. The financial services market continues to be negatively impacted by the current investment climate resulting in consolidation within that industry and the wider use of flat-panel screens for smaller applications. Also, the global recession has negatively impacted Indoor sales and rentals and maintenance revenues. Outdoor display revenues decreased $2.8 million or 26.7%. Of this decrease, Outdoor display equipment sales decreased $2.8 million or 31.6%, primarily in the catalog sports and commercial markets. Outdoor display equipment rentals and maintenance revenues decreased $45,000 or 2.5%. Also, the global recession has negatively impacted the Outdoor sales revenues. LED lighting is a start-up business and did not generate any revenues for the six months ended June 30, 2010. Real estate rental revenues increased $14,000 or 12.1%, due to an increase in rental income in the Santa Fe, New Mexico rental property. Total operating income for the six months ended June 30, 2010 decreased $2.2 million to an operating loss of $1.7 million from an operating income of $549,000 for the six months ended June 30, 2009, principally due to the decline in revenues, the restructuring costs and the charge to write-off engineering software, offset by a decrease in other general and administrative expenses. Indoor display operating loss increased $886,000 to $1.5 million in 2010 compared to $569,000 in 2009, primarily as a result of a decrease in revenues and the $935,000 restructuring costs, offset by a $361,000 decrease in bad debt expense. The cost of Indoor displays represented 89.0% of related revenues in 2010 compared to 85.1% in 2009. The Company periodically addresses the cost of field service to keep it in line with revenues from equipment rentals and maintenance. Cost of Indoor display equipment rentals and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. Indoor display cost of equipment sales decreased $174,000 or 18.9%, primarily due to the decrease in revenues. Indoor display general and administrative expenses decreased $311,000 or 24.8%, primarily due the decrease in the bad debt expense. The restructuring will result in annual payroll savings of approximately $1.2 million. Outdoor display operating income decreased $1.3 million, primarily as a result of a decrease in 15 revenues, the $456,000 charge to write-off engineering software and the $107,000 restructuring costs, offset by a $74,000 decrease in bad debt expense and a decrease in selling payroll and benefits and related expenses. The cost of Outdoor displays represented 79.5% of related revenues in 2010 compared to 76.1% in 2009. Outdoor display cost of equipment sales decreased $1.8 million or 27.0%, principally due to the decrease in volume. Outdoor display cost of equipment rentals and maintenance decreased $24,000 or 2.0%. Outdoor display general and administrative expenses increased $237,000 or 16.1%, primarily due to the charge to write-off engineering software, offset by a reduction in selling payroll and benefits and related expenses, as well as the decrease in bad debt expense. Cost of Outdoor display equipment rentals and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. The restructuring will result in annual payroll savings of approximately $0.7 million. LED lighting operating loss of $78,000 is primarily due to the start-up expenses of this new segment. Real estate rental operating income increased $23,000 or 29.5%, primarily due to the increase in rental revenues. The cost of Real estate rental represented 18.5% of related revenues in 2010 compared to 26.7% in 2009. Real estate rental general and administrative expenses remained level. Corporate general and administrative expenses decreased $345,000 or 18.3%. The 2010 corporate general and administrative expenses includes a $67,000 positive effect in the Canadian currency exchange, while 2009 included a $151,000 negative effect in the Canadian currency exchange, a difference of $218,000. Reductions in audit, insurance and medical expenses and payroll contributed to the decrease this year, offset by an increase in accrued consulting fees. The Company continues to monitor and reduce certain overhead costs such as benefit and medical costs. Net interest expense decreased $59,000 or 7.0%, primarily due to scheduled payments of long-term debt as well as a reduction in the outstanding balance of the revolving credit facility. The effective tax rate for the six months ended June 30, 2010 and 2009 was 0.7% and 1.9%, respectively. Both the 2010 and 2009 tax rate are being affected by the valuation allowance on the Company's deferred tax assets as a result of reporting pre-tax losses. The income tax expense relates to the Company's Canadian subsidiary. Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009 Total revenues for the three months ended June 30, 2010 decreased $1.2 million or 15.7% to $6.3 million from $7.4 million for the three months ended June 30, 2009, primarily due to a decrease in the Outdoor display sales revenues. Indoor display revenues decreased $74,000 or 3.3%. Of this decrease, Indoor display equipment rentals and maintenance revenues decreased $167,000 or 10.8%, primarily due to disconnects and non-renewals of equipment on rental on existing contracts in the financial services market. The financial services market continues to be negatively impacted by the current investment climate resulting in consolidation within that industry and the wider use of flat-panel screens for smaller 16 applications. Indoor display equipment sales increased $93,000 or 13.9%, primarily due to an increase in sales from the transportation and gaming markets. Also, the global recession has negatively impacted Indoor sales and rentals and maintenance revenues. Outdoor display revenues decreased $1.1 million or 21.3%. Of this decrease, Outdoor display equipment sales decreased $1.0 million or 23.5%, primarily in the catalog sports and commercial markets. Outdoor display equipment rentals and maintenance revenues decreased $101,000 or 11.2%, primarily due to the continued expected revenue decline in the older Outdoor display equipment rental and maintenance bases acquired in the early 1990s. Also, the global recession has negatively impacted the Outdoor sales and rentals and maintenance revenues. LED lighting is a start-up business and did not generate any revenues for the three months ended June 30, 2010. Real estate rental revenues increased $7,000 or 11.9%, due to an increase in rental income in our Santa Fe, New Mexico rental property. Total operating income for the three months ended June 30, 2010 decreased $2.0 million to an operating loss of $1.6 million from an operating income of $392,000 for the three months ended June 30, 2009, principally due to the restructuring charge, the decline in revenues and the charge to write-off engineering software, offset