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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 July 3, 1999
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 JULY 29,
1999 WAS 13,773,146.
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THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JULY 3, 1999
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income for the three
months ended July 3, 1999 and July 4, 1998........................1
Consolidated Statements of Income for the six
months ended July 3, 1999 and July 4, 1998........................2
Consolidated Balance Sheets as of
July 3, 1999 and December 31, 1998................................3
Consolidated Statements of Cash Flows for the six
months ended July 3, 1999 and July 4, 1998........................4
Notes to Consolidated Interim Financial Statements..................5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS .......................10
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS............................................13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................13
Signatures...........................................................14
Exhibit 27: Financial Data Schedule..................................15
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JULY 3, 1999 AND JULY 4, 1998
(000'S OMITTED, EXCEPT PER SHARE DATA)
(Unaudited)
1999 1998
-----------------------
Net sales $243,645 $130,327
Cost of sales 164,175 84,634
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Gross profit 79,470 45,693
Selling and administrative expenses 58,426 33,354
-----------------------
Operating profit 21,044 12,339
Interest expense, net 1,075 980
Minority interest 6,181 --
-----------------------
Income before income taxes 13,788 11,359
Income tax provision 5,928 4,884
-----------------------
Net income $ 7,860 $ 6,475
=======================
Earnings per share
Basic $ 0.57 $ 0.47
Diluted $ 0.57 $ 0.47
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 SIX MONTHS ENDED JULY 3, 1999 AND JULY 4, 1998
(000'S OMITTED, EXCEPT PER SHARE DATA)
(Unaudited)
1999 1998
-----------------------
Net sales $481,121 $260,451
Cost of sales 324,273 170,282
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Gross profit 156,848 90,169
Selling and administrative expenses 116,892 66,205
-----------------------
Operating profit 39,956 23,964
Interest expense, net 2,271 1,824
Minority interest 11,695 --
-----------------------
Income before income taxes 25,990 22,140
Income tax provision 11,175 9,519
-----------------------
Net income $ 14,815 $ 12,621
=======================
Earnings per share
Basic $ 1.07 $ 0.93
Diluted $ 1.07 $ 0.92
The accompanying notes are an integral part
of these consolidated financial statements.
2
THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JULY 3, 1999 AND DECEMBER 31, 1998
(000'S OMITTED)
(Unaudited)
7/3/99 12/31/98
---------------------
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 6,548 $ 8,555
Accounts receivable, less allowance for doubtful
accounts of $10,517 and $10,907, respectively 174,494 146,167
Inventories:
Raw materials and supplies 45,432 43,167
Work in process 14,562 14,529
Finished goods 81,504 79,308
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Total inventories 141,498 137,004
Other current assets 26,027 25,520
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Total current assets 348,567 317,246
Plant and equipment, at cost 317,879 309,032
Less: accumulated depreciation and amortization 209,935 203,353
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Net plant and equipment 107,944 105,679
Cost in excess of net assets of acquired businesses 80,350 57,944
Other assets 26,588 20,733
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Total assets $563,449 $501,602
===================
LIABILITIES & STOCKHOLDERS' INVESTMENT:
CURRENT LIABILITIES:
Short-term borrowings $ 137 $ 1,932
Accounts payable 79,876 73,852
Accrued expenses and current portion of long-term debt 57,165 61,430
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Total current liabilities 137,178 137,214
Long-term debt 98,271 60,852
Deferred income taxes 30,168 30,293
Minority interest 92,235 84,649
Other liabilities 22,422 22,362
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Total liabilities 380,274 335,370
STOCKHOLDERS' INVESTMENT:
Common stock 137 136
Additional paid-in capital 17,260 16,207
Retained earnings 135,341 120,526
Accumulated other comprehensive income 30,437 29,363
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Total stockholders' investment 183,175 166,232
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Total liabilities & stockholders' investment $563,449 $501,602
===================
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 SIX MONTHS ENDED JULY 3, 1999 AND JULY 4, 1998
(000'S OMITTED)
(Unaudited)
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14,815 $ 12,621
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 12,159 6,461
Loss (gain) from disposal of plant and equipment 299 --
Changes in assets and liabilities:
Accounts receivable (24,138) (12,853)
Inventories (2,377) (2,044)
Other current assets (160) 65
Other assets (2,243) (80)
Accounts payable and accrued expenses (2,415) (1,161)
Deferred income taxes (249) (4)
Minority interest 7,586 --
Other liabilities 60 (759)
Minimum pension liability 230 --
All other, net (726) --
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Net cash provided by operating activities 2,841 2,246
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (31,026) --
Purchases of plant and equipment (10,435) (7,823)
Purchases of treasury stock (253) --
--------------------
Net cash used in investing activities (41,714) (7,823)
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock options exercised 1,307 586
Increase in debt, net 34,301 4,028
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Net cash provided by financing activities 35,608 4,614
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Effect of exchange rate changes on cash and cash equivalents 1,258 (364)
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Net increase (decrease) in cash and cash equivalents (2,007) (1,327)
Cash and cash equivalents at beginning of period 8,555 1,654
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Cash and cash equivalents at end of period $ 6,548 $ 327
====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 1,918 $ 1,504
Income taxes $ 10,397 $ 8,972
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 JULY 3, 1999
(000'S OMITTED, EXCEPT PER SHARE DATA)
(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 Genlyte Thomas Group LLC. The term
"Genlyte" as used herein refers only to The Genlyte Group Incorporated.
