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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2001
Commission File Number 0-16960
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THE GENLYTE GROUP INCORPORATED
AND SUBSIDIARIES
4360 BROWNSBORO ROAD
LOUISVILLE, KY 40207
(502) 893-4600
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[ ]
THE NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S COMMON STOCK AS OF MAY 3, 2001
WAS 13,332,124.
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THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2001
CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income for the three
months ended March 31, 2001 and April 1, 2000..................1
Consolidated Balance Sheets as of
March 31, 2001 and December 31, 2000...........................2
Consolidated Statements of Cash Flows for the three
months ended March 31, 2001 and April 1, 2000..................3
Notes to Consolidated Interim Financial Statements................4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.........................7
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................10
Signatures...........................................................11
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND APRIL 1, 2000
(Dollars in thousands, except per share data)
(Unaudited)
2001 2000
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Net sales $244,795 $246,360
Cost of sales 159,448 162,420
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Gross profit 85,347 83,940
Selling and administrative expenses 64,272 62,967
Amortization of goodwill and other intangible assets 1,500 1,045
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Operating profit 19,575 19,928
Interest expense, net of interest income 1,120 857
Minority interest 5,616 5,877
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Income before income taxes 12,839 13,194
Income tax provision 5,136 5,540
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Net income $ 7,703 $ 7,654
======== ========
Earnings per share
Basic $ 0.58 $ 0.56
Diluted $ 0.57 $ 0.55
The accompanying notes are an integral part of these
consolidated financial statements.
1
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2001 AND DECEMBER 31, 2000
(Dollars in thousands)
(Unaudited)
3/31/01 12/31/00
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ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 20,533 $ 23,785
Accounts receivable, less allowance for doubtful
accounts of $10,966 and $11,014, respectively 155,539 142,784
Inventories:
Raw materials 53,775 55,651
Work in process 14,781 13,484
Finished goods 83,445 82,122
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Total inventories 152,001 151,257
Other current assets 31,165 29,899
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Total current assets 359,238 347,725
Property, plant and equipment, at cost 353,420 349,239
Less: accumulated depreciation and amortization 241,001 236,238
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Net property, plant and equipment 112,419 113,001
Goodwill, net of accumulated amortization 137,645 140,312
Other assets 32,431 34,845
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TOTAL ASSETS $ 641,733 $ 635,883
========== ==========
LIABILITIES & STOCKHOLDERS' INVESTMENT:
CURRENT LIABILITIES:
Short-term borrowings and current portion of long-term debt $ 9,137 $ 2,661
Accounts payable 88,051 96,794
Accrued expenses 64,995 76,096
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Total current liabilities 162,183 175,551
Long-term debt 74,634 66,652
Deferred income taxes 34,280 32,508
Minority interest 115,692 111,000
Other liabilities 21,287 23,007
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Total liabilities 408,076 408,718
STOCKHOLDERS' INVESTMENT:
Common stock 133 133
Additional paid-in capital 8,311 7,557
Retained earnings 197,314 189,611
Accumulated other comprehensive income 27,899 29,864
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Total stockholders' investment 233,657 227,165
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TOTAL LIABILITIES & STOCKHOLDERS' INVESTMENT $ 641,733 $ 635,883
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
2
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND APRIL 1, 2000
(Dollars in thousands)
(Unaudited)
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,703 $ 7,654
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 7,687 6,692
Net (gain) loss from disposals of plant and equipment (3) 1,019
(Increase) decrease in:
Accounts receivable (12,755) (4,307)
Inventories (744) (3,185)
Other current assets (1,266) (66)
Other assets 3,581 318
Increase (decrease) in:
Accounts payable and accrued expenses (19,844) (8,713)
Deferred income taxes 1,772 (3)
Minority interest 4,692 5,826
Other liabilities (1,720) 1,394
All other, net 322 70
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Net cash provided by (used in) operating activities (10,575) 6,699
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of plant and equipment (5,924) (6,020)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings 6,600 --
Proceeds from long-term debt 9,000 --
Reduction of long-term debt (1,142) (218)
Purchases of treasury stock (26) (1,137)
Stock options exercised 780 121
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Net cash provided by (used in) financing activities 15,212 (1,234)
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Effect of exchange rate changes on cash and cash equivalents (1,965) (89)
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Net decrease in cash and cash equivalents (3,252) (644)
Cash and cash equivalents at beginning of period 23,785 22,660
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Cash and cash equivalents at end of period $ 20,533 $ 22,016
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 1,381 $ 789
Income taxes $ 2,410 $ 1,446
The accompanying notes are an integral part of these
consolidated financial statements.
