FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2001
---------------------
Commission File Number 1-5426
THOMAS INDUSTRIES INC.
--------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
DELAWARE 61-0505332
----------------------- -----------------------------------------
(State of incorporation) (I.R.S. Employer Identification Number)
4360 BROWNSBORO ROAD, LOUISVILLE, KENTUCKY 40207
------------------------------------------ ------------
(Address of principal executive offices) (Zip Code)
502/893-4600
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
SECURITIES EXCHANGE ACT OF 1934:
Title of Each Class Name of Each Exchange on which Registered
-------------------------------- -----------------------------------------
Common Stock, $1 Par Value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
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. [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 11, 2002, 15,251,810 shares of the registrant's Common Stock were
outstanding.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 11, 2002, was approximately $427,050,680.
Portions of the Proxy Statement for the Annual Meeting of Shareholders on April
18, 2002, are incorporated by reference in Part III of this report.
Portions of the Annual Report to Shareholders for fiscal year ended December 31,
2001, are incorporated by reference in Parts I and II of this report.
PART I.
ITEM 1. BUSINESS
a. General Development of Business.
-------------------------------
The company that was eventually to become known as Thomas Industries
("Thomas"or the "Company") was founded in 1928 as the Electric Sprayit
Company. Electric Sprayit manufactured paint spraying machines,
blowers, and air compressors in Chicago, Illinois. In 1948, Mr. Lee B.
Thomas and a group of investors acquired Moe Brothers Manufacturing of
Fort Atkinson, Wisconsin, a manufacturer of residential lighting
products. In 1953, Moe Lighting and The Electric Sprayit Company merged
to become Thomas Industries Inc.
Although its roots are in lighting products and air compressors, Thomas
began to diversify further in the 1960's and 1970's, acquiring
different types of consumer products along with tools, hardware, and
specialty products. A new strategic focus that began in the 1980's was
finalized in 1994 and led the Company to divest its non-core businesses
and concentrate on Lighting and Pumps and Compressors. Significant
additions to these businesses on the Lighting side included the Lumec
and Day-Brite Lighting acquisitions in 1987 and 1989 and Pumps and
Compressors acquisitions which included ASF, Pneumotive, Brey, WISA,
Welch and Oberdorfer, made from 1987 through 1999.
On August 30, 1998, Thomas and The Genlyte Group ("Genlyte") formed a
lighting joint venture that combined substantially all of the assets
and liabilities of Genlyte and substantially all of the lighting assets
and related liabilities of Thomas to create Genlyte Thomas Group LLC,
estimated to be the third largest lighting fixture manufacturer in
North America. Thomas owns a 32% interest in the joint venture, and
Genlyte owns a 68% interest.
b. Financial Information about Segments.
------------------------------------
The information required by this item is set forth in Exhibit 13 under
the heading "Notes to Consolidated Financial Statements," which
information is contained in the Company's Annual Report to Shareholders
and incorporated herein by reference.
c. Narrative Description of Business.
---------------------------------
Pump and Compressor Segment
---------------------------
With the lighting joint venture in place, Thomas is now focused on its
Pump and Compressor business. Thomas is the leading supplier to the
original equipment manufacturer (OEM) market in such applications as
medical equipment, gasoline vapor and refrigerant recovery, automotive
and transportation applications, printing, tape drives, laboratory
equipment, and many other applications for consumer, commercial, and
industrial uses. The Company designs, manufactures, markets, and sells
these products through operations worldwide. Group headquarters are as
2
ITEM 1. (Continued)
follows: North American Group--Sheboygan, Wisconsin; European Group--
Puchheim, Germany; and Asia Pacific Group--Hong Kong, China.
The Company has four manufacturing operations in the United States
which manufacture rotary vane, linear, piston, and diaphragm pumps and
compressors, and various liquid pump technologies. These products are
distributed worldwide to OEM's, as well as through industrial
distributors.
Three German operations manufacture a complementary line of rotary
vane, piston, linear, and diaphragm pumps and compressors, and various
liquid pump technologies. These products are distributed worldwide.
The Company also maintains sales offices in England, Italy,
Switzerland, Hong Kong, Japan, Taiwan, Mexico, and Australia. The
Corporate Office is in Louisville, Kentucky.
The Company offers a wide selection of standard air compressors and
vacuum pumps and will modify or design its products to meet exacting
OEM applications. For the OEM market, the Company's pump and compressor
products are manufactured under the names Thomas in the U.S. and ASF
Thomas in Europe. Other products are marketed under the brand names
Welch (high vacuum systems for laboratory and chemical markets),
Air-Pac (pnueumatic construction equipment), Vakuumatic (leakage
detection systems), Medi-Pump (respiratory products), and Oberdorfer
(liquid pumps).
The medical equipment market, which includes oxygen concentrators,
nebulizers, aspirators, and other devices, is important to the Company.
Company sales to medical equipment OEM's were approximately $70 million
in 2001, $65 million in 2000, and $62 million in 1999. Oxygen
concentrator OEM's represent over 50 percent of the Company's sales in
the medical equipment market. The Company believes it has the leading
market share in the oxygen concentrator OEM market worldwide.
No single customer of the Company accounted for 10 percent or more of
the Company's net sales in 2001.
The backlog of unshipped orders was $38 million at December 31, 2001,
and $42 million at December 31, 2000. The reduction in backlog was due
primarily to exchange rate fluctuations regarding our European
operations and a shortening of the cycle time for our larger OEM
customers between when their orders are received and when the Company
ships. The Company believes substantially all of such orders are firm,
although some orders are subject to cancellation. Substantially all of
these orders are expected to be filled in 2002.
The Company believes that it has adequate sources of materials and
supplies for its business.
There is no significant seasonal impact on the business of the Company.
3
ITEM 1. (Continued)
Lighting Segment
----------------
On August 30, 1998, Thomas and Genlyte formed a lighting joint venture
that combined substantially all of the assets and liabilities of
Genlyte and substantially all of the lighting assets and related
liabilities of Thomas to create Genlyte Thomas Group LLC ("GTG"),
estimated to be the third largest lighting fixture manufacturer in
North America. Thomas owns a 32% interest in the joint venture, and
Genlyte owns a 68% interest.
GTG designs, manufactures, markets, and sells lighting fixtures for a
wide variety of applications in the commercial, industrial, and
residential markets. GTG operates in these three industry segments
through the following divisions: Lightolier, Day-Brite, Crescent,
Capri/Omega, Choride Systems, Controls, Hadco, Gardco, Wide-Lite,
Stonco and Thomas Residential in the United States and Mexico; and
Canlyte, Thomas Lighting Canada, Lumec, and Ledalite in Canada.
GTG's products primarily utilize incandescent, fluorescent, and
high-intensity discharge (HID) light sources and are marketed primarily
to distributors who resell the products for use in new residential,
commercial, and industrial construction as well as in remodeling
existing structures. Because GTG does not principally sell directly to
the end user of its products, it's management cannot determine
precisely the percentage of its revenues derived from the sale of
products installed in each type of building or the percentage of its
products sold for new construction versus remodeling. GTG's sales, like
those of the lighting fixture industry in general, are partly dependent
on the level of activity in new construction and remodeling.
GTG designs, manufactures, markets, and sells the following types of
products:
Indoor fixtures - Incandescent, fluorescent, and HID lighting
fixtures and lighting controls for commercial, industrial,
institutional, medical, sports, and residential markets, and task
lighting for all markets.
Outdoor fixtures - HID and incandescent lighting fixtures and
accessories for commercial, industrial, institutional, sports, and
residential markets.
GTG's products are marketed by independent sales representatives and
GTG direct sales personnel who sell to distributors, electrical
wholesalers, mass merchandisers, and national accounts. In addition,
GTG's products are promoted through architects, engineers, contractors,
and building owners. GTG's products are principally sold throughout the
United States, Canada, and Mexico.
Thomas' investment in GTG is accounted for using the equity method of
accounting. At any time on or after January 31, 2002, Thomas has the
right (a "put right"), but not the obligation, to require the Joint
4
ITEM 1. (Continued)
Venture (GTG) to purchase all, but not less than all, of Thomas'
ownership interest in GTG at the applicable purchase price. The
purchase price shall be equal to the "Fair Market Value" of GTG
multiplied by Thomas' ownership percentage in GTG. The "Fair Market
Value"means the value of the total interest in GTG computed as a going
concern, including the control premium.
d. Other
-----
The Company expects to fund working capital requirements from a
combination of available cash balances, internally generated funds,
and, if necessary, short-term financing arrangements. The Company does
not currently have any bank committed lines of credit and management
believes, if short-term borrowings were needed to support the sales
growth of the business, that competitive financing could be obtained
given the current financial position of the Company.
The Company has various patents and trademarks but does not consider
its business to be materially dependent upon any individual patent or
trademark.
During 2001, the Company spent $10,369,000 on research activities
relating to the development of new products and the improvement of
existing products. Substantially all of this amount was
Company-sponsored activity. During 2000, the Company spent $9,721,000
on these activities and during 1999, $9,370,000.
Continued compliance with present and reasonably expected federal,
state, and local environmental regulations is not expected to have any
material effect upon capital expenditures, earnings, or the competitive
position of the Company and its subsidiaries.
