- - --------------------------------------------------------------------------------
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 October 3, 1998
Commission File Number 0-16960
---------------
THE GENLYTE GROUP INCORPORATED
AND SUBSIDIARIES
2345 VAUXHALL ROAD
UNION, N. J. 07083-1948
(908) 964-7000
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 NOVEMBER 4,
1998 WAS 13,624,540.
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THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED OCTOBER 3, 1998
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income for the three months ended
October 3,1998 and September 27,1997............................. 1
Consolidated Statements of Income for the nine
months ended October 3, 1998 and September 27, 1997.............. 2
Consolidated Balance Sheets as of
October 3, 1998 and December 31, 1997............................ 3
Consolidated Statements of Cash Flows for the nine
months ended October 3, 1998 and September 27, 1997.............. 4
Notes to Consolidated Interim Financial Statements. ............... 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS ...................... 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS...........................................11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...........................12
Signature............................................................13
Exhibit 27: Financial Data Schedule..................................14
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
(000'S OMITTED, EXCEPT PER SHARE DATA)
(Unaudited)
- - --------------------------------------------------------------------------------
1998 1997
================================================================================
Net Sales $174,178 $123,981
Cost of Sales 112,150 81,393
- - --------------------------------------------------------------------------------
Gross Profit 62,028 42,588
Selling and Administrative Expenses 45,698 32,870
- - --------------------------------------------------------------------------------
Operating Profit 16,330 9,718
Interest Expense, Net 1,365 1,073
Minority Interest 2,857 --
- - --------------------------------------------------------------------------------
Income Before Income Taxes 12,108 8,645
Provision for Income Taxes 5,208 3,718
- - --------------------------------------------------------------------------------
Net Income $ 6,900 $ 4,927
- - --------------------------------------------------------------------------------
Earnings per Share
Basic $ 0.50 $ 0.37
Diluted $ 0.50 $ 0.37
================================================================================
The accompanying notes are an integral part of these
consolidated financial statements.
1
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
(000'S OMITTED, EXCEPT PER SHARE DATA)
(Unaudited)
- - --------------------------------------------------------------------------------
1998 1997
================================================================================
Net Sales $434,629 $357,979
Cost of Sales 282,432 235,640
- - --------------------------------------------------------------------------------
Gross Profit 152,197 122,339
Selling and Administrative Expenses 111,903 96,131
- - --------------------------------------------------------------------------------
Operating Profit 40,294 26,208
Interest Expense, Net 3,189 3,208
Minority Interest 2,857 --
- - --------------------------------------------------------------------------------
Income Before Income Taxes 34,248 23,000
Provision for Income Taxes 14,727 9,890
- - --------------------------------------------------------------------------------
Net Income $ 19,521 $ 13,110
- - --------------------------------------------------------------------------------
Earnings per Share
Basic $ 1.43 $ 0.98
Diluted $ 1.42 $ 0.98
================================================================================
The accompanying notes are an integral part of these
consolidated financial statements.