by a decrease in general and administrative expenses. Indoor display operating loss increased $785,000 to $1.1 million in 2010 compared to $350,000 in 2009, primarily as a result of the $935,000 restructuring costs and the decline in both sales and rentals and maintenance revenues, offset by a $240,000 decrease in bad debt expense. The cost of Indoor displays represented 85.6% of related revenues in 2010 compared to 87.0% in 2009. The Company periodically addresses the cost of field service to keep it in line with revenues from equipment rentals and maintenance. Cost of Indoor display equipment rentals and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. Indoor display cost of equipment sales increased $37,000 or 7.9%, primarily due to the increase in revenues. Indoor display general and administrative expenses decreased $128,000 or 20.1%, primarily due to a reduction in payroll and benefits and related expenses, as well as the decrease in bad debt expense. Outdoor display operating income decreased $1.1 million to an operating loss of $429,000 in 2010 compared to operating income of $703,000 in 2009, primarily as a result of the decrease in revenues and the $456,000 charge to write-off engineering software. The cost of Outdoor displays represented 80.3% of related revenues in 2010 compared to 74.7% in 2009. Outdoor display cost of equipment sales decreased $610,000 or 18.7%, principally due to the decrease in volume. Outdoor display cost of equipment rentals and maintenance increased slightly. Outdoor display general and administrative expenses increased $519,000 to $1.1 million in 2010 compared to $604,000 in 2009, primarily due to the charge to write-off engineering software, offset by a decrease in bad debt expense. Cost of Outdoor display equipment rentals and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. LED lighting operating loss of $78,000 is primarily due to the start-up expenses of this new segment. 17 Real estate rental operating income increased $13,000 or 33.3%, primarily due to the increase in rental revenues. The cost of Real estate rental represented 18.2% of related revenues in 2010 compared to 27.1% in 2009. Real estate rental general and administrative expenses remained level. Corporate general and administrative expenses decreased $387,000 or 37.9%. The 2010 corporate general and administrative expenses includes a $193,000 positive effect in the Canadian currency exchange, while 2009 included a $157,000 negative effect in the Canadian currency exchange, a difference of $350,000. Reductions in audit, insurance and medical expenses and payroll contributed to the decrease, offset by an increase in accrued consulting fees. Net interest expense decreased $72,000 or 16.5%, primarily due to scheduled payments of long-term debt as well as a reduction in the outstanding balance of the revolving credit facility. The effective tax rate for the three months ended June 30, 2010 and 2009 was 0.5% and 1.4%, respectively. Both the 2010 and 2009 tax rate are being affected by the valuation allowance on the Company's deferred tax assets as a result of reporting pre-tax losses. The income tax expense relates to the Company's Canadian subsidiary. Liquidity and Capital Resources The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant recurring losses from continuing operations and has a significant working capital deficiency. The Company incurred a net loss of $4.0 million for the six months ended June 30, 2010 and has a working capital deficiency of $16.9 million as of June 30, 2010. In addition, the Company reported a loss from continuing operations of $8.8 million for the year ended December 31, 2009. The June 30, 2010 results include a $1.0 million restructuring charge related to the relocation of the manufacturing of the Indoor display equipment from Connecticut to Iowa as further discusses in Note 3 - - Plan of Restructuring and the $456,000 charge to write-off engineering software. As further discussed in Note 7 - Long-Term Debt, the Company did not make the required sinking fund payment of $105,700 on its 9 1/2% Subordinated debentures due 2012 (the "Debentures"), which was due on December 1, 2009 and the June 1, 2010 interest payment of $50,200, and did not make the March 1, 2010 interest payment of $417,800 on its 8 1/4% Limited convertible senior subordinated notes due 2012 (the "Notes"). Under the terms of the indenture agreements that govern the Debentures and Notes, the non-payments constitute events of default; accordingly, the trustees or the holders of 25% of the outstanding Debentures and Notes have the right to declare the outstanding principal and interest due and payable immediately. In the event that the Company receives such notice, the senior lender has the right to demand payment on outstanding amounts on the Credit Agreement. As such, the outstanding Debentures, Notes and Credit Agreement debt have been classified as Current portion of long-term debt on the accompanying Condensed Consolidated Balance Sheets. These matters raise substantial doubt about the Company's ability to continue as a going concern. 18 The Company has a bank Credit Agreement, which provides for a term loan of $10.0 million, a non-revolving line of credit of up to $6.2 million (which is no longer available) to finance the redemptions of one-half of the 7 1/2% Subordinated notes due 2006 (which were redeemed in June 2006 and no longer outstanding), and a revolving loan of up to $4.3 million, based on eligible accounts receivable and inventory, at a variable rate of interest of Prime plus 2.00%, with a floor of 6.00% (6.00% at June 30, 2010). On April 13, 2010, the maturity of the Credit Agreement was extended to May 1, 2011. As of August 1, 2010, the senior lender modified the Credit Agreement to reduce the availability under the revolving loan from $5.0 million to $4.3 million, amend the principal repayment schedule to defer the next three monthly principal payments of $50,000 each unti the maturity date and remove the senior debt coverage ratio covenant test for the June 30, 2010 and September 30, 2010 periods. As of June 30, 2010, the Company has drawn $4.0 million against the revolving loan facility and none was available for additional borrowing. The Credit Agreement, as amended, requires an annual facility fee on the unused commitment of 0.25% and requires compliance with certain financial covenants as defined in the Credit Agreement, which include a senior debt coverage ratio of not less than 1.25 to 1.0, a loan-to-value ratio of not more than 50% and a $1.0 million cap on capital expenditures per quarter beginning with the quarter ended December 31, 2010. In addition, the April 13, 2010 amendment waived the default on the Notes and Debentures, but in the event that the holders of the Notes or Debentures or trustees declare a default and begins