The Company employed approximately 1,070 people at December 31, 2001.
e. Financial Information about Geographic Areas.
--------------------------------------------
See Notes to Consolidated Financial Statements, as set forth in Exhibit
13, which information is contained in the Company's 2001 Annual Report
to Shareholders, and incorporated herein by reference, for financial
information about foreign and domestic operations.
f. Executive Officers of the Registrant.
------------------------------------
Year
Office or Position First Elected
Name with Company Age as an Officer
---- ------------ --- -------------
Timothy C. Brown Chairman of the Board, 51 1984
(A) President, Chief Executive
Officer, and Director
5
ITEM 1. (Continued)
Year
Office or Position First Elected
Name with Company Age as an Officer
---- ------------ --- -------------
Phillip J. Stuecker Vice President of Finance, 50 1984
(B) Chief Financial Officer,
and Secretary
Bernard R. Berntson Vice President; General 62 1992
(C) Manager, North American
Pump and Compressor Group
Peter H. Bissinger Vice President; General 56 1992
(D) Manager, European
Pump and Compressor Group
(A) Timothy C. Brown was elected Chairman of the Board on April 20,
1995, in addition to his other duties of President and Chief
Executive Officer. Prior to this, Mr. Brown held various
management positions in the Company including Chief Operating
Officer, Executive Vice President, and Vice President and Group
Manager of the Specialty Products Group.
(B) Phillip J. Stuecker was elected Vice President of Finance, Chief
Financial Officer, and Secretary on October 23, 1989. Prior to
this, Mr. Stuecker held various management positions in the
Company including Vice President and Treasurer.
(C) Bernard R. Berntson was elected an officer effective December 14,
1992. Mr. Berntson had held the position of General Manager of the
North American Pump and Compressor Group since 1987.
(D) Peter H. Bissinger was elected an officer effective December 14,
1992, in addition to his position of President of ASF Thomas GmbH,
a wholly owned subsidiary of the Company. Mr. Bissinger had held
the position of President of ASF Thomas GmbH since 1979.
ITEM 2. PROPERTIES
The Corporate offices of the Company are located in Louisville, Kentucky.
Due to the large number of individual locations and the diverse nature of
the operating facilities, specific description of the properties owned and
leased by the Company is not necessary to an understanding of the Company's
business. All of the buildings are of steel, masonry, and concrete
construction, are in generally good condition, provide adequate and suitable
space for the operations at each location, and are of sufficient capacity
for present and foreseeable future needs.
6
ITEM 2. (Continued)
The following listing summarizes the Company's properties.
Number
of Facilities Combined
Segment Owned Leased Square Feet Nature of Facilities
------- ----- ------ ----------- --------------------
Pump and Compressor 4 4 707,000 Manufacturing plants
1 5 30,000 Distribution centers
Corporate -- 1 5,300 Corporate headquarters
2 -- 160,000 Leased to third parties
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, the Company is a party to legal
proceedings and claims. When costs can be reasonably estimated, appropriate
liabilities for such matters are recorded. While management currently
believes the amount of ultimate liability, if any, with respect to these
actions will not materially affect the financial position, results of
operations, or liquidity of the Company, the ultimate outcome of any
litigation is uncertain. Were an unfavorable outcome to occur, the impact
could be material to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The information required by this item is set forth in Exhibit 13 under the
headings "Common Stock Market Prices and Dividends," and "Notes to
Consolidated Financial Statements," which information is contained in the
Company's 2001 Annual Report to Shareholders and incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is set forth in Exhibit 13 under the
heading "Five-Year Summary of Operations and Statistics," which information
is contained in the Company's 2001 Annual Report to Shareholders and
incorporated herein by reference.
7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is set forth in Exhibit 13 under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations," which information is contained in the Company's 2001
Annual Report to Shareholders and incorporated herein by reference.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's long-term debt bears interest at fixed rates, with the
exception of the $1.25 million Industrial Revenue Bond that accrues
interest at a variable rate. Short-term borrowings are priced at variable
interest rates. The Company's results of operations and cash flows,
therefore, would only be affected by interest rate changes to the extent of
variable rate debt. At December 31, 2001, only the $1.25 million Industrial
Revenue Bond was outstanding. A 100 basis point movement in the interest
rate on the $1.25 million bond would result in an $12,500 annualized effect
on interest expense and cash flows.
The Company also has short-term investments of $28.8 million as of December
31, 2001 that bear interest at variable rates. Therefore, a 100 basis point
movement in the interest rate would result in an approximate $288,000
annualized effect on interest income and cash flows.
The fair value of the Company's long-term debt is estimated based on
current interest rates offered to the Company for similar instruments. A
100 basis point movement in the interest rate would result in an
approximate $490,000 annualized effect on the fair value of long-term debt.
The Company has significant operations consisting of sales and
manufacturing activities in foreign countries. As a result, the Company's
financial results could be significantly affected by factors such as
changes in currency exchange rates or changing economic conditions in the
foreign markets in which the Company manufactures or distributes its
products. Currency exposures for our Pump and Compressor Segment are
concentrated in Germany but exist to a lesser extent in other parts of
Europe and Asia. Our Lighting Segment currency exposure is primarily in
Canada.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and notes to consolidated financial
statements of the registrant and its subsidiaries are set forth in Exhibit
13 under the headings "Consolidated Financial Statements" and "Notes to
Consolidated Financial Statements," which information is contained in the
Company's 2001 Annual Report to Shareholders and incorporated herein by
reference. The Report of Independent Auditors is also set forth in Exhibit
13 and hereby incorporated herein by reference. In addition, financial
statements of GTG are included in this Form 10-K on pages F-1 to F-23.
8
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On April 19, 2001, on the recommendation of the Audit Committee, the
Board of Directors appointed Arthur Andersen LLP as the Corporation's
independent auditors for the 2001 fiscal year, replacing Ernst & Young
LLP ("Ernst & Young") which was dismissed from that role.
Ernst & Young's reports on the financial statements for the two fiscal
years preceding dismissal contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit
scope or accounting principles. During the two fiscal years and interim
period preceding the dismissal, there were no disagreements with Ernst
& Young on any matter of accounting principles or practices, financial
statement disclosure, or audit scope or procedure.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
a. Directors of the Company
------------------------
The information required by this item is set forth in registrant's
Proxy Statement for the Annual Meeting of Shareholders to be held on
April 18, 2002, under the headings "Election of Directors" and "Section
16(a), Beneficial Ownership Reporting Compliance," which information is
incorporated herein by reference.
b. Executive Officers of the Company
---------------------------------
Reference is made to "Executive Officers of the Registrant" in Part I,
Item 1.f.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 18,
2002, under the headings "Executive Compensation," "Compensation Committee
Interlocks and Insider Participation," and "Board of Directors," which
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 18,
2002, under the heading "Securities Beneficially Owned by Principal
Shareholders and Management," which information is incorporated herein by
reference.
9
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth in registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 18,
2002, under the headings "Board of Directors" and "Compensation Committee
Interlocks and Insider Participation," which information is incorporated
herein by reference.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a. (1) Financial Statements
--------------------
The following consolidated financial statements of Thomas
Industries Inc., included in the Company's 2001 Annual Report to
Shareholders, are included in Part II, Item 8:
Consolidated Balance Sheets -- December 31, 2001 and 2000
Consolidated Statements of Income -- Years ended December 31,
2001, 2000, and 1999
Consolidated Statements of Shareholders' Equity -- Years ended
December 31, 2001, 2000, and 1999
Consolidated Statements of Cash Flows -- Years ended December
31, 2001, 2000, and 1999
Notes to Consolidated Financial Statements -- December 31,
2001
(2) Financial Statement Schedule
----------------------------
Schedule II -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable and, therefore, have been omitted.
(3) Listing of Exhibits
-------------------
Exhibit No. Exhibit
----------- -------
3(a) Restated Certificate of Incorporation,
as amended, filed as Exhibit 3(a) to
registrant's report on Form 10-Q dated
August 11, 1998, hereby incorporated by
reference.
3(b) Bylaws, as amended April 15, 1999, filed
as Exhibit 3(b) to registrant's report
on Form 10-K dated March 29, 1999,
hereby incorporated by reference.
4(a) Note Agreement dated January 19, 1990,
by and among the Company and Day-Brite
Lighting, Inc., Allstate Life Insurance
Company, and other investors
10
ITEM 14. (Continued)
Exhibit No. Exhibit
----------- -------
filed as Exhibit 4 to registrant's
report on Form 10-K dated March 22,
1990, hereby incorporated by reference.
First Amendment to Note Agreement dated
April 8, 1992, and Second Amendment to
Note Agreement dated July 31, 1992,
filed as Exhibit 4 to Form 10-Q filed
August 12, 1992, herein incorporated by
reference. Third Amendment to Note
Agreement dated July 7, 1998, filed as
Exhibit 4 to Form 10-Q filed November
16, 1998, herein incorporated by
reference.
Copies of debt instruments for which the
related debt is less than 10% of
consolidated total assets will be
furnished to the Commission upon
request.