2
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF OCTOBER 3, 1998 AND DECEMBER 31, 1997
(000'S OMITTED)
================================================================================
(Unaudited)
10/03/98 12/31/97
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ASSETS:
- - --------------------------------------------------------
Current Assets:
Cash and Cash Equivalents $ 13,250 $ 1,654
Accounts Receivable, less allowance for doubtful
accounts of $9,270 and $8,222, respectively 162,684 73,220
Inventories
Raw Materials and Supplies 47,608 32,324
Work in Process 15,390 5,613
Finished Goods 78,176 42,910
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Total Inventories 141,174 80,847
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Other Current Assets 26,545 18,385
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Total Current Assets 343,653 174,106
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Property, Plant & Equipment 309,630 213,141
Less: accumulated depreciation and amortization
on plant and equipment 202,630 153,523
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Net Property, Plant & Equipment 107,000 59,618
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Cost in Excess of Net Assets of Purchased Business 53,163 12,434
Other Assets 17,076 7,870
- - --------------------------------------------------------------------------------
TOTAL ASSETS $ 520,892 $ 254,028
================================================================================
LIABILITIES & STOCKHOLDERS' INVESTMENT
- - --------------------------------------------------------
Current Liabilities:
Short-term Borrowings $ 35,288 $ --
Current Maturities of Long-term Debt 92 $ --
Accounts Payable 71,862 49,433
Accrued Expenses 60,856 42,712
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Total Current Liabilities 168,098 92,145
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Long-term Debt 63,059 32,785
Deferred Income Taxes 6,066 6,828
Minority Interest 82,163 --
Other Liabilities 20,570 18,541
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Total Liabilities 339,956 150,299
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Stockholders' Investment
Common Stock 136 135
Paid-in Capital 15,112 12,889
Foreign Currency Translation (4,175) (3,061)
Retained Earnings 169,863 93,766
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Total Stockholders' Investment 180,936 103,729
- - --------------------------------------------------------------------------------
TOTAL LIABILITIES & STOCKHOLDERS' INVESTMENT $ 520,892 $ 254,028
================================================================================
The accompanying notes are an integral part of
these consolidated financial statements.
3
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
(000'S OMITTED)
(Unaudited)
==========================================================================================
1998 1997
- - ------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
- - ---------------------------------------------------------------------
Net Income $ 19,521 $ 13,110
Adjustments to reconcile net income to net cash
flows provided by (used in) operating activities:
Depreciation and amortization 10,052 9,016
Changes in assets and liabilities,
net of effect of formation of Joint Venture (See Note 5)
Accounts receivable (21,558) (13,463)
Inventories 1,145 2,500
Other current assets (6,621) (2,306)
Accounts payable and accrued expenses 7,381 (9,778)
Deferred income taxes (976) 2,982
Minority interest 2,857 --
Other (1,043) (2,656)
- - ------------------------------------------------------------------------------------------
Net cash flows provided by (used in) operating activities 10,758 (595)
- - ------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- - ------------------------------------------------------------------------------------------
Formation of Joint Venture, net of cash acquired (See Note 5) 1,881 --
Purchases of plant and equipment, net of disposals (11,027) (8,590)
- - ------------------------------------------------------------------------------------------
Net cash flows used in investing activities (9,146) (8,590)
- - ------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- - ------------------------------------------------------------------------------------------
Options exercised 2,224 901
Increase in debt, net 8,874 9,160
- - ------------------------------------------------------------------------------------------
Net cash flows provided by financing activities 11,098 10,061
- - ------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES (1,114) (257)
- - ------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 11,596 619
Cash and cash equivalents at beginning of period 1,654 2,895
- - ------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 13,250 $ 3,514
==========================================================================================
The accompanying notes are an integral part of these
consolidated financial statements.
4
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
AS OF OCTOBER 3, 1998
(000'S OMITTED, EXCEPT PER SHARE DATA)
(Unaudited)
1. BASIS OF PRESENTATION
The financial information included is unaudited; 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.
These results include the operations of the Genlyte Thomas Group LLC
from the date of formation, August 30, 1998. See Note 5 regarding this
formation.
The results of operations for the nine month period ended October 3,
1998 are not necessarily indicative of the results to be expected for
the full year.
2. USE OF ESTIMATES
Management of the Genlyte Group Incorporated (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
During the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 130 "Reporting Comprehensive
Income." The Statement establishes standards for the reporting and
display of comprehensive income and its components in a full set of
general purpose financial statements. Comprehensive income includes net
income and other comprehensive income, which for the Company, primarily
comprises foreign currency translation adjustments.
For the three months ended October 3, 1998 and September 27, 1997
1998 1997
-------- -------
Net Income $ 6,900 $ 4,927
Minimum pension liability (368) --
Foreign currency translation adjustments (750) (665)
One-time gain on Joint Venture contribution (See Note 5) 56,944 --
-------- -------
Comprehensive Income $ 62,726 $ 4,262
======== =======
5
For the nine months ended October 3, 1998 and September 27, 1997
1998 1997
-------- --------
Net Income $ 19,521 $ 13,110
Minimum pension liability (368) --
Foreign currency translation adjustments (1,114) (257)
One-time gain on Joint Venture contribution (See Note 5) 56,944 --
-------- --------
Comprehensive Income $ 74,983 $ 12,853
======== ========
4. EARNINGS PER SHARE
During the fourth quarter of 1997, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share."