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 Genlyte Thomas Group LLC for
the first and second quarters of 1999 but not for the first and second
quarters of 1998. See Note 5 regarding the formation of Genlyte Thomas
Group LLC.
The results of operations for the six-month period ended July 3, 1999
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
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. For the three
months ended July 3, 1999 and July 4, 1998, total comprehensive income
was $8,468 and $5,851, respectively. For the six months ended July 3,
1999 and July 4, 1998, total comprehensive income was $15,889 and
$12,257, respectively.
5
4. EARNINGS PER SHARE
The calculation of the average common shares outstanding assuming
dilution for the three months ended July 3, 1999 and July 4, 1998
follows:
1999 1998
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Average common shares outstanding 13,798 13,666
Incremental common shares issuable:
Stock option plans 24 33
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Average common shares outstanding assuming dilution 13,822 13,699
=========== ===========
The calculation of the average common shares outstanding assuming
dilution for the six months ended July 3, 1999 and July 4, 1998
follows:
1999 1998
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Average common shares outstanding 13,794 13,633
Incremental common shares issuable:
Stock option plans 11 21
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Average common shares outstanding assuming dilution 13,805 13,654
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5. FORMATION OF GENLYTE THOMAS GROUP LLC
On August 30, 1998, Genlyte and Thomas Industries Inc. ("Thomas")
completed the combination of the business of Genlyte with the lighting
business of Thomas ("Thomas Lighting"), in the form of a limited
liability company named Genlyte Thomas Group LLC ("Genlyte Thomas").
Genlyte Thomas manufactures, sells, markets and distributes consumer,
commercial, industrial and outdoor lighting fixtures and controls.
Genlyte contributed substantially all of its assets and liabilities to
Genlyte Thomas and received a 68% interest in Genlyte Thomas. Thomas
contributed substantially all of its assets and certain related
liabilities comprising Thomas Lighting and received a 32% interest in
Genlyte Thomas.
6
On an unaudited pro forma basis, assuming the business combination
described above had occurred at the beginning of the six-month period
ended July 4, 1998, the results would have been:
Six Months Ended
July 3, 1999 July 4, 1998
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Net sales $ 481,121 $ 459,018
Net income $ 14,815 $ 11,801
Earnings per share $ 1.07 $ .86
The pro forma results do not purport to state exactly what the
Company's results of operations would have been had the business
combination in fact been consummated as of the assumed date.
6. ACQUISITION OF LEDALITE ARCHITECTURAL PRODUCTS INC. AND INVESTMENT IN
FIBRE LIGHT
On June 30, 1999, Genlyte Thomas acquired the assets and liabilities of
privately held Ledalite Architectural Products Inc., located in
Vancouver Canada. For accounting purposes, the assets and liabilities
acquired are valued at their fair values, which result from
management's preliminary determination of purchase accounting
adjustments and are based upon available information and certain
assumptions that management considers reasonable under the
circumstances. Consequently, the determination of these fair values as
reflected in the balance sheet are subject to change.