4(b) Amended and Restated Rights Agreement
filed as Exhibit 4(b) to registrant's
report on Form 10-Q dated August 14,
2000, hereby incorporated by reference.
4(c) First Amendment to Rights Agreement
filed as Exhibit 4(c) to registrant's
report on Form 10-K dated March 26,
2001, hereby incorporated by reference.
10(a) Employment Agreements with Timothy C.
Brown and Phillip J. Stuecker filed as
Exhibit 3(j) to registrant's report on
Form 10-Q dated November 11, 1988,
hereby incorporated by reference.
10(b) Trust Agreement, filed as Exhibit 10(1)
to registrant's report on Form 10-Q
dated November 11, 1988, hereby
incorporated by reference.
10(c) Form of Indemnity Agreement and
Amendment thereto entered into by the
Company and each of its Executive
Officers filed as Exhibits 10 (g) and
(h) to registrant's report on Form 10-K
dated March 23, 1988, hereby
incorporated by reference.
10(d) Severance pay policy of the Company,
effective October 1, 1988, covering all
Executive Officers, filed as Exhibit
10(d) to registrant's report on Form
10-K dated March 23, 1989, hereby
incorporated by reference.
10(e) Nonemployee Director Stock Option Plan
as Amended and Restated as of February
5, 1997, filed as
11
ITEM 14. (Continued)
Exhibit No. Exhibit
----------- -------
Exhibit 10(h) to registrant's report on
Form 10-K dated March 20, 1997, hereby
incorporated by reference.
10(f) 1995 Incentive Stock Plan as Amended
and Restated as of April 15, 1999, filed
as Exhibit 10(h) to registrant's report
on Form 10-Q dated November 12, 1999,
hereby incorporated by reference.
10(g) Employment Agreement with Timothy C.
Brown dated January 29, 1997, filed as
Exhibit 10(j) to registrant's report on
Form 10-K dated March 20, 1997, hereby
incorporated by reference.
10(h) Master Transaction Agreement by and
between Thomas Industries Inc. and The
Genlyte Group Incorporated dated April
28, 1998, filed as Exhibit 2.1 to
registrant's report on Form 8-K dated
July 24, 1998, hereby incorporated by
reference.
10(i) Limited Liability Company Agreement of
GT Lighting, LLC, dated April 28, 1998,
filed as Exhibit 2.2 to registrant's
report on Form 8-K dated July 24, 1998,
hereby incorporated by reference.
10(j) Capitalization Agreement among GT
Lighting, LLC, and Thomas Industries
Inc., Tupelo Holdings Inc., Thomas
Industries Holdings Inc., Gardco
Manufacturing, Inc., Capri Lighting,
inc., Thomas Imports, Inc., and TI
Industries Corporation dated April 28,
1998, filed as Exhibit 2.3 to
registrant's report on Form 8-K dated
July 24, 1998, hereby incorporated by
reference.
10(k) Capitalization Agreement between GT
Lighting, LLC, and The Genlyte Group
Incorporated dated April 28, 1998, filed
as Exhibit 2.4 to registrant's Form 8-K
dated July 24, 1998, hereby incorporated
by reference.
13 Certain portions of the Company's 2001
Annual Report to Shareholders as
specified in Parts I and II, hereby
incorporated by reference in this Annual
Report on Form 10-K.
21 Subsidiaries of the Registrant.
23(a) Consent of Arthur Andersen LLP.
23(b) Consent of Ernst & Young LLP.
12
ITEM 14. (Continued)
23(c) Consent of Arthur Andersen LLP.
b. Reports on Form 8-K
-------------------
There were no reports on Form 8-K for the three months ended
December 31, 2001.
c. Exhibits
--------
The exhibits filed as part of this Annual Report on Form 10-K are
as specified in Item 14(a)(3) herein.
13
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) 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.
THOMAS INDUSTRIES INC.
Date: March 15, 2002 By /s/ Timothy C. Brown
------------------------------------------
Timothy C. Brown, Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Timothy C. Brown Chairman of the Board; 3/15/02
Timothy C. Brown President; Chief Executive
Officer; Director
(Principal Executive Officer)
/s/ Phillip J. Stuecker Vice President of Finance; 3/15/02
Phillip J. Stuecker Chief Financial Officer;
Secretary
(Principal Financial Officer)
/s/ Roger P. Whitton Controller 3/15/02
Roger P. Whitton (Principal Accounting Officer)
/s/ Wallace H. Dunbar Director 3/15/02
Wallace H. Dunbar
/s/ H. Joseph Ferguson Director 3/15/02
H. Joseph Ferguson
/s/ Gene P. Gardner Director 3/15/02
Gene P. Gardner
/s/ Director Director 3/15/02
Lawrence E. Gloyd
14
Signatures (Continued)
Signature Title Date
--------- ----- ----
/s/ William M. Jordan Director 3/15/02
William M. Jordan
/s/ Franklin J. Lunding, Jr. Director 3/15/02
Franklin J. Lunding, Jr.
/s/ Anthony A. Massaro Director 3/15/02
Anthony A. Massaro
15
Report of Independent Public Accountants
To the Board of Directors and
Shareholders of Thomas Industries Inc.:
We have audited the accompanying consolidated balance sheet of Thomas
Industries Inc. (a Delaware corporation) as of December 31, 2001, and the
related consolidated statements of income, shareholders' equity and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Thomas
Industries Inc. as of December 31, 2001, and the consolidated results of
its operations and its cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States.
/s/ Arthur Andersen LLP
Louisville, Kentucky
January 25, 2002
16
Report of Independent Auditors
The Board of Directors and Shareholders
Thomas Industries Inc.
We have audited the consolidated balance sheet of Thomas Industries Inc. as of
December 31, 2000, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the two years in the period
ended December 31, 2000. Our audits also included the information for each of
the two years in the period ended December 31, 2000 included in the financial
statement schedule listed in the Index at Item 14(a). These financial statements
and information included in the schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and information included in the schedule based on our
audits. The financial statements of Genlyte Thomas Group LLC (GTG), a
partnership formed on August 30, 1998, in which the Company has a 32% interest,
have been audited by other auditors whose report has been furnished to us;
insofar as our opinion on the consolidated financial statements relates to data
included for GTG, it is based solely on their report.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Thomas Industries Inc.
at December 31, 2000, and the consolidated results of its operations and its
cash flows for each of the two years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States.
Also, in our opinion, the information for each of the two years in the period
ended December 31, 2000 included in the related financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
/s/ Ernst & Young LLP
Louisville, Kentucky
February 7, 2001
17
VALUATION AND QUALIFYING ACCOUNTS
THOMAS INDUSTRIES INC. AND SUBSIDIARIES
DECEMBER 31, 2001
------------------------------------------------------------------------------------------------------------------------------------
Balance at Charged to Charged to Balance at
Description Beginning Costs Other Accounts- Deductions- End of
of Period and Expenses Describe Describe Period
------------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 2001
Allowance for doubtful accounts $752,000 $514,000 $163,000 (1) $1,103,000
Allowance for obsolete and slow moving 1,999,000 880,000 894,000 (2) 1,985,000
inventory
---------------------------------- ----------------------------------
$2,751,000 $1,394,000 $1,057,000 $3,088,000
================================== ==================================
Year ended December 31, 2000
Allowance for doubtful accounts $698,000 $206,000 $152,000 (1) $752,000
Allowance for obsolete and slow moving 1,861,000 624,000 486,000 (2) 1,999,000
inventory
---------------------------------- ----------------------------------
$2,559,000 $830,000 $638,000 $2,751,000
================================== ==================================
Year ended December 31, 1999
Allowance for doubtful accounts $656,000 $192,000 $150,000 (1) $698,000
Allowance for obsolete and slow moving 1,932,000 174,000 245,000 (2) 1,861,000
inventory
---------------------------------- ----------------------------------
$2,588,000 $366,000 $395,000 $2,559,000
================================== ==================================
(1) Uncollectible accounts written off, less recoveries on accounts previously
written off and effect of translation in accordance with SFAS No. 52.
(2) Disposal of obsolete inventory and effect of translation in accordance with
SFAS No. 52.
18
On August 30, 1998, Thomas and Genlyte formed a lighting joint venture that
combined substantially all of the assets and liabilities of Genlyte and
substantially all of the lighting assets and related liabilities of Thomas to
create Genlyte Thomas Group LLC ("GTG"), estimated to be the third largest
lighting fixture manufacturer in North America. Thomas owns a 32% interest in
the joint venture, and Genlyte owns a 68% interest.
Following are audited financial statements of GTG for the years ended December
31, 2001, 2000, and 1999.