SFAS No. 128 requires the presentation of basic earnings per share and
diluted earnings per share. "Basic earnings per share" represents net
income divided by the weighted-average number of common shares
outstanding during the period. "Diluted earnings per share" represents
net income divided by the weighted-average number of common shares
outstanding during the period adjusted for the incremental dilution of
outstanding stock options and is consistent with the Company's
historical presentation.
For the three months ended October 3, 1998 and September 27, 1997
1998 1997
-------- --------
Average common shares outstanding 13,723 13,406
Incremental common shares issuable:
Stock option plans 5 47
-------- --------
Average common shares outstanding assuming dilution 13,728 13,453
======== ========
For the nine months ended October 3, 1998 and September 27, 1997
1998 1997
-------- --------
Average common shares outstanding 13,652 13,345
Incremental common shares issuable:
Stock option plans 22 46
-------- --------
Average common shares outstanding assuming dilution 13,674 13,391
======== ========
6
5. FORMATION OF THE GENLYTE THOMAS GROUP LLC
On August 30, 1998, the Company and Thomas Industries Inc. ("Thomas")
completed the combination of the business of the Company with the
lighting business of Thomas ("Thomas Lighting") through a joint
venture, in the form of a limited liability company, named Genlyte
Thomas Group LLC (f/k/a GT Lighting, LLC) ("Genlyte Thomas"). Genlyte
Thomas manufactures, sells, markets and distributes consumer,
commercial, industrial and outdoor lighting fixtures and controls.
Pursuant to (i) the Master Transaction Agreement dated April 28, 1998
by and between the Company and Thomas, (ii) the Limited Liability
Company Agreement dated April 28, 1998 by and among the Company, Thomas
and Genlyte Thomas, and (iii) the Capitalization Agreement dated April
28, 1998 by and between Genlyte Thomas and the Company, the Company
contributed substantially all of its assets to Genlyte Thomas. In
addition, pursuant to the Capitalization Agreement dated April 28, 1998
by and between Genlyte Thomas and Thomas and certain of its affiliates,
Thomas contributed to Genlyte Thomas substantially all of its assets
comprising Thomas Lighting.
In exchange for the assets contributed by the Company, the Company
received a 68% interest in Genlyte Thomas, and Genlyte Thomas assumed
substantially all of the Company's liabilities. In exchange for the
assets contributed by Thomas, Thomas and certain of its affiliates
received a 32% interest in Genlyte Thomas, and Genlyte Thomas assumed
certain related liabilities. The interests in Genlyte Thomas issued to
each of the Company and Thomas were based on arms-length negotiations
between the parties with the assistance of their financial advisers.
The formation of Genlyte Thomas and the contribution of the assets of
the Company and Thomas Lighting to Genlyte Thomas in exchange for the
Company's and Thomas' respective interests in Genlyte Thomas and the
assumption by Genlyte Thomas of the foregoing liabilities pursuant to
the agreements described above is referred to herein as the
"Transaction."
