UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
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Commission file number 1-2257
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TRANS-LUX CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 13-1394750
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Richards Avenue, Norwalk, CT 06856-5090
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(Address of Registrant's principal executive offices) (Zip code)
Registrant's telephone number, including area code: (203) 853-4321
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $1.00 par value American Stock Exchange
8 1/4% Limited Convertible Senior
Subordinated Notes due 2012 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes No X
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Indicate by check mark if the Registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes No X
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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CONTINUED
TRANS-LUX CORPORATION
2007 Form 10-K Cover Page Continued
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. [ X ]
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.
Large accelerated filer Accelerated filer Non-accelerated filer X
--- --- ---
Smaller reporting company
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Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes No X
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The aggregate market value of the Registrant's Common and Class B Stock held by
non-affiliates of the Registrant based upon the last sale price of the
Registrant's Common Stock reported on the American Stock Exchange on June 30,
2007, was approximately $12,715,000. (The value of a share of Common Stock is
used as the value for a share of Class B Stock, as there is no established
market for Class B Stock, which is convertible into Common Stock on a
share-for-share basis.)
As of the close of business on March 27, 2008, there were outstanding, 2,020,090
shares of the Registrant's Common Stock and 286,814 shares of its Class B Stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held June 4, 2008, to be filed with the Commission within
120 days of the Registrant's fiscal year end (the "Proxy Statement"), are
incorporated by reference into Part III, Items 10-14 of this Form 10-K to the
extent stated herein.
TRANS-LUX CORPORATION
2007 Form 10-K Annual Report
Table of Contents
PART I
Page
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ITEM 1. Business 1
ITEM 1A. Risk Factors 5
ITEM 1B. Unresolved Staff Comments 7
ITEM 2. Properties 7
ITEM 3. Legal Proceedings 8
ITEM 4. Submission of Matters to a Vote of Security Holders 8
PART II
ITEM 5. Market for the Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 8
ITEM 6. Selected Financial Data 9
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 15
ITEM 8. Financial Statements and Supplementary Data 15
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 55
ITEM 9A. Controls and Procedures 55
ITEM 9B. Other Information 55
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance 56
ITEM 11. Executive Compensation 56
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 56
ITEM 13. Certain Relationships and Related Transactions, and Director
Independence 57
ITEM 14. Principal Accounting Fees and Services 57
PART IV
ITEM 15. Exhibits and Financial Statement Schedules 58
Signatures 60
PART I
ITEM 1. BUSINESS
Unless the context otherwise requires, the term "Company" as used herein
refers to Trans-Lux Corporation and its subsidiaries. The Company is a
full-service provider of integrated multimedia systems for today's
communications environments. The essential elements of these systems are the
real-time, programmable electronic information displays the Company
manufactures, distributes and services. These display systems utilize LED
(light emitting diode), plasma and LCD (liquid crystal display) technologies.
Designed to meet the evolving communications needs of both the indoor and
outdoor markets, these display products include text, graphic and video displays
for stock and commodity exchanges, financial institutions, college and high
school sports stadiums, schools, casinos, convention centers, corporate
applications, government applications, theatres, retail sites, airports,
billboard sites and numerous other applications. In addition to its core
display business, the Company also owns and operates a chain of motion picture
theatres in the western Mountain States and an income-producing real estate
property.
ELECTRONIC INFORMATION DISPLAY PRODUCTS
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The Company's high performance electronic information displays are used to
communicate messages and information in a variety of indoor and outdoor
applications. The Company's product line encompasses a wide range of state-
of-the-art electronic displays in various shape, size and color configurations.
Most of the Company's display products include hardware components and
sophisticated software. In both the indoor and outdoor markets in which the
Company serves, the Company adapts basic product types and technologies for
specific use in various niche market applications. The Company also operates a
direct service network throughout the United States and parts of Canada, which
performs on-site project management, installation, service and maintenance for
its customers and others.
The Company employs a modular engineering design strategy, allowing basic
"building blocks" of electronic modules to be easily combined and configured in
order to meet the broad application requirements of the industries it serves.
This approach ensures product flexibility, reliability, ease of service and
minimum spare parts requirements.
The Company's electronic information display market is broken down into two
distinct segments: the Indoor division and the Outdoor division. Electronic
information displays are used by financial institutions, including brokerage
firms, banks, energy companies, insurance companies and mutual fund companies;
sports stadiums and venues; educational institutions; outdoor advertising
companies; corporate and government communication centers; retail outlets;
casinos, race tracks and other gaming establishments; airports, train stations,
bus terminals and other transportation facilities; highways and major
thoroughfares; movie theatres; health maintenance organizations and in various
other applications.
Indoor Division: The indoor electronic display market is currently
dominated by three categories of users: financial, government/private sector
and gaming. The financial sector, which includes trading floors, exchanges,
brokerage firms, banks, mutual fund companies and energy companies, has long
been a user of electronic information displays due to the need for real-time
dissemination of data. The major stock and commodity exchanges depend on
reliable information displays to post stock and commodity prices, trading
volumes, interest rates and other financial data. Brokerage firms use
electronic ticker displays for both customers and brokers; they have also
installed other larger displays to post major headline news events in their
brokerage offices to enable their sales force to stay up-to-date on events
affecting general market conditions and specific stocks. Banks and other
financial institutions also use information displays to advertise product
offerings to consumers. The Indoor division has a new line of advanced last
sale price displays, full color LED tickers and graphic displays.
The government/private sector includes applications found in major
corporations, public utilities and government agencies for the display of
real-time, critical data in command/control centers, data centers, help desks,
visitor centers, lobbies, inbound/outbound telemarketing centers, retail
applications to attract customers and for employee communications. Electronic
displays have found acceptance in applications for the healthcare industry such
as outpatient pharmacies, military hospitals and HMOs to automatically post
patient names when prescriptions are ready for pick up. Theatres use electronic
displays to post current box office and ticket information, directional
information and promote concession sales. Information displays are consistently
used in airports, bus terminals and train stations to post arrival and
departure, gate and baggage claim information, all of which help to guide
passengers through these facilities.
The gaming sector includes casinos, Indian gaming establishments and
racetracks. These establishments generally use large information displays to
post odds for race and sporting events and to display timely information such as
results, track conditions, jockey weights and scratches. Casinos and racetracks
also use electronic displays throughout their facilities to advertise to and
attract gaming patrons. Equipment for the Indoor display segment generally has
a lead-time of 30 to 120 days depending on the size and type of equipment
ordered and material availability.
Outdoor Division: The outdoor electronic display market is even more
diverse than the Indoor division. Displays are being used by schools, sports
stadiums, sports venues, gas stations, highway departments and outdoor
advertisers, such as digital billboards, attempting to capture the attention of
passers-by. The Outdoor division has a new line of LED message centers,
scoreboards and video displays available in monochrome and full color. The
Company has utilized its strong position in the Indoor display market combined
with several acquisitions to enhance its presence in the Outdoor display market.
Outdoor displays are installed in amusement parks, entertainment facilities,
high schools, college sports stadiums, city park and recreational facilities,
churches, racetracks, military installations, bridges and other roadway
installations, automobile dealerships, banks and other financial institutions.
This division generally sells through distributors and dealers. Equipment for
the Outdoor display segment generally has a lead-time of 10 to 120 days
depending on the size and type of equipment ordered and material availability.
Sales Order Backlog (excluding leases): The amount of sales order backlog
at December 31, 2007 and 2006 was approximately $4.5 million and $3.4 million,
respectively. The December 31, 2007 backlog is expected to be recognized in
2008. These amounts include only the sale of products; they do not include new
lease orders or renewals of existing lease agreements that may be presently
in-house.
ENGINEERING AND PRODUCT DEVELOPMENT
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The Company's ability to compete and operate successfully depends on its
ability to anticipate and respond to the changing technological and product
needs of its customers, among other factors. For this reason, the Company
continually develops enhancements to its existing product line and examines and
tests new display technologies.
During 2007 the Company's Outdoor display division continued to enhance
CaptiVue(TM), a line of outdoor full matrix LED message centers. CaptiVue
offers greater design flexibility, modularity and increased clarity at an
economical price, and is being well received in the commercial marketplace.
Recent enhancements include full color, monochrome blue configurations, higher
resolution and larger configurations for digital billboard applications. The
Company continued enhancements to its line of LED Fuel Price Changer displays,
which use CaptiVue technology to allow gasoline stations, truck stops and
convenience stores to update fuel prices instantaneously to one facility or many
via their point-of-purchase systems without the use of ladders and other manual
equipment.
In 2005, the Company supplemented its LED product line with third-party LED
products to remain competitive in price, product offerings and performance. The
Company offers the product of two leading providers of advanced LED video
display products under which Trans-Lux distributes their lines of display
products to its catalog sports market and non-sports markets, respectively.
Trans-Lux is private-labeling a portion of these products for both indoor and
outdoor applications under the name CaptiVision(TM). CaptiVision jumbo video
monitors have the capability to deliver brilliant full motion video and
animation in billions of colors to corporate, financial and entertainment
markets where the presentation of multimedia, live-action, advertising and
promotions is of major importance.
The Company continued enhancements to its line of economical full-matrix
indoor graphic display products. GraphixWall(R) fixed size displays and
GraphixMax(TM) tileable displays for larger custom sized feature versatile
functionality at a lower cost, presenting line art, graphics and variable-sized
text at a competitive price. Applications for GraphixWall and GraphixMax
displays include flight information, baggage claim and way-funding at airports,
automatic call directories at contact centers, order processing support at
manufacturing facilities and for posting prices and promoting products in
financial and retail environments. Recent enhancements include a full color
version for additional color flexibility and impact.
Continued development of new indoor products includes new monochrome and
tri-color ticker displays utilizing improved LED display technology; curved and
flexible displays; higher speed processors for faster data access and improved
update speed; greater integration of blue LEDs to provide full color text and
graphic displays; wireless controlled displays; and a new graphic interface to
display more data at higher resolutions.
As part of its ongoing development efforts, the Company seeks to package
certain products for specific market segments as well as to continually track
emerging technologies that can enhance its products. Full color, live video and
digital input technologies continue to be improved. The Company continued to
expand its PromoWall(R) product line, which combines several different display
technologies in attractive, self-contained enclosures. By combining the long
distance readability of a text-based LED display with the eye-catching motion of
a traveling display and the colorful graphic ability of LCD or plasma display,
promotional advertising and custom messages becomes even more dynamic.
The Company maintains a staff of 23 people who are responsible for product
development and support. The engineering, product enhancement and development
efforts are supplemented by outside independent engineering consulting
organizations and colleges where required. Engineering expense and product
enhancement and development amounted to $1,770,000, $1,990,000 and $2,213,000 in
2007, 2006 and 2005, respectively.
MARKETING AND DISTRIBUTION
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The Company markets its indoor and outdoor electronic information display
products in the U.S. and Canada using a combination of distribution channels,
including 18 direct sales representatives, four telemarketers and a network of
independent dealers and distributors. By working with software vendors and
using the internet to expand the quality and quantity of multimedia content that
can be delivered to our electronic displays, we are able to offer customers
relevant, timely information, content management software and display hardware
in the form of turnkey display communications packages.
The Company employs a number of different marketing techniques to attract
new customers, including direct marketing efforts by its sales force to known
and potential users of information displays; internet marketing; advertising in
industry publications; and exhibiting at approximately 19 domestic and
international trade shows annually.
Internationally, the Company uses a combination of internal sales people
and independent distributors to market its products outside the U.S. The
Company has existing relationships with approximately 17 independent
distributors worldwide covering Europe, the Middle East, South and Central
America, Canada, the Far East and Australia. Foreign sales have represented
less than 10% of total revenues in the past three years but the Company believes
that it is well positioned for expansion.
Headquartered in Norwalk, Connecticut, the Company has major sales and
service offices in New York, New York; Des Moines, Iowa; Las Vegas, Nevada;
Logan, Utah, Toronto, Ontario; and Brampton, Ontario; as well as approximately
16 satellite offices in the U.S.
The Company's equipment is both leased and sold. A significant portion of
the electronic information display revenues is from equipment rentals with
current lease terms ranging from 30 days to ten years.
The Company's revenues in 2007, 2006 and 2005 did not include any single
customer that accounted for more than 10% of total revenues.
MANUFACTURING AND OPERATIONS
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The Company's production facilities are located in Norwalk, Connecticut and
Des Moines, Iowa, and consist principally of the manufacturing, assembly and
testing of display units, and related components. The Company performs most
subassembly and all final assembly of its products.
All product lines are design engineered by the Company and controlled
throughout the manufacturing process. The Company has the ability to produce
very large sheet metal fabrications, cable assemblies, and surface mount and
through-hole designed assemblies. Some of the subassembly processes are
outsourced. The Company's production of many of the subassemblies and all of
the final assemblies gives the Company the control needed for on-time delivery
to its customers.
The Company has the ability to rapidly modify its product lines. The
Company's displays are designed with flexibility in mind, enabling the Company
to customize its displays to meet different applications with a minimum of lead-
time. The Company designs certain of its materials to match components
furnished by suppliers. If such suppliers were unable to provide the Company
with those components, the Company would have to contract with other suppliers
to obtain replacement sources. Such replacement might result in engineering
design changes, as well as delays in obtaining such replacement components. The
Company believes it maintains suitable inventory and has contracts providing for
delivery of sufficient quantities of such components to meet its needs. The
Company also believes there presently are other qualified vendors of these
components. The Company does not acquire significant amount of purchases
directly from foreign suppliers, but certain key components such as the LEDs and
LED modules are manufactured by foreign sources.
The Company is ISO-9001-2000 registered by Underwriters Laboratories at its
Norwalk manufacturing facility. The Company's products are also third-party
certified as complying with applicable safety, electromagnetic emissions and
susceptibility requirements worldwide. The Company believes these distinctions
in its industry give it a competitive advantage in the global marketplace.
SERVICE AND SUPPORT
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The Company emphasizes the quality and reliability of its products and the
ability of its field service personnel and third-party agents to provide timely
and expert service to the Company's installed base. The Company believes that
the quality and timeliness of its on-site service personnel are important
components in the Company's ongoing and future success. The Company provides
turnkey installation and support for the products it leases and sells in the
United States and Canada. The Company provides training to end-users and
provides ongoing support to users who have questions regarding operating
procedures, equipment problems or other issues. The Company provides
installation and service to those who purchase and lease equipment. In the
market segments covered by the Company's dealers and distributors, they offer
support for the products they sell.
Personnel based in regional and satellite service locations throughout the
United States and Canada provide high quality and timely on-site service for the
installed rental equipment and maintenance base and other types of
customer-owned equipment. Purchasers or lessees of the Company's larger
products, such as financial exchanges, casinos and sports stadiums, often retain
the Company to provide on-site service through the deployment of a service
technician who is on-site daily for scheduled events. The Company operates its
National Technical Services and Repair Center from its Des Moines, Iowa
facility. Equipment repairs are performed in Des Moines and service technicians
are dispatched nationwide from the Des Moines facility. The Company's field
service is augmented by various service companies in the United States, Canada
and overseas. From time to time the Company uses various third-party service
agents to install, service and/or assist in the service of certain displays for
reasons that include geographic area, size and height of displays.
COMPETITION
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The Company's offer of short- and long-term leases to customers and its
nationwide sales, service and installation capabilities are major competitive
advantages in the display business. The Company believes that it is the largest
supplier of large-scale stock, commodity, sports and race book gaming displays
in the United States, as well as one of the larger outdoor electronic display
and service organizations in the country.
The Company competes with a number of competitors, both larger and smaller
than itself, and with products based on different forms of technology. There
are several companies whose current products utilize similar technology and who
possess the resources necessary to develop competitive and more sophisticated
products in the future.
THEATRE OPERATIONS
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The Company currently operates 65 screens in 10 locations in the western
Mountain States, which includes a fourteen-plex theatre in Loveland, Colorado,
which is a 50% owned joint venture partnership. In 2007, the Company began a
four-screen expansion of its Espanola, New Mexico theatre, which is expected to
open in the spring 2008. In 2006, the Company closed an unprofitable single
screen theatre in Santa Fe, New Mexico to lease to the New Mexico Department of
Cultural Affairs for a film museum. In 2005, the Company expanded its Dillon,
Colorado location by adding two additional screens and purchased land in Silver
City, New Mexico to construct a new multiplex theatre. The Company's theatre
revenues are generated from box office admissions, theatre concessions, theatre
rentals and other sales. Theatre revenues are generally seasonal and coincide
with the release dates of major films during the summer and holiday seasons.
The Company is not currently operating any multimedia entertainment venues, but
continues to stay abreast of innovations in this area of technology and
continues to investigate new opportunities.
The Company's motion picture theatres are subject to varying degrees of
competition in the geographic areas in which they operate. The Company's
theatres also face competition from all other forms of entertainment competing
for the public's leisure time and disposable income.
INTELLECTUAL PROPERTY
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The Company owns or licenses a number of patents and holds a number of
trademarks for its display equipment and theatrical enterprises and considers
such patents, licenses and trademarks important to its business.
EMPLOYEES
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The Company has approximately 402 employees as of February 29, 2008 of
which approximately 254 employees support the Company's electronic display
business. Approximately 13% of the employees are unionized. The Company
believes its employee relations are good.
ITEM 1A. RISK FACTORS
LEVERAGE
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As of December 31, 2007, the Company's total long-term debt (including
current portion) was $46.2 million. We expect we will incur indebtedness in
connection with the implementation of our growth strategy. Our ability to
satisfy our obligations will be dependent upon our future performance, which is
subject to prevailing economic conditions and financial, business and other
factors, including factors beyond our control. There can be no assurance that
our operating cash flows will be sufficient to meet our long-term debt service
requirements or refinance indebtedness at maturity. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."