On May 10, 1999, Genlyte Thomas acquired a 2% interest (with rights to
acquire an additional 6%) in Fibre Light International, based in
Burleigh Heads, Queensland, Australia. The two companies then formed a
jointly owned limited liability company named Fibre Light U.S. LLC, of
which Genlyte Thomas owns 80%.
The purchase price of these acquisitions was approximately $31.5
million, consisting of $8.5 million in cash payments and $23 million in
borrowings.
7
7. SEGMENT REPORTING
During the fourth quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of
an Enterprise and Related Information" (SFAS No. 131). 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 are
not presented in the table below.
For the three months ended July 3, 1999 and July 4, 1998:
Industrial
Commercial Residential and Other Total
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1999
Net sales 175,050 35,275 33,320 243,645
Operating profit 15,906 2,104 3,034 21,044
1998
Net sales 99,359 18,123 12,845 130,327
Operating profit 9,860 1,180 1,299 12,339
For the six months ended July 3, 1999 and July 4, 1998:
Industrial
Commercial Residential and Other Total
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1999
Net sales 343,563 70,185 67,373 481,121
Operating profit 30,495 3,490 5,971 39,956
1998
Net sales 197,786 36,824 25,841 260,451
Operating profit 19,075 2,275 2,614 23,964
8
The Company has operations throughout North America. Information about the
Company's operations by geographical area for the three months ended July 3,
1999 and July 4, 1998 follows. Foreign balances represent primarily Canada and
some Mexico.
United States Foreign Total
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1999
Net sales 214,932 28,713 243,645
Operating profit 18,884 2,160 21,044
Assets 460,604 102,845 563,449
1998
Net sales 113,356 16,971 130,327
Operating profit 10,947 1,392 12,339
Assets 230,015 38,960 268,975
Information about the Company's operations by geographical area for the six
months ended July 3, 1999 and July 4, 1998 follows:
United States Foreign Total
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1999
Net sales 424,357 56,764 481,121
Operating profit 35,873 4,083 39,956
Assets 460,604 102,845 563,449
1998
Net sales 226,293 34,158 260,451
Operating profit 21,239 2,725 23,964
Assets 230,015 38,960 268,975
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
COMPARISON OF SECOND QUARTER 1999 TO SECOND QUARTER 1998
Net sales for the second quarter of 1999 were $243.6 million, an increase of
86.9 percent from the second quarter of 1998. Net income for the second quarter
of 1999 was $7.9 million ($.57 per share), a 21.4 percent increase over the
second quarter 1998 net income of $6.5 million ($.47 per share). Sales and
earnings for the second quarter of 1999 included the consolidated results of
Genlyte Thomas, but earnings were reduced by Thomas' minority interest. Net
sales on a comparable division basis grew 5.4 percent for the second quarter
over last year as the commercial construction markets that the Company serves
continued their year-to-year growth for 1999.
Cost of sales for the second quarter of 1999 was 67.4 percent of net sales,
compared to 64.9 percent in the second quarter of 1998. This increase results
from the higher mix of commodity fluorescent products in the 1999 second quarter
from Genlyte Thomas sales compared to the former Genlyte divisions. Selling and
administrative expenses decreased to 24.0 percent of sales in the second quarter
of 1999 from 25.6 percent in the second quarter of 1998 because expenses of the
corporate headquarters were lower in 1999 and sales were 86.9 percent higher.
Operating profit increased 70.5 percent to $21.0 million in the second quarter
of 1999 from $12.3 million in the second quarter of 1998 because of the
consolidated results of Genlyte Thomas.
Interest expense was $1.1 million in the second quarter of 1999, compared to
$1.0 million in the second quarter of 1998. Minority interest of $6.2 million
represents the 32 percent interest of Thomas in the earnings of Genlyte Thomas
for the second quarter of 1999.
The effective tax rate was approximately 43.0 percent for the second quarters of
both 1999 and 1998.
The formation of Fibre Light U.S. LLC and the acquisition of Ledalite are not
expected to have a material effect on the Company's earnings in 1999, but they
are expected to contribute to earnings in 2000 and beyond.