to exercise any of their rights and remedies in connection with the non-payment defaults, this shall constitute a separate and distinct event of default and the senior lender may exercise any and all rights and remedies it may have. In addition, the April 13, 2010 amendment waived the default of non-payment of certain pension plan contributions, but in the event that any government agency takes any enforcement action or otherwise exercises any rights and remedies it may have, this shall constitute a separate and distinct event of default and the senior lender may exercise any and all rights and remedies it may have. The Company's objective in regards to the Credit Agreement is to obtain additional funds from external sources through equity or additional debt financing and the Company is in discussions with senior lenders and others to obtain additional borrowing capacity, which management believes will be difficult to accomplish within the next 12 months given the current global credit markets, economic conditions and operating results of the Company. While management hopes it can be successful in the long run, there can be no assurance that management will be successful in achieving these objectives. The Company continually evaluates the need and availability of long-term capital in order to meet its cash requirements and fund potential new opportunities. The amounts outstanding under the Credit Agreement are collateralized by all of the Display division assets. At June 30, 2010 and December 31, 2009, the total amount outstanding under the Credit Agreement is classified as Current portion of long-term debt. On March 1, 2010, the Company refinanced its existing mortgage on its facility located in Des Moines, Iowa, which was scheduled to mature in 2009. The refinancing was for $650,000 at a fixed rate of interest of 6.50% payable in monthly installments, which matures on March 1, 2015. The Company used proceeds of $390,000 to settle the prior debt and will use the $260,000 balance for working capital needs. On February 25, 2010, the Company took out a mortgage on land located in Silver City, New Mexico. The financing was for $100,000 at a fixed rate of interest of 7.80% payable in monthly interest only payments, which matures on February 25, 2012. 19 The Company also has a mortgage on its real estate rental property located in Santa Fe, New Mexico at a variable rate of interest of Prime, with a floor of 6.75%, which was the interest rate in effect at June 30, 2010, payable in monthly installments through December 12, 2012. The Company has generated cash provided by operating activities from operations of $1.3 million and $2.7 million for the six months ended June 30, 2010 and 2009, respectively. The Company has implemented several initiatives to improve operational results and cash flows over future periods, including the closing of the Stratford, Connecticut manufacturing facility. The Company continues to explore ways to reduce operational and overhead costs. The Company periodically takes steps to reduce the cost to maintain the equipment on rental and maintenance. The Company is dependent on future operating performance in order to generate sufficient cash flows in order to continue to run its businesses. Future operating performance is dependent on general economic conditions, as well as financial, competitive and other factors beyond our control. As a result, we have experienced a decline in our sales and lease bases. The cash flows of the Company are constrained, and in order to more effectively manage its cash resources in these challenging economic times, the Company has, from time to time, increased the timetable of its payment of some of its payables. There can be no assurance that we will meet our anticipated current and near term cash requirements. The Company's objective in regards to the Credit Agreement is to obtain additional funds from external sources through equity or additional debt financing prior to the maturity of the Credit Agreement on May 1, 2011, and is in discussions with senior lenders and others, but the current global credit environment has been and continues to be a challenge in accomplishing these objectives. If the Company is unable to obtain replacement financing before the maturity of the Credit Agreement on May 1, 2011, the senior lender has the right to call the loan. If the loan were called, the Company would have difficulties meeting its obligations in the normal course of business. The Company continually evaluates the need and availability of long-term capital in order to meet its cash requirements. The Company has $10.1 million of Notes outstanding. Interest is payable semi-annually and the Notes may be redeemed, in whole or in part, at par. The Company has not remitted the $417,800 March 1, 2010 semi-annual interest payment to the trustee, which continued for more than 30 days. The non-payment constitutes an event of default under the indenture governing the Notes and the trustee, by notice to the Company, or the holders of 25% of the principal outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately. When such notice is received by the Company, no payment shall be made by the Company to the holders or trustee until the earlier of such non-payment event of default is cured or waived or 179 days since receipt by the trustee of notice of such event, unless the holder of Senior Indebtedness has accelerated the due date thereof. If the holder of Senior Indebtedness accelerates the due date at any time, then no payment may be made until the default is cured or waived. In addition, the Company has $1.1 million of Debentures outstanding. The Company has not remitted the December 1, 2009 annual sinking fund payment of $105,700. Interest is payable semi-annually and the Debentures may be redeemed, in whole or in part, at par. The Company has not remitted the $50,200 June 1, 2010 semi-annual interest payment to the trustee, which continued 20 for more than 30 days. The non-payments constitute an event of default under the indenture governing the Debentures and the trustee, by notice to the Company, or the holders of 25% of the principal outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately. During the continuation of any event which, with notice or lapse of time or both, would constitute a default under any agreement under which Senior Indebtedness is issued, if the effect of such default is to cause or permit the holder of Senior Indebtedness to become due prior to its stated maturity, no payment (including any required sinking fund payment) of principal, premium or interest shall be made on the Debentures unless and until such default shall have been remedied, if written notice of such default has been given to the trustee by the Company or the holder of Senior Indebtedness. The failure to make the sinking fund payment is