RELIANCE ON KEY SUPPLIERS
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We design certain of our materials to match components furnished by
suppliers. If such suppliers were unable or unwilling to provide us with those
components, we would have to contract with other suppliers to obtain replacement
sources. In particular, we purchase almost all of the LED module blocks used in
our electronic information displays from three suppliers. We do not have
long-term supply contracts with these suppliers. A change in suppliers of
either LED module blocks or certain other components may result in engineering
design changes, as well as delays in obtaining such replacement components. We
believe there are presently other qualified vendors of these components. Our
inability to obtain sufficient quantities of certain components as required, or
to develop alternative sources at acceptable prices and within a reasonable
time, could result in delays or reductions in product shipments that could have
a materially adverse effect on our business and results of operations.
COMPETITION
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Our electronic information displays compete with a number of competitors,
both larger and smaller than us, and with products based on different forms of
technology. In addition, there are several companies whose current products
utilize similar technology and who possess the resources to develop competitive
and more sophisticated products in the future. Our success is somewhat
dependent upon our ability to anticipate technological changes in the industry
and to successfully identify, obtain, develop and market new products that
satisfy evolving industry requirements. There can be no assurance that
competitors will not market new products which have perceived advantages over
our products or which, because of pricing strategies, render the products
currently sold by us less marketable or otherwise adversely affect our operating
margins. Our motion picture theatres are subject to varying degrees of
competition in the geographic areas in which they operate. Our theatres also
face competition from all other forms of entertainment competing for the
public's leisure time and disposable income.
NATURE OF LEASING AND MAINTENANCE REVENUES
------------------------------------------
We derive a substantial percentage of our revenues from the leasing of our
electronic information displays, generally pursuant to leases that have an
average term of one to five years. Consequently, our future success is at least
partly dependent on our ability to obtain the renewal of existing leases or to
enter into new leases as existing leases expire. We also derive a significant
percentage of our revenues from maintenance agreements relating to our display
products. The average term of such agreements is generally one to five years.
A portion of the maintenance agreements are cancelable upon 30 days notice.
There can be no assurance that we will be successful in obtaining renewal of
existing leases or maintenance agreements, obtaining replacement leases or
realizing the value of assets currently under leases that are not renewed. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations."
DEPENDENCE ON KEY PERSONNEL
---------------------------
We believe that our President and Co-Chief Executive Officer, Michael R.
Mulcahy, and our Co-Chief Executive Officer and Executive Vice President, Thomas
Brandt, play a significant role in the success of the Company and the loss of
the services of either could have an adverse effect on the Company. There can
be no assurance that the Company would be able to find a suitable replacement
for either Mr. Mulcahy or Mr. Brandt. The Company has employment agreements
with Mr. Mulcahy and Mr. Brandt, which expire in 2010 and 2009, respectively,
which may be extended by the employees in case of a change-in-control approved
by the present Board of Directors. The Company believes that in addition to the
above referenced key personnel, there is a core group of executives that also
plays a significant role in the success of the Company.
EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS AND CONTROL BY EXISTING STOCKHOLDERS
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Our Restated Certificate of Incorporation contains certain provisions that
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from attempting to acquire control of us. Such
provisions could limit the price that certain investors might be willing to pay
in the future for shares of our Common Stock, thus making it less likely that a
stockholder will receive a premium on any sale of shares. Under our Restated
Certificate of Incorporation, we have two classes of common stock outstanding,
Common Stock and Class B Stock, each with its own rights and preferences. Each
share of Class B Stock receives ten votes per share on all matters submitted to
a vote of the stockholders versus the one vote received for each share of Common
Stock. The Class B Stock is entitled to vote separately as a class on any
proposal for merger, consolidation and certain other significant transactions.
Moreover, our Board of Directors is divided into three classes, each of which
serves for a staggered three-year term, making it more difficult for a third
party to gain control of our Board. Our Restated Certificate of Incorporation
also has a provision that requires a four-fifths vote on any merger,
consolidation or sale of assets with or to an "Interested Person" or "Acquiring
Person."
Additionally, we are authorized to issue 500,000 shares of Preferred Stock
containing such rights, preferences, privileges and restrictions as may be fixed
by our Board of Directors which may adversely affect the voting power or other
rights of the holders of Common Stock or delay, defer or prevent a change in
control of the Company, or discourage bids for the Common Stock at a premium
over its market price or otherwise adversely affect the market price of the
Common Stock. Our Board of Directors is also authorized to issue 3,000,000
shares of Class A Stock, which is identical to the Common Stock but is
non-voting and is entitled to a 10% higher dividend than the Common Stock.
As of December 31, 2007, 14 stockholders who are executive officers and/or
directors of the Company beneficially own approximately 81.96% of our
outstanding Class B Stock, 10.19% of all classes and 49.87% of the voting power.
As a result, these stockholders collectively will continue to have the ability
to elect all of our directors and to veto major transactions for which a
stockholder vote is required under Delaware law, including mergers,
consolidations and certain other significant transactions. These stockholders
could also block tender offers for our Common Stock that could give stockholders
the opportunity to realize a premium over the then prevailing market price for
their shares of Common Stock.
LIMITED TRADING VOLUME AND VOLATILITY OF STOCK PRICE
----------------------------------------------------
Our Common Stock is not widely held and the volume of trading has been low
and sporadic. Accordingly, the Common Stock is subject to increased price
volatility and reduced liquidity. There can be no assurance a more active
trading market for the Common Stock will develop, or be sustained if it does
develop. The limited public float of our Common Stock could cause the market
price for the Common Stock to fluctuate substantially. In addition, stock
markets have experienced wide price and volume fluctuations in recent periods
and these fluctuations often have been unrelated to the operating performance of
the specific companies affected. Any of these factors could adversely affect
the market price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
-------------------------------
Future sales of Common Stock in the public market by current stockholders
of the Company could adversely affect the market price for the Common Stock.
324,285 shares of Common Stock (including Class B Stock if converted into equal
amounts of Common Stock) may be sold in the public market by executive officers
and directors, subject to the limitations contained in Rule 144 under the
Securities Act of 1933, as amended. Sales of substantial amounts of the shares
of Common Stock in the public market, or even the potential for such sales,
could adversely affect the prevailing market price of our Common Stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The Company's headquarters and principal executive offices are located at
110 Richards Avenue, Norwalk, Connecticut. In June 2008, the Company is
relocating its principal executive office to 26 Pearl Street, Norwalk,
Connecticut and its manufacturing operations to Stratford, Connecticut. In June
2004, the Company entered into a sale/leaseback of its 102,000 square foot
facility located at 110 Richards Avenue, Norwalk, Connecticut, which is occupied
by the Company and is used for administration, sales, engineering, production
and assembly of its indoor display products. The Company leased back the entire
building for four years. In the second quarter of 2007, the Company terminated
its three-year lease for a portion of the building that would have taken effect
in the second quarter of 2008. Approximately 9,500 square feet of the building
is currently subleased to others.
The Company owns a facility in Des Moines, Iowa and theatre/real estate
properties in:
Sahuarita, Arizona
Dillon, Colorado
Durango, Colorado
Espanola, New Mexico
Los Lunas, New Mexico
Santa Fe, New Mexico
Taos, New Mexico
Laramie, Wyoming
The Company also owns land in Silver City, New Mexico, on which the Company
expects to construct and operate a multiplex movie theatre and for other
commercial uses. The Company leases eleven premises throughout North America
for use as sales, service and/or administrative operations, and leases three
theatre locations. The aggregate rental expense was $793,000, $908,000 and
$1,053,000 for each of the three years ended December 31, 2007.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to legal proceedings and claims, which arise in the
ordinary course of its business. The Company is not a party to any pending
legal proceedings and claims that it believes will have a material adverse
effect on the consolidated financial position or operations of 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, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
(a) The Company's Common Stock is traded on the American Stock Exchange
under the symbol "TLX." Sales prices are set forth in (d) below.
(b) The Company had approximately 604 holders of record of its Common Stock
and approximately 59 holders of record of its Class B Stock as of March
27, 2008.
(c) The Board of Directors did not declare any cash dividends for Common
Stock and Class B Stock during 2007 in order to conserve cash and pay
down debt. Management and the Board of Directors will continue to
review payment of quarterly cash dividends.
(d) The range of Common Stock prices on the American Stock Exchange are set
forth in the quarterly financial data table below in Item 6(b).
(e) The Company did not purchase any of its equity securities during any
month of the fourth fiscal quarter of 2007.
ITEM 6. SELECTED FINANCIAL DATA
(a) The following table sets forth selected consolidated financial data
with respect to the Company for the five years ended December 31, 2007,
which were derived from the audited consolidated financial statements
of the Company and should be read in conjunction with them:
Years Ended 2007 2006 2005 2004 2003
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In thousands, except per share data
Revenues $51,205 $53,911 $ 54,368 $ 52,579 $ 56,022
Income (loss) from continuing operations (5,095) (1,647) (1,793) 412 365
Income from discontinued operation - - - 127 689
Net income (loss) (5,095)(1) (1,647) (1,793) 539 1,054
Earnings (loss) per share - continuing
operations:
Basic $ (2.43) $ (1.31) $ (1.42) $ 0.33 $ 0.29
Diluted (2.43) (1.31) (1.42) 0.33 0.29
Earnings per share - discontinued
operation:
Basic $ - $ - $ - $ 0.10 $ 0.55
Diluted - - - 0.03 0.20
Total earnings (loss) per share:
Basic $ (2.43) $ (1.31) $ (1.42) $ 0.43 $ 0.84
Diluted (2.43) (1.31) (1.42) 0.43 0.70
Cash dividends per share:
Common stock $ - $ 0.035 $ 0.14 $ 0.14 $ 0.14
Class B stock - 0.0315 0.126 0.126 0.126
Average common shares outstanding 2,098 1,260 1,261 1,261 1,261
Total assets $83,959 $88,472 $100,550 $101,114 $100,092
Long-term debt 39,899 51,537 48,365 56,796 60,505
Stockholders' equity 24,596 20,174 22,396 24,605 24,036
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(1) Included a $1.5 million debt conversion cost, a $1.0 million valuation allowance on
deferred tax assets and $0.4 million pension settlement charge.
(b) The following table sets forth quarterly financial data for years ended
December 31, 2007 and December 31, 2006:
Quarters Ended March 31 June 30 September 30 December 31
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In thousands, except per share data
2007
Revenues $ 12,130 $ 13,158 $ 14,269 $ 11,648
Gross profit 2,956 3,118 3,426 2,091
Net loss (2) (2,402) (264) (300) (2,129)
Loss per share (1.65) (0.11) (0.13) (0.92)
Cash dividends per share:
Common stock - - - -
Class B stock - - - -
Range of Common Stock prices on the
American Stock Exchange $6.50 - $9.04 $5.85 - $7.45 $5.00 - $7.30 $4.55 - $6.40
2006
Revenues $ 11,610 $ 13,709 $ 15,437 $ 13,155
Gross profit 2,723 3,347 4,097 2,690
Net income (loss) (1,073) (393) 61 (242)
Earnings (loss) per share (0.85) (0.31) 0.04 (0.19)
Cash dividends per share:
Common stock 0.035 - - -
Class B stock 0.0315 - - -
Range of Common Stock prices on the
American Stock Exchange $5.50 - $6.60 $5.50 - $6.55 $5.50 - $6.05 $6.00 - $7.85
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(2) The quarter ended March 31, 2007 net loss includes a $1.5 million debt conversion cost. The
quarter ended December 31, 2007 net loss includes a $1.0 million valuation allowance on deferred
tax assets and $0.4 million pension settlement charge.
ITEM 7. MANGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
Trans-Lux is a full service provider of integrated multimedia systems for
today's communications environments. The essential elements of these systems
are the real-time, programmable electronic information displays we manufacture,
distribute and service. Designed to meet the evolving communications needs of
both the indoor and outdoor markets, these displays are used primarily in
applications for the financial, banking, gaming, corporate, transportation,
entertainment and sports industries. In addition to its display business, the
Company owns and operates a chain of motion picture theatres in the western
Mountain States. The Company operates in three reportable segments: Indoor
display, Outdoor display and Entertainment/real estate.
The Indoor display segment includes worldwide revenues and related expenses
from the rental, maintenance and sale of indoor displays. This segment includes
the financial, government/private and gaming markets. The Outdoor display
segment includes worldwide revenues and related expenses from the rental,
maintenance and sale of outdoor displays. Included in this segment are catalog
sports, retail, digital billboards and commercial markets. The
Entertainment/real estate segment includes the operations of the motion picture
theatres in the western Mountain States and income-producing real estate
properties.
Critical Accounting Policies and Estimates
Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses the Company's consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the 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. On an ongoing basis,
management evaluates its estimates and judgments, including those related to
percentage of completion, uncollectable accounts, inventories, goodwill and
intangible assets, income taxes, warranty obligations, benefit plans,
contingencies and litigation. Management bases its estimates and judgments on
historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. Senior management has
discussed the development and selection of these accounting estimates and the
related disclosures with the audit committee of the Board of Directors.
Management believes the following critical accounting policies, among
others, involve its more significant judgments and estimates used in the
preparation of its consolidated financial statements:
Percentage of Completion: The Company recognizes revenue on long-term
equipment sales contracts using the percentage of completion method based on
estimated incurred costs to the estimated total cost for each contract. Should
actual total cost be different from estimated total cost, an addition or a
reduction to cost of sales may be required.
Uncollectable Accounts: The Company maintains allowances for uncollectable
accounts for estimated losses resulting from the inability of its customers to
make required payments. Should non-payment by customers differ from the
Company's estimates, a revision to increase or decrease the allowance for
uncollectable accounts may be required.
Inventories: The Company writes down its inventory for estimated
obsolescence equal to the difference between the carrying value of the inventory
and the estimated market value based upon assumptions about future demand and
market conditions. If actual future demand or market conditions are less
favorable than those projected by management, additional inventory write-downs
may be required.
Goodwill and Intangible Assets: The Company evaluates goodwill and
intangible assets for possible impairment annually for goodwill and when events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable for other intangible assets. The Company uses the fair
market value approach to test for impairment of its goodwill, and other factors
that are considered in the review for impairment include, economic trends, and
our market capitalization relative to net book value. The fair market
valuations used for the impairment tests can be affected by changes in the
estimates of revenue multiples and the discount rate used in the calculations.
No impairment resulted from the annual reviews performed in 2007, 2006 or 2005.
Future adverse changes in market conditions or poor operating results of
underlying assets could result in an inability to recover the carrying value of
the assets, thereby possibly requiring an impairment charge in the future.
Income Taxes: The Company records a valuation allowance to reduce its
deferred tax assets to the amount that it believes is more likely than not to be
realized. While the Company has considered future taxable income and ongoing
feasible tax planning strategies in assessing the need for the valuation
allowance, in the event the Company were to determine that it would not be able
to realize all or part of its net deferred tax assets in the future, an
adjustment to the deferred tax assets would be charged to income taxes in the
period such determination was made. Likewise, should the Company determine that
it would be able to realize its deferred tax assets in the future in excess of
its net recorded amount, an adjustment to the deferred tax assets would increase
income in the period such determination was made.
Warranty Obligations: The Company provides for the estimated cost of
product warranties at the time revenue is recognized. While the Company engages
in product quality programs and processes, including evaluating the quality of
the component suppliers, the warranty obligation is affected by product failure
rates. Should actual product failure rates differ from the Company's estimates,
revisions to increase or decrease the estimated warranty liability may be
required.
Benefit Plans: The Company is required to make estimates and assumptions
to determine benefit plan liabilities, which include investment returns, rates
of salary increases and discount rates. During 2007 and 2006, the Company
recorded an after tax minimum pension liability adjustment in other
comprehensive loss of ($103,000) and $567,000, respectively. Estimates and
assumptions are reviewed annually with the assistance of external actuarial
professionals and adjusted as circumstances change. At December 31, 2007, plan
assets were invested 42.2% in guaranteed investment contracts, 55.4% in equity
and index funds, 2.3% in bonds and 0.1% in money market funds. The investment
return assumption takes the asset mix into consideration. The assumed discount
rate reflects the rate at which the pension benefits could be settled. At
December 31, 2007, the weighted average rates used for the computation of
benefit plan liabilities were: investment returns, 8.75%; rates of salary
increases, 3.00%; and discount rate, 6.25%. Net periodic cost for 2007 will be
based on the December 31, 2007 valuation. The defined benefit plan periodic
cost was $628,000 in 2007, $285,000 in 2006 and $261,000 in 2005. The 2007
periodic pension cost included a settlement charge of $366,000. At December 31,
2007, assuming no change in the other assumptions, a one percentage point change
in investment returns would affect the net periodic cost by $77,000 and a one
percentage point change in the discount rate would affect the net periodic cost
by $128,000. As of December 31, 2003, the benefit service under the defined
benefit plan had been frozen and, accordingly, there is no service cost for each
of the three years ended December 31, 2007.
Quantitative and Qualitative Disclosures About Market Risks
The Company's cash flows and earnings are subject to fluctuations from changes
in interest rates and foreign currency exchange rates. The Company manages its
exposures to these market risks through internally established policies and
procedures and, when deemed appropriate, through the use of interest-rate swap
agreements and forward exchange contracts. At December 31, 2007, long-term debt
outstanding of $32.3 million was at variable rates of interest ranging from 7.0%
to 7.4% and $13.9 million was at fixed rates ranging from 7.0% to 9.5%. The
Company does not enter into derivatives or other financial instruments for
trading or speculative purposes and, at December 31, 2007, was not involved in
any derivative financial instruments.