F - 1
Report of Independent Public Accountants
To the Members of Genlyte Thomas Group LLC:
We have audited the accompanying consolidated balance sheets of Genlyte
Thomas Group LLC (a Delaware limited liability company) and Subsidiaries
(the Company) as of December 31, 2001 and 2000, and the related
consolidated statements of income, members' equity, and cash flows for each
of the three years in the period ended December 31, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Genlyte Thomas Group
LLC and Subsidiaries as of December 31, 2001 and 2000, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
Louisville, Kentucky
January 18, 2002
F - 2
CONSOLIDATED STATEMENTS OF INCOME
GENLYTE THOMAS GROUP LLC AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
(DOLLARS IN THOUSANDS)
2001 2000 1999
-----------------------------------------
Net sales $985,176 $ 1,007,706 $978,302
Cost of sales 636,582 651,304 645,572
-----------------------------------------
Gross profit 348,594 356,402 $332,730
Selling and administrative expenses 248,005 257,583 240,589
Amortization of goodwill and other intangible assets 6,007 4,616 3,704
-----------------------------------------
Operating profit 94,582 94,203 $88,437
Interest expense, net of interest income 3,699 4,184 4,633
Minority interest (54) (140) -
-----------------------------------------
Income before income taxes 90,937 90,159 $83,804
Income tax provision 6,064 6,622 4,841
-----------------------------------------
Net income $ 84,873 $ 83,537 $78,963
=========================================
The accompanying notes are an integral part of these consolidated financial
statements.
F - 3
CONSOLIDATED BALANCE SHEETS
GENLYTE THOMAS GROUP LLC AND SUBSIDIARIES
AS OF DECEMBER 31, 2001 AND 2000
(DOLLARS IN THOUSANDS)
2001 2000
----------------------
ASSETS:
Current Assets:
Cash and cash equivalents $ 59,691 $ 23,817
Accounts receivable, less allowances for doubtful
accounts of $10,111 and $11,014, respectively 141,658 142,784
Related-party receivables - 1,204
Inventories 132,932 151,257
Other current assets 8,763 7,564
----------------------
Total current assets 343,044 326,626
Property, plant and equipment, at cost:
Land and land improvements 6,490 6,506
Buildings and leasehold improvements 83,318 83,594
Machinery and equipment 273,154 258,892
----------------------
Total property, plant and equipment 362,962 348,992
Less: Accumulated depreciation and amortization 252,515 235,991
----------------------
Net property, plant and equipment 110,447 113,001
Goodwill, net of accumulated amortization 135,417 140,312
Other assets 30,213 34,453
----------------------
TOTAL ASSETS $ 619,121 $ 614,392
======================
LIABILITIES & MEMBERS' EQUITY:
Current Liabilities:
Current maturities of long-term debt $ 3,284 $ 2,661
Accounts payable 82,150 96,794
Related-party payables 19,705 7,022
Accrued expenses 65,406 70,977
----------------------
Total current liabilities 170,545 177,454
Long-term debt 36,989 66,652
Deferred income taxes 3,991 4,271
Accrued pension 15,666 12,728
Minority interest (194) (140)
Other long-term liabilities 6,121 6,121
----------------------
Total liabilities 233,118 267,086
Commitments and contingencies (See notes (12) and (13))
Members' Equity:
Accumulated other comprehensive income (9,076) 875
Other members' equity 395,079 346,431
----------------------
Total members' equity 386,003 347,306
----------------------
TOTAL LIABILITIES & MEMBERS' EQUITY $ 619,121 $ 614,392
======================
The accompanying notes are an integral part of these consolidated financial
statements.
F - 4
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
GENLYTE THOMAS GROUP LLC AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
(DOLLARS IN THOUSANDS)
Accumulated
Other Other Total
Comprehensive Members' Members'
Income Equity Equity
-------------------------------------
Members' equity, December 31, 1998 $ (1,075) $ 265,603 $ 264,528
Net income - 78,963 78,963
Decrease in minimum pension liability 1,793 - 1,793
Foreign currency translation adjustments 2,440 - 2,440
-------------------------------------
Total comprehensive income 4,233 78,963 83,196
Adjustment to contribution by Thomas - (1,014) (1,014)
Distributions to members - (37,542) (37,542)
-------------------------------------
Members' equity, December 31, 1999 $ 3,158 $ 306,010 $ 309,168
Net income - 83,537 83,537
Increase in minimum pension liability (277) - (277)
Foreign currency translation adjustments (2,006) - (2,006)
-------------------------------------
Total comprehensive income (2,283) 83,537 81,254
Distributions to members - (43,116) (43,116)
-------------------------------------
Members' equity, December 31, 2000 $ 875 $ 346,431 $ 347,306
Net income - 84,873 84,873
Increase in minimum pension liability (6,424) - (6,424)
Foreign currency translation adjustments (3,527) - (3,527)
-------------------------------------
Total comprehensive income (9,951) 84,873 74,922
Distributions to members - (36,225) (36,225)
-------------------------------------
Members' equity, December 31, 2001 $ (9,076) $ 395,079 $ 386,003
=====================================
The accompanying notes are an integral part of these consolidated financial
statements.
F - 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
GENLYTE THOMAS GROUP LLC AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)
2001 2000 1999
--------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 84,873 $ 83,537 $ 78,963
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 28,172 25,664 23,835
Net (gain) loss from disposals of plant and equipment (807) (77) (20)
Provision for doubtful accounts receivable 424 (718) 4,113
Provision (benefit) for deferred income taxes (150) 1,575 642
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable 1,520 18,899 (9,467)
Related-party receivables 1,204 (1,204) 1,855
Inventories 19,419 (10,726) 3,039
Other current assets (1,199) 204 1,018
Other assets 5,017 481 (28,736)
Accounts payable and accrued expenses (21,188) 2,173 24,223
Related-party payables 12,683 (1,740) 8,060
Deferred income taxes (130) 1,439 (106)
Minority interest (54) (140) -
Accrued pension and other long-term liabilities 2,938 228 (2,260)
Minimum pension liability (6,424) (277) 1,793
All other, net (79) 566 (3,247)
--------------------------------------
Net cash provided by operating activities 126,219 119,884 103,705
--------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of businesses, net of cash received (2,900) (59,145) (30,934)
Purchases of property, plant and equipment (20,250) (28,423) (20,514)
Proceeds from sales of property, plant and equipment 1,597 1,347 6,195
--------------------------------------
Net cash used in investing activities (21,553) (86,221) (45,253)
--------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings - - (1,932)
Proceeds from long-term debt 14,000 47,600 20,956
Reduction of long-term debt (43,040) (35,029) (28,202)
Distributions to members (36,225) (43,116) (37,542)
--------------------------------------
Net cash used in financing activities (65,265) (30,545) (46,720)
--------------------------------------
Effect of exchange rate changes on cash and cash equivalents (3,527) (2,006) 2,440
--------------------------------------
Net increase in cash and cash equivalents 35,874 1,112 14,172
Cash and cash equivalents at beginning of year 23,817 22,705 8,533
--------------------------------------
Cash and cash equivalents at end of year $ 59,691 $ 23,817 $ 22,705
======================================
The accompanying notes are an integral part of these consolidated financial
statements.
F - 6
Genlyte Thomas Group LLC and Subsidiaries
Notes to Consolidated Financial Statements
(Dollar Amounts in Thousands)
(1) DESCRIPTION OF BUSINESS
Genlyte Thomas Group LLC ("GTG" or "the Company") is a Delaware limited
liability company. The Company designs, manufactures, and sells lighting
fixtures and controls for a wide variety of applications in the commercial,
residential, and industrial markets in North America. The Company's products are
marketed primarily to distributors who resell the products for use in
commercial, residential, and industrial construction and remodeling. The Company
is the result of the business combination discussed in note (3) "Formation of
Genlyte Thomas Group LLC."
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements
include the accounts of GTG and all majority-owned subsidiaries, and also
include other entities that are jointly owned by The Genlyte Group Incorporated
and Thomas Industries Inc., all of which entities in total operationally
comprise GTG. Intercompany accounts and transactions have been eliminated.
Investments in affiliates owned less than 50%, and over which the Company does
not exercise significant influence, are accounted for using the equity method,
under which the Company's share of these affiliates' earnings is included in
income as earned.
USE OF ESTIMATES: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual amounts could differ from the
estimates.
REVENUE RECOGNITION: In December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101"), which provides the staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. The
effective date of SAB 101 for the Company was the fourth quarter of 2000. SAB
101 had no impact on the Company's financial position or results of operations
in 2000 because the Company had been in compliance with the guidance of SAB 101.
The Company records sales revenue when products are shipped because that is the
point when the customer accepts title and the risks and rewards of ownership. A
provision for estimated returns and allowances is recorded as a sales deduction.
CUSTOMER REBATES: Whereas the Company had been classifying most rebates paid to
customers as sales deductions, certain rebates were classified as selling and
administrative expenses. In 2001, the Company began classifying all customer
rebates as sales deductions. The effect in 2001 was to reclassify $3,007 to net
sales (decrease) from selling and administrative expenses (decrease). Prior year
statements of income have not been reclassified to conform to the 2001
classification, because the amounts, $3,125 in 2000 and $2,965 in 1999, are not
considered material.
F - 7
SHIPPING AND HANDLING COSTS: In compliance with Emerging Issues Task Force issue
00-10, "Accounting for Shipping and Handling Fees and Costs," the Company began
in 2000 to include in net sales all amounts billed to customers that relate to
shipping and handling. Previously, such revenue was netted against the related
costs. The effect in 2001 and 2000 was to reclassify $7,502 and $7,664,
respectively, to net sales (increase) from selling and administrative expenses
(increase). The 1999 statement of income has not been reclassified to conform to
the 2001 and 2000 classification, because the amount, $6,016, is not considered
material. The amounts of shipping and handling costs included in selling and
administrative expenses were $50,552 in 2001, $52,805 in 2000, and $40,814 in
1999.