an event of default under the Credit Agreement since it involves indebtedness over $500,000 and no payment can be made to such trustee or the holders at this time as such event has not been waived. In March 2010 the Company submitted to the Internal Revenue Service a request for waiver of the minimum funding standard for its defined benefit plan. The waiver request was submitted as a result of the current economic climate and the current business hardship that the Company is experiencing. The waiver, if granted, will defer payment of $285,000 of the minimum funding standard for the 2009 plan year. If the waiver is not granted, the Pension Benefit Guaranty Corporation and the Internal Revenue Service have various enforcement remedies they can implement to protect the participant's benefits, such as termination of the plan and require the Company to make the unpaid contributions. The senior lender has waived the default of non-payment of certain pension plan contributions. In the event that any government agency takes any enforcement action or otherwise exercises any rights and remedies it may have, this shall constitute a separate and distinct event of default and the senior lender may exercise any and all rights and remedies it may have. At this time, the Company is not anticipating to make its required contributions for the 2010 plan year. Management believes that with its current cash resources and cash provided by operations, it will have difficulty funding operations and its current obligations over the next 12 months. Cash and cash equivalents increased $166,000 for the six months ended June 30, 2010 compared to an increase of $320,000 for the six months ended June 30, 2009. The increase in 2010 is primarily attributable to cash provided by operating activities of $1.3 million and $100,000 proceeds from long-term debt, offset by the investment in equipment for rental of $820,000, the investment in property, plant and equipment of $35,000, scheduled payments of long-term debt of $597,000 and $55,000 of payments on its revolving credit facility. In addition, the Company refinanced its Des Moines mortgage, netting an additional $260,000 for working capital needs. The increase in 2009 is primarily attributable to cash provided by operating activities of $2.7 million and proceeds from the sale of available-for-sale securities of $135,000, offset by the investment in equipment for rental of $1.1 million, the investment in property, plant and equipment of $133,000 and scheduled payments of long-term debt of $1.3 million. A fundamental principle of the preparation of financial statements in accordance with accounting principles generally accepted in the United States of America is the assumption that an entity will continue in existence as a going concern, which contemplates continuity of operations and the realization of assets and settlement of liabilities occurring in the ordinary course of business. This 21 principle is applicable to all entities except for entities in liquidation or entities for which liquidation appears imminent. In accordance with this requirement, the Company has prepared its condensed consolidated financial statements on a going concern basis. While we have prepared our consolidated financial statements on a going concern basis, the continuing losses and uncertainty regarding the inability to make the required sinking fund payment on the Debentures and the interest payments on the Notes and the Debentures and the potential of the senior lender accelerating the payments on the Credit Agreement due to an event of default on the Debentures and Notes raises substantial doubt about our ability to continue as a going concern. Therefore, we may not be able to realize our assets and settle our liabilities in the ordinary course of business. Our condensed consolidated financial statements included in this quarterly report on Form 10-Q do not reflect any adjustments that might specifically result from the outcome of this uncertainty. Under various agreements, the Company is obligated to make future cash payments in fixed amounts. These include payments under the Company's long-term debt agreements, employment and consulting agreement payments and rent payments required under operating lease agreements. The Company has both variable and fixed interest rate debt. Interest payments are projected based on actual interest payments incurred until the underlying debts mature. The following table summarizes the Company's fixed cash obligations as of June 30, 2010 for the remainder of 2010 and the next four years: - ------------------------------------------------------------------------------------------ Remainder of In thousands 2010 2011 2012 2013 2014 - ------------------------------------------------------------------------------------------ Long-term debt, including interest $17,274 $ 289 $2,079 $ 89 $ 89 Employment and consulting agreement obligations 275 550 226 195 195 Operating lease payments 158 293 185 77 - ------------------------------------- Total $17,707 $1,132 $2,490 $361 $284 - ------------------------------------------------------------------------------------------
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 its investment in its Canadian 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 22 purposes. At June 30, 2010, 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 $69,000. A 10% change in the Canadian dollar relative to the U.S. dollar would result in a currency exchange expense fluctuation of approximately $327,000, based on dealer quotes, considering current exchange rates. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures. As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this report, we have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management (including our Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded these disclosure controls are effective as of June 30, 2010. 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 quarter ended June 30, 2010, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. Part II - Other Information --------------------------- Item 1. Legal Proceedings The Company is subject to legal proceedings and claims which arise in the ordinary course of its business and/or which are covered by insurance that it believes individually and in the aggregate will not have a material adverse effect on the consolidated financial position or operations of the Company. 23 Item 1A. Risk Factors The Company is subject to a number of risks including general business and financial risk factors. Any or all of such factors could have a material adverse effect on the business, financial condition or results of operations of the Company. The risk factors identified in our Annual Report on Form 10-K for the year ended December 31, 2009 should be carefully considered. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3. Defaults upon Senior Securities As disclosed in Note 7 - Long-Term Debt to the condensed consolidated financial statements, the Company has $10.1 million of 8 1/4% Limited convertible senior subordinated notes due 2012 (the "Notes") which are no longer convertible into common shares; interest is payable semi-annually and the Notes may be redeemed, in whole or in part, at par. The Company did not remit the March 1, 2010 semi-annual interest payment of $417,800 to the trustee, which non-payment continued for more than 30 days. The non-payment constitutes an event of default under the indenture governing the Notes and the trustee, by notice to the Company, or the holders of 25% of the principal outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately. When such notice is received by the Company, no payment shall be made by the Company to the holders or trustee until the earlier of such non-payment event of default is cured or waived or 179 days since receipt by the trustee of notice of such event, unless the holder of Senior Indebtedness has accelerated the due date thereof. If the holder of Senior Indebtedness accelerates the due date at any time, then no payment may be made until the default is cured or waived. At June 30, 2010, the total amount outstanding is classified as Current portion of long-term debt. Also disclosed in Note 7 - Long-Term Debt, the Company has $1.1 million of 9 1/2% Subordinated debentures due 2012 (the "Debentures") which are due in annual sinking fund payments of $105,700 beginning in 2009, which payment has not been remitted by the Company, with the remainder due in 2012; interest is payable semi-annually and the Debentures may be redeemed, in whole or in part, at par. The Company did not remit the June 1, 2010 semi-annual interest payment of $50,200 to the trustee, which non-payment continued for more than 30 days. The non-payments constitute an event of default under the Indenture governing the Debentures and the trustee, by notice to the Company, or the holders of 25% of the principal outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately. During the continuation of any event which, with notice or lapse of time or both, would constitute a default under any agreement under which Senior Indebtedness is issued, if the effect of such default is to cause or permit the holder of Senior Indebtedness to become due prior to its stated maturity, no payment (including any required sinking fund payment) of principal, premium or interest shall be made on the Debentures unless and until such default shall have been remedied, if written notice of such default has been given to the trustee by the Company or the holder of Senior Indebtedness. The failure to 24 make the sinking fund payment is an event of default under the Credit Agreement since it involves indebtedness over $500,000 and no payment can be made to the trustee or the holders at this time as such event has not been waived. At June 30, 2010, the total amount outstanding is classified as Current portion of long-term debt. Item 4. (Removed and Reserved) Item 5. Other Information None. Item 6. Exhibits 10.1 Amendment No. 15 to the Amended and Restated Commercial Loan and Security Agreement with People's United Bank dated as of August 1, 2010, filed herewith. 31.1 Certification of Jean-Marc Allain, President and 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 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. 32.1 Certification of Jean-Marc Allain, President and 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 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. 25 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) by /s/ Angela D. Toppi ----------------------------- Angela D. Toppi Executive Vice President and Chief Financial Officer by /s/ Todd Dupee ----------------------------- Todd Dupee Vice President and Controller Date: August 18, 2010 26 EX-10 2 peoplesamend15.txt AMENDMENT 15 TO CREDIT AGREEMENT Exhibit 10.1 AMENDMENT NO. 15 TO AMENDED AND RESTATED COMMERCIAL LOAN AND ------------------------------------------------------------ SECURITY AGREEMENT AND WAIVER AGREEMENT --------------------------------------- This AMENDMENT NO. 15 TO AMENDED AND RESTATED COMMERCIAL LOAN AND SECURITY AGREEMENT AND WAIVER AGREEMENT (this "Agreement") is made as of the 1st day of August, 2010, by and among TRANS-LUX CORPORATION, a Delaware corporation, with its chief executive office and principal place of business located at 26 Pearl Street, Norwalk, Connecticut 06850 ("Borrower"), each of the other corporations signatory hereto as guarantors (collectively, the "Guarantors"), and PEOPLE'S UNITED BANK (formerly known as People's Bank), a Connecticut chartered banking corporation with an office located at 350 Bedford Street, Stamford, Connecticut 06901 ("Lender"). W I T N E S S E T H: WHEREAS, Lender has made certain loans (collectively, the "Loans") to Borrower pursuant to a certain Amended and Restated Commercial Loan and Security Agreement dated as of December 23, 2004 (the "Original LSA"), as amended by a certain Amendment No.1 to Amended and Restated Commercial Loan and Security Agreement dated as of May 9, 2006, as further amended by a letter agreement dated November 16, 2006, as further amended by a letter agreement dated April 2, 2007, as further amended by a letter agreement dated May 17, 2007 as further amended by a certain Amendment No. 5 to Amended and Restated Commercial Loan and Security Agreement dated as of August 9, 2007, as further amended by a letter agreement dated March 24, 2008, as further amended by a letter agreement dated March 27, 2008, as further amended by a certain Amendment No. 8 to Amended and Restated Commercial Loan and Security Agreement dated as of May 20, 2008, as further amended by a certain Amendment No. 9 to Amended and Restated Commercial Loan and Security Agreement dated as of July 16, 2008, as further amended by a letter agreement dated August 13, 2008, as further amended by a letter agreement dated November 14, 2008, as further amended by a letter agreement dated November 20, 2008, as further amended by a certain Amendment No. 13 to Amended and Restated Commercial Loan and Security Agreement and Waiver Agreement dated as of September 4, 2009, and as further amended by a certain Amendment No. 14 to Amended and Restated Commercial Loan and Security Agreement and Waiver Agreement dated as of April 2, 2010 (collectively, the "Prior Amendments"); WHEREAS, in addition to the Prior Amendments, the Original LSA was also amended by a letter agreement dated April 20, 2009 and a letter agreement dated August 14, 2009 (collectively, the "2009 Letter Agreements") (the Original LSA, as amended by the Prior Amendments and the 2009 Letter Agreements and as further amended from time to time, being hereinafter referred to as, the "LSA"); WHEREAS, capitalized terms not otherwise defined in this Agreement shall have the meanings ascribed to them in the LSA; WHEREAS, the Guarantors have guaranteed all obligations of the Borrower to the Lender under the LSA and related Loan Documents pursuant to a certain Amended and Restated Unlimited Guaranty dated as of December 23, 2004 (as the same may be amended or reaffirmed from time to time, the "Guaranty"); WHEREAS, as security for its obligations to the Lender, including, without limitation, those arising under the LSA the Borrower has, among other things, granted to the Lender a lien on and security interest in all of its personal property assets pursuant to the LSA; WHEREAS, as security for their respective obligations to the Lender under the Guaranty, each Secured Guarantor has granted to the Lender a lien on and security interest in all of its personal property assets pursuant to a certain Amended and Restated Guarantor Security Agreement dated as of December 23, 2004 (as the same may be amended or reaffirmed from time to time, the "Guarantor Security Agreement"); WHEREAS, Borrower and the Guarantors (collectively, the "Obligors") have requested Lender to (i) waive testing of the Senior Debt Coverage Ratio for the test periods ending June 30, 2010 and September 30, 2010; (ii) reduce the amount of availability under the Revolving Loans to $4,250,000; (iii) amend the principal repayment schedule applicable to the Converted Term Loan; and (iv) waive, amend and modify certain other covenants all as more particularly set forth herein, and WHEREAS, Section 10.1 of the LSA provides that no modification or amendment of the Credit Agreement shall be effective unless the same shall be in writing and signed by the Lender and Borrower. NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and each Obligor agree as follows: 1. Acknowledgments, Affirmations and Representations and Warranties. a. The Obligors acknowledge, affirm, represent and warrant that: (i) All of the statements contained herein are true and correct and that each understands that the Lender is relying on the truth and completeness of such statements to enter into this Agreement. (ii) As of August 1, 2010 the Borrower is legally and validly indebted to the Lender: (A) by virtue of the Revolving Loan in the principal outstanding amount of $3,890,000.00, and (B) by virtue of the Converted Term Loan in the principal amount of $1,070,833.00, plus interest and fees accrued and accruing on each of the foregoing and costs and expenses of collection, including without limitation, attorneys' fees, relating thereto and there is no defense, offset or counterclaim with respect to any of the foregoing or independent claim or action against the Lender. (iii) Each Guarantor is legally and validly indebted to the Lender by virtue of the Guaranty and there is no defense, offset or counterclaim with respect thereto or independent claim or action against the Lender. -2- (iv) The resolutions previously adopted by the Board of Directors of the Borrower and provided to the Lender have not in any way been rescinded or modified and have been in full force and effect since their adoption to and including the date hereof and are now in full force and effect, except to the extent that they have been modified or supplemented to authorize this Agreement and the documents and transactions described herein. (v) The Borrower has the power and authority to enter into, and has taken all necessary corporate action to authorize, this Agreement and the transactions contemplated hereby and thereby. (vi) The resolutions previously adopted by the Board of Directors of each of the Guarantors and provided to the Lender have not in any way been rescinded or modified and have been in full force and effect since their adoption to and including the date hereof and are now in full force and effect, except to the extent that they have been modified or supplemented to authorize this Agreement and the documents and transactions described herein. (vii) Each Guarantor has the power and authority to enter into, and has taken all necessary corporate action to authorize, this Agreement and the transactions contemplated hereby and thereby. (viii) All representations, warranties and covenants contained in, and schedules and exhibits to, the LSA, the Guaranty and the other Loan Documents are true and correct in all material respects on and as of the date hereof, are incorporated herein by reference and are hereby remade except that Schedule 4.4(c) to the LSA relating to outstanding indebtedness of the Borrower and the Guarantors is hereby updated and replaced with Schedule 4.4(c) attached hereto. (ix) No Default currently exists under the LSA, the Guaranty or any of the other Loan Documents and no condition exists which would constitute a default or an event of default (howsoever defined) under any of the Loan Documents but for the giving of notice or passage of time, or both. (x) The consummation of the transactions contemplated hereby is not prevented or limited by, nor does it conflict with or result in a breach of terms, conditions or provisions of the Borrower's or any Guarantor's Certificate of Incorporation or Bylaws or any evidence of indebtedness, agreement or instrument of whatever nature to which the Borrower or any Guarantor is a party or by which it is bound, does not constitute a default under any of the foregoing and does not violate any federal, state or local law, regulation or order or any order of any court or agency which is binding upon the Borrower or any Guarantor. 2. Amendment of LSA and other Loan Documents. a. Section 1.1 of the LSA entitled "Defined Terms" is amended as follows: (i) by deleting the definition of "Existing Revolving Loan Notes" in its entirety and by substituting the following therefore: -3- "Existing Revolving Loan Note" means that certain Replacement commercial Revolving Loan Promissory Note of the Borrower payable to the Lender date December 24, 2004 in the original principal amount of up to $5,000,000. (ii) by deleting the definition of "Revolving Loan Commitment" set forth therein in its entirety and by substituting the following therefor: "Revolving Loan Commitment" means, Lender's commitment to make Revolving Loans pursuant to Section 2.1(a) hereof and to issue Letters of Credit pursuant to Section 2.20(a) hereof in an aggregate principal amount and Available Amount not to exceed at any time outstanding FOUR MILLION TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($4,250,000). b. Article 2 of the LSA entitled "AMOUNTS AND TERMS OF LOANS" is hereby amended as follows: (i) by amending Section 2.4 entitled "Conversion to the Converted Term Loan" by deleting subsection (b) therein in its entirety and by substituting the following therefor: "(b) The Converted Term Loan shall be evidenced by, and repaid