Results of Operations
2007 Compared to 2006
Total revenues for the year ended December 31, 2007 decreased 5.0% to $51.2
million from $53.9 million for the year ended December 31, 2006.
Entertainment/real estate revenues increased but were offset by decreases in
both Indoor display revenues and Outdoor display revenues.
Indoor display revenues decreased $3.0 million or 21.7%. Of this decrease,
Indoor display equipment sales decreased $2.1 million or 38.4%, primarily due to
a reduction in sales from the financial services and transportation markets.
Indoor display equipment rentals and maintenance revenues decreased $872,000 or
10.5%, primarily due to disconnects and non-renewals of equipment on rental and
maintenance on existing contracts in the financial services market. The
financial services market continues to be negatively impacted by the current
investment climate, resulting in consolidation within that industry; and the
wider use of flat-panel screens. The decrease in indoor display equipment
rentals and maintenance revenues have lessened over last year, which indicates
that the market conditions appear to be slowly improving, although the Company
does continue to take disconnects and non-renewal of existing equipment on
rental and maintenance, the Company does enter into new lease contracts.
Outdoor display revenues decreased $559,000 or 2.1%. Of this decrease,
Outdoor display equipment rentals and maintenance revenues decreased $440,000 or
8.3%, primarily due to the continued expected gradual revenue decline in the
older Outdoor display equipment rental and maintenance bases acquired in the
early 1990s. Outdoor display equipment sales decreased less than 1.0%,
predominantly in the catalog sports market, offset by increases of billboard and
commercial revenues.
Entertainment/real estate revenues increased $857,000 or 6.4%. Both box
office revenues and concession sales increased due to a slight increase in
attendance and price increases. The Company closed its single screen theatre in
Santa Fe, New Mexico in April 2006.
Total operating income for the year ended December 31, 2007 decreased 24.1%
to $3.2 million from $4.2 million for the year ended December 31, 2006,
principally due to the increased losses of the Indoor display segment.
Indoor display operating income decreased $1.2 million to a loss of $1.6
million in 2007 compared to a loss of $361,000 in 2006, primarily as a result of
the decrease in revenues in the financial services and transportation markets.
The cost of Indoor displays represented 81.5% of related revenues in 2007
compared to 75.0% in 2006. The cost of Indoor displays as a percentage of
related revenues increased primarily due to the relationship between field
service costs of equipment rentals and maintenance decreasing, and the revenues
from Indoor display equipment rentals and maintenance also decreasing, but not
at the same rate. The Company continues to monitor and address the cost of its
field service operations to try and bring it in line with the revenues and has
centralized the dispatch, help desk and repair functions into the Des Moines,
Iowa facility. Indoor display cost of equipment rentals and maintenance
decreased $223,000 or 3.1%, largely due to a $502,000 reduction in depreciation
expense, offset by an increase of $279,000 of field service costs. Cost of
Indoor display equipment rentals and maintenance includes field service
expenses, plant repair costs, maintenance and depreciation expense. Indoor
display cost of equipment sales decreased $1.3 million or 42.5%, primarily due
to the decrease in Indoor display sales. Indoor display general and
administrative expenses decreased $261,000 or 6.8%, primarily due to a reduction
in salaries, related benefits and travel costs, offset by an increase in the
allowance for doubtful accounts.
Outdoor display operating income decreased $12,000 or 0.9%, primarily as a
result of a decrease in catalog sports revenue and an increase in the allowance
for doubtful accounts. The cost of Outdoor displays represented 77.7% of
related revenues in 2007 compared to 78.3% in 2006. Outdoor display cost of
equipment sales increased by 1.1%, primarily due to the cost of raw materials.
Outdoor display cost of equipment rentals and maintenance decreased $777,000 or
16.4%, primarily due to a decrease in field service costs of $436,000 and a
reduction in depreciation expense of $341,000. Cost of Outdoor display
equipment rentals and maintenance includes field service expenses, plant repair
costs, maintenance and depreciation expense. Outdoor display general and
administrative expenses increased slightly.
Entertainment/real estate operating income increased $206,000 or 6.6%,
primarily due to the increase in box office revenues and an increase in the
MetroLux Theatres joint venture income of $110,000 or 32.0%. The cost of
Entertainment/real estate represented 73.6% of related revenues in 2007 compared
to 73.0% in 2006. Cost of theatre receipts and other, which includes film
rental costs, other operating costs and depreciation expense, increased $708,000
or 7.2%, principally due to the increase in box office revenues, as well as an
increase in payroll costs due to federal and state minimum wage increases.
Entertainment/real estate general and administrative expenses increased $53,000
or 6.4%, primarily due to increases in payroll and travel costs.
Corporate general and administrative expenses increased $1.1 million or
34.1%, primarily due to the negative effect of a $406,000 change in the currency
exchange gain/loss in 2007 compared to 2006, an increase of $374,000 in pension
expense and an increase in the cost of medical benefits.
Net interest expense decreased $583,000 or 13.8%, primarily due to the
reduction in the 8 1/4% Limited Convertible Senior Subordinated Notes due 2012,
as a result of the exchange offer in the first quarter of 2007, coupled with the
reduction of other long-term debt due to regularly scheduled payments and a
reduction in the interest rates of the variable rate debt.
The debt conversion cost relates to a $1.5 million one-time, non-cash,
non-tax deductible charge for the exchange of debt for Common Stock as a result
of the exchange offer. See Note 9 - Long-Term Debt to the Consolidated
Financial Statements.
The effective tax benefit rate for the years ended December 31, 2007 and
2006 was 11.4% and 49.6%, respectively. The 2007 effective tax benefit rate was
affected by the $1.5 million one-time, non-cash, non-tax deductible debt
conversion cost, and the $1.0 million valuation allowance on its deferred tax
assets as a result of reporting a pre-tax loss in recent years. The 2006
effective tax benefit rate was affected by the reversal of a deferred tax
liability related to prior repurchases of the Company's convertible debt.
2006 Compared to 2005
Total revenues for the year ended December 31, 2006 decreased 0.8% to $53.9
million from $54.4 million for the year ended December 31, 2005, principally due
to a decrease in Indoor display equipment rentals and maintenance revenues
offset by an increase in Outdoor display sales revenues.
Indoor display revenues decreased $1.4 million or 9.2%. Of this decrease,
Indoor display equipment rentals and maintenance revenues decreased $1.1 million
or 11.8%, primarily due to disconnects and non-renewals of equipment on rental
and maintenance on existing contracts in the financial services market. The
financial services market continues to be negatively impacted by the current
consolidations within that industry. Although the market conditions appear to
be slowly improving, installations of new equipment tend to lag any economic
turnaround. Indoor display equipment sales decreased $291,000 or 5.0%,
primarily due to a reduction in sales to the corporate sector.
Outdoor display revenues increased $865,000 or 3.4%. Of this increase,
Outdoor display equipment sales increased $1.0 million or 5.0%, primarily in the
outdoor catalog sports market. This increase was offset by a $150,000 or 2.7%
decrease in the Outdoor display equipment rentals and maintenance revenues,
primarily due to the continued expected gradual revenue decline in the older
Outdoor display equipment rental and maintenance bases acquired in the early
1990s.
Entertainment/real estate revenues increased slightly. While box office
revenues remained level, there was an increase in concession sales, even though
the Company closed its single screen theatre in Santa Fe, New Mexico in April
2006.
Total operating income for the year ended December 31, 2006 decreased 7.8%
to $4.2 million from $4.5 million for the year ended December 31, 2005,
principally due to the reduction in revenues in the Indoor display segment.
Indoor display operating income decreased $1.5 million to a loss of
$361,000 in 2006 compared to an operating income of $1.1 million in 2005,
primarily as a result of the decrease in revenues in the financial services
market and a decrease in the gross margin of sold equipment due to the product
mix. The cost of Indoor displays represented 75.0% of related revenues in 2006
compared to 66.4% in 2005. The cost of Indoor displays as a percentage of
related revenues increased primarily due to the relationship between field
service costs of equipment rentals and maintenance decreasing, and the revenues
from Indoor display equipment rentals and maintenance also decreasing, but not
at the same rate. The Company continues to monitor and address the cost of its
field service operations to bring it in line with the revenues. The dispatch,
help desk and repair functions have been centralized into the Des Moines, Iowa
facility. Field service costs for the year ended December 31, 2006 compared to
2005 were reduced by approximately $160,000. Indoor display cost of equipment
rentals and maintenance decreased $298,000 or 3.9%, largely due to the reduction
in the rentals and maintenance bases. Cost of Indoor display equipment rentals
and maintenance includes field service expenses, plant repair costs, maintenance
and depreciation. Indoor display cost of equipment sales increased $565,000 or
22.2%, primarily due to reduced margins of the Indoor display equipment sales
due to product mix of sales to the transportation market. Indoor display
general and administrative expenses decreased $172,000 or 4.3% due to a $102,000
decrease in the allowance for uncollectable accounts receivable and a decrease
in salaries and benefits.
Outdoor display operating income increased $874,000 or 168.5%, primarily as
a result of the increase in volume of sales in the catalog scoreboard business
and a decrease in field service costs. The cost of Outdoor displays represented
78.3% of related revenues in 2006 compared to 80.5% in 2005. Outdoor display
cost of equipment sales increased $613,000 or 4.0%, principally due to the
increase in volume. Outdoor display cost of equipment rentals and maintenance
decreased $499,000 or 9.5%, primarily due to a decrease in field service costs.
Field service costs for the year ended December 31, 2006 compared to 2005 were
reduced by approximately $525,000. Cost of Outdoor display equipment rentals
and maintenance includes field service expenses, plant repair costs, maintenance
and depreciation. Outdoor display general and administrative expenses decreased
$123,000 or 2.7%, primarily due to a decrease in certain sales overhead costs in
the commercial outdoor business such as trade shows, salaries, related benefits
and travel.
Entertainment/real estate operating income increased $272,000 or 9.5%,
primarily due to an increase in MetroLux Theatres joint venture income of
$218,000 to $344,000 in 2006 from $126,000 in 2005. This increase was
attributable to a $264,000 impairment loss recorded in 2005 on the sale of the
old theatre building held for sale, which was sold in February 2006. MetroLux
Theatres relocated to a new state-of-the-art location in October 2005. The cost
of Entertainment/real estate represented 73.0% of related revenues in 2006
compared to 73.9% in 2005. Cost of theatre receipts and other, which includes
film rental costs and depreciation expense, decreased slightly, principally due
to film rental costs. Entertainment/real estate general and administrative
expenses increased $87,000 or 11.6%, primarily due to increased salaries and
related benefits.
Corporate general and administrative expenses decreased $306,000 or 8.57%,
primarily due to staff reductions, overall decreases in salaries and related
benefits and a $105,000 increase in the currency exchange gain in 2006.
Net interest expense increased $356,000 or 9.2%, due to an increase in the
interest rates of the variable rate debt. The gain on sale of assets in 2005
relates to the sale of vacant land in Taos, New Mexico.
The effective tax benefit rate for the years ended December 31, 2006 and
2005 was 49.6% and 34.9%, respectively. The 2006 effective tax benefit rate was
affected by the reversal of a deferred tax liability related to prior
repurchases of the Company's convertible debt.
Liquidity and Capital Resources
The Company has a bank Credit Agreement, which provides for a term loan of $10.0
million, a non-revolving line of credit of up to $6.2 million to finance
purchases and/or redemptions of one-half of the 7 1/2% Notes, and a revolving
loan of up to $5.0 million at variable interest rates ranging from LIBOR plus
2.25% to Prime (ranging from 7.25% to 7.41% at December 31, 2007). The Credit
Agreement matures on May 1, 2009. $6.1 million of the non-revolving line of
credit was drawn in June 2006 to finance one-half of the redemption of the 7
1/2% Notes and on December 31, 2006, was converted into a four-year term loan
maturing May 1, 2009. At December 31, 2007, the entire revolving loan facility
had been drawn. The Credit Agreement requires an annual facility fee on the
unused commitment of 0.25%, and requires compliance with certain financial
covenants, which include a fixed charge coverage ratio of 1.1 to 1.0, a
loan-to-value ratio of not more than 50%, a cap on capital expenditures and
maintaining accounts with an average monthly compensating balance of not less
than $750,000. As of December 31, 2007, the Company was in compliance with the
forgoing financial covenants, but the Company was not in compliance with
maintaining a tangible net worth of not less than $24.75 million and a leverage
ratio of 3.0 to 1.0, which its senior lender waived subsequent to year end.
In addition, the tangible net worth covenant was modified to $23.5 million as
of March 31, 2008. The Company continues to be in discussion with its senior
lender to further extend the maturity of the Credit Agreement.
Although the Company has incurred losses for the last three years, it
believes that cash generated from operations together with cash and cash
equivalents on hand should be sufficient to fund its anticipated current and
near term cash requirements. The Company is in discussions with its senior
lender to restructure its existing Credit Agreement, which includes the
revolving loan facility, which matures May 1, 2009. The Company continually
evaluates the need and availability of long-term capital in order to meet its
cash requirements and fund potential new opportunities.
On March 13, 2006 and April 14, 2004, the Company completed two separate
offers to exchange $1,000 principal amount of its 8 1/4% Limited convertible
senior subordinated notes due 2012 (the "8 1/4% Notes") for each $1,000
principal amount of its 7 1/2% Convertible subordinated notes (the "7 1/2%
Notes"). A total of $18.0 million principal amount of the 7 1/2% Notes were
exchanged ($0.1 million in 2006 and $17.9 million in 2004), leaving $12.2
million principal amount of 7 1/2% Notes outstanding. The 8 1/4% Notes provide
for a higher interest rate, which is payable semi-annually, have a longer term,
were convertible into Common Stock at a lower conversion price of $9.00 per
share until March 1, 2007, may be redeemed by the Company, in whole or in part,
at declining premiums and were senior to the 7 1/2% Notes and are senior to the
Company's 9 1/2% Subordinated debentures due 2012.
On March 15, 2007, the Company completed an offer to exchange 133 shares of
its Common Stock, $1 par value per share, for each $1,000 principal amount of
its 8 1/4% Notes. The offer was for up to $9.0 million principal amount, or
approximately 50% of the $18.0 million principal amount outstanding of the 8
1/4% Notes. A total of $7.8 million principal amount of the 8 1/4% Notes were
exchanged, leaving $10.1 million principal amount of the 8 1/4% Notes
outstanding. A total of 1,041,257 shares of Common Stock were issued in the
exchange. In accordance with FASB No. 84 "Induced Conversions of Convertible
Debt," the Company recorded a non-cash, non-tax deductible charge for the
exchange of debt for Common Stock and additional amortization of prepaid
financing costs aggregating $1.5 million in debt conversion cost as a result of
the exchange offer.
During 2007, the Company secured the refinancing of $1.6 million and an
additional $2.1 million mortgage to finance the expansion of a theatre location.
The refinanced mortgage now has a maturity date of March 2018 and an interest
rate at 7.69%, with interest only payments through April 2008. Also during
2007, the Company secured a five-year $2.0 million financing of its rental
property in New Mexico at prime rate of interest, 7.25% at December 31, 2007.
The Board of Directors approved one quarterly cash dividend of $0.035 per
share for Common Stock and $0.0315 per share for Class B Stock during the first
quarter of 2006. No cash dividends for Common Stock and Class B Stock were
declared during 2007 in order to conserve cash and pay down debt.
Cash and cash equivalents increased $826,000 in 2007 compared to a decrease
of $7.8 million in 2006 and an increase of $1.2 million in 2005. The increase
in 2007 was primarily attributable to proceeds received from loan borrowings of
$4.0 million, proceeds from the Company's joint venture of $0.5 million and
operating activities of $5.9 million, offset by the investment in equipment
manufactured for rental of $3.9 million, purchases of property, plant and
equipment, including expansion of the Company's movie theatre in Espanola, New
Mexico, of $1.0 million and payments on long-term debt of $4.7 million. The
decrease in 2006 is primarily attributable to the reduction of long-term debt of
$7.8 million, investment in equipment manufactured for rental of $4.3 million
and purchases of property, plant and equipment of $0.7 million, offset by
increases from operating activities of $3.8 million, proceeds from the Company's
joint venture of $1.0 million and proceeds from the sale of available-for-sale
securities of $0.3 million. The increase in 2005 was primarily attributable to
an increase of long-term debt of $4.0 million, proceeds from the Company's joint
venture of $0.3 million and operating activities of $3.9 million, offset by the
investment in equipment manufactured for rental of $4.8 million and purchases of
property, plant and equipment of $2.0 million, which included expansion of the
Company's movie theatre in Dillon, Colorado and purchase of land in Silver City,
New Mexico. The Company experiences a favorable collection cycle on its trade
receivables.
Under various agreements, the Company is obligated to make future cash
payments in fixed amounts. These include payments under the Company's long-term
debt agreements, employment and consulting agreement payments and rent payments
required under operating lease agreements. The Company has both variable and
fixed interest rate debt. Interest payments are projected based on actual
interest payments incurred in 2007 until the underlying debts mature.
The following table summarizes the Company's fixed cash obligations as of
December 31, 2007 over the next five fiscal years:
In thousands 2008 2009 2010 2011 2012
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Long-term debt, including interest $ 9,590 $16,052 $3,406 $3,330 $15,739
Employment and consulting
agreement obligations 1,380 786 383 303 198
Operating lease payments 772 529 509 455 304
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Total $11,742 $17,367 $4,298 $4,088 $16,241
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Off-Balance Sheet Arrangements: The Company has no majority-owned subsidiaries
that are not included in the consolidated financial statements nor does it have
any interests in or relationships with any special purpose off-balance sheet
financing entities.