ADVERTISING COSTS: The Company expenses advertising costs principally as
incurred. Certain catalog, literature, and display costs are amortized over
their useful lives, from 6 to 36 months. Total advertising expenses, classified
as selling and administrative expenses, were $10,373 in 2001, $12,221 in 2000,
and $13,416 in 1999.
RESEARCH AND DEVELOPMENT COSTS: Research and development costs are expensed as
incurred. These expenses, classified as selling and administrative expenses,
were $9,359 in 2001, $8,510 in 2000, and $8,086 in 1999.
CASH EQUIVALENTS: The Company considers all highly liquid investments with a
maturity of three months or less from the date of purchase to be cash
equivalents.
CONCENTRATION OF CREDIT RISK: Assets that potentially subject the Company to
concentration of credit risk are cash and cash equivalents and accounts
receivable. The Company invests its cash primarily in high-quality institutional
money market funds with maturities of less than three months and limits the
amount of credit exposure to any one financial institution. The Company provides
credit to most of its customers in the ordinary course of business, and
generally collateral or other security is not required. The Company conducts
ongoing credit evaluations of its customers and maintains allowances for
potential credit losses. Concentration of credit risk with respect to accounts
receivable is limited due to the wide variety of customers and markets to which
the Company sells. As of December 31, 2001, management does not consider the
Company to have any significant concentration of credit risk.
INVENTORIES: Inventories are stated at the lower of cost or market and include
materials, labor, and overhead. Inventories at December 31 consisted of the
following:
2001 2000
------------------------------------------------------------------------
Raw materials $ 51,595 $55,651
Work in process 13,582 13,484
Finished goods 67,755 82,122
----------------------------
Total inventories $132,932 $ 151,257
============================
Inventories valued using the last-in, first-out ("LIFO") method represented
approximately 83% of total inventories at December 31, 2001 and 2000.
Inventories not valued at LIFO (primarily inventories of Canadian operations)
are valued using the first-in, first-out ("FIFO") method. On a FIFO basis, which
approximates current cost, inventories would have been $2,616 and $1,403 lower
than reported at December 31, 2001 and 2000, respectively.
F - 8
During each of the last three years, certain inventory quantity reductions
caused partial liquidations of LIFO inventory layers (in some cases including
the base), the effects of which increased 2001 pre-tax income by $1,047,
decreased 2000 pre-tax income by $591, and decreased 1999 net pre-tax income by
$248.
PROPERTY, PLANT AND EQUIPMENT: The Company provides for depreciation of
property, plant and equipment, which also includes amortization of assets
recorded under capital leases, on a straight-line basis over the estimated
useful lives of the assets. Useful lives vary among the items in each
classification, but generally fall within the following ranges:
Land improvements 10 - 25 years
Buildings and leasehold improvements 10 - 40 years
Machinery and equipment 3 - 10 years
Leasehold improvements are amortized over the terms of the respective leases, or
over their estimated useful lives, whichever is shorter. Depreciation and
amortization of property, plant and equipment was $22,165 in 2001, $21,048 in
2000, and $20,131 in 1999. Accelerated methods of depreciation are used for
income tax purposes, and appropriate provisions are made for the related
deferred income taxes for the foreign subsidiaries.
When the Company sells or otherwise disposes of property, plant and equipment,
the asset cost and accumulated depreciation are removed from the accounts, and
any resulting gain or loss is recorded in selling and administrative expenses in
the consolidated statements of income.
Maintenance and repairs are expensed as incurred. Renewals and improvements are
capitalized and depreciated or amortized over the remaining useful lives of the
respective assets.
GOODWILL AND OTHER INTANGIBLE ASSETS: Cost in excess of net assets of businesses
acquired (goodwill) prior to 1971 of $4,922 is not amortized since, in the
opinion of management, there has been no diminution in value. For businesses
acquired subsequent to 1970, the cost in excess of net assets, aggregating
$165,928 as of December 31, 2001 and $165,884 as of December 31, 2000, is being
amortized on a straight-line basis over periods ranging from 10 to 40 years.
Accumulated amortization was $35,433 and $30,494 as of December 31, 2001 and
2000, respectively.
Other intangible assets, which consist primarily of license and non-competition
agreements, aggregating $23,317 as of December 31, 2001 and $23,096 as of
December 31, 2000, are being amortized on a straight- line basis, primarily over
30 years. Accumulated amortization was $1,029 and $234 as of December 31, 2001
and 2000, respectively.
The Company periodically evaluates goodwill and other intangible assets for
permanent impairment by assessing recoverability from future operating cash
flows. An impairment would be recognized as expense if a permanent diminution in
value occurred. In the opinion of management, no material diminution in value
has occurred during the periods presented in these consolidated financial
statements.
F - 9
TRANSLATION OF FOREIGN CURRENCIES: Balance sheet accounts of foreign
subsidiaries are translated into U.S. dollars at the rates of exchange in effect
as of the balance sheet date. The cumulative effects of such adjustments were a
charge of $2,375 at December 31, 2001 and a credit of $1,152 at December 31,
2000, and have been recorded in the foreign currency translation adjustment
component of accumulated other comprehensive income in members' equity. Income
and expenses are translated at the average exchange rates prevailing during the
year. Gains or losses resulting from foreign currency transactions, netting to a
gain of $88 in 2001, a loss of $80 in 2000, and a loss of $241 in 1999, are
included in selling and administrative expenses.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying amounts of cash equivalents
and long-term debt approximate fair value because of their short-term maturity
and/or variable market-driven interest rates.
COLLECTIVE BARGAINING AGREEMENTS: As of December 31, 2001, the Company had 2,712
employees, or 51.0% of the total employees, who were members of various
collective bargaining agreements. Several of these collective bargaining
agreements, covering 294 employees, which is 10.8% of the collective bargaining
employees and 5.5% of the total employees, will expire in 2002. Management does
not expect the expiration and renegotiation of these agreements to have a
significant impact on 2002 production.
NEW ACCOUNTING STANDARDS: Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"),
was issued by the Financial Accounting Standards Board in June 1998 and was
effective for the Company beginning in 2001. Statement of Financial Accounting
Standards No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities - an Amendment of FASB Statement No. 133" was issued in June
2000 and is to be adopted concurrently with SFAS No. 133. The Company did not
use any significant derivative financial instruments or participate in any
significant hedging activities during 2001.
Statements of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS No. 141"), and No. 142, "Goodwill and Other Intangible Assets" ("SFAS No.
142"), were issued in July 2001. SFAS No. 141 eliminates the
pooling-of-interests method and requires all business combinations initiated
after June 30, 2001 to be accounted for using the purchase method. It also
requires intangible assets acquired in a business combination to be recognized
separately from goodwill. SFAS No. 141 has had no impact on the Company's
financial position or results of operations with respect to business combination
transactions that have occurred prior to June 30, 2001. Accounting for the
acquisition of Entertainment Technology has been in compliance with SFAS No.
141. The impact to the Company was in the allocation of the purchase price
between goodwill and other intangible assets. See note (6) "Acquisition of
Entertainment Technology."
SFAS No. 142 addresses how goodwill and other intangible assets should be
accounted for upon their acquisition and afterwards. Management of the Company
is currently analyzing the impact of this statement, which is effective January
1, 2002. The primary impact of SFAS No. 142 on the Company is that existing
goodwill and intangible assets with indefinite lives will no longer be amortized
beginning in 2002. The Company has no intangible assets with indefinite lives,
but has been amortizing goodwill with a gross book value of $165,928 as of
December 31, 2001.
F -10
Intangible assets with finite lives will continue to be amortized, and the
Company has $23,317 of such assets as of December 31, 2001, consisting primarily
of license and non-competition agreements. Instead of amortization, goodwill
will be subject to an assessment for impairment on a reporting unit basis by
applying a fair-value-based test annually, and more frequently if circumstances
indicate a possible impairment. If a reporting unit's net book value is more
than its fair value and the reporting unit's net book value of its goodwill
exceeds the fair value of that goodwill, an impairment loss is recognized in an
amount equal to the excess goodwill value.
Management estimates that, based on December 31, 2001 goodwill balances, the
Company will report lower amortization of goodwill and higher operating profit
of approximately $5,200 annually. Although management does not expect to record
a material loss for goodwill impairment upon the adoption of SFAS No. 142 on
January 1, 2002, the evaluation is still in process.
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"), was issued in
October 2001 and is effective for the Company beginning in 2002. SFAS No. 144
requires that long-lived assets to be disposed of by sale be measured at the
lower of net book value or fair value less cost to sell, whether reported in
continuing operations or in discontinued operations. SFAS No. 144 also expands
the reporting of discontinued operations to include components of an entity that
have been or will be disposed of rather than limiting such reporting to
discontinued segments of a business. Management is currently analyzing the
provisions of SFAS No. 144, but does not expect its adoption to have a
significant impact on the Company's financial position or results of operations.
However, future plans to dispose of long-lived assets could result in charges
against operations to write down long-lived asset values.