Concurrent with the formation of Genlyte Thomas, the Company has
recognized a one-time gain on the Transaction, which represents the
excess of the fair market value of Thomas Lighting's contributed assets
over the historical book value of the Company's contributed assets (as
set forth in the table below):
68 percent of the fair value of Thomas Lighting $ 94,565
32 percent of the historical book value of the Company's net assets
contributed to Genlyte Thomas 37,621
--------
One-time gain recognized on the formation of Genlyte Thomas by
the Company $ 56,944
========
7
On an unaudited pro forma basis (assuming the Transaction described above had
occurred at the beginning of the three and nine month periods ended October 3,
1998, and September 27, 1997), the results were:
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
Oct. 3, 1998 Sept. 27, 1997 Oct. 3, 1998 Sept. 27, 1997
------------ -------------- ------------ --------------
Net Sales $ 240,639 $ 227,499 $ 699,657 $ 647,586
Net Income $ 7,203 $ 6,081 $ 18,522 $ 14,321
Earnings per Share $ 0.52 $ 0.45 $ 1.35 $ 1.07
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
COMPARISON OF THIRD QUARTER 1998 TO THIRD QUARTER 1997
Net sales for the third quarter of 1998, inclusive of Genlyte Thomas, were
$174.2 million, an increase of 40.5 percent from the third quarter 1997. Sales
and earnings for the current quarter include the consolidated results of Genlyte
Thomas for the month of September. Net sales on a comparable Division basis grew
for the third quarter over last year as the commercial construction markets
which the Company serves continued their year-to-year growth for 1998. Net
income increased $2.0 million from the third quarter 1997 to $6.9 million and
earnings per share increased to $.50 from $.37 in the 1997 third quarter.
Cost of sales for the third quarter of 1998 was 64.4 percent of net sales, an
improvement over the third quarter 1997 level of 65.6 percent. This is primarily
the result of the continued focus on manufacturing cost reductions and
productivity improvements by the Company. Selling, general and administrative
expenses decreased as a percent of sales during the third quarter of 1998 to
26.2 percent, down from 26.5 percent of sales for the comparable 1997 period
primarily due to economies of scale associated with the increase in sales as
well as general expense control efforts. Operating profit increased in the third
quarter of 1998 to $16.3 million, an improvement of $6.6 million over the third
quarter 1997.
Interest expense amounted to $1.4 million compared to $1.1 million in the third
quarter 1997. This increase was primarily attributable to the greater
outstanding indebtedness of the combined Genlyte Thomas businesses. Minority
interest of $2.9 million represents the 32 percent interest of Thomas in the
earnings of Genlyte Thomas for the month of September 1998.
The effective tax rate was approximately 43.0 percent for the third quarters of
both 1998 and 1997.
8
COMPARISON OF NINE MONTHS 1998 TO NINE MONTHS 1997
Net sales for the first nine months of 1998 were $434.6 million, an increase of
$76.7 million or 21.4 percent over the first nine months of 1997. Sales
increases include Genlyte Thomas for the month of September. Net income
increased 48.9 percent to $19.5 million from $13.1 million in the nine months of
1997, and earnings per share increased 44.9 percent from $.98 to $1.42.
Cost of sales as a percentage of net sales decreased to 65.0 percent compared to
65.8 percent for the same period in 1997. This decrease is primarily due to
manufacturing and raw material cost reductions and productivity improvements.
Selling, general and administrative expenses for the nine months of 1998
decreased to 25.7 percent of sales as compared to 26.9 percent in 1997 primarily
due to economies of scale associated with the increase in sales as well as
general expense control efforts. Operating profit increased to $40.3 million in
the year- to-date 1998, up $14.1 million from $26.2 million during the nine
months of 1997.
Interest expense of $3.2 million for the nine months of 1998 was unchanged from
the comparable nine months of 1997. Minority interest of $2.9 million represents
the 32 percent interest of Thomas in the earnings of Genlyte Thomas for the
month of September, 1998.
The effective tax rate was approximately 43.0 percent for the nine months of
both 1998 and 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased to $13.3 million at October 3, 1998,
compared to $3.5 million at September 27,1997. In the nine months ended October
3, 1998, cash provided by operating activities was $10.8 million; cash used in
investing activities was $9.1 million, primarily for plant and equipment
acquisition; cash provided by financing activities was $11.1 million. Working
capital at the end of the third quarter of 1998 was approximately $176 million
(including $67 million attributable to the Genlyte Thomas business addition) and
compared to $82 million for the end of the year 1997. The increase is also due
to seasonal needs and the overall increase in business levels. The Company
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 future business
needs.