The Company has guaranteed $0.5 million (75%) of a $0.7 million business
loan to finance theatre equipment held by its joint venture, MetroLux Theatres,
until May 2011, and accordingly, has recognized a liability for $33,000. The
unrelated 50% partner of MetroLux Theatres also guaranteed $0.5 million (75%) of
the $0.7 million business loan. The assets of MetroLux Theatres collateralize
this business loan.
Safe Harbor Statement under the Private Securities Reform Act of 1995
The Company may, from time to time, provide estimates as to future performance.
These forward-looking statements will be estimates, and may or may not be
realized by the Company. The Company undertakes no duty to update such forward-
looking statements. Many factors could cause actual results to differ from
these forward-looking statements, including loss of market share through
competition, introduction of competing products by others, pressure on prices
from competition or purchasers of the Company's products, interest rate and
foreign exchange fluctuations, terrorist acts and war.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to interest rate risk on its long-term debt. The
Company manages its exposure to changes in interest rates by the use of variable
and fixed interest rate debt. The fair value of the Company's fixed rate
long-term debt is disclosed in Note 9 to the consolidated financial statements.
A one-percentage point change in interest rates would result in an annual
interest expense fluctuation of approximately $292,000. In addition, the
Company is exposed to foreign currency exchange rate risk mainly as a result of
investment in its Canadian subsidiary. A 10% change in the Canadian dollar
relative to the U.S. dollar would result in a currency exchange expense
fluctuation of approximately $76,000, based on dealer quotes, considering
current exchange rates. The Company does not enter into derivatives for trading
or speculative purposes and did not hold any derivative financial instruments at
December 31, 2007.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary financial
information are set forth below:
Consolidated Statements of Operations
In thousands, except per share data Years ended December 31 2007 2006 2005
------------------------------------------------------------------------------------------------
Revenues:
Equipment rentals and maintenance $12,310 $13,621 $14,882
Equipment sales 24,593 26,845 26,121
Theatre receipts and other 14,302 13,445 13,365
-----------------------------
Total revenues 51,205 53,911 54,368
-----------------------------
Operating expenses:
Cost of equipment rentals and maintenance 11,033 12,033 12,830
Cost of equipment sales 18,053 19,201 18,023
Cost of theatre receipts and other 10,528 9,820 9,881
-----------------------------
Total operating expenses 39,614 41,054 40,734
-----------------------------
Gross profit from operations 11,591 12,857 13,634
General and administrative expenses 13,302 12,328 12,843
Interest income 214 279 353
Interest expense (3,859) (4,507) (4,225)
Debt conversion cost (1,475) - -
Gain on sale of assets - - 128
Other income 629 87 71
-----------------------------
Loss from operations before income
taxes and income from joint venture (6,202) (3,612) (2,882)
Benefit (provision) for income taxes:
Current (131) (234) (370)
Deferred 784 1,855 1,333
-----------------------------
Total benefit for income taxes 653 1,621 963
-----------------------------
Income from joint venture 454 344 126
-----------------------------
Net Loss $(5,095) $(1,647) $(1,793)
=============================
Loss per share - basic and diluted $ (2.43) $ (1.31) $ (1.42)
=============================
Weighted average common shares outstanding -
basic and diluted 2,098 1,260 1,261
=============================
------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Balance Sheets
In thousands, except share data December 31 2007 2006
------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 6,591 $ 5,765
Available-for-sale securities 171 199
Receivables, less allowance of $892 - 2007 and $1,034 - 2006 5,233 6,721
Unbilled receivables 12 962
Other receivables 2,580 -
Inventories 6,853 6,467
Prepaids and other 1,375 858
-------------------
Total current assets 22,815 20,972
-------------------
Rental equipment 66,626 88,903
Less accumulated depreciation 37,692 56,946
-------------------
28,934 31,957
-------------------
Property, plant and equipment 39,858 39,459
Less accumulated depreciation 11,764 10,948
-------------------
28,094 28,511
Goodwill 1,004 1,004
Other assets 3,112 6,028
-------------------
TOTAL ASSETS $83,959 $88,472
------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,439 $ 2,412
Accrued liabilities 7,633 6,929
Current portion of long-term debt 6,276 3,162
-------------------
Total current liabilities 16,348 12,503
-------------------
Long-term debt:
8 1/4% Limited convertible senior subordinated notes due 2012 10,129 17,958
9 1/2% Subordinated debentures due 2012 1,057 1,057
Notes payable 28,713 32,522
-------------------
39,899 51,537
Deferred credits, deposits and other 3,116 3,782
Deferred income taxes - 476
Stockholders' equity:
Capital stock
Common - $1 par value - 5,500,000 shares authorized,
2,453,591 shares issued in 2007 and 2006 2,453 2,453
Class B - $1 par value - 1,000,000 shares authorized,
286,814 shares issued in 2007 and 2006 287 287
Additional paid-in-capital 14,733 13,897
Retained earnings 11,848 17,193
Accumulated other comprehensive loss (1,262) (1,853)
-------------------
28,059 31,977
Less treasury stock - at cost - 433,596 common shares
in 2007 and 1,475,588 common shares in 2006 3,463 11,803
-------------------
Total stockholders' equity 24,596 20,174
-------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $83,959 $88,472
------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Cash Flows
In thousands Years ended December 31 2007 2006 2005
---------------------------------------------------------------------------------------------
Cash flows from operating activities
Net loss $(5,095) $ (1,647) $(1,793)
Adjustment to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 8,771 9,543 9,685
Income from joint venture (454) (344) (126)
Deferred income taxes (1,137) (1,855) (1,332)
Gain on sale of assets - - (108)
Loss (gain) on sale of available-for-sale securities - 15 (1)
Exchange of 8 1/4% Notes for Common Stock 1,345 - -
Changes in operating assets and liabilities:
Receivables 2,438 (520) (894)
Inventories (386) (809) (43)
Prepaids and other assets (283) 58 (335)
Accounts payable and accruals 1,238 (380) 39
Deferred credits, deposits and other (494) (302) (1,220)
----------------------------------
Net cash provided by operating activities 5,943 3,759 3,872
----------------------------------
Cash flows from investing activities
Equipment manufactured for rental (3,898) (4,317) (4,831)
Purchases of property, plant and equipment (974) (673) (1,978)
Purchases of available-for-sale securities - - (114)
Proceeds from sale of available-for-sale securities - 257 32
Proceeds from joint venture, net 450 953 250
Proceeds from sale of assets - - 190
----------------------------------
Net cash used in investing activities (4,422) (3,780) (6,451)
----------------------------------
Cash flows from financing activities
Proceeds from long-term debt 4,029 6,250 6,020
Payments of long-term debt (4,724) (14,043) (2,050)
Purchase of treasury stock - - (3)
Proceeds from exercise of stock options - 12 -
Cash dividends - (43) (176)
----------------------------------
Net cash (used in) provided by financing activities (695) (7,824) 3,791
----------------------------------
Net increase (decrease) in cash and cash equivalents 826 (7,845) 1,212
Cash and cash equivalents at beginning of year 5,765 13,610 12,398
----------------------------------
Cash and cash equivalents at end of year $ 6,591 $ 5,765 $13,610
---------------------------------------------------------------------------------------------
Interest paid $ 3,936 $ 4,083 $ 3,106
Income taxes paid 45 253 354
Supplemental disclosures of non-cash financing activities:
Exercise of stock options 10 - -
Exchange of 7 1/2% Notes - 108 -
Exchange of 8 1/4% Notes for Common Stock 7,829 - -
---------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Stockholders' Equity
Accumulated
Additional Other
In thousands, except share data Common Stock Class B Paid-in Treasury Retained Comprehensive
For the three years ended December 31, 2007 Shares Amount Shares Amount Capital Stock Earnings Income (Loss)
---------------------------------------------------------------------------------------------------------------------------------
Balance January 1, 2005 2,452,942 $2,453 287,463 $287 $13,901 $(11,838) $20,852 $(1,050)
Net loss - - - - - - (1,793) -
Cash dividends - - - - - - (176) -
Common stock acquired (366 shares) - - - - - (3) - -
Other comprehensive income (loss), net of tax:
Unrealized foreign currency translation - - - - - - - 88
Unrealized holding loss on securities - - - - - - - (24)
Minimum pension liability adjustment - - - - - - - (301)
Class B conversion to common stock 649 - (649) - - - - -
----------------------------------------------------------------------------------
Balance December 31, 2005 2,453,591 2,453 286,814 287 13,901 (11,841) 18,883 (1,287)
Net loss - - - - - - (1,647) -
Cash dividends - - - - - - (43) -
Stock option compensation expense - - - - 4 - - -
Common stock issued (2,000 shares) - - - - - 18 - -
Stock options exercised (2,500 shares) - - - - (8) 20 - -
Other comprehensive income (loss), net of tax:
Unrealized foreign currency translation - - - - - - - (23)
Unrealized holding gain on securities - - - - - - - 24
Minimum pension liability adjustment - - - - - - - 354
Pension liability adjustment - SFAS 158 - - - - - - - (921)
----------------------------------------------------------------------------------
Balance December 31, 2006 2,453,591 2,453 286,814 287 13,897 (11,803) 17,193 (1,853)
Net loss - - - - - - (5,095) -
Stock option compensation expense - - - - 1 - - -
Common stock issued (1,041,257 shares) - - - - 844 8,330 - -
Stock options exercised (2,500 shares) - - - - (9) 10 - -
Tax liability adjustment - FIN 48 - - - - - - (250) -
Other comprehensive income (loss), net of tax:
Unrealized foreign currency translation - - - - - - - 505
Unrealized holding loss on securities - - - - - - - (17)
Minimum pension liability adjustment - - - - - - - 103
----------------------------------------------------------------------------------
Balance December 31, 2007 2,453,591 $2,453 286,814 $287 $14,733 $ (3,463) $11,848 $(1,262)
---------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Comprehensive Loss
In thousands Years ended December 31 2007 2006 2005
------------------------------------------------------------------------------------------
Net loss $(5,095) $(1,647) $(1,793)
---------------------------------
Other comprehensive income (loss):
Unrealized foreign currency translation gain (loss) 505 (23) 88
Unrealized holding gain (loss) on securities (28) 40 (40)
Minimum pension liability adjustment 172 306 (219)
Pension liability adjustment - SFAS 158 - (1,536) -
Income tax benefit (expense) related to items
of other comprehensive income (loss) (58) 647 (66)
---------------------------------
Total other comprehensive income (loss), net of tax 591 (566) (237)
---------------------------------
Comprehensive loss $(4,504) $(2,213) $(2,030)
------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
Notes To Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Trans-Lux Corporation is a leading manufacturer and supplier of programmable
electronic information displays and owner/operator of cinemas.
Principles of consolidation: The consolidated financial statements include
the accounts of Trans-Lux Corporation, a Delaware corporation, and all
wholly-owned subsidiaries (the "Company"). The investment in a 50% owned joint
venture partnership, MetroLux Theatres, is reflected under the equity method and
is included in other assets in the Consolidated Balance Sheets and is recorded
as income from joint venture in the Consolidated Statements of Operations.
Intercompany balances and transactions have been eliminated in consolidation.
Use of estimates: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
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 results could differ
from those estimates. Estimates and assumptions are reviewed periodically, and
the effects of revisions are reflected in the financial statements in the period
in which they are determined to be necessary. Estimates are used when
accounting for such items as costs of long-term sales contracts, allowance for
uncollectable accounts, inventory valuation allowances, depreciation and
amortization, intangible assets, income taxes, warranty obligation, benefit
plans, contingencies and litigation.
Cash and cash equivalents: The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. The Company's credit facility with its senior lender requires
maintaining accounts with an average monthly compensating balance of not less
than $750,000.
Available-for-sale securities: Available-for-sale securities consist of
fixed income mutual funds and are stated at fair value based on quoted market
prices. The Company determines realized gains and losses on the specific
identification basis. Unrealized gains and losses on investments available for
sale are reflected in accumulated other comprehensive loss in the Consolidated
Balance Sheets and as a separate item in the Consolidated Statements of
Comprehensive Income (Loss).
Accounts receivable: Receivables are carried at net realizable value.
Reserves for uncollectable accounts are provided based on historical experience
and current trends. The Company evaluates the adequacy of these reserves
regularly.
The following is a summary of the allowance for uncollectable accounts at
December 31:
In thousands 2007 2006 2005
-----------------------------------------------------
Balance at beginning of year $1,034 $ 935 $ 711
Provisions 607 258 360
Deductions (749) (159) (136)
-----------------------
Balance at end of year $ 892 $1,034 $ 935
-----------------------------------------------------
Concentrations of credit risk with respect to accounts receivable are limited
due to the large number of customers and relatively small account balances
within the majority of the Company's customer base, and their dispersion across
different businesses.
Inventories: Inventories are stated at the lower of cost (first-in,
first-out method) or market value. Valuation allowances for slow moving and
obsolete inventories are provided based on historical experience and demand for
servicing of the displays. The Company evaluates the adequacy of these
valuation allowances regularly.
Rental equipment and property, plant and equipment: Rental equipment and
property, plant and equipment are stated at cost and depreciated over their
respective useful lives using straight line or 150% declining balance methods.
Leaseholds and improvements are amortized over the lesser of the useful lives or
term of the lease.
The estimated useful lives are as follows:
Years
-----------------------------------------
Rental equipment 10 - 15
Buildings and improvements 10 - 40
Machinery, fixtures and equipment 4 - 15
Leaseholds and improvements 5 - 27
-----------------------------------------
When rental equipment and property, plant and equipment are fully depreciated,
retired or otherwise disposed of, the cost and accumulated depreciation are
eliminated from the accounts.
Goodwill and intangibles: Goodwill and intangible assets are accounted for
in accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). Under
SFAS 142, goodwill and indefinite-lived intangible assets are no longer
amortized, but are reviewed annually for impairment, or more frequently if
indications of possible impairment exist.
Goodwill represents the excess of purchase price over the estimated fair
value of net assets acquired. Identifiable intangible assets are recorded at
cost and amortized over their estimated useful life on a straight line basis;
non-compete agreements over their term of 10 years; deferred financing costs
over the life of the related debt of two to 20 years; and other intangibles over
10 years. Total goodwill is $1,004,000, of which $938,000 relates to the
Outdoor display segment and $66,000 relates to the Indoor display segment. The
Company annually evaluates the value of its goodwill and determines if it is
impaired by comparing the carrying value of goodwill to its estimated fair
value. The Company performed the annual impairment tests for goodwill as of
October 1, 2007, 2006 and 2005, and determined that goodwill was not impaired as
of those dates. The Company also evaluates the value of its other intangible
assets by comparing the carrying value with estimated future cash flows when
indicators of possible impairment exist.
Impairment or disposal of long-lived assets: The Company evaluates whether
there has been an impairment in any of its long-lived assets, excluding
goodwill, if certain circumstances indicate that a possible impairment may
exist. An impairment in value may exist when the carrying value of a long-lived
asset exceeds its undiscounted cash flows. If it is determined that an
impairment in value has occurred, the carrying value is written down to its fair
value.
Maintenance contracts: Purchased maintenance contracts are stated at cost
and are being amortized over their economic lives of 15 years using an
accelerated method, which contemplates contract expiration, fall-out and
non-renewal.
Revenue recognition: Revenue from rental of equipment and revenue from
maintenance contracts are recognized as they accrue during the term of the
respective agreements, which generally run for periods of one month to 10 years.
At December 31, 2007, the future minimum lease payments due the Company under
operating leases that expire at varying dates through 2017 for its rental
equipment and maintenance contracts, assuming no renewals of existing leases or
any new leases, aggregating $19,531,000 was as follows: $9,458,000 - 2008,
$4,839,000 - 2009, $2,576,000 - 2010, $1,510,000 - 2011, $644,000 - 2012,
$504,000 - thereafter. The Company recognizes revenues on long-term equipment
sales contracts, which require more than three months to complete, using the
percentage of completion method. The Company records unbilled receivables
representing amounts due under these long-term equipment sales contracts, which
have not been billed to the customer. Income is recognized based on the
percentage of incurred costs to the estimated total costs for each contract.
The determination of the estimated total costs is susceptible to change on these
sales contracts. Revenues on equipment sales, other than long-term equipment
sales contracts, are recognized upon shipment when title and risk of loss passes
to the customer. Theatre receipts and other revenues are recognized at the time
service is provided.
Warranty obligations: The Company provides for the estimated cost of
product warranties at the time revenue is recognized. While the Company engages
in product quality programs and processes, including evaluating the quality of
the component suppliers, the warranty obligation is affected by product failure
rates. Should actual product failure rates differ from the Company's estimates,
revisions to increase or decrease the estimated warranty liability may be
required.
Taxes on income: Income taxes are accounted for in accordance with SFAS
No. 109, "Accounting for Income Taxes," ("SFAS 109"). Under this method,
deferred tax assets and liabilities are established for temporary differences
between the financial reporting basis and the tax basis of the Company's assets
and liabilities at tax rates expected to be in effect when such temporary
differences are expected to reverse. The temporary differences are primarily
attributable to operating loss carryforwards and depreciation. When necessary,
the Company records a valuation allowance against net deferred tax assets if,
based upon the available evidence, it is not more likely than not that the
deferred tax assets will be realized.