3
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
AS OF MARCH 31, 2001
(Dollars in thousands)
(Unaudited)
1. BASIS OF PRESENTATION
Throughout this Form 10-Q, the term "Company" as used herein refers to
The Genlyte Group Incorporated, including the consolidation of The
Genlyte Group Incorporated and all majority-owned subsidiaries. The
term "Genlyte" as used herein refers only to The Genlyte Group
Incorporated.
The financial information presented is unaudited (except that as of
December 31, 2000), however, such information reflects all adjustments,
consisting solely of normal recurring adjustments, which are, in the
opinion of management, necessary for a fair statement of results for
the interim periods. The financial information has been prepared in
accordance with rules and regulations of the Securities and Exchange
Commission for Form 10-Q. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. For further information refer
to the consolidated financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December
31, 2000.
The results of operations for the three-month period ended March 31,
2001 are not necessarily indicative of the results to be expected for
the full year.
2. USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from these estimates.
3. COMPREHENSIVE INCOME
For the three months ended March 31, 2001 and April 1, 2000 total
comprehensive income was $5,738 and $7,565, respectively. Other than
net income, the only component of total comprehensive income during the
periods was loss on foreign currency translation.
4
4. EARNINGS PER SHARE
The calculation of the average common shares outstanding assuming
dilution for the three months ended March 31, 2001 and April 1, 2000
follows:
2001 2000
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(Amounts in thousands)
Average common shares outstanding 13,285 13,675
Incremental common shares issuable:
Stock option plans 125 134
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Average common shares outstanding assuming dilution 13,410 13,809
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5. SEGMENT REPORTING
The Company's reportable operating segments include the Commercial
Segment, the Residential Segment, and the Industrial and Other Segment.
Inter-segment sales are eliminated in consolidation and therefore not
presented in the table below. For the three months ended March 31, 2001
and April 1, 2000:
Industrial
Commercial Residential and Other Total
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2001
Net sales $ 176,166 $ 33,255 $ 35,374 $ 244,795
Operating profit $ 14,408 $ 2,577 $ 2,590 $ 19,575
2000
Net sales $ 175,329 $ 34,752 $ 36,279 $ 246,360
Operating profit $ 14,330 $ 2,250 $ 3,348 $ 19,928
The Company has operations throughout North America. Information about
the Company's operations by geographical area for the three months
ended March 31, 2001 and April 1, 2000 follows. Foreign balances
represent activity in Canadian operations.
United States Foreign Total
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2001
Net sales $ 210,835 $ 33,960 $ 244,795
Operating profit $ 17,210 $ 2,365 $ 19,575
2000
Net sales $ 216,222 $ 30,138 $ 246,360
Operating profit $ 17,775 $ 2,153 $ 19,928
No material changes have occurred in total assets since December 31,
2000.
5
6. SUBSEQUENT EVENT
On April 25, 2001, the Company announced that it plans to repurchase up
to 5% or approximately 670,000 shares of its outstanding common stock
over a period of twelve months. The repurchase will take place in the
open market or through privately negotiated transactions at the
prevailing market price. Shares purchased will be held in the corporate
treasury and will be used for general corporate purposes.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
COMPARISON OF FIRST QUARTER 2001 TO FIRST QUARTER 2000
Net sales for the first quarter of 2001 were $244.8 million, a decrease of less
than one percent compared to 2000 first quarter net sales of $246.4 million.
Sales for the first quarter of 2001 included Translite Sonoma and Chloride
Systems, which were purchased in September and October, respectively, of 2000.
Without these two acquisitions, sales for the first quarter of 2001 would have
been 4.6% less than the first quarter of 2000. The general economic slowdown
that began in the fourth quarter of 2000 continues to affect the Company's
sales, particularly in commodity product lines. Also, the weakening of the
Canadian dollar during the first quarter of 2001 compared to the first quarter
of 2000 decreased U.S. dollar sales of Canadian operations approximately $2
million.