with interest in accordance with, the Third Amended and Restated Converted Term Loan Promissory Note of the Borrower dated as of August 1, 2010 in the original principal amount of $1,070,833.00, a copy of which is attached hereto as Exhibit D (such promissory note is referred to herein as the "Converted Term Note"), which Converted Term Note amends, restates, supersedes and replaces in its entirety that certain Second Amended and Restated Converted Term Loan Promissory Note of the Borrower dated April 2, 2010 in the original principal amount of $1,220,833.00 (the "Existing Converted Term Note"), provided, however, that the amendment, restatement and replacement of the Existing Converted Term Note shall in no way be construed as a novation of the Borrower's indebtedness evidenced by the Existing Converted Term Note." c. Exhibit A to the LSA is hereby deleted in its entirety and a copy of the Second Replacement Commercial Revolving Loan Promissory Note of the Borrower in favor of the Lender dated as of August 1, 2010 in the original principal amount of up to $4,250,000.00, a copy of which is attached hereto as Exhibit A (the "Second Replacement Revolving Loan Note") is hereby substituted therefor. d. Exhibit D to the LSA is hereby deleted in its entirety and a copy of the Third Amended and Restated Converted Term Loan Promissory Note of the Borrower in favor of the Lender dated as of August 1, 2010 in the original principal amount of $1,070,833.00, a copy of which is attached hereto as Exhibit B (the "Third Amended and Restated Converted Term Note") is hereby substituted therefor. -4- e. Any reference in any of the Notes or any of the other Loan Documents to: (i) the Amended and Restated Commercial Loan and Security Agreement between the Borrower and the Lender dated as of December 23, 2004 (howsoever defined) shall be amended to refer to and mean the Original LSA, as amended by the Amendments and as further amended and modified by this Agreement; (ii) the Revolving Loan Note shall refer to and mean the Second Replacement Commercial Revolving Loan Promissory Note of the Borrower in favor of the Lender dated as of August 1, 2010, in the original principal amount of up to $4,250,000.00, a copy of which is attached hereto as Exhibit A, (iii) the Converted Term Note shall refer to and mean the Third Amended and Restated Converted Term Loan Promissory Note of the Borrower in favor of the Lender dated as of August 1, 2010, in the original principal amount of $1,070,833.00, a copy of which is attached hereto as Exhibit B, and (iv) the Existing Revolving Loan Notes shall mean the Existing Revolving Loan Note defined in the LSA, as amended hereby. 3. Waivers. a. At the request of the Borrower, the Lender has agreed not to test the Senior Debt Coverage Ratio set forth in Section 7.4A of the LSA for the test periods ending June 30, 2010 and September 30, 2010 (the "Test Period Waivers"). Testing of the Senior Debt Coverage Ratio will resume for the test period ending December 31, 2010 and will continue thereafter in accordance with the LSA. b. The Obligors acknowledge that one or more of them have failed to make certain pension plan contributions which were due on July 15, 2010 (the "Pension Plan Contribution Defaults") and, that as a result thereof, there has occurred an Event of Default under the LSA. In addition, the Obligors further acknowledge that one or more of them do not expect to make certain pension plan contributions which are due on October 15, 2010 (the "Anticipated Pension Plan Contribution Defaults") and, that if such contributions are not made, there shall occur an Event of Default under the LSA. Subject to the proviso herein below, the Lender hereby agrees to waive such Pension Plan Contribution Defaults with respect to the July 15, 2010 payment date and to prospectively waive the Anticipated Pension Plan Contribution Defaults with respect to the October 15, 2010 payment date, provided, however, that in the event that the IRS or any other Governmental Authority takes any enforcement action or otherwise exercises any rights and remedies it may have against any Obligor with respect to such Pension Plan Contribution Defaults and/or such Anticiplated Pension Plan Contribution Defaults (any such enforcement action or exercise of rights and remedies being referred to as a "Pension Plan Enforcement Action"), any such Pension Plan Enforcement Action shall constitute a separate and distinct Event of Default under and within the meaning of the LSA which shall entitle the Lender to exercise any and all of its rights and remedies thereunder and at law. c. By their signatures below, each of the Obligors hereby acknowledges and agrees that the Test Period Waivers and the waivers set forth in Section 3.b. above are one-time waivers for the period or dates specifically specified above and that the execution, delivery and effectiveness of this Agreement shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Lender under the LSA or any of the other Loan Documents, nor constitute or be construed or interpreted, directly or by implication, as a waiver -5- of or an amendment or modification to any other obligation of any Obligor to the Lender under the LSA or any of the other Loan Documents. 4. Conditions to Effectiveness. The effectiveness of this Agreement is subject to the prior satisfaction of the following conditions precedent (the date of such satisfaction herein referred to as the "Amendment Effective Date"): a. The representations and warranties of the Obligors contained herein shall be true and correct in all material respects. b. There shall exist no Default or Event of Default. c. The Lender shall have received evidence satisfactory to the Lender that all requisite corporate and company action necessary for the valid execution, delivery and performance by each of the Obligors of this Agreement and all other instruments and documents delivered by the Obligors, or any one of them, in connection herewith has been taken. d. Borrower shall execute and deliver to the Lender the Second Replacement Revolving Loan Note. e. Borrower shall execute and deliver to the Lender the Third Amended and Restated Converted Term Note. f. In connection with the amendments and waivers contemplated by this Agreement, the Borrower shall have paid to the Lender a non-refundable amendment and waiver fee in an amount of $5,000 (the "Amendment and Waiver Fee"). 