RECLASSIFICATIONS: Certain prior year amounts have been reclassified to conform
to the current year presentation. These changes had no impact on previously
reported net income or members' equity.
(3) FORMATION OF GENLYTE THOMAS GROUP LLC
On August 30, 1998, the Genlyte Group Incorporated ("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 contributed
substantially all of its assets and liabilities to GTG and received a 68%
interest in GTG. Thomas contributed substantially all of the assets and certain
related liabilities of Thomas Lighting and received a 32% interest in GTG. The
percentage interests in GTG issued to Genlyte and Thomas were based on
arms-length negotiations between the parties with the assistance of their
financial advisers.
Under the purchase method of accounting, Genlyte's majority ownership of GTG
required the assets and liabilities contributed by Thomas Lighting to GTG to be
valued at their fair values, as of the acquisition date, in the consolidated
financial statements of GTG. The resulting cost in excess of the fair market
value of net assets contributed by Thomas Lighting (goodwill) of $32,412 is
being amortized on a straight-line basis over 30 years. The assets contributed
by Genlyte to GTG are reflected at their historical cost.
F - 11
To the extent the actual net working capital contributed by Thomas Lighting
exceeded the target net working capital, GTG paid Thomas the difference of
$35,189. Of this amount, $34,175 was paid in 1998 and $1,014 was paid in 1999,
based on an adjustment to the Thomas Lighting net working capital. The target
net working capital was determined by a formula that considered Genlyte's
adjusted net working capital, Thomas Lighting's net working capital, and
Genlyte's net working capital as a percentage of net sales as of August 30,
1998.
Subject to the provisions in the Genlyte Thomas Group LLC Agreement (the "LLC
Agreement") regarding mandatory distributions described below, and the
requirement of special approval in certain instances, distributions to Genlyte
and Thomas (the "Members"), respectively, will be made at such time and in such
amounts as determined by the Company's Management Board and shall be made in
cash or other property in proportion to the Members' respective percentage
interests. Notwithstanding anything to the contrary provided in the LLC
Agreement, no distribution under the LLC Agreement shall be permitted to the
extent prohibited by Delaware law.
The LLC Agreement requires that GTG make the following distributions to the
Members:
(i) a distribution to each Member, based on its percentage interest, for tax
liabilities attributable to its participation as a Member of GTG based upon the
effective tax rate of the Member having the highest tax rate; and
(ii) subject to the provisions of Delaware law and the terms of the primary GTG
credit facility, distributions (exclusive of the tax distributions set forth
above) to each of the Members so that Thomas receives at least an aggregate of
$3,000 and Genlyte receives at least an aggregate of $6,375 per year.
Also under the terms of the LLC Agreement, at any time on or after January 31,
2002, Thomas has the right (a "Put Right"), but not the obligation, to require
GTG to purchase all, but not less than all, of Thomas's 32% interest at the
appraised value of such interest. The appraised value shall be the fair market
value of GTG as a going concern, taking into account a control premium, and
determined by an appraisal process to be undertaken by recognized investment
banking firms chosen initially by Genlyte and Thomas. If GTG cannot secure the
necessary financing with respect to Thomas's exercise of its Put Right, then
Thomas has the right to cause GTG to be sold. Also, at any time after Thomas
exercises its Put Right, Genlyte has the right to cause GTG to be sold.
Also under the terms of the LLC Agreement, on or after the later to occur of (1)
the final settlement or disposition of the litigation described in note (13)
"Contingencies" or (2) January 31, 2002, either Member has the right, but not
the obligation, to offer to buy the other Member's interest (the "Offer Right").
If the Members cannot agree on the terms, then GTG shall be sold to the highest
bidder. Either Member may participate in the bidding for the purchase of GTG.
Complete details of the Put Right, Offer Right, and appraisal process can be
found in the proxy statement pertaining to the formation of GTG, filed with the
Securities and Exchange Commission by Genlyte on July 23, 1998.
F - 12
(4) INVESTMENT IN FIBRE LIGHT AND ACQUISITION OF LEDALITE
On May 10, 1999, GTG acquired a 2% interest (with rights to acquire an
additional 6%) in Fibre Light International, based in Australia. Fibre Light
International is in the business of commercializing fiber optic lighting
technology. The two companies then formed a jointly owned limited liability
company named Fibre Light U.S. LLC ("Fibre Light"), of which GTG owns 80%. Fibre
Light manufactures, markets, and sells fiber optic lighting systems in the U.S.
On July 5, 2000, GTG acquired an additional 2% interest in Fibre Light
International. The investment in Fibre Light is accounted for using the cost
method.
On June 30, 1999, GTG acquired the assets and liabilities of privately held
Ledalite Architectural Products Inc. ("Ledalite"), located in Vancouver, Canada.
Ledalite designs, manufactures, and sells architectural linear lighting systems
for offices, schools, transportation facilities, and other commercial buildings.
The original purchase prices of these acquisitions totaled $31,469 in 1999
(including costs of acquisition), consisting of approximately $8,500 in cash
payments and approximately $23,000 in borrowings. In 2000, an additional $424
was paid to Ledalite's owners based on Ledalite's 1999 earnings performance.
The Ledalite acquisition has been accounted for using the purchase method of
accounting. The excess of the total purchase price over the fair market value of
net assets acquired (goodwill) of $26,463 is being amortized on a straight-line
basis over 30 years.
The operating results of Fibre Light and Ledalite have been included in the
Company's consolidated financial statements since the respective dates of
acquisition. On an unaudited pro forma basis, assuming these acquisitions had
occurred at the beginning of 1999, the Company's results would have been:
Actual Pro Forma
1999 1999
------------------------------
Net sales $978,302 $990,326
Net income 78,963 78,432
The pro forma results do not purport to state exactly what the Company's results
of operations would have been had the acquisitions in fact been consummated as
of the assumed dates and for the periods presented.
(5) ACQUISITIONS OF TRANSLITE SONOMA AND CHLORIDE SYSTEMS
On September 14, 2000, the Company acquired Translite Limited ("Translite
Sonoma"), a San Carlos, California based manufacturer of low-voltage cable and
track lighting systems and decorative architectural glass lighting. Earlier in
2000, Translite Limited had expanded its operations by merging with Sonoma
Lighting Limited, which had been a manufacturer of decorative architectural
glass lighting. The Company purchased all of the outstanding capital stock of
Translite Limited for $6,427 (including costs of acquisition), borrowing $5,000
from the revolving credit facility and funding the remainder from cash on hand.
F - 13
On October 1, 2000, the Company acquired the assets of the emergency lighting
business of Chloride Power Electronics Incorporated ("Chloride Systems") from
the Chloride Group, PLC, in London, England. The purchase included the U.S.
Chloride Systems and LightGuard emergency lighting brands. The purchase price
was $52,324 in cash plus the assumption of approximately $2,800 in liabilities.
The revolving credit facility was used to borrow $35,000 and cash on hand was
used to pay the remaining $17,324.
The Translite Sonoma and Chloride Systems acquisitions have been accounted for
using the purchase method of accounting. The excess of the purchase price over
the fair market value of net assets acquired (goodwill) of $6,952 for Translite
Sonoma and $23,365 for Chloride Systems is being amortized on a straight-line
basis over 30 years. The fair market value of net assets acquired from Chloride
Systems included $23,000 in intangible assets for license and non-competition
agreements, which are being amortized over 30 years.
The operating results of Translite Sonoma and Chloride Systems have been
included in the Company's consolidated financial statements since the respective
dates of acquisition. On an unaudited pro forma basis, assuming these
acquisitions had occurred at the beginning of 2000 and 1999, the Company's
results would have been:
Actual Pro Forma Actual Pro Forma
2000 2000 1999 1999
---------------------------------------------------
Net sales $1,007,706 $1,035,139 $ 978,302 $1,011,778
Net income 83,537 83,349 78,963 79,773
The pro forma results do not purport to state exactly what the Company's results
of operations would have been had the acquisitions in fact been consummated as
of the assumed dates and for the periods presented.
(6) ACQUISITION OF ENTERTAINMENT TECHNOLOGY
On August 31, 2001, the Company acquired the assets of Entertainment Technology,
Incorporated ("ET"), a subsidiary of privately held Rosco Laboratories, Inc. of
Stamford CT. ET is a manufacturer of entertainment lighting equipment and
controls. Products include the Intelligent Power System line of theatrical
dimming equipment and the family of Horizon lighting controls. The purchase
price of $3,000, minus a holdback of $100 to cover potentially unrealizable
inventory, plus the assumption of $622 of liabilities, was funded from cash on
hand.
The ET acquisition is accounted for using the purchase method of accounting. The
preliminary determination of the excess of the purchase price over the fair
market value of net assets acquired (goodwill) of $1,849 is not being amortized,
in accordance with Statement of Financial Accounting Standards No. 141,
"Business Combinations." See note (2) "Summary of Significant Accounting
Policies - New Accounting Standards." The determination of the fair market value
as reflected in the balance sheet is subject to change, with a final
determination no later than one year after the acquisition date. The operating
results of ET have been included in the Company's consolidated financial
statements since the date of acquisition. The pro forma results and other
disclosures required by SFAS No. 141 have not been presented because the
acquisition of ET is not considered a material acquisition.