Effective January 1, 2007, the Company adopted the provisions of Financial
Accounting Standard Board ("FASB") Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109" ("FIN
48"). FIN 48 prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken in a
tax return. The Company must determine whether it is "more-likely-than-not"
that a tax position will be sustained upon examination, including resolution of
any related appeals or litigation processes, based on the technical merits of
the position. Once it is determined that a position meets the
more-likely-than-not recognition threshold, the position is measured to
determine the amount of benefit to recognize in the financial statements. FIN
48 applies to all tax positions related to income taxes subject to FASB
Statement No. 109, "Accounting for Income Taxes." The interpretation scopes out
income tax positions related to FASB Statement No. 5, "Accounting for
Contingencies." See Note 7 - Income Taxes.
As a result of the implementation of FIN 48, the Company recognized a
$250,000 adjustment for interest and penalties in connection with uncertain tax
positions. This increase was accounted for as an adjustment to the beginning
balance of retained earnings. The Company's policy is to classify interest and
penalties related to uncertain tax positions in income tax expense. To date,
there have been no interest or penalties charged to the Company in relation to
the underpayment of income taxes.
Foreign currency: The functional currency of the Company's non-U.S.
business operation is the applicable local currency. The assets and liabilities
of such operation are translated into U.S. dollars at the year-end rate of
exchange, and the income and cash flow statements are converted at the average
annual rate of exchange. The resulting translation adjustment is recorded in
accumulated other comprehensive loss in the Consolidated Balance Sheets and as a
separate item in the Consolidated Statements of Comprehensive Income (Loss).
Gains and losses related to the settling of transactions not denominated in the
functional currency are recorded as a component of general and administrative
expenses in the Consolidated Statements of Operations.
Share-based compensation plans: On January 1, 2006, the Company adopted
SFAS 123 (revised 2004) "Share-Based Payment" ("SFAS 123R"), which requires the
measurement and recognition of compensation expense for all share-based payment
awards made to employees and directors including employee stock options based on
estimated fair values. Under the fair value recognition provisions of SFAS 123R
compensation is estimated at the grant date based on the fair value of the
awards expected to vest and recognized as expense ratably over the requisite
service period of the award. The Company has used the binomial options-pricing
valuation model to estimate fair value of share-based awards, which requires
various assumptions including estimating stock price volatility, expected life
of the stock option and risk free interest rate. For details on the accounting
effect of share-based compensation see Note 13 - Share-Based Compensation. The
Company elected the "modified prospective method" of transition as permitted by
SFAS 123R. Under this transition method, the Company is required to record
compensation expense or all awards granted after the date of adoption and for
the unvested portion of previously granted awards that were outstanding at the
date of adoption, and accordingly, periods prior to adoption were not restated.
SFAS 123R required the Company to apply an estimated forfeiture rate in
calculating the period expense, as opposed to recognizing forfeitures as an
expense reduction as they occur. The Company has not experienced any
forfeitures that would need to be taken into consideration in SFAS 123R
calculations.
Prior to January 1, 2006, the Company accounted for stock options granted
in accordance with the provisions and related interpretations of APB 25 as
permitted by Statement of Accounting Standards No. 123 "Accounting for
Stock-Based Compensation" ("SFAS 123"). Therefore, there was no share-based
compensation recorded in the Consolidated Statements of Operations related to
employee and director stock options for the years ended December 31, 2005 and
2004.
Recent accounting pronouncements: In September 2006, the FASB issued SFAS
No. 157, "Fair Value Measurements" ("SFAS 157") that defines fair value,
establishes a framework for measuring fair value in accordance with accounting
principles generally accepted in the United States and expands the disclosures
about fair value measurements. On December 14, 2007, the FASB issued proposed
FASB Staff Position No. FAS 157-b, "Effective Date of FASB Statement No. 157"
(the "proposed FSP"). The proposed FSP would amend SFAS 157, to delay the
effective date of SFAS 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (that is, at least annually). The
proposed FSP defers the effective date of SFAS 157 to fiscal years beginning
after November 15, 2008, and interim periods within those fiscal years for items
within the scope of the proposed FSP. The Company is subject to the remaining
provisions of SFAS 157 beginning December 30, 2007. Management is assessing the
potential impact of SFAS 157 on the Company's financial condition and results of
operations, however it believes that the impact on the financial assets is not
significant.
In February 2007, the FASB issued Statement of Financial Accounting
Standards No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities" ("SFAS 159"). SFAS 159 permits entities to choose to measure many
financial instruments and certain other items at fair value that are not
currently required to be measured at fair value. SFAS 159 also establishes
presentation and disclosure requirements designed to facilitate comparisons
between entities that chose different measurement attributes for similar assets
and liabilities. SFAS 159 is effective for financial statements issued for
fiscal years beginning after November 15, 2007. We have not yet determined the
impact, if any, that the implementation of SFAS 159 will have on our results of
operations or financial condition.
In December 2007, the FASB issued Statement of Financial Accounting
Standards No. 141R, "Business Combinations" ("SFAS 141R"), which replaces FASB
Statement No. 141. Under SFAS 141R, an acquiring entity will be required to
recognize all the assets acquired and liabilities assumed in a transaction at
the acquisition date fair value with limited exceptions. SFAS 141R establishes
principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed,
any non-controlling interest in the acquiree and the goodwill acquired. SFAS
141R also establishes disclosure requirements which will enable users to
evaluate the nature and financial effects of the business combination. SFAS
141R is effective for financial statements issued for fiscal years beginning
after December 15, 2008. Early adoption is prohibited. We have not yet
determined the impact, if any, that the implementation of SFAS 141R will have on
our results of operations or financial condition.
In December 2007, the FASB issued FASB Statement No. 160, "Noncontrolling
Interests in Consolidated Financial Statements - An Amendment of ARB No. 51"
("SFAS 160"). SFAS 160 establishes new accounting and reporting standards for
the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. Specifically, SFAS 160 requires the recognition of a noncontrolling
interest (minority interest) as equity in the consolidated financial statements
and separate from the parent's equity. The amount of net income attributable to
the noncontrolling interest will be included in consolidated net income on the
face of the income statement. SFAS 160 clarifies that changes in a parent's
ownership interest in a subsidiary that do not result in deconsolidation are
equity transactions if the parent retains its controlling financial interest.
In addition, SFAS 160 requires that a parent recognize a gain or loss in net
income when a subsidiary is deconsolidated. Such gain or loss will be measured
using the fair value of the noncontrolling equity investment on the
deconsolidation date. SFAS 160 also includes expanded disclosure requirements
regarding the interests of the parent and its noncontrolling interest. SFAS 160
is effective for fiscal years beginning on or after December 15, 2008. Earlier
adoption is prohibited.
Reclassifications: Certain reclassifications of prior years' amounts have
been made to conform to the current year's presentation.
2. Available-for-Sale Securities
Available-for-sale securities are carried at estimated fair values and the
unrealized holding gains and losses are excluded from earnings and reported net
of income taxes in accumulated other comprehensive income (loss) until realized.
An adjustment of $28,000 and $40,000 was recorded to reflect the unrealized loss
on available-for-sale securities at December 31, 2007 and 2006, respectively.
Management believes that these changes in the fair value of securities are
temporary. The Company did not realize any gains or losses during 2007 and
recognized a loss of $15,000 during 2006 on the sales of available-for-sale
securities. Previously, an unrealized loss of $23,000, had been recorded in
accumulated other comprehensive income (loss) for the sold available-for-sale
securities in 2006.
Available-for-sale securities consist of the following:
In thousands 2007 2006
---------------------------------------------------
Fair Unrealized Fair Unrealized
Value Losses Value Losses
------------------------------------
Mutual funds $171 $45 $199 $17
---------------------------------------------------
3. Inventories
Inventories consist of the following:
In thousands 2007 2006
---------------------------------
Raw materials $4,743 $4,508
Work-in-progress 1,351 1,358
Finished goods 759 601
---------------
$6,853 $6,467
---------------------------------
4. Rental Equipment
Rental equipment consist of the following:
In thousands 2007 2006
--------------------------------------------
Indoor rental equipment $48,506 $54,401
Outdoor rental equipment 18,120 34,502
-----------------
$66,626 $88,903
--------------------------------------------
All the rental equipment is pledged as collateral under the Company's credit
facility. The 1992 acquisition of the outdoor rental equipment was fully
depreciated as of December 31, 2007, and the cost and accumulated deprecation
were eliminated from the accounts.
5. Property, Plant and Equipment
Property, plant and equipment consist of the following:
In thousands 2007 2006
-----------------------------------------------------
Land, buildings and improvements $32,421 $31,706
Machinery, fixtures and equipment 6,586 6,765
Leaseholds and improvements 851 988
-----------------
$39,858 $39,459
-----------------------------------------------------
Land, buildings and equipment having a net book value of $26.2 million and
$25.7 million at December 31, 2007 and 2006, respectively, are pledged as
collateral under various mortgage agreements.
6. Other Assets
Other assets consist of the following:
In thousands 2007 2006
-------------------------------------------------------------------
Receivable - sale/leaseback of facility $ - $2,580
Spare parts 650 750
Deferred financing costs, net of accumulated
amortization of $966 - 2007 and $641 - 2006 612 798
Investment in joint venture (see Note 17) 449 444
Prepaids 403 347
Noncompete agreements, net of accumulated
amortization of $221 - 2007 and $186 - 2006 229 274
Maintenance contracts, net of accumulated
amortization of $2,345 - 2007 and $2,303 - 2006 42 84
Deposits and other 727 751
---------------
$3,112 $6,028
-------------------------------------------------------------------
The receivable - sale/leaseback of facility relates to the sale/leaseback of the
Company's Norwalk, Connecticut facility in 2004. The $2.6 million receivable is
secured by a purchase money mortgage subordinated to a $3.5 million first
mortgage in favor of the purchaser. The receivable is due June 2008 and
therefore, at December 31, 2007, has been reclassified to a current asset in
prepaids and other in the Consolidated Balance Sheets. The base four-year term
of the sale/leaseback ends in June 2008. The Company terminated its subsequent
three-year lease for part of the property during the second quarter of 2007 and
recognized $293,000 of the deferred gain. The deferred gain represented the
present value of the lease payments over the term of the leaseback and has been
recognized proportionately to the rental charge over the base four-year term.
Deferred financing costs relate to the issuance of the 8 1/4% Limited
convertible senior subordinated notes due 2012, the 9 1/2% Subordinated
debentures due 2012, mortgages and other financing agreements.
Noncompete agreements relate to the acquisition of theatre leases and a
$450,000 restrictive covenant agreement relating to a theatre acquisition.
Maintenance contracts represent the present value of acquired agreements to
service outdoor display equipment.
Future amortization expense of intangible assets over the next five years
is expected as follows: $211,000 - 2008, $147,000 - 2009, $139,000 - 2010,
$135,000 - 2011, $80,000 - 2012.
7. Taxes on Income
The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of
the implementation of FIN 48, the Company recognized a $250,000 adjustment for
interest and penalties in connection with uncertain tax positions. This
increase was accounted for as an adjustment to the beginning balance of retained
earnings. The Company's policy is to classify interest and penalties related to
uncertain tax positions in income tax expense.
The Company is subject to U.S. federal income tax as well as income tax in
multiple state and local jurisdictions and Canadian federal and provincial
income tax. Currently, no federal or state or provincial income tax returns are
under examination. The tax years 2003 through 2006 remain open to examination
by the major taxing jurisdictions and the 2002 tax year remains open to
examination by some state and local taxing jurisdictions to which the Company is
subject.
The components of income tax expense (benefit) are as follows:
In thousands 2007 2006 2005
------------------------------------------------------
Current:
Federal $ - $ - $ -
State and local - - 78
Foreign 131 234 292
---------------------------
131 234 370
---------------------------
Deferred:
Federal (508) (1,562) (1,122)
State and local (276) (293) (211)
---------------------------
(784) (1,855) (1,333)
---------------------------
Total income tax benefit $(653) $(1,621) $ (963)
------------------------------------------------------
Income (loss) before income taxes, including income from joint venture, is from
the United States ($5,911) and ($3,734) and Canada $163 and $466 for the years
ended December 31, 2007 and 2006, respectively.
Income tax benefits differed from the expected federal statutory rate of 34.0%
as follows:
2007 2006 2005
---------------------------------------------------------------------
Statutory federal income tax benefit rate (34.0%) (34.0%) (34.0%)
State income taxes, net of federal benefit (3.2) (5.9) (3.1)
Foreign income taxed at different rates 1.3 2.3 2.7
Gain on purchase of the Company's
9% subordinated debentures - (11.4) -
Debt conversion costs 8.0 - -
Deferred tax asset valuation reserve 16.7 - -
Other (0.2) (0.6) (0.5)
------------------------
Effective income tax rate (11.4%) (49.6%) (34.9%)
---------------------------------------------------------------------
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities are as follows:
In thousands 2007 2006
--------------------------------------------------
Deferred tax asset:
Tax credit carryforwards $ 1,038 $1,038
Operating loss carryforwards 6,780 5,424
Net pension costs 1,274 1,207
Accruals 599 508
Bad debts 297 361
Other 283 482
Valuation allowance (1,270) (56)
----------------
9,001 8,964
----------------
Deferred tax liability:
Depreciation 8,532 8,930
Other 469 510
----------------
9,001 9,440
----------------
Net deferred tax liability $ - $ 476
--------------------------------------------------
Tax credit carryforwards primarily relate to federal alternative minimum taxes
of $0.9 million paid by the Company, which may be carried forward indefinitely
and applied against regular federal taxes. Operating tax loss carryforwards
primarily relate to U.S. federal net operating loss carryforwards of
approximately $18.4 million, which begin to expire in 2019.
A valuation allowance has been established in the fourth quarter of 2007
for the amount of deferred tax assets related to Federal and state net operating
loss carryforwards, which management estimates will more likely than not expire
unused.
8. Accrued Liabilities
Accrued liabilities consist of the following:
In thousands 2007 2006
----------------------------------------------------
Deferred revenues $2,220 $1,678
Compensation and employee benefits 1,029 1,115
Interest payable 644 943
Taxes payable 626 482
Warranty obligations 317 186
Pension liability (see Note 12) 210 95
Other 2,587 2,430
---------------
$7,633 $6,929
----------------------------------------------------
Warranty obligations: The Company provides for the estimated cost of product
warranties at the time revenue is recognized. While the Company engages in
product quality programs and processes, including evaluating the quality of the
component suppliers, the warranty obligation is affected by product failure
rates. Should actual product failure rates differ from the Company's estimates,
revisions to increase or decrease the estimated warranty liability may be
required. A summary of the warranty liabilities for the three years ended
December 31 is as follows:
In thousands 2007 2006 2005
----------------------------------------------------
Balance at beginning of year $ 186 $ 212 $ 260
Provisions 265 139 100
Deductions (134) (165) (148)
---------------------
Balance at end of year $ 317 $ 186 $ 212
----------------------------------------------------
9. Long-Term Debt
Long-term debt consist of the following:
In thousands 2007 2006
--------------------------------------------------------------
8 1/4% Limited convertible senior
subordinated notes due 2012 $10,129 $17,958
9 1/2% Subordinated debentures due 2012 1,057 1,057
Term loan - bank secured, due in quarterly
installments through 2009 12,206 14,350
Revolving loan - secured 5,000 5,000
Real estate mortgages - secured, due in
monthly installments through 2026 17,680 16,200
Loans payable - CEBA, secured, due in
monthly installments through 2011 103 134
-----------------
46,175 54,699
Less portion due within one year 6,276 3,162
-----------------
Long-term debt $39,899 $51,537
--------------------------------------------------------------
Payments of long-term debt due for the next five years are:
In thousands 2008 2009 2010 2011 2012
-----------------------------------------------------------
$6,276 $13,451 $1,405 $1,421 $13,930
-----------------------------------------------------------
On March 15, 2007, the Company completed an offer to exchange 133 shares of its
Common Stock, $1 par value per share, for each $1,000 principal amount of its 8
1/4% Limited convertible senior subordinated notes due 2012 (the "8 1/4%
Notes"). The offer was for up to $9.0 million principal amount, or
approximately 50% of the $18.0 million principal amount outstanding of the 8
1/4% Notes. A total of $7.8 million principal amount of the 8 1/4% Notes were
exchanged, leaving $10.1 million principal amount of the 8 1/4% Notes
outstanding. A total of 1,041,257 shares of Common Stock were issued in the
exchange. In accordance with FASB No. 84 "Induced Conversions of Convertible
Debt," the Company recorded a non-cash, non-tax deductible charge for the
exchange of debt for Common Stock and additional amortization of prepaid
financing costs aggregating $1.5 million in debt conversion cost as a result of
the exchange offer.
On March 13, 2006 and April 14, 2004, the Company completed two separate
offers to exchange $1,000 principal amount of its 8 1/4% Notes for each $1,000
principal amount of its 7 1/2% Convertible subordinated notes (the "7 1/2%
Notes"). A total of $18.0 million principal amount of the 7 1/2% Notes were
exchanged ($0.1 million in 2006 and $17.9 million in 2004), leaving $12.2
million principal amount of 7 1/2% Notes outstanding. The 8 1/4% Notes provide
for a higher interest rate, which is payable semi-annually, have a longer term,
were convertible into Common Stock at a lower conversion price of $9.00 per
share until March 1, 2007, may be redeemed by the Company, in whole or in part,
at declining premiums and were senior to the 7 1/2% Notes and are senior to the
Company's 9 1/2% Subordinated debentures due 2012 (the "Debentures").
On June 15, 2006, the $12.2 million principal amount of outstanding 7 1/2%
Notes that were due December 1, 2006 were redeemed at par. Interest was payable
semi-annually. The 7 1/2% Notes were convertible at the option of the holder
into shares of Common Stock, $1 par value per share, of the Company at any time
prior to the close of business on June 14, 2006 at the rate of $14.013 per
share, which conversion rate was substantially above the market price of the
Common Stock. The Company utilized $6.1 million of its non-revolving line of
credit to finance one-half of the redemption of the 7 1/2% Notes and utilized
$6.1 million of cash for the remaining one-half.
