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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q (a)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended July 2, 1994
Commission File Number 0-16960
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THE GENLYTE GROUP INCORPORATED
100 Lighting Way
Secaucus, N.J. 07096
(201) 864-3000
INCORPORATED IN DELAWARE I.R.S. EMPLOYER
IDENTIFICATION NO. 22-2584333
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
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The number of shares outstanding of the issuer's common stock as of July 13,
1994 was 12,233,674.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS:
COMPARISON OF SECOND QUARTER 1994 TO SECOND QUARTER 1993
Genlyte's net sales for the second quarter of 1994 were $108.8 million, which
reflects a $.3 million, or .2% decrease from the second quarter of 1993. Net
income doubled to $1.6 million from $.8 million, and earnings per share
increased from $.06 to $.12 on a comparable number of outstanding shares.
All divisions experienced sales growth from the second quarter of 1993 except
the DFT division. DFT continues to experience shipping difficulties following
its relocation from Cleveland, Ohio to Elgin, Illinois earlier this year.
Substantial progress is being made in resolving these problems. The DFT
decrease was partially offset by a sales increase in all of Lightolier's product
lines. In addition, the decline in the Canadian exchange rate by approximately
7 points from the prior year's second quarter reduced Genlyte's reported sales
by $1.1 million, despite sales growth in the Company's Canadian operations.
Selling, general and administrative expenses for second quarter 1994, as a
percent of sales, were comparable to second quarter 1993.
Operating profit increased in the second quarter of 1994 to $5.8 million, a
28.2% improvement from the second quarter of 1993. Lightolier U.S. realized an
increase in operating profit as compared to the prior year due to increased
sales of higher margin products, product line pruning, and ongoing facility
rationalizations which reduced fixed costs. DFT experienced a decrease in
operating profit compared to the same period of the prior year, resulting from
the decrease in sales volume discussed above. Other U.S. divisions such as
Controls, Stonco and Wide-Lite experienced volume increases, improvements in
product mix, favorable material variances and effective cost reductions which
resulted in additional operating profit.
Interest expense dropped $.3 million due primarily to the $15.0 million
reduction in debt from the second quarter of 1993.
The effective tax rate remained constant at 44% for both the second quarter of
1993 and 1994.
COMPARISON OF FIRST SIX MONTHS 1994 TO FIRST SIX MONTHS 1993
Genlyte net sales for 1994 were $209.1 million, a $6.5 million, or 3%,
decrease from the prior year. The sales decrease at DFT partially offset
increases in sales volumes in all product lines at Lightolier U.S., for reasons
described above. In addition, the Canadian exchange rate decline of
approximately 6 points from 1993 to 1994 resulted in a $1.3 million decrease as
compared to the prior year in U.S. dollars, despite sales growth in our Canlyte
operations. Operating profit increased in 1994 to $11 million, a 23.7% increase
from the prior year. The improvement in operating profit was attributable to an
increased sales volume of higher margin products and continued cost reduction
efforts.
Selling, general and administrative expenses for 1994 were $52.8 million, or
25.2% of sales, as compared to $53.2 million, or 24.7% of sales, in 1993.
Headcount reductions were partially offset by expenses incurred by DFT during
their relocation from Ohio to Illinois.
Interest expense for the first six months of 1994 was down $.7 million as
compared to the first six months of 1993 due to lower average borrowings.
As a result of the above factors, net income and earnings per share improved by
$1.5 million (105%) and $.11(100%), respectively.
FINANCIAL CONDITION
As of July 2, 1994 accounts receivable increased by $10.9 million, or 18.5%;
inventories increased by $2.9 million, or 3.4%; accounts payable increased by
$4.0 million, or 12.7%; and long-term debt increased by $12.6 million, or 13.5%.
Increases are customary for the Company at this time of year and are comparable
to 1993's results.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $104.6 million as of July 2, 1994, up to $18.8 million from
year-end 1993, due primarily to significantly lower current maturities of long-
term debt as a result of the revolving credit line extension. In addition, an
increase in both accounts receivable and inventory and a decrease in accrued
expenses were offset partially by an increase in accounts payable.
In the fourth quarter of 1992, the Company recorded a pre-tax charge of $6.2
million to establish a reserve for the costs associated with the Company's
decision to consolidate and improve the manufacturing processes in its plants.
The Company's plan included: relocation of its DFT manufacturing and
distribution operations (leased) in Cleveland, Ohio to an existing facility in
Elgin, Illinois, closure of its Prodel operations in Quebec City, Canada, and
sale of the existing building; downsizing of manufacturing and distribution
facilities in Edison, New Jersey and Compton, California; and the transfer of
certain Headquarters staff to the Company's expanded Fall River, Massachusetts
facility.
The Company intended to complete all aspects of the plan during 1993, but union
negotiations and construction at the Fall River facility created significant
delays in implementation. As a result, charges against the reserve in 1993
totalled only $.7 million of which $.4 million required cash. During 1994 the
Company expects to charge an additional $5.1 million to the reserve, using cash
of approximately $4.8 million. Charges against the reserve through the first
two quarters of 1994 are summarized in the following table:
Plant and Equipment Writedown $ 286,000
Inventory Writedown $ 299,000
Severance Costs $ 946,000
Personnel Relocation Costs $1,467,000
Other Costs $ 101,000
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$3,099,000
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The charges were allocated by facility as follows:
DFT - Cleveland $2,063,000
Prodel - Canada $ 909,000
Headquarters $ 127,000
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$3,099,000
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Proceeds from the sale of the Prodel facility are not expected to be realized
until at least late 1994. The Company expects the plan to generate operating
profit improvements, primarily representing labor cost savings, in excess of
$4.4 million per year beginning in 1995; specific results are difficult to
measure as operating efficiencies may occur for reasons not directly associated
with the consolidation process. The margin improvements are expected to be
offset to a large degree in 1994 by indirect costs and inefficiencies resulting
from the relocation.
Genlyte's Revolving Credit and Term Loan Agreement was amended and restated (the
"Amended Agreement") to provide for a revolving credit facility of $125.0
million reducing to $110.0 million over a two-year period maturing on July 1,
1996 which, subject to the satisfaction of certain conditions, will convert to
$110.0 million term loan amortizing through July 1, 1999. Approximately $23.0
million remains available to borrow under the Amended Agreement.
The Company expects funds generated from operations plus amounts available under
the existing loan agreement and short-term credit lines to be sufficient to
fulfill anticipated requirements for capital expenditures, the facility
restructuring, and working capital.