F - 14
(7) INCOME TAXES
The results of operations are included in the tax returns of the Members, and,
accordingly, no provision has been recognized by the Company for U.S. federal
income taxes payable by the Members. The Company's foreign subsidiaries are
taxable corporations, and current and deferred taxes are provided on their
income. The income tax provision also includes U.S income taxes (primarily state
income taxes) of $710 in 2001, $984 in 2000, and $360 in 1999. Cash paid for
income taxes was $6,003 in 2001, $6,964 in 2000, and $2,994 in 1999.
(8) LONG-TERM DEBT
Long-term debt at December 31 consisted of the following:
2001 2000
--------------------------------------------------------------------------------
Revolving credit notes $ - $ 8,000
Canadian dollar notes 16,009 19,015
Industrial revenue bonds 23,100 18,100
Loan payable to Thomas - 22,287
Capital leases and other 1,164 1,911
-----------------------------------
40,273 69,313
Less: current maturities 3,284 2,661
------------------------------------
Total long-term debt $ 36,989 $ 66,652
====================================
GTG has a $150,000 revolving credit agreement (the "Facility") with various
banks that matures in 2003. Under the most restrictive borrowing covenant, which
is the fixed charge coverage ratio, GTG could incur approximately $28,000 in
additional interest charges and still comply with the covenant.
Total borrowings under the Facility as of December 31, 2001 and 2000, were $0
and $8,000, respectively. In addition, at December 31, 2001, GTG had outstanding
$42,880 of letters of credit, which reduce the amount available to borrow under
the Facility. Outstanding borrowings bear interest at the option of GTG based on
the bank's base rate or the LIBOR rate plus a spread as determined by total
indebtedness. Based upon December 31, 2001 indebtedness, the spread was 0.375%
and the interest rate was 2.3%. The commitment fee on the unused portion of the
Facility was 0.125%.
The amount outstanding under the Facility is secured, if requested by the
banking group, by liens on domestic accounts receivable, inventories, and
machinery and equipment, as well as the investments in certain subsidiaries of
GTG. The net book value of assets subject to lien at December 31, 2001 was
$325,767.
GTG has $16,009 of borrowings through its Canadian subsidiary Genlyte Thomas
Group Nova Scotia ULC. These borrowings will be repaid in installments in each
of the next three years. Interest rates on these borrowings can be either the
Canadian prime rate or the Canadian LIBOR rate plus a spread of 0.5%. As of
December 31, 2001, the weighted average interest rate was 2.6%. These borrowings
are backed by the letters of credit mentioned above.
F - 15
GTG has $23,100 of variable rate demand Industrial Revenue Bonds that mature
during 2009 to 2020. As of December 31, 2001, the weighted average interest rate
on these bonds was 1.7%. These bonds are backed by the letters of credit
mentioned above.
The unsecured loan payable to Thomas accrued interest quarterly based on the 90
day LIBOR rate plus a spread as determined by the Facility. This loan, which
would have matured in 2003, was prepaid in whole in November 2001.
Interest expense totaled $4,192 in 2001, $5,146 in 2000, and $4,879 in 1999.
Offsetting these amounts in the consolidated statements of income were interest
income of $493 in 2001, $962 in 2000, and $246 in 1999.
Cash paid for interest on debt was $4,158 in 2001, $3,596 in 2000, and $4,566 in
1999.
The annual maturities of long-term debt are summarized as follows:
Year ending December 31
-------------------------------------------------
2002 $ 3,284
2003 4,062
2004 9,670
2005 157
2006 -
Thereafter 23,100
---------
Total long-term debt $ 40,273
=========
(9) RETIREMENT PLANS
The Company has defined benefit plans that cover certain of its full-time
employees. The Company uses September 30 as the measurement date for the
retirement plan disclosure. The Company's policy for funded plans is to make
contributions equal to or greater than the requirements prescribed by the
Employee Retirement Income Security Act. The plans' assets consist primarily of
stocks and bonds. Pension costs for all Company defined benefit plans are
actuarially computed. The Company also has other defined contribution plans,
including those covering certain former Genlyte and Thomas employees.
The amounts included in the accompanying consolidated balance sheets for the
U.S. and Canadian defined benefit plans, based on the funded status at September
30 of each year, follow:
F - 16
U.S. Plans Canadian Plans
2001 2000 2001 2000
-----------------------------------------------------------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATIONS
Benefit obligations, beginning $ 78,626 $ 73,927 $ 4,658 $ 4,530
Service cost 1,782 1,348 159 169
Interest cost 5,893 5,412 377 359
Benefits paid (4,990) (5,179) (205) (364)
Member contributions - - 142 153
Plan amendments 505 1,426 210 -
Curtailment gain - (1,146) - -
Actuarial loss 4,205 2,838 430 -
Foreign currency exchange rate change - - (278) (189)
-------------------------------------------------------------------
Benefit obligations, ending $ 86,021 $ 78,626 $ 5,493 $ 4,658
===================================================================
CHANGE IN PLAN ASSETS
Plan assets at fair value, beginning $ 79,084 $ 73,377 $ 6,403 $ 5,496
Actual return (loss) on plan assets (6,734) 7,837 (699) 887
Employer contributions 3,729 3,049 299 534
Member contributions - - 142 153
Benefits paid (4,990) (5,179) (205) (364)
Foreign currency exchange rate change - - (298) (303)
-------------------------------------------------------------------
Plan assets at fair value, ending $ 71,089 $ 79,084 $ 5,642 $ 6,403
===================================================================
FUNDED STATUS OF THE PLANS
Plan assets in excess of (less than) benefit
obligations $ (14,932) $ 458 $ 150 $ 1,745
Unrecognized transition obligation (4) - (26) (30)
Unrecognized actuarial (gain) loss 7,351 (10,371) 531 (1,139)
Unrecognized prior service cost 2,923 2,759 284 102
Contributions subsequent to measurement date
222 862 53 72
-------------------------------------------------------------------
Net pension asset (liability) $ (4,440) $ (6,292) $ 992 $ 750
===================================================================
BALANCE SHEET ASSET (LIABILITY)
Accrued pension (liability) $ (15,925) $ (12,728) $ - $ -
Prepaid pension cost 2,019 4,242 992
750
Intangible asset 2,765 1,917 - -
Accumulated other comprehensive income
6,701 277 - -
-------------------------------------------------------------------
Net asset (liability) recognized $ (4,440) $ (6,292) $ 992 $ 750
===================================================================
WEIGHTED AVERAGE ASSUMPTIONS
Discount rate 7.30% 7.75% 7.10% 7.75%
Rate of compensation increase 4.00% 4.00% 4.00% 4.00%
Expected return on plan assets 9.00% 9.00% 7.75% 7.75%
F - 17
U.S. Plans
2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------
COMPONENTS OF NET PERIODIC BENEFIT COSTS
Service cost $ 1,782 $ 1,348 $2,310
Interest cost 5,893 5,412 5,358
Expected return on plan assets (6,585) (5,898) (5,536)
Amortization of transition amounts 10 102 181
Amortization of prior service cost 342 220 293
Recognized actuarial (gain) loss (197) (295) 60
Net gain due to curtailment and settlement - (580) -
---------------------------------------------
Net pension expense of defined benefit plans 1,245 309 2,666
Defined contribution plans 3,185 2,665 1,574
Multi-employer plans for certain union employees 289 327 274
-------------------------------- ------------
Total benefit costs $ 4,719 $ 3,301 $4,514
================================ ============
Canadian Plans
2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------
COMPONENTS OF NET PERIODIC BENEFIT COSTS
Service cost $ 159 $ 169 $ 252
Interest cost 377 359 339
Expected return on plan assets (484) (427) (368)
Amortization of transition amounts (3) (3) (6)
Amortization of prior service cost 13 7 5
Recognized actuarial (gain) loss (14) (10) (1)
---------------------------------------------
Net pension expense of defined benefit plans 48 95 221
Defined contribution plans 284 196 152
---------------------------------------------
Total benefit costs $ 332 $ 291 $ 373
=============================================
A summary of the plans in which benefit obligations and accumulated benefit
obligations exceed fair value of assets follows:
2001 2000
--------------------------------------------------------------------------------
Benefit obligation $79,594 $13,230
Accumulated benefit obligation 76,677 13,230
Plan assets at fair value 63,687 9,929
Effective January 1, 2000 the Company froze the defined benefit plan of certain
U.S. salaried employees. This resulted in a curtailment credit of $603, which
was a reduction of net pension expense in 2000. These employees are eligible for
Company matching on their 401(k) contributions as well as being participants in
the GTG Retirement Savings and Investment defined contribution plan.