5. Effect of Amendment; Reaffirmation of Liens and other Obligations. Lender and each Obligor hereby agree and acknowledge that (except as provided in this Agreement, the Third Amended and Restated Converted Term Note and the Second Replacement Revolving Loan Note), the LSA, the Guaranty, the Notes and the other Loan Documents (together with all Schedules and Exhibits attached hereto) remain in full force and effect and have not been modified or amended in any respect, it being the intention of Lender and each Obligor that this Agreement and the LSA be read, construed and interpreted as one and the same instrument. In addition, without limiting the generality of the foregoing: (i) the Borrower acknowledges, affirms and agrees that the Lender's security interest in the Collateral shall continue to secure any and all of the Borrower's indebtedness to the Lender, including without limitation, the indebtedness arising under the LSA, as amended hereby; and (ii) each Guarantor acknowledges, affirms and agrees that (A) the Obligations of the Borrower to the Lender which have been guaranteed by such Guarantor include, without limitation the Loans, as modified hereby; and (B) each Secured Guarantor acknowledges, affirms and agrees that the Lender's security interest in the Collateral (as defined in the Guarantor Security Agreement) shall continue to secure the payment and performance of all of its obligations and liabilities to the Lender arising under the Guaranty. 6. Fees and Expenses. In addition to the Amendment and Waiver Fee, the Borrower agrees to pay all reasonable legal fees and expenses of Lender incurred in connection with the preparation, negotiation and execution of this Agreement. -6- 7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut (except its conflicts of laws provisions). 8. Counterparts. This Agreement may be executed in any number of identical counterparts, each of which shall be deemed to be an original, and all of which shall collectively constitute a single agreement, fully binding upon and enforceable against the parties hereto. 9. Capitalized Terms. All capitalized terms not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the LSA. 10. Benefit. This Agreement shall inure to the benefit of and bind the parties hereto and their respective successors and assigns. [NEXT PAGE IS A SIGNATURE PAGE] -7- IN WITNESS WHEREOF, Lender, Borrower and Guarantors have executed this Agreement as of the date first above written. WITNESSES: /s/ Witness TRANS-LUX CORPORATION - -------------------------- /s/ Witness By: /s/ Angela D. Toppi - -------------------------- --------------------------- Name: Angela D. Toppi Its: Executive Vice President Duly Authorized [Signature Page (1) to Amendment No. 15 to Amended and Restated Commercial Loan and Security Agreement and Waiver Agreement] TRANS-LUX DISPLAY CORPORATION TRANS-LUX MIDWEST CORPORATION TRANS-LUX COMMERCIAL CORPORATION (f/k/a Trans-Lux West Corporation) TRANS-LUX DURANGO CORPORATION TRANS-LUX SERVICE CORPORATION TRANS-LUX FOUR CORNERS CORPORATION TRANS-LUX LOS LUNAS CORPORATION TRANS-LUX MONTEZUMA CORPORATION TRANS-LUX REAL ESTATE CORPORATION TRANS LUX SUMMIT CORPORATION TRANS-LUX TAOS CORPORATION TRANS-LUX VALLEY CORPORATION TRANS-LUX WYOMING CORPORATION TRANS-LUX CASTLE ROCK COPORATION TRANS-LUX COCTEAU CORPORATION TRANS-LUX COLORADO CORPORATION TRANS-LUX DESERT SKY CORPORATION TRANS-LUX DREAMCATCHER CORPORATION TRANS-LUX HIGH FIVE CORPORATION TRANS-LUX LARAMIE CORPORATION TRANS-LUX LOMA CORPORATION TRANS-LUX SKYLINE CORPORATION TRANS-LUX STARLIGHT CORPORATION TRANS-LUX STORYTELLER CORPORATION TRANS-LUX NEW MEXICO CORPORATION TRANS-LUX MULTI-MEDIA CORPORATION TRANS-LUX CINEMA CONSULTING CORPORATION TRANS-LUX LOVELAND CORPORATION TRANS-LUX MOVIE OPERATIONS CORPORATION TRANS-LUX MULTIMEDIA CORPORATION /s/ Witness - -------------------------- /s/ Witness By: /s/ Angela D. Toppi - -------------------------- --------------------------- Name: Angela D. Toppi Its: Executive Vice President /s/ Witness PEOPLE'S UNITED BANK (formerly - -------------------------- known as People's Bank) /s/ Witness By: /s/ Gaetan R. Frosina - -------------------------- --------------------------- Name: Gaetan R. Frosina Its: Region Manager, SVP Duly Authorized [Signature Page (2) to Amendment No. 15 to Amended and Restated Commercial Loan and Security Agreement and Waiver Agreement] EX-31.1 3 tlxex311.txt CERTIFICATION - J.M. ALLAIN EXHIBIT 31.1 TRANS-LUX CORPORATION CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT I, Jean-Marc Allain, certify that: 1. I have reviewed this quarterly 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 registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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 registrant, 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant'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 d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): 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 registrant'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 registrant's internal control over financial reporting. /s/ Jean-Marc Allain ------------------------------------- Date: August 18, 2010 Jean-Marc Allain President and Chief Executive Officer EX-31.2 4 tlxex312.txt CERTIFICATION - A. TOPPI EXHIBIT 31.2 TRANS-LUX CORPORATION CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT I, Angela D. Toppi, certify that: 1. I have reviewed this quarterly 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 registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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 registrant, 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant'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 d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): 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 registrant'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 registrant's internal control over financial reporting. /s/ Angela D. Toppi ------------------------------------- Date: August 18, 2010 Angela D. Toppi Executive Vice President and Chief Financial Officer EX-32.1 5 tlxex321.txt CERTIFICATION, SEC 906 - J.M. ALLAIN EXHIBIT 32.1 CERTIFICATION OF 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, Jean-Marc Allain, President and Chief Executive Officer of Trans-Lux Corporation, do hereby certify, to the best of my knowledge that: (1) The Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 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 Registrant. 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 Registrant or the certifying officer. /s/ Jean-Marc Allain ------------------------------------- Date: August 18, 2010 Jean-Marc Allain President and Chief Executive Officer EX-32.2 6 tlxex322.txt CERTIFICATION, SEC 906 - A. TOPPI EXHIBIT 32.2 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 "Registrant"), do hereby certify, to the best of my knowledge that: (1) The Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 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 Registrant. 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 Registrant or the certifying officer. /s/ Angela D. Toppi ------------------------------------- Date: August 18, 2010 Angela D. Toppi Executive Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----