COMPARISON OF FIRST SIX MONTHS 1999 TO FIRST SIX MONTHS 1998
Net sales for the first six months of 1999 were $481.1 million, an increase of
84.7 percent from the first six months of 1998. Net income for the first six
months of 1999 was $14.8 million ($1.07 per share), a 17.4 percent increase over
1998 net income of $12.6 million ($.92 per share) for the comparable period.
Sales and earnings for the first six months of 1999 included the consolidated
results of Genlyte Thomas, but earnings were reduced by Thomas' minority
interest. Net sales on a comparable division basis grew 4.8 percent for the
first six months over last year as the commercial construction markets that the
Company serves continued their year-to-year growth for 1999.
10
Cost of sales for the first six months of 1999 was 67.4 percent of net sales,
compared to 65.4 percent in the first six months of 1998. This increase resulted
from the higher mix of commodity fluorescent products in the 1999 first six
months from Genlyte Thomas sales compared to the former Genlyte divisions.
Selling and administrative expenses decreased to 24.3 percent of sales in the
first six months of 1999 from 25.4 percent in the first six months of 1998
because expenses of the corporate headquarters were lower in 1999 and sales were
84.7 percent higher. Operating profit increased 66.7 percent to $40.0 million in
the first six months of 1999 from $24.0 million in the first six months of 1998
because of the consolidated results of Genlyte Thomas.
Interest expense was $2.3 million in the first six months of 1999, compared to
$1.8 million in the first six months of 1998, primarily due to an increase in
short-term borrowings during the first quarter of 1999 over 1998 to fund
increased working capital. This increase was offset somewhat by a reduction in
interest rates compared to the same period last year. Minority interest of $11.7
million represents the 32 percent interest of Thomas in the earnings of Genlyte
Thomas for the first six months of 1999.
The effective tax rate was approximately 43.0 percent for the first six months
of both 1999 and 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased to $6.5 million at July 3, 1999, compared to
$8.6 million at December 31, 1998. Total debt increased to $98.4 million at July
3, 1999, compared to $62.8 million at December 31, 1998. The increase in
borrowings is mainly due to working capital needs and the addition of $23.0
million debt relating to the Ledalite acquisition. Working capital at July 3,
1999 was approximately $211.4 million, compared to $180.0 million at December
31, 1998. Due to the seasonal requirements of the Company's business, accounts
receivable and inventory increased during the first six months of 1999,
resulting in a need for additional borrowings. Cash provided by operating
activities during the first six months was $2.8 million, compared to cash
provided by operating activities of $2.2 million in the first six months last
year. Cash used in investing activities was $41.7 million, primarily for the
Ledalite acquisition as well as for normal plant and equipment purchases. Cash
provided by financing activities was $35.6 million, primarily from increased
debt referenced above. 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 business needs in the foreseeable future.
Genlyte Thomas has a $125 million revolving credit facility that matures in
August 2003. Total borrowings under this facility at July 3, 1999 were $44
million, classified as long-term. The Company's remaining long-term debt at July
3, 1999 consisted of $22.3 million payable to Thomas, $10.5 million in
industrial revenue bonds, $20.2 million (in Canadian dollars) due to the
Ledalite acquisition and $1.3 million other.
11
YEAR 2000 ISSUES
All divisions in the Company have established and are in the process of
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 are
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 substantially complete. The Company has determined the status of these
components with regard to year 2000 readiness by contacting third party
providers of these components or performing analyses 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. Customers, vendors and service providers have or will
be contacted to determine their readiness.
Through July 3, 1999 the Company has spent approximately $2.7 million on
external resources, hardware and software required to address the year 2000
issue. Of this amount, approximately $.8 million was spent in the first six
months of 1999. It is estimated that an additional $.8 million will be spent in
the remainder of 1999 to attain year 2000 readiness.
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.
However, management believes through execution of this plan, year 2000
processing will not cause significant disruptions in the Company's business.
The statements contained in the foregoing year 2000 readiness disclosure are
subject to certain protection under the Year 2000 Information and Readiness
Disclosure Act.
FORWARD-LOOKING STATEMENTS
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.
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.
12
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K: None.
13
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: August 17, 1999 /s/ LARRY K. POWERS
-----------------------------------------
Larry K. Powers
President and Chief Executive Officer
Date: August 17, 1999 /s/ WILLIAM G. FERKO
-----------------------------------------
William G. Ferko
V. P. Finance - CFO & Treasurer
14