F - 18
(10) POST-RETIREMENT BENEFIT PLANS
The Company provides post-retirement medical and life insurance benefits for
certain retirees and employees, and accrues the cost of such benefits during the
service lives of such employees. The amounts included in the accompanying
consolidated balance sheets for the post-retirement benefit plans, based on the
funded status at September 30 of each year, follow:
2001 2000
--------------------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATIONS
Benefit obligations, beginning $ 4,019 $ 4,151
Service cost 46 36
Interest cost 358 303
Benefits paid (403) (472)
Actuarial loss 1,010 1
--------------------------------
Benefit obligations, ending $ 5,030 $ 4,019
================================
FUNDED STATUS OF THE PLANS
Plan assets less than benefit obligations $(5,030) $(4,019)
Unrecognized actuarial loss 1,512 564
--------------------------------
Accrued liability $(3,518) $(3,455)
================================
Employer contributions $ 403 $ 472
Benefits paid $ (403) $ (472)
2001 2000 1999
--------------------------------------------------------------------------------
COMPONENTS OF NET PERIODIC BENEFIT COSTS
Service costs $ 46 $ 36 $ 39
Interest costs 358 303 294
Recognized actuarial loss 62 10 -
-----------------------------------
Net expense of post-retirement plans $ 466 $ 349 $ 333
===================================
The assumed discount rate used in measuring the obligations was 7.30% as of
September 30, 2001 and 7.75% as of September 30, 2000. The assumed health care
cost trend rate for 2001 was 10%, declining to 5.5% in 2006. A
one-percentage-point increase or decrease in the assumed health care cost trend
rate for each year would increase or decrease the obligation at September 30,
2001 by approximately $360, and the 2001 post-retirement benefit expense by
approximately $33.
(11) ACCRUED EXPENSES
Accrued expenses at December 31 consisted of the following:
2001 2000
-------------------------------------------------------------------------------
Employee related costs and benefits $27,881 $30,038
Advertising and sales promotion 8,635 10,018
Income and other taxes payable 4,144 4,448
Other accrued expenses 24,746 26,473
----------------------------
Total accrued expenses $65,406 $70,977
============================
F - 19
(12) LEASE COMMITMENTS
The Company rents office space, equipment, and computers under non-cancelable
operating leases. Rental expenses for operating leases amounted to $9,128 in
2001, $7,764 in 2000, and $6,184 in 1999. Offsetting the rental expenses were
sublease rentals of $303 in 2001, $139 in 2000, and $233 in 1999. Two divisions
of the Company also rent manufacturing and computer equipment and software under
agreements that are classified as capital leases. Future required minimum lease
payments as of December 31, 2001 were as follows:
Operating Capital
Leases Leases
-----------------------------------------------------------------------
2002 $ 6,690 $ 400
2003 4,638 204
2004 3,092 149
2005 2,136 127
2006 1,496 -
Thereafter 7,102 -
-----------------------------
Total minimum lease payments $25,154 $ 880
================
Less amount representing interest 99
-------------
Present value of minimum lease payments $ 781
=============
Total minimum lease payments on operating leases have not been reduced by
minimum sublease rentals of $1,063 due in the future under non-cancelable
subleases.
In 2000, GTG entered into a $1.3 million bridge synthetic lease agreement to
finance the land for a manufacturing facility in San Marcos, Texas. GTG is
currently negotiating a new synthetic lease agreement for $20 million to finance
construction of a 300,000 square foot facility. As of December 31, 2001,
approximately $1.2 million had been advanced under the bridge agreement.
However, construction is being delayed at the election of management, pending
improvement in the economic outlook and forecast sales volume. In the event that
the synthetic lease agreement is not completed and entered into, the bridge
lease shall expire and GTG shall, at its option, either purchase the land and
reimburse the lessor for its costs associated with the land's purchase, or just
reimburse the lessor for its costs. A synthetic lease is accounted for as an
operating lease.
(13) CONTINGENCIES
In the normal course of business, the Company is a party to legal proceedings
and claims. When costs can be reasonably estimated, appropriate liabilities or
reserves for such matters are recorded. While management currently believes the
amount of ultimate liability, if any, with respect to these actions will not
materially affect the financial condition, results of operations, or liquidity
of the Company, the ultimate outcome of any litigation is uncertain. Were an
unfavorable outcome to occur, the impact could be material to the Company.
Additionally, the Company is a defendant and/or potentially responsible party,
with other companies, in actions and proceedings under state and Federal
environmental laws, including the Federal Comprehensive Environmental Response
Compensation and Liability Act, as amended. Management does not believe that the
disposition of the lawsuits and/or proceedings will have a material effect on
the Company's financial condition, results of operations, or liquidity.
F - 20
(14) ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income at December 31 consisted of the
following:
2001 2000
--------------------------------------------------------------------------------
Minimum pension liability $(6,701) $ (277)
Foreign currency translation adjustments (2,375) 1,152
-----------------------------
Total accumulated other comprehensive income $(9,076) $ 875
=============================
(15) RELATED-PARTY TRANSACTIONS
The Company in the normal course of business has transactions with Genlyte and
Thomas. These transactions consist primarily of interest payments to Thomas
under the loan discussed in note (8) "Long-term Debt" and reimbursement for
shared corporate expenses such as rent, office services, professional services,
and shared personnel. In addition, while the distributions to Members discussed
in note (3) "Formation of Genlyte Thomas Group LLC" are paid to Thomas entirely
in cash, such distributions are not paid to Genlyte entirely in cash. Portions
are still owed and have been recorded as related-party payables to Genlyte or
Genlyte Canadian Holdings, LLC, a wholly-owned subsidiary of Genlyte. These
payables bear interest at a rate of 2.0% at December 31, 2001.
Related-party receivables and payables at December 31 consisted of the
following:
2001 2000
-----------------------------------------------------------------------
Receivable from Genlyte $ - $ 1,204
----------------------------
Payable to Genlyte $ 4,628 $ -
Payable to Genlyte Canadian Holdings, LLC 15,040 6,823
Payable to Thomas 37 199
----------------------------
Total related-party payables $ 19,705 $ 7,022
============================
For the years ended December 31 the Company had the following related-party
transactions:
2001 2000 1999
-----------------------------------------------------------------------
Payments to Thomas for:
Interest under the loan agreement $1,012 $1,543 $1,281
Reimbursement of corporate expenses 387 515 496
Payments from Genlyte for:
Reimbursement of corporate expenses 111 103 36
F - 21
(16) SEGMENT REPORTING
The Company's reportable operating segments include the Commercial Segment, the
Residential Segment, and the Industrial and Other Segment. Intersegment sales
are eliminated in consolidation and therefore are not presented in the table
below. Corporate assets and expenses are allocated to the segments. Information
about the Company's segments as of and for the years ended December 31 follows:
Industrial
2001 Commercial Residential and Other Total
----------------------------------------------------------------------------------------------------------------------
Net sales $712,662 $134,269 $138,245 $ 985,176
Operating profit 69,405 13,219 11,958 94,582
Assets 454,569 89,605 74,947 619,121
Depreciation and amortization 20,564 3,692 3,916 28,172
Expenditures for plant & equipment 15,634 1,663 2,953 20,250
Industrial
2000 Commercial Residential and Other Total
----------------------------------------------------------------------------------------------------------------------
Net sales $724,350 $137,838 $145,518 $ 1,007,706
Operating profit 69,114 11,083 14,006 94,203
Assets 437,678 89,419 87,295 614,392
Depreciation and amortization 18,197 3,739 3,728 25,664
Expenditures for plant & equipment 20,389 3,424 4,610 28,423
Industrial
1999 Commercial Residential and Other Total
--------------------------------------------------------------------------------------------------------------------
Net sales $689,167 $145,040 $144,095 $ 978,302
Operating profit 67,134 8,042 13,261 88,437
Assets 376,343 92,291 84,797 553,431
Depreciation and amortization 16,595 3,532 3,708 23,835
Expenditures for plant & equipment 14,399 3,023 3,092 20,514
F - 22
(17) GEOGRAPHICAL INFORMATION
The Company has operations throughout North America. Foreign amounts represent
primarily Canada and some Mexico. Information about the Company's operations by
geographical area as of and for the years ended December 31 follows:
2001 U.S. Foreign Total
-----------------------------------------------------------------------------------------------------------------------
Net sales $836,754 $148,422 $ 985,176
Operating profit 77,740 16,842 94,582
Assets 485,276 133,845 619,121
Depreciation and amortization 22,019 6,153 28,172
Expenditures for plant & equipment 14,451 5,799 20,250
2000 U.S. Foreign Total
------------------------------------------------------------------------------------------------------------------------
Net sales $870,209 $137,497 $1,007,706
Operating profit 78,011 16,192 94,203
Assets 482,812 131,580 614,392
Depreciation and amortization 19,749 5,915 25,664
Expenditures for plant & equipment 19,923 8,500 28,423
1999 U.S. Foreign Total
------------------------------------------------------------------------------------------------------------------------
Net sales $855,199 $123,103 $ 978,302
Operating profit 75,295 13,142 88,437
Assets 418,729 134,702 553,431
Depreciation and amortization 19,178 4,657 23,835
Expenditures for plant & equipment 16,506 4,008 20,514
F - 23
EXHIBIT INDEX
Exhibit No. Exhibit Page
---------- ------- ----
13 Certain portions of the Company's 2001
Annual Report to Shareholders as
specified in Parts I and II hereof to
be incorporated by reference in this
Annual Report on Form 10-K 43
21 Subsidiaries of the Registrant 87
23(a) Consent of Arthur Andersen LLP 88
23(b) Consent of Ernst & Young LLP 89
23(c) Consent of Arthur Andersen LLP 90
42