The Debentures are due in annual sinking fund payments of $105,700
beginning in 2009, with the remainder due in 2012. Interest is payable
semi-annually. The Company may redeem the Debentures, in whole or in part, at
declining premiums.
The Company has a bank Credit Agreement, which provides for a term loan of
$10.0 million, a non-revolving line of credit of up to $6.2 million to finance
purchases and/or redemptions of one-half of the 7 1/2% Notes, and a revolving
loan of up to $5.0 million at variable interest rates ranging from LIBOR plus
2.25% to Prime (ranging from 7.25% to 7.41% at December 31, 2007). The Credit
Agreement matures on May 1, 2009. $6.1 million of the non-revolving line of
credit was drawn in June 2006 to finance one-half of the redemption of the 7
1/2% Notes and on December 31, 2006, was converted into a four-year term loan
maturing May 1, 2009. At December 31, 2007, the entire revolving loan facility
had been drawn. The Credit Agreement requires an annual facility fee on the
unused commitment of 0.25%, and requires compliance with certain financial
covenants, which include a fixed charge coverage ratio of 1.1 to 1.0, a
loan-to-value ratio of not more than 50%, a cap on capital expenditures and
maintaining accounts with an average monthly compensating balance of not less
than $750,000. As of December 31, 2007, the Company was in compliance with the
forgoing financial covenants, but the Company was not in compliance with
maintaining a tangible net worth of not less than $24.75 million and a leverage
ratio of 3.0 to 1.0, which its senior lender waived subsequent to year end. In
addition, the tangible net worth covenant was modified to $23.5 million as of
March 31, 2008. The amounts outstanding under the Credit Agreement are
collateralized by all of the Display division assets.
The Company has mortgages on certain of its facilities at variable rates of
interest, which are payable in monthly installments, the last of which extends
to 2026. At December 31, 2007, such variable interest rates ranged from 7.00%
to 7.69%. During 2007, the Company secured the refinancing of $1.6 million and
an additional $2.1 million mortgage to finance the expansion of a theatre
location. The refinanced mortgage now has a maturity date of March 2018 and an
interest rate at 7.69%, with interest only payments through April 2008. Also
during 2007, the Company secured a five-year $2.0 million financing of its
rental property in New Mexico at prime rate of interest, 7.25% at December 31,
2007.
During 1999, the Company received $400,000 structured as forgivable loans
from the State of Iowa, City of Des Moines and Polk County, which were
classified as deferred credits, deposits and other in the Consolidated Balance
Sheets. The loans were forgiven on a pro-rata basis when predetermined
employment levels were attained through December 31, 2007. In addition, during
2006, the Company received $150,000 from the State of Iowa and City of Des
Moines as a zero percent interest loan, amortizing on a straight-line basis for
five years. At December 31, 2007, the present value of this loan, assuming a 6%
interest rate, the rate of previous loans from the State of Iowa and City of Des
Moines, is $92,000. The premium is being amortized using the effective interest
method and is included in the carrying value of the loan.
During 2007, the Company incurred $3.9 million of interest costs; and also
$1.5 million of debt conversion costs relating to the exchange of Common Stock
for the 8 1/4% Notes. At December 31, 2007, the estimated fair value of the 8
1/4% Notes and Debentures was $9.6 million and $1.0 million, respectively. The
estimated fair value of the remaining long-term debt approximates the carrying
value. At December 31, 2007, the Company was not involved in any derivative
financial instruments.
10. Stockholders' Equity
During 2007, the Board of Directors did not declare any quarterly cash dividends
on the Company's Common Stock or on the Company's Class B Stock in order to
preserve cash and pay down debt. Each share of Class B Stock is convertible at
any time into one share of Common Stock and has ten votes per share, as compared
to Common Stock, which has one vote per share but receives a 10% higher
dividend.
The Company has 3.0 million shares of authorized and unissued capital stock
designated as Class A Stock, $1.00 par value. Such shares have no voting rights
except as required by law and would receive a 10% higher dividend than the
Common Stock.
The Company also has 0.5 million shares of authorized and unissued capital
stock designated as Preferred Stock, $1.00 par value.
The stockholders previously approved an increase in the authorized shares
of Common Stock to 11.0 million and Class A Stock to 6.0 million. A Certificate
of Amendment increasing the authorized shares will be filed when deemed
necessary.
Shares of Common Stock reserved for future issuance in connection with
convertible securities and stock option plans were 65,000 and 2.1 million at
December 31, 2007 and 2006, respectively.
On March 15, 2007, 1,041,257 shares of Common Stock were issued in exchange
for $7,829,000 principal amount of the 8 1/4% Notes, resulting in an increase in
stockholder's equity of the same amount.
11. Engineering Development
Engineering development expense was $414,000, $449,000 and $383,000 for 2007,
2006, and 2005, respectively, which is included in general and administrative
expenses in the Consolidated Statements of Operations.
12. Pension Plan
On September 29, 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans" ("SFAS 158"). SFAS 158
requires, among other things, an employer to recognize the funded status of its
benefit plans in its balance sheet. The Company adopted SFAS 158 as of December
31, 2006.
All eligible salaried employees of Trans-Lux Corporation and certain of its
subsidiaries are covered by a non-contributory defined benefit pension plan.
Pension benefits vest after five years of service and are based on years of
service and final average salary. The Company's general funding policy is to
contribute at least the required minimum amounts sufficient to satisfy
regulatory funding standards, but not more than the maximum tax-deductible
amount. As of December 31, 2003, the benefit service under the pension plan had
been frozen and, accordingly, there is no service cost for each of the three
years ended December 31, 2007.
For 2007 and 2006, due primarily to a drop in the discount rate and the
effect of the plan's investment experience at the December 31 measurement dates
on the valuation of plan assets, the accrued benefit obligation of the plan
exceeded the fair value of plan assets. The Company's pension obligations for
this plan exceeded plan assets by $3.2 million at December 31, 2007.
The Company employs a total return investment approach whereby a mix of
equities and fixed income investments are used to maximize the long-term return
of plan assets for a prudent level of risk. The intent of this strategy is to
minimize plan expenses by outperforming plan liabilities over the long run.
Risk tolerance is established through careful consideration of plan liabilities,
plan funded status and corporate financial condition. The portfolio contains a
diversified blend of equity and fixed income investments. Investment risk is
measured and monitored on an ongoing basis through annual liability
measurements, periodic asset/liability studies and quarterly investment
portfolio reviews.
At December 31, 2007 and 2006, the Company's pension plan weighted average asset
allocations by asset category are as follows:
2007 2006
------------------------------------------------
Guaranteed investment contracts 42.2% 48.8%
Equity and index funds 55.4 48.8
Bonds 2.3 2.1
Money market funds 0.1 0.3
--------------
100.0% 100.0%
------------------------------------------------
Bonds include $167,000 of the Company's 9 1/2% subordinated debentures for 2007
and 2006.
The funded status of the plan as of December 31, 2007 and 2006 is as follows:
In thousands 2007 2006
-----------------------------------------------------------------------
Change in benefit obligation:
Projected benefit obligation at beginning of year $10,906 $11,024
Interest cost 641 611
Actuarial loss 101 9
Benefits paid (1,167) (738)
------------------
Projected benefit obligation at end of year $10,481 $10,906
------------------
Change in plan assets:
Fair value of plan assets at beginning of year $ 7,878 $ 7,862
Actual return on plan assets 286 754
Company contributions 287 -
Benefits paid (1,167) (738)
------------------
Fair value of plan assets at end of year $ 7,284 $ 7,878
------------------
Funded status:
Funded status (underfunded) $(3,197) $(3,028)
Net actuarial loss 3,635 3,790
Unrecognized prior service cost 76 93
------------------
Net amount $ 514 $ 855
------------------
Amounts recognized in the balance sheet consist of:
Accrued benefit liability $(2,009) $(1,585)
Unrecognized prior service cost 76 93
Accumulated other comprehensive loss 2,447 2,347
------------------
Net amount $ 514 $ 855
------------------
Weighted average assumptions as of December 31:
Discount rate:
Components of cost 6.00% 5.75%
Benefit obligations 6.25% 6.00%
Expected return on plan assets 8.75% 8.75%
Rate of compensation increase 3.00% 3.00%
-----------------------------------------------------------------------
The accumulated benefit obligation at December 31, 2007 and 2006 was $9.3
million and $9.5 million, respectively. The minimum required contribution for
2008 is expected to be $210,000.
Expected projected benefit payments due for the next five years are:
In thousands 2008 2009 2010 2011 2012
------------------------------------------------
$441 $350 $439 $955 $838
------------------------------------------------
The following table presents the components of the net periodic pension cost for
the three years ended December 31, 2007:
In thousands 2007 2006 2005
----------------------------------------------------------
Interest cost $ 641 $ 611 $ 619
Expected return on plan assets (677) (654) (643)
Amortization of prior service cost 17 17 17
Amortization of net actuarial loss 281 311 268
Settlement charge 366 - -
---------------------
Net periodic pension cost $ 628 $ 285 $ 261
----------------------------------------------------------
In the fourth quarter of 2007 the Company recognized $366,000 of its
unrecognized losses as a settlement charge relating to the total lump sum
payments made during the year.
The Company does not offer any post-retirement benefits other than the
pension retirement benefits described herein.
13. Share-Based Compensation
Effective January 1, 2006, the Company adopted the provisions of SFAS 123R,
which establishes the accounting for stock-based awards exchanged for employee
services. SFAS 123R requires all share-based payments to employees, including
grants of employee stock options, to be measured at fair value and expensed in
the Consolidated Statements of Operations over the service period (generally the
vesting period). The Company elected the "modified prospective method" of
transition as permitted by SFAS 123R. Under this transition method, the Company
is required to record compensation expense for all awards granted after the date
of adoption and for the unvested portion of previously granted awards that were
outstanding at the date of adoption, and accordingly, periods prior to adoption
were not restated. SFAS 123R required the Company to apply an estimated
forfeiture rate in calculating the period expense, as opposed to recognizing
forfeitures as an expense reduction as they occur. The Company has not
experienced any forfeitures that would need to be taken into consideration in
SFAS 123R calculations. The Company previously accounted for share-based
compensation plans under APB 25 and the related interpretations and provided the
required SFAS 123 pro forma disclosures for employee stock options.
The Company has three stock option plans. Under the 1995 Stock Option
Plan, 125,000 shares of Common Stock were authorized for grant to key employees.
Under the Non-Employee Director Stock Option Plan, 30,000 shares of Common Stock
were authorized for grant. Under the Non-Statutory Stock Option Agreement,
10,000 shares of Common Stock were authorized and issued to the former Chairman
of the Board.
Changes in the stock option plans are as follows:
Weighted
Number of Shares Average
-------------------------------- Exercise
Authorized Granted Available Price
--------------------------------------------------------------------
Balance January 1, 2005 156,239 81,039 75,200 $6.39
Terminated (73,439) (11,739) (61,700) 8.10
Granted - 2,000 (2,000) 6.25
-----------------------------
Balance December 31, 2005 82,800 71,300 11,500 6.10
Terminated - (2,000) 2,000 6.08
Exercised (2,500) (2,500) - 4.95
Granted - 500 (500) 5.95
-----------------------------
Balance December 31, 2006 80,300 67,300 13,000 6.15
Terminated (1,300) (2,300) 1,000 9.63
Exercised (2,500) (2,500) - 4.03
Granted - 2,500 (2,500) 5.45
-----------------------------
Balance December 31, 2007 76,500 65,000 11,500 6.08
--------------------------------------------------------------------
Under the 1995 Stock Option Plan, option prices must be at least 100% of the
market value of the Common Stock at time of grant. No option may be exercised
prior to one year after date of grant. Exercise periods are for ten years from
date of grant and terminate at a stipulated period of time after an employee's
termination of employment. At December 31, 2007, options for 45,000 shares with
exercise prices ranging from $5.40 to $9.00 per share were outstanding, all of
which were exercisable. During 2007, no options were exercised or granted, and
options for 1,300 shares expired. During 2006, no options were exercised,
granted or expired. During 2005, no options were exercised or granted, and
options for 9,739 shares expired. No additional options can be granted under
the 1995 Plan.
Under the Non-Employee Director Stock Option Plan, option prices must be at
least 100% of the market value of the Common Stock at time of grant. No option
may be exercised prior to one year after date of grant and the optionee must be
a director of the Company at time of exercise, except in certain cases as
permitted by the Compensation Committee. Exercise periods are for six years
from date of grant and terminate at a stipulated period of time after an
optionee ceases to be a director. At December 31, 2007, options for 10,000
shares with exercise prices ranging from $4.95 to $7.00 per share were
outstanding, 7,500 of which were exercisable. During 2007, options for 2,500
shares were granted with an exercise price of $5.45 per share, 2,500 options
were exercised, which had an intrinsic value of $10,000 determined as a
difference between the market price at the date of exercise and the exercise
price, and options for 1,000 shares expired. During 2006, options for 500
shares were granted with an exercise price of $5.95 per share, 2,500 options
were exercised, which had an intrinsic value of $7,000, and options for 2,000
shares expired. During 2005, options for 2,000 shares were granted with an
exercise price of $6.25 per share, no options were exercised, and options for
2,000 shares expired.
Under the Non-Statutory Stock Option Agreement for the former Chairman of
the Board, the option price must be at least 100% of the market value of the
Common Stock at time of grant and the exercise period is for 10 years from date
of grant. At December 31, 2007, the options for 10,000 shares with an exercise
price of $4.025 were outstanding and exercisable. During 2007, 2006 and 2005,
no options were exercised, granted or expired.
The following tables summarize information about stock options outstanding at
December 31, 2007:
Weighted
Average Weighted Aggregate
Range of Number Remaining Average Intrinsic
Exercise Prices Outstanding Contractual Life Exercise Price Value
-------------------------------------------------------------------------
$4.03 - $5.39 12,000 3.3 $4.18 $27,000
5.40 - 6.09 29,500 4.2 5.41 29,000
6.10 - 6.99 5,500 3.6 6.23 1,000
7.00 - 8.59 5,500 5.8 7.00 -
9.00 - 9.00 12,500 0.7 9.00 -
------ -------
65,000 3.4 6.08 $57,000
-------------------------------------------------------------------------
Weighted Aggregate
Range of Number Average Intrinsic
Exercise Prices Exercisable Exercise Price Value
-------------------------------------------------------------------------
$4.03 - $5.39 12,000 $4.18 $27,000
5.40 - 6.09 27,000 5.41 27,000
6.10 - 6.99 5,500 6.23 1,000
7.00 - 8.59 5,500 7.00 -
9.00 - 9.00 12,500 9.00 -
------ -------
62,500 6.10 $55,000
-------------------------------------------------------------------------
As of December 31, 2007 there was $4,000 of total unrecognized compensation cost
related to non-vested options granted under the Plans, which will be recognized
in 2008.
The estimated fair value of options granted during 2007, 2006 and 2005 was
$1.83, $2.86 and $2.66 per share, respectively. The fair value of options
granted under the Company's stock option plans during 2007, 2006 and 2005 was
estimated on dates of grant using the binomial options-pricing model with the
following weighted average assumptions used:
2007 2006 2005
----------------------------------------------------------------
Dividend yield - - 2.06%
Expected volatility 23.82% 42.17% 43.00%
Risk free interest rate 4.34% 4.76% 4.59%
Expected lives of option grants (years) 4.0 4.0 4.0
----------------------------------------------------------------
Prior to the adoption of SFAS 123R, the Company provided the disclosures
required under SFAS 123. The Company did not recognize stock option-based
compensation cost in its Consolidated Statements of Operations for the periods
prior to the adoption of SFAS 123R, as all options granted had an exercise price
equal to the market price of its Common Stock on the date of grant.
The following table illustrates the effect on net loss and loss per share for
the year ended December 31, 2005 as if the Company had applied the fair value
recognition provisions of SFAS 123 to stock-based employee compensation:
In thousands, except per share data 2005
--------------------------------------------------------------
Net loss, as reported $(1,793)
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards, net of tax 9
-------
Pro forma net loss $(1,802)
-------
Loss per share:
Basic and diluted, as reported $ (1.42)
Basic and diluted, pro forma $ (1.43)
--------------------------------------------------------------
14. Loss Per Common Share
Basic loss per common share is computed by dividing net loss by the weighted
average number of common shares outstanding for the period. The Company's
diluted loss per common share is calculated by adjusting net loss for the
after-tax interest expense on convertible debt and dividing that amount by the
weighted average number of common shares outstanding, adjusted for shares that
would be assumed outstanding after convertible debt conversion and stock options
vested under the treasury stock method. At December 31, 2007, there were no
outstanding convertible debt and outstanding stock options to purchase 65,000
shares of Common Stock were excluded from the calculation of diluted loss per
share because their impact would have been anti-dilutive.
15. Commitments and Contingencies
Commitments: The Company has employment agreements with certain executive
officers, which expire at various dates through March 2010 and a consulting
agreement, with a private consulting company owned by the family of a certain
board member who is a former officer of the Company and performs the consulting
services on behalf of the consulting company, which expires December 2014. At
December 31, 2007, the aggregate commitment for future salaries and consulting
fees, excluding bonuses, was approximately $3.4 million.
Contingencies: The Company is subject to legal proceedings and claims,
which arise in the ordinary course of its business. The Company is not a party
to any pending legal proceedings and claims that it believes will have a
material adverse effect on the consolidated financial position or operations of
the Company.