Net income for the first quarter of 2001 was $7,703,000 ($0.57 per share), an
increase of less than one percent over the first quarter 2000 net income of
$7,654,000 ($0.55 per share). Because of lower outstanding shares due to
Genlyte's share repurchase program, earnings per share increased a greater
percentage (3.6%) than net income. Without the acquisitions of Translite Sonoma
and Chloride Systems, net income for the first quarter of 2001 would have been
$7,587,000. The 2001 net income included a $1,000,000 pre-tax write-off of an
investment in Source Alliance (an electrical industry internet based supply
source start-up) and an $895,000 pre-tax gain on the sale of the Company's
Hopkinsville distribution center, both of which were classified in selling and
administrative expenses.
Cost of sales for the first quarter of 2001 was 65.1% of net sales, compared to
65.9% in the first quarter of 2000. Selling and administrative expenses for the
first quarter of 2001 were 26.3% of net sales, compared to 25.6% in the first
quarter of 2000, primarily due to increases in freight and selling costs. Net
interest expense increased 30.7% to $1,120,000 in the first quarter of 2001 from
$857,000 in the first quarter of 2000. The increase was the result of an
increase in debt to fund the Translite Sonoma and Chloride Systems acquisitions
in 2000 and to fund an increase in working capital in 2001. See additional
explanation in the Liquidity and Capital Resources section.
The effective tax rate was 40.0% for the first quarter of 2001 compared to 42.0%
for the first quarter of 2000. The decrease in the effective rate is because of
lower Canadian tax rates and lower effective state tax rates. The apportionment
of income among states has been changing because of recent acquisitions and
restructuring of legal entities.
7
LIQUIDITY AND CAPITAL RESOURCES
The Company focuses on its level of net debt (total debt minus cash and cash
equivalents), its level of working capital, and its current ratio as its most
important measures of short-term liquidity. For long-term liquidity, the Company
considers its ratio of total debt to total capital employed (total debt plus
total stockholders' investment) and trends in net debt and cash provided by
operating activities to be the most important measures. From both a short-term
and a long-term perspective, the Company's liquidity is strong.
Net debt increased to $63.3 million at March 31, 2001, compared to $45.5 million
at December 31, 2000. Total debt increased to $83.8 million at March 31, 2001,
compared to $69.3 million at December 31, 2000, while cash and cash equivalents
decreased to $20.5 million at March 31, 2001, compared to $23.8 million at
December 31, 2000. The increase in debt was due to short-term borrowings and
borrowings on the Company's revolving credit facility to fund an increase in
working capital, much of which is typical during the first quarter.
Working capital at March 31, 2001 was $197.1 million, compared to $172.2 million
at December 31, 2000. This increase was primarily due to a $12.8 million
increase in accounts receivable, an $8.7 million decrease in accounts payable,
and an $11.1 million decrease in accrued expenses, offset by a $6.5 million
increase in short-term borrowings. Accounts receivable usually increase in the
first quarter, due to seasonal tendencies of the Company's business. However,
accounts receivable increased more in 2001 than in 2000 because of an increase
in granting extended payment terms to customers associated with Affiliated
Distributors (the largest affiliated distributor marketing group of electrical
equipment and industrial supplies in North America). This accounted for
approximately $5 million of the increase in accounts receivable. Accounts
payable decreased because payments to vendors were extended at the end of 2000
to optimize cash flow and unusually large payments were made in the first
quarter of 2001. Accrued expenses decreased in the first quarter as usual
because of accrued liabilities for bonuses, profit sharing, and customer
rebates, which build during the year and are paid out in the first quarter.
These accrued liabilities decreased $14.6 million from December 31, 2000 levels.
The current ratio increased to 2.2 at March 31, 2001 from 2.0 at December 31,
2000.