Effective August 30, 1998, Genlyte Thomas entered into a $125 million, five-year
revolving credit facility. This replaced a $100 million revolving credit
facility held by the Company. Total borrowings under this new facility at
October 3, 1998 were $30 million.
Short-term borrowings were $35 million at the end of the third quarter 1998.
These consisted primarily of loans payable to Thomas as part of the liabilities
assumed by Genlyte Thomas in the Transaction. Long-term borrowings were $63
million. These consisted of loans payable of $30 million under the revolving
credit facility, $22 million to Thomas as part of the liabilities assumed by
Genlyte Thomas in the Transaction and $11 million in industrial revenue bonds.
9
YEAR 2000 ISSUES
All Divisions in the Company are establishing and executing plans to prepare the
Company's information technology (IT) systems and non-information technology
systems with embedded technology (ET) for the year 2000 issue. These plans
encompass the use of both internal and external resources to identify, correct
and test systems for year 2000 readiness. External resources include nationally
recognized consulting firms and other specialized technology resource providers.
The identification and documentation of affected IT and ET components is
substantially complete. This inventory includes mainframe hardware and software,
personal computer hardware and software, communications hardware and software,
and various other devices controlled by ET (security systems, telephone systems,
HVAC systems, manufacturing machinery, etc.) which may contain date processing
functions. The assessment of this inventory with regard to year 2000 readiness
is currently underway. The Company has determined or plans to determine the
status of these components with regard to year 2000 readiness by contacting
third party providers of these components or performing analysis utilizing
internal or external resources. All components identified to date as non-year
2000 compliant have either been made compliant or are in the process of being
replaced or upgraded to be made compliant.
The Company is also currently addressing the year 2000 readiness of third
parties whose business interruption could have a material negative impact on the
Company's business. These parties include customers, raw material vendors and
other service providers. Vendors and service providers have or will be contacted
to determine their readiness. Customers have or will be contacted to make sure
they are aware of the issue.
Through September 30, 1998 the Company inclusive of Genlyte Thomas has spent
$1,761,000 on external resources, hardware and software required to address the
year 2000 issue. It is estimated that an additional $2,647,000 will be spent in
the remaining months of 1998 and in 1999 to attain substantial year 2000
readiness.
The major identified risks to the business associated with the year 2000 issue
and targeted by the Company's year 2000 plan are a loss of ability to:
o Plan production for dates after December 31, 1999
o Accept customer orders for shipment after December 31, 1999
o Issue purchase orders for delivery after December 31, 1999
o Issues invoices with due dates beyond December 31, 1999
o Obtain critical raw materials from vendors who experience significant
business interruption because of their potential year 2000 related problems
Several Divisions of the Company plan to replace customer service information
systems which are not year 2000 ready with systems that are year 2000 ready. The
inherent complexity of these systems makes the exact implementation dates of the
replacement systems somewhat uncertain. In order to compensate for this
uncertainty, the Company is in the process of developing, and in some cases,
executing, contingency plans for the possibility that the existing customer
service systems targeted for replacement would fail before the implementation of
the new systems. These contingency plans involve handling certain business
transactions outside the system as well as correcting problems with existing
systems. A portion of the estimated additional expenditures above is for the
planning and execution of these contingency plans. The amount of the estimated
additional expenditures may increase or decrease depending on whether the
execution of additional contingency plans is deemed necessary and whether
contingency plans currently being executed are deemed no longer necessary.
10
Despite diligent preparation, unanticipated third-party failures, more general
public infrastructure failures or failure to successfully conclude the Company's
remediation efforts as planned could have a material adverse impact on results
of operations, financial condition and/or cash flows in 1999 and beyond.
The statements contained in the foregoing year 2000 readiness disclosure are
subject to certain protection under the Year 2000 Information and Readiness
Disclosure Act.
The statements in this document with respect to future results, future
expectations, 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 may differ materially from those currently expected.