Operating leases: Theatre and other premises are occupied under operating
leases that expire at varying dates through 2044. Certain of these leases
provide for the payment of real estate taxes and other occupancy costs. Future
minimum lease payments due under operating leases at December 31, 2007
aggregating $3,648,000 are as follows: $772,000 - 2008, $529,000 - 2009,
$509,000 - 2010, $455,000 - 2011, $304,000 - 2012, $1,079,000 - thereafter.
Rent expense was $793,000, $908,000 and $1,053,000 for the years ended December
31, 2007, 2006 and 2005, respectively.
Guarantees: The Company has guaranteed $0.5 million (75%) of a $0.7
million business loan to finance theatre equipment held by its joint venture,
MetroLux Theatres, until May 2011, and, accordingly has recognized a liability
for $33,000. The unrelated 50% partner of MetroLux Theatres also guaranteed
$0.5 million (75%) of the $0.7 million business loan. The assets of MetroLux
Theatres collateralize this business loan.
16. Business Segment Data
Operating segments are based on the Company's business components about which
separate financial information is available, and are evaluated regularly by the
Company's chief operating decision makers in deciding how to allocate resources
and in assessing performance.
The Company evaluates segment performance and allocates resources based
upon operating income. The Company's operations are managed in three reportable
business segments. The Display Division comprises two operating segments,
Indoor display and Outdoor display. Both design, produce, lease, sell and
service large-scale, multi-color, real-time electronic information displays.
Both operating segments are conducted on a global basis, primarily through
operations in the U.S. The Company also has operations in Canada. The Indoor
display and Outdoor display segments are differentiated primarily by the
customers they serve. The Entertainment/real estate segment owns a chain of
motion picture theatres in the western Mountain States and income-producing real
estate properties. Segment operating income is shown after operating expenses
and sales, general and administrative expenses directly associated with the
segment. The Entertainment/real estate segment includes the operating results
of the theatre joint venture, MetroLux Theatres. Corporate general and
administrative items relate to costs that are not directly identifiable with a
segment. There are no intersegment sales.
Foreign revenues represent less than 10% of the Company's revenues and
therefore are not separately disclosed. The foreign operation does not
manufacture their own equipment; the domestic operation provides the equipment
that the foreign operation leases or sells. The foreign operation operates
similarly to the domestic operation and has similar profit margins.
Information about the Company's operations in its three business segments as of
December 31, 2007 and 2006 and for the three years ended December 31, 2007 is as
follows:
In thousands 2007 2006 2005
---------------------------------------------------------------------------
Revenues:
Indoor display $10,855 $13,859 $15,261
Outdoor display 26,048 26,607 25,742
Entertainment/real estate 14,302 13,445 13,365
---------------------------
Total revenues $51,205 $53,911 $54,368
---------------------------
Operating income (loss):
Indoor display $(1,560) $ (361) $ 1,136
Outdoor display 1,381 1,393 520
Entertainment/real estate 3,341 3,135 2,862
---------------------------
Total operating income 3,162 4,167 4,518
Other income 629 87 199
Corporate general and administrative expenses (4,419) (3,294) (3,601)
Interest expense - net (3,645) (4,228) (3,872)
Debt conversion cost (1,475) - -
Income tax benefit 653 1,621 963
---------------------------
Net loss $(5,095) $(1,647) $(1,793)
---------------------------
Assets:
Indoor display $27,803 $31,529
Outdoor display 21,711 23,287
Entertainment/real estate 27,683 27,691
-----------------
Total identifiable assets 77,197 82,507
General corporate 6,762 5,965
-----------------
Total assets $83,959 $88,472
-----------------
Depreciation and amortization:
Indoor display $ 5,229 $ 5,709 $ 5,894
Outdoor display 2,111 2,532 2,521
Entertainment/real estate 1,074 1,038 1,016
General corporate 357 264 254
---------------------------
Total depreciation and amortization $ 8,771 $ 9,543 $ 9,685
---------------------------
Capital expenditures:
Indoor display $ 3,182 $ 3,690 $ 4,270
Outdoor display 857 748 883
Entertainment/real estate 830 551 1,654
General corporate 3 1 2
---------------------------
Total capital expenditures $ 4,872 $ 4,990 $ 6,809
---------------------------------------------------------------------------
17. Joint Venture
The Company has a 50% ownership in a joint venture partnership, MetroLux
Theatres ("MetroLux"), accounted for by the equity method. The following
results of operations summary information relates to MetroLux for the three
years ended December 31, 2007, and balance sheet summary information as of
December 31, 2007 and 2006:
In thousands 2007 2006 2005
---------------------------------------------------------------------
Revenues $5,695 $5,235 $3,656
Gross profit 1,075 909 929
Other income (expense) (68) (121) (616)
Net income 908 688 252
Company's share of partnership net income 454 344 126
---------------------------------------------------------------------
Current assets 956 634
Noncurrent assets 1,573 1,851
---------------
Total assets 2,529 2,485
---------------
Current liabilities 1,086 859
Noncurrent liabilities 641 832
---------------
Total liabilities 1,727 1,691
---------------
Company's equity in partnership net assets $ 417 $ 412
---------------------------------------------------------------------
The Company's equity in partnership net assets is reflected in other assets in
the Consolidated Balance Sheets.
---------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Trans-Lux Corporation
We have audited the consolidated balance sheets of Trans-Lux Corporation
and its subsidiaries (the "Company") as of December 31, 2007 and 2006 and the
related consolidated statements of operations, stockholders' equity,
comprehensive loss and cash flows for each of the years in the three-year period
ended December 31, 2007. 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 the standards of the Public
Company Accounting Oversight Board (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. We were not engaged
to perform an audit of the Company's internal control over financial reporting.
Our audits include consideration of internal control over financial reporting as
a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly,
in all material respects, the consolidated financial position of Trans-Lux
Corporation and its subsidiaries as of December 31, 2007 and 2006, and the
consolidated results of their operations and their consolidated cash flows for
each of the years in the three-year period ended December 31, 2007, in
conformity with accounting principles generally accepted in the United States of
America.
As discussed in Note 7 to the consolidated financial statements, the
Company adopted the provisions of Financial Accounting Standard Board
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109," effective January 1, 2007.
As discussed in Note 12 to the consolidated financial statements, the
Company recognized the funded status of its benefit plans in its consolidated
balance sheet effective December 31, 2006, in adopting the new accounting
standard for "Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans."
/s/ Eisner LLP
New York, New York
March 28, 2008
METROLUX THEATRES
FINANCIAL STATEMENTS
DECEMBER 31, 2007, 2006 AND 2005
CONTENTS
Page
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Balance Sheets 2
Statements of Income 3
Statements of Partners' Equity 4
Statements of Cash Flows 5-6
NOTES TO THE FINANCIAL STATEMENTS 7-14
-----------------------------------------------------
GSC
Certified Public Accountants
-----------------------------------------------------
23480 Park Sorrento, Suite 100B, Calabasas, CA 91302
TEL: (818) 348-4800 - FAX: (818) 348-6326
gsc-cpas.com
Board of Directors
MetroLux Theatres
Norwalk, Connecticut
Independent Auditors' Report
We have audited the accompanying balance sheets of MetroLux Theatres as of
December 31, 2007, 2006 and 2005, and the related statements of income,
partners' equity, and cash flows for the years then ended. These financial
statements are the responsibilibility 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 of America. Those standards require that we plan and
perform the audits 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 MetroLux Theatres as of
December 31, 2007, 2006 and 2005, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
/s/ GSC, Certified Public Accountants
March 25, 2008
METROLUX THEATRES
BALANCE SHEETS
DECEMBER 31, 2007, 2006 AND 2005
(Dollars in thousands)
ASSETS
2007 2006 2005
------ ------ ------
CURRENT ASSETS:
Cash $ 791 $ 499 $ 465
Concession supplies 25 25 21
Prepaid expenses and other current assets 140 110 85
Long-lived assets held for sale - - 3,052
------ ------ ------
Total current assets 956 634 3,623
PROPERTY AND EQUIPMENT, net 1,573 1,841 1,990
INTANGIBLE ASSETS, net - 10 31
------ ------ ------
$2,529 $2,485 $5,644
====== ====== ======
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Film rentals payable $ 271 $ 201 $ 192
Accounts payable and accrued expenses 475 336 280
Current portion of long-term debt 178 179 2,053
Deferred revenues 129 115 103
Due to Partners 33 28 26
------ ------ ------
Total current liabilities 1,086 859 2,654
DEFERRED LEASE LIABILITY 113 131 97
LONG-TERM DEBT, net of current portion 528 701 883
------ ------ ------
Total liabilities 1,727 1,691 3,634
COMMITMENTS - - -
PARTNERS' EQUITY 802 794 2,010
------ ------ ------
$2,529 $2,485 $5,644
====== ====== ======
The accompanying notes are an integral part of the financial statements
METROLUX THEATRES
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Dollars in thousands)
2007 2006 2005
------ ------ ------
OPERATING REVENUES:
Theatre operations
Admissions $3,813 $3,464 $2,419
Concessions 1,811 1,701 1,177
Other operating revenues 71 70 60
------ ------ ------
Total operating revenues 5,695 5,235 3,656
------ ------ ------
OPERATING EXPENSES:
Theatre operations
Film costs and advertising 2,144 1,918 1,333
Cost of concessions 348 262 189
Other operating expenses 2,128 2,146 1,205
Administrative expenses 99 100 61
------ ------ ------
Total operating expenses 4,719 4,426 2,788
------ ------ ------
INCOME FROM OPERATIONS 976 809 868
------ ------ ------
OTHER (EXPENSE) INCOME:
Interest income 1 1 6
Interest expense (69) (92) (94)
Impairment loss - long-lived assets held for sale - - (528)
Loss on sale of property and equipment - (30) -
------ ------ ------
Net other (expense) (68) (121) (616)
------ ------ ------
NET INCOME $ 908 $ 688 $ 252
====== ====== ======
The accompanying notes are an integral part of the financial statements
METROLUX THEATRES
STATEMENTS OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Dollars in thousands)
Trans-Lux
Metro Colorado Loveland
Corporation Corporation Total
-------------- ----------- -------
PARTNERS' EQUITY, December 31, 2004 $1,130 $1,130 $ 2,260
EQUITY CONTRIBUTION FROM LEASE
GUARANTEE 16 16 32
PARTNERSHIP DISTRIBUTIONS (267) (267) (534)
NET INCOME 126 126 252
-------------- ----------- -------
PARTNERS' EQUITY, December 31, 2005 1,005 1,005 2,010
EQUITY CONTRIBUTION FROM LEASE
GUARANTEE 17 17 34
PARTNERSHIP DISTRIBUTIONS (969) (969) (1,938)
NET INCOME 344 344 688
-------------- ----------- -------
PARTNERS' EQUITY, December 31, 2006 397 397 794
EQUITY CONTRIBUTION FROM LEASE
GUARANTEE 25 25 50
PARTNERSHIP DISTRIBUTIONS (475) (475) (950)
NET INCOME 454 454 908
-------------- ----------- -------
PARTNERS' EQUITY, December 31, 2007 $ 401 $ 401 $ 802
============== =========== =======
The accompanying notes are an integral part of the financial statements
METROLUX THEATRES
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Dollars in thousands)
2007 2006 2005
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 908 $ 688 $ 252
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 286 270 174
Impairment loss - long-lived assets held for sale - - 528
Loss on sale of property and equipment - 30 -
Changes in assets and liabilities:
Concession supplies - (4) (8)
Prepaid expenses and other current assets 20 9 (1)
Film rentals payable 70 9 65
Accounts payable and accrued expenses 139 97 115
Deferred revenues 14 12 21
Due to Partners 5 2 17
Deferred lease liability (18) 34 97
------- ------- -------
Net cash provided by operating activities 1,424 1,147 1,260
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of property and equipment - 1,381 -
Acquisition of property and equipment (8) (136) (1,857)
Acquisition of intangible assets - - (21)
------- ------- -------
Net cash (used in) provided by investing activities (8) 1,245 (1,878)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment on long-term debt (174) (420) (224)
Proceeds from new long-term debt - - 1,300
Partnership distributions (950) (1,938) (534)
------- ------- -------
Net cash (used in) provided by financing activities (1,124) (2,358) 542
------- ------- -------
NET INCREASE (DECREASE) IN CASH 292 34 (76)
CASH, beginning of year 499 465 541
------- ------- -------
CASH, end of year $ 791 $ 499 $ 465
======= ======= =======
METROLUX THEATRES
STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Dollars in thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 69 $ 92 $ 90
======= ======= ======
NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES:
In February 2006, the Company completed the sale of its previous facility for
the gross selling price of $3,200. As part of the sales transaction, the
Company paid off the remaining balance of its real estate loan with a bank of
$1,636, and property tax and other cost allocations that totaled $41. The net
proceeds received from the sale, after the selling expenses, totaled $1,381.
During the year ended December 31, 2005, the Company moved its operations into
a new leased theatre facility and adopted a plan to sell the previous
facility's land and building. The Company reclassified the land, building and
improvements with total original cost of $4,612, and the related accumulated
depreciation of $1,032 as long-lived assets held for sale, and recorded an
impairment loss of $528 to adjust the net book value of the assets to fair
value.
During the years ended December 31, 2007, 2006 and 2005, the Company recorded
prepaid rent through an increase in equity in the amounts of $50, $34 and $32,
respectively (See Note 8).
The accompanying notes are an integral part of the financial statements
METROLUX THEATRES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Nature of Operations
--------------------
MetroLux Theatres (the "Company") is a general partnership between
Metro Colorado Corporation, a California corporation ("Metro
Colorado"), and Trans-Lux Loveland Corporation, a Colorado corporation
("Trans-Lux"). The Partnership was created for the purpose of engaging
in the business of constructing, purchasing, owning and performing all
functions in relation to the operation of a multi-screen movie theatre,
ancillary real estate and other entertainment uses in Loveland,
Colorado. Prior to November 2005, the Company operated a 12 screen
movie theatre located in property owned by the Company. Beginning in
November 2005, the Company moved into a 14 screen movie theatre leased
under a long-term lease.
Property and Equipment
----------------------
Property and equipment are stated at cost, net of accumulated
depreciation. Depreciation is provided utilizing straight-line and
accelerated methods over the estimated useful lives of the assets as
follows:
Buildings and improvements 10-39 years
Theatre equipment 5-10 years
Software 3 years
Major repairs and replacements are capitalized and ordinary maintenance
and repairs are charged to operations as incurred.
Intangible Assets
-----------------
Intangible assets consist of loan fees net of accumulated amortization.
Amortization is provided utilizing the straight-line method over the
term of the loan.
Income Taxes
------------
The Company is treated as a partnership for federal and state income
tax purposes. Consequently, federal and state income taxes are not
payable, or provided for, by the Company. Partners are taxed
individually on their share of the Company's earnings. The Company's
net income or loss is allocated among the Partners in accordance with
their percentage of ownership.
METROLUX THEATRES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
------------------------------------------------------
Revenue and Expense Recognition
-------------------------------
The Company recognizes revenue when admission tickets and concession
goods are sold. Revenue from gift certificates and group activity is
recognized when they are redeemed. Film rental costs are recognized
based on the applicable box office receipts and mutually agreed film
licensing arrangements.
Advertising (Dollars in thousands)
----------------------------------
The Company's advertising costs are expensed as incurred. The
advertising costs for the years ended December 31, 2007, 2006 and 2005
totaled $54, $58 and $84, respectively.
Lease Accounting
----------------
The Company accounts for leased properties under the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 13,
"Accounting for Leases", and other authoritative accounting literature.
The Company determined that its facility lease is an operating lease,
and recognizes the lease expense on a straight-line basis over the
lease term. The differences between lease payments and recognized
expense are charged to deferred lease liability.
Concentration of Credit Risk (Dollars in thousands)
---------------------------------------------------
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of cash. The Company places its
cash with high credit quality financial institutions. Total amounts
for the years ended December 31, 2007, 2006 and 2005 in excess of the
FDIC limit amounted to approximately $497, $308 and $307, respectively.
Services from Partners
----------------------
The Partners provide management and administrative services to the
Company. Trans-Lux provides oversight over the Company's movie theatre
operations and Metro Colorado provides accounting, payroll, human
resources and other management and administrative services. The
services provided by the Partners are deemed to be of equal value and
are not recognized on the financial statements of the Company.
METROLUX THEATRES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
------------------------------------------------------
Management Estimates
--------------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 results could differ from those estimates.
NOTE 2 - PROPERTY AND EQUIPMENT (Dollars in thousands)
---------------------------------------------
Property and equipment consist of the following for the years ended
December 31:
2007 2006 2005
------ ------ ------
Improvements $1,665 $1,657 $1,532
Theatre equipment 670 670 662
Construction in progress - - 18
Software 9 9 9
------ ------ ------
2,344 2,336 2,221
Less: accumulated depreciation
and amortization 771 495 231
------ ------ ------
$1,573 $1,841 $1,990
====== ====== ======
Depreciation and amortization expense for the years ended December 31,
2007, 2006 and 2005 was approximately $276, $264 and $169,
respectively.
METROLUX THEATRES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 3 - LONG-LIVED ASSETS HELD FOR SALE (Dollars in thousands)
------------------------------------------------------
On October 28, 2005, the Company moved its operations into a new
theatre facility in Loveland, Colorado, and adopted a plan to sell its
previously used facility. The Company reclassified the net book value
of the assets to be sold as long-lived assets held for sale, and
adjusted the net book value of the assets to the estimated fair value,
which resulted in an asset impairment loss of $528. The sale was
completed in February 2006, and resulted in an additional loss of $30.