The ratio of total debt to total capital employed remained very low at 26.4%
compared to 23.4% at December 31, 2000. Although this ratio has increased over
the last two years, primarily because of debt to fund the Translite Sonoma and
Chloride Systems acquisitions in 2000 and the Ledalite acquisition in 1999, it
is still in a favorable range. During the first quarter of 2001, the Company
used $10.6 million cash in operating activities. Although the Company provided
$6.7 million cash from operating activities in 2000, that was unusual; it is
normal for the Company to use cash in the first quarter. The large use of cash
in 2001 was a result of the increase in working capital described above.
Management expects operating activities to provide cash during the final three
quarters of 2001.
8
Cash used in investing activities is comprised of normal purchases of plant and
equipment. Purchases of plant and equipment in the first quarter of 2001 were
virtually the same amount as the first quarter of last year. In the second
quarter of 2000 the Company obtained a $7.6 million industrial revenue bond to
finance a plant expansion and paint line at the Hadco division in Littlestown,
Pennsylvania. Also, the Company has plans to spend approximately $30 million to
build and relocate into a new 300,000 square foot HID (high intensity discharge)
manufacturing plant in San Marcos, Texas, replacing current multiple facilities.
The Company entered into a $20 million synthetic lease agreement in the fourth
quarter of 2000 to construct this plant. Both of these projects are on hold
until the economy and the Company's sales strengthen.
Cash provided by financing activities during the first quarter of 2001 was $15.2
million, with a net increase in debt of $14.5 million and $780,000 provided by
stock options exercised. Very little treasury stock was purchased in 2001 under
the share repurchase program that expired on February 22. However, on April 25,
the Company announced a new program to repurchase up to 5% or approximately
670,000 shares of its outstanding common stock over a period of twelve months.
The Company has a $150 million revolving credit facility with Bank of America
that matures in August 2003. At March 31, 2001 the Company had $17 million in
borrowings and $45.9 million in outstanding letters of credit under this
facility. The Company's remaining long-term debt at March 31, 2001 consisted of
$18.1 million in Canadian dollar notes from the Ledalite acquisition, $22.3
million payable to Thomas Industries Inc., $18.1 million in industrial revenue
bonds, and $1.7 million in capital leases and other. The Company is in
compliance with all of its debt covenants.
Management believes that currently available cash and borrowing facilities,
combined with internally generated funds, should be sufficient to fund capital
expenditures as well as any increase in working capital required to accommodate
business needs in the foreseeable future. The Company continues to seek
opportunities to acquire businesses that fit its strategic growth plans.
Management believes adequate financing for any such investments will be
available through future borrowings.
For the first quarters of 2001 and 2000, 13.9% and 12.2%, respectively, of the
Company's net sales were generated from operations in Canada. In addition, the
Company has production facilities in Mexico. International operations are
subject to fluctuations in currency exchange rates. The Company monitors its
currency exposure in each country, but does not actively hedge or use derivative
financial instruments to manage exchange rate risk. Management cannot predict
future foreign currency fluctuations, which have and will continue to affect the
Company's balance sheet and results of operations.
FORWARD-LOOKING STATEMENTS
The statements in this document with respect to future results, performance, and
achievements, and plans for future activities may be regarded as forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, and actual results, performance, achievements, and activities may differ
materially from those currently expected. The Company will not undertake and
specifically declines any obligation to update or correct any forward-looking
statements, or any facts, to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
9
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At Genlyte's Annual Meeting of Stockholders held April 25, 2001, the following
actions were taken by stockholders:
Larry Powers was re-elected and Zia Eftekhar was elected to the Board of
Directors. Mr. Powers had 12,105,709 shares voted for and 566,022 shares
withheld, and Mr. Eftekhar had 12,514,925 shares voted for and 156,806 shares
withheld.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K:
A Form 8-K was filed on March 8, 2001 providing a preliminary release of the
Company's comparative financial statements for the year ended December 31, 2000,
without footnotes and without the auditor's opinion.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Genlyte has
duly caused this report to be signed on its behalf as of May 11, 2001 by the
undersigned thereunto duly authorized.
THE GENLYTE GROUP INCORPORATED
(Registrant)
/s/ LARRY K. POWERS
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Larry K. Powers
Chairman, President and Chief Executive Officer
/s/ WILLIAM G. FERKO
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William G. Ferko
V. P. Finance, CFO and Treasurer
11