They are subject to various risks, such as the ability of the Company to meet
new business sales goals, fluctuations in commodity prices, slowing of the
overall economy, increased interest costs arising from a change in the Company's
leverage or change in rates, failure of the Company's plans to produce
anticipated cost savings, the timing and magnitude of capital expenditures,
effects of technological difficulties including remediation of Year 2000
compliance issues, as well as other risks discussed in the company's filings
with the Securities and Exchange Commission, including its Annual Report and
10-K for the year ended December 31, 1997. The Company makes no commitment to
disclose any revision to forward-looking statements, or any facts, events, or
circumstances after the date hereof that may bear upon forward-looking
statements.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has been named as one of a number of corporate and individual
defendants in an adversary proceeding filed on June 8, 1995, arising out of the
Chapter 11 bankruptcy filing of Keene Corporation ("Keene"). Except for the last
count, as discussed below, the claims and causes of action set forth in the June
8, 1995 complaint (the "complaint") are substantially the same as were brought
against the Company in the U.S. District Court in New York in August 1993,
(which original proceeding was permanently enjoined as a result of Keene's
reorganization plan). The complaint is being prosecuted by the Creditors Trust
created for the benefit of Keene's creditors (the "Trust"), seeking from the
defendants, collectively, damages in excess of $700 million, rescission of
certain asset sale and stock transactions, and other relief. With respect to the
Company, the complaint principally maintains that certain lighting assets of
Keene were sold to a predecessor of the Company in 1984 at less than fair value,
while both Keene and the Company were wholly-owned subsidiaries of Bairnco
Corporation ("Bairnco"). The complaint also challenges Bairnco's spin-off of the
Company in August 1988. Other allegations are that the Company, as well as other
corporate defendants, are liable as corporate successors to Keene. The complaint
fails to specify the amount of damages sought against the Company. The complaint
also alleges a violation of the Racketeer Influenced and Corrupt Organizations
Act ("RICO").
Following confirmation of the Keene reorganization plan, the parties moved to
withdraw the case from bankruptcy court to the Southern District of New York
Federal District Court. The case is now pending before the Federal District
Court. On October 13, 1998, the Court issued an opinion dismissing certain
counts as to the Company and certain other corporate defendants. In particular,
the Court dismissed the count of the complaint against the Company which alleged
that the 1988 spin-off was a fraudulent transaction, and the count alleging a
violation of RICO. The Court also denied a motion to dismiss the challenge to
the 1984 transaction on statute of limitations grounds and ruled that the
complaint should not be dismissed for failure to specifically plead fraud.
Discovery, which was stayed since commencement of the action, has now been
authorized by the Court to begin. The Company will prepare and file its answer
to the complaint in the near future. The Company believes that it has
meritorious defenses to the adversary proceeding and will defend said action
vigorously.
11
Additionally, the Company is a defendant and/or potentially responsible party,
with other companies, in actions and proceedings under state and Federal
environment laws including the Federal Comprehensive Environmental Response
Compensation and Liability Act, as amended ("Superfund"). Such actions include,
but are not limited to, the Keystone Sanitation Landfill site located in
Pennsylvania, in which the United States Environmental Protection Agency has
sought remedial action and reimbursement for past costs. The Company has
executed a Consent Order with other defendants and USEPA to perform a
groundwater remedy at the Keystone site, which Order is presently before the
Court for approval.
Management does not believe that the disposition of the lawsuits and/or
proceedings will have a material effect on the Company's financial condition or
results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10: Credit Agreement dated August 30, 1998.
(b) Exhibit 27: Financial Data Schedules
(c) A Form 8-KA was filed on November 5, 1998, to amend the form 8-K filed on
September 11, 1998 announcing that the Company and Thomas completed the
Transaction that created a joint venture between the two companies. The
amendment provided the required financial statements in accordance with the
form.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Genlyte
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
THE GENLYTE GROUP INCORPORATED
(Registrant)
Date:
/s/ LARRY POWERS
-----------------------------------
Larry Powers
President and Chief Executive
Officer
Date:
/s/ DAVID J. STUMLER
-----------------------------------
David J. Stumler
Controller and Chief Accounting
Officer
13