As of December 31, 2005, long-lived assets held for sale consisted of
the following:
Buildings $4,027
Improvements 66
Land 519
------
4,612
Less: accumulated depreciation 1,032
------
3,580
Less: asset impairment loss 528
------
$3,052
======
NOTE 4 - INTANGIBLE ASSETS (Dollars in thousands)
----------------------------------------
Intangible assets consist of the following for the years ended December
31:
2007 2006 2005
---- ---- ----
Loan fees $35 $35 $50
Less: accumulated amortization 35 25 19
--- --- ---
$ - $10 $31
=== === ===
Amortization expense related to intangible assets amounted to $10, $6,
and $5, for the years ended December 31, 2007, 2006 and 2005,
respectively.
METROLUX THEATRES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 5 - DUE TO PARTNERS (Dollars in thousands)
--------------------------------------
As of December 31, 2007, 2006 and 2005, the net advances due to the
general partners were approximately $33, $28 and $26, respectively.
These advances represent the difference between allocations and
reimbursements of certain shared costs, and are unsecured, non-interest
bearing and are expected to be repaid within the next year.
During the years ended December 31, 2007, 2006 and 2005, the Company
made net advances to the general partners of approximately $5, $2 and
$17, respectively.
NOTE 6 - LONG-TERM DEBT (Dollars in thousands)
-------------------------------------
Long-term debt consists of the following for the years ended December
31:
2007 2006 2005
------ ------ ------
A $2.5 million real estate loan with a bank.
Borrowings under the term loan bear interest
at the bank's prime rate minus 0.30% (6.95%
at December 31, 2005). Payments under the
agreement are in equal monthly installments
of approximately $26 of principal and
interest, maturing January 2009 with the
remaining unpaid principal due upon
maturity. The loan is collateralized by the
assets of the Company and 60% of the debt is
guaranteed by each of the Partners. The
loan was paid off in full upon the sale of
the land and building on February 28, 2006.
The entire loan balance is included in
current portion of long-term debt at
December 31, 2005. $ - $ - $1,636
METROLUX THEATRES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 6 - LONG-TERM DEBT (Dollars in thousands) - CONTINUED
-------------------------------------------------
Long-term debt consists of the following for the years ended December
31:
2007 2006 2005
------ ------ ------
A $1.3 million bank loan obtained in
November 2005. Borrowings under the loan
bear interest at LIBOR rate plus 2.0% (7.24%
at December 31, 2007). The loan requires a
$325 payment upon the sale of the old
theatre facility, 59 equal monthly payments
of principal and interest of $19 beginning
in June 2006, with the remaining unpaid
principal due upon maturity in May 2011.
The loan is collateralized by the assets of
the Company and 75% of the debt is
guaranteed by each of the Partners. 706 880 1,300
------ ------ ------
706 880 2,936
Less: current portion 178 179 2,053
------ ------ ------
$528 $701 $ 883
====== ====== ======
Maturities of long-term debt outstanding at December 31, 2007 are as
follows:
Year Ending
December 31,
------------
2008 $178
2009 202
2010 218
2011 108
----
$706
====
The bank loan includes various restrictive covenants, including, among
others, provisions relating to maintenance of certain financial ratios
and reporting covenants. As of December 31, 2007, the Company was not
in compliance with one financial ratio covenant. On March 25, 2008,
the Company was granted a waiver from the bank for this violation.
METROLUX THEATRES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 7 - DEFERRED REVENUES (Dollars in thousands)
----------------------------------------
Deferred revenues at December 31, 2007, 2006 and 2005 consist of gift
certificates and group activity passes that are used for concession
goods and admission at theatres. The breakdown is as follows at
December 31:
2007 2006 2005
---- ---- ----
Gift certificates $119 $107 $ 96
Group activity passes 10 8 7
---- ---- ----
$129 $115 $103
==== ==== ====
NOTE 8 - COMMITMENTS (Dollars in thousands)
----------------------------------
In August 2004, the Company entered into a lease for a new
multi-screen movie theatre, which opened on October 28, 2005. The
initial lease term is for 15 years and may be extended for a total of
three extension periods of 5 years each. The lease requires minimum
annual rent payments beginning in January 2006, ranging from $500 to
$600 and contains a provision for an additional rent equal to 10% of
the amount by which gross annual revenue exceeds a certain threshold.
The lease is guaranteed by Metropolitan Theatres Corporation ("MTC"), a
parent of Metro Colorado Corporation. The future minimum rent payments
are as follows:
Year Ending
December 31,
------------
2008 $ 500
2009 500
2010 500
2011 546
2012 550
2013-2017 2,846
2018-2021 1,842
------
$7,284
======
The Company subleases space for certain exhibits and meetings on a
month-to-month basis to unrelated parties. For the years ending
December 31, 2007, 2006 and 2005, the revenue recognized for such
rentals totaled $26, $22 and $18, respectively.
METROLUX THEATRES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS (Dollars in thousands) - CONTINUED
----------------------------------------------
In connection with a guarantee by MTC, in 2007, 2006 and 2005,
Trans-Lux paid MTC $25, $17 and $16, respectively, in consideration for
the guarantee of the new lease. In accordance with FASB Interpretation
No. 45 - "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others",
the Company recorded the payment by Trans-Lux, and the respective value
of the guarantee for Metro Colorado, as an equity contribution by the
Partners, and an increase in prepaid rent in the accompanying financial
statements.
NOTE 9 - PENSION PLAN (Dollars in thousands)
-----------------------------------
The Company's employees may elect to participate in a 401(k) pension
plan sponsored by the parent of Metro Colorado, after they meet certain
period of service and age eligibility requirements. Participating
employees may contribute 1% to 100% of their salary, subject to limits
based on the applicable tax regulations.
The pension plan elected Safe Harbor provisions, where the Company
provides a matching of 100% of the first 3% of the employee's
contribution and matches 50% of the next 2% of the employee's
contribution up to a maximum of 4% of the employee's gross salary. The
contributions are fully vested when funded. The Company's matching
contributions totaled $3 for each of the years ended December 31, 2007,
2006 and 2005.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. As of the end of
the period covered by this Annual Report, we carried out an
evaluation, under the supervision and with the participation of our
management, including our Co-Chief Executive Officers and Chief
Financial Officer (its principal executive officers and principal
financial officer), of the effectiveness of the design and operation
of our disclosure controls and procedures (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)). Our
Co-Chief Executive Officers and Chief Financial Officer have
concluded that our disclosure controls and procedures are effective to
ensure that information required to be disclosed by us in the reports
that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules
and forms of the Securities and Exchange Commission and that such
information is accumulated and communicated to our management
(including our Co-Chief Executive Officers and Chief Financial
Officer) to allow timely decisions regarding required disclosures.
Based on such evaluation, our Co-Chief Executive Officers and Chief
Financial Officer have concluded these disclosure controls are
effective as of December 31, 2007.
(b) Changes in internal control over financial reporting. There has been
no change in the Company's internal control over financial reporting
that occurred in the fourth fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
(c) Management's Report on Internal Control Over Financial Reporting. The
management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting for the
Company as defined in Rule 13a-15(f) under the Securities Exchange Act
of 1934. A company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting
principles generally accepted in the United States. A company's
internal control over financial reporting includes policies and
procedures that (1) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting
principles generally accepted in the United States, and that receipts
and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and (3)
provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Company's
assets that could have a material effect on the financial statements.
Our internal control system was designed to provide reasonable
assurance to our management and Board of Directors regarding the
preparation and fair presentation of published financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate. This annual report does not include an attestation
report of the Company's registered public accounting firm regarding
internal control over financial reporting. Management's report was
not subject to attestation by the Company's registered public
accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only
management's report in this annual report.
The Company's management assessed its internal control over financial
reporting as of December 31, 2007 using the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Management, including the Company's Co-Chief Executive
Officers and its Chief Financial Officer, based on their evaluation of
the Company's internal control over financial reporting (as defined in
Securities Exchange Act Rule 13a-15(f)), have concluded that the
Company's internal control over financial reporting was effective as
of December 31, 2007.
ITEM 9B. OTHER INFORMATION
All information required to be reported in a report on Form 8-K during
the fourth quarter covered by this Form 10-K has been reported.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
(a) The information required by this Item with respect to directors is
incorporated herein by reference to the Section entitled "Election of
Directors" in the Company's Proxy Statement.
(b) The following executive officers were elected by the Board of
Directors for the ensuing year and until their respective successors
are elected:
Name Office Age
------------------ ---------------------------------------- ---
Michael R. Mulcahy President and Co-Chief Executive Officer 59
Thomas Brandt Executive Vice President and Co-Chief 44
Executive Officer
Matthew Brandt Executive Vice President 44
Al L. Miller Executive Vice President 62
Angela D. Toppi Executive Vice President, Treasurer, 52
Secretary and Chief Financial Officer
Karl P. Hirschauer Senior Vice President 60
John Long Senior Vice President 61
Thomas F. Mahoney Senior Vice President 60
Messrs. Mulcahy, T. Brandt, M. Brandt, Miller, Hirschauer, Mahoney
and Ms. Toppi have been associated in an executive capacity with the
Company for more than five years. Mr. Long was elected Senior Vice
President in charge of Outdoor Operations on March 24, 2004 and has
been employed by the Company since 1997. Mr. Long served as Senior
Vice President of Outdoor Display Subsidiaries between March 27, 2002
and March 24, 2004 and served as Vice President of Trans-Lux Midwest
Corporation between December 10, 1998 and March 27, 2002.
(c) The information required by Items 405, 406 and 407 of Regulation S-K
is incorporated herein by reference to the Sections entitled
"Compliance with Section 16(a) of the Securities Exchange Act of
1934," "Code of Ethics" and "Corporate Governance" in the Company's
Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference
to the Section entitled "Executive Compensation and Transactions with
Management" in the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated herein by reference
to the Section entitled "Security Ownership of Certain Beneficial Owners,
Directors and Executive Officers" in the Company's Proxy Statement.
Equity Compensation Plan Information
------------------------------------
Securities Weighted Securities
to be issued average available for
December 31, 2007 upon exercise exercise price future issuance
--------------------------------------------------------------------------------
Equity compensation plans
approved by stockholders 55,000 $6.45 11,500
Equity compensation plans
not approved by stockholders 10,000 $4.03 -
------ ------
Total 65,000 $6.08 11,500
--------------------------------------------------------------------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this Item is incorporated herein by reference
to the Section entitled "Executive Compensation and Transactions with
Management" in the Company's Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTING FIRM FEES AND SERVICES
The information required by this Item is incorporated herein by reference
to the Section entitled "Ratification of the Selection of Independent
Registered Accounting Firm" in the Company's Proxy Statement.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
(1) Consolidated Financial Statements of Trans-Lux Corporation
Consolidated Statements of Operations for the Years Ended December
31, 2007, 2006 and 2005
Consolidated Balance Sheets as of December 31, 2007 and 2006
Consolidated Statements of Cash Flows for the Years Ended December
31, 2007, 2006 and 2005
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 2007, 2006 and 2005
Consolidated Statements of Comprehensive Income for the Years Ended
December 31, 2007, 2006 and 2005
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Financial statements of MetroLux Theatres, a 50% owned entity,
accounted for by the equity method:
Independent Auditors' Report
Balance Sheets as of December 31, 2007 and 2006
Statements of Income for the Years Ended December 31, 2007, 2006
and 2005
Statements of Partners' Equity for the Years Ended December 31,
2007, 2006 and 2005
Statements of Cash Flows for the Years Ended December 31, 2007,
2006 and 2005
Notes to Financial Statements
(2) Financial Statement Schedules: None.
(3) Exhibits:
3(a) Form of Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 of Registration No.
333-15481).
(b) By-Laws of the Registrant (incorporated by reference to Exhibit
3(b) of Form 10-K for the year ended December 31, 2001).
4(a) Indenture dated as of December 1, 1994 (form of said indenture
is incorporated by reference to Exhibit 6 of Schedule 13E-4
Amendment No. 2 dated December 23, 1994).
(b) Indenture dated as of March 1, 2004 (form of said indenture is
incorporated by reference to Exhibit 12(d) of Schedule TO dated
March 2, 2004).
10.1 Form of Indemnity Agreement - Directors (form of said agreement
is incorporated by reference to Exhibit 10.1 of Registration No.
333-15481).
10.2 Form of Indemnity Agreement - Officers (form of said agreement
is incorporated by reference to Exhibit 10.2 of Registration No.
333-15481).
10.3 Amended and Restated Pension Plan dated January 1, 2001 and
Amendment No. 1 dated as of April 1, 2002 (incorporated by
reference to Exhibit 10.3 of Form 10-K for the year ended
December 31, 2001). Amendment No. 2 dated as of December 31,
2002 (incorporated by reference to Exhibit 10.3 of Form 10-K for
the year ended December 31, 2002). Amendment No. 3 dated as of
December 31, 2003 (incorporated by reference to Exhibit 10.3 of
Form 10-K for the year ended December 31, 2003).
10.4(a) 1989 Non-Employee Director Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.4(a) of Form 10-K for
the year ended December 31, 1999).
(b) 1995 Stock Option Plan, as amended (incorporated by reference to
Proxy Statement dated April 7, 2000).
10.5 Amended and Restated Commercial Loan and Security Agreement with
People's Bank dated December 23, 2004 (incorporated by reference
to Exhibit 10(a) of Form 8-K filed December 28, 2004).
Amendment No. 1 dated as of December 31, 2005 (incorporated by
reference to Exhibit 10.2 of Form 10-Q for the quarter ended
March 31, 2006). Letter amendments dated as of September 30,
2006 and December 31, 2006 (incorporated by reference to Exhibit
10.5 of Form 10-K for the year ended December 31, 2006).
Amendment No. 5 dated August 9, 2007 (incorporated by reference
to Exhibit 10.1 of Form 10-Q for the quarter ended June 30,
2007).
10.6 Consulting Agreement with Moving Images, LLC dated as of
December 1, 2004 and termination letter with Richard Brandt
(incorporated by reference to Exhibit 10.6 of Form 10-K for the
year ended December 31, 2004). Amendment dated December 7, 2005
(incorporated by reference to Exhibit 10.6 of Form 10-K for the
year ended December 31, 2005). Amendment dated as of March 28,
2007 (incorporated by reference to Exhibit 10.1 of Form 10-Q for
the quarter ended March 31, 2007).
10.7 Employment Agreement with Michael R. Mulcahy dated as of April
1, 2005 (incorporated by reference to Exhibit 10.7 of Form 10-K
for the year ended December 31, 2004).
10.8 Employment Agreement with Thomas Brandt dated as of April 1,
2005 (incorporated by reference to Exhibit 10.8 of Form 10-K for
the year ended December 31, 2004).
10.9 Employment Agreement with Angela D. Toppi dated as of April 1,
2005 (incorporated by reference to Exhibit 10.9 of Form 10-K for
the year ended December 31, 2004).
10.10 Employment Agreement with Matthew Brandt dated as of April 1,
2005 (incorporated by reference to Exhibit 10.10 of Form 10-K
for the year ended December 31, 2004).
10.11 Employment Agreement with Al Miller dated as of April 1, 2005
(incorporated by reference to Exhibit 10.1 of Form 10-Q for the
quarter ended June 30, 2005).
10.12 Employment Agreement with Karl Hirschauer dated as of April 1,
2006 (incorporated by reference to Exhibit 10.1 of Form 10-Q for
the quarter ended March 31, 2006).
21 List of Subsidiaries (incorporated by reference to Exhibit 21 of
Form 10-K for the year ended December 31, 2006).
31.1 Certification of Michael R. Mulcahy, President and Co-Chief
Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, filed herewith.
31.2 Certification of Thomas Brandt, Executive Vice President and
Co-Chief Executive Officer, pursuant to Rule 13a-14(a) and
15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith.
31.3 Certification of Angela D. Toppi, Executive Vice President and
Chief Financial Officer, pursuant to Rule 13a-14(a) and
15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith.
32.1 Certification of Michael R. Mulcahy, President and Co-Chief
Executive Officer, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, filed herewith.
32.2 Certification of Thomas Brandt, Executive Vice President and
Co-Chief Executive Officer, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, filed herewith.
32.3 Certification of Angela D. Toppi, Executive Vice President and
Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, filed herewith.
SIGNATURES
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:
TRANS-LUX CORPORATION
by: /s/ Angela D. Toppi
---------------------------
Angela D. Toppi
Executive Vice President and
Chief Financial Officer
Dated: March 28, 2008
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 date indicated:
/s/ Gene F. Jankowski March 28, 2008
-------------------------------------------
Gene F. Jankowski, Chairman of the Board
/s/ Victor Liss March 28, 2008
-------------------------------------------
Victor Liss, Vice Chairman of the Board
/s/ Matthew Brandt March 28, 2008
-------------------------------------------
Matthew Brandt, Executive Vice President
and Director
/s/ Richard Brandt March 28, 2008
-------------------------------------------
Richard Brandt, Director
/s/ Thomas Brandt March 28, 2008
-------------------------------------------
Thomas Brandt, Executive Vice President
and Co-Chief Executive Officer and Director
/s/ Howard M. Brenner March 28, 2008
-------------------------------------------
Howard M. Brenner, Director
/s/ Jean Firstenberg March 28, 2008
-------------------------------------------
Jean Firstenberg, Director
/s/ Howard S. Modlin March 28, 2008
-------------------------------------------
Howard S. Modlin, Director
/s/ Michael R. Mulcahy March 28, 2008
-------------------------------------------
Michael R. Mulcahy, President
and Co-Chief Executive Officer and Director