UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2008
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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.)
26 Pearl Street, Norwalk, CT 06850-1647
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(Address of principal executive offices) (Zip code)
(203) 853-4321
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(Registrant's telephone number, including area code)
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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Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (check one)
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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Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Date Class Shares Outstanding
-------- ------------------------------------ ------------------
08/13/08 Common Stock - $1.00 Par Value 2,020,090
08/13/08 Class B Stock - $1.00 Par Value 286,814
(Immediately convertible into a like
number of shares of Common Stock.)
TRANS-LUX CORPORATION AND SUBSIDIARIES
Table of Contents
Page No.
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Part I - Financial Information (unaudited)
Item 1. Condensed Consolidated Balance Sheets - June 30,
2008 and December 31, 2007 (audited 1
Condensed Consolidated Statements of Operations -
Three and Six Months Ended June 30, 2008 and 2007 2
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2008 and 2007 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 18
Item 4. Controls and Procedures 19
Part II - Other Information
Item 1A. Risk Factors 19
Item 2. Unregistered Sales of Securities and Use of Proceeds 20
Item 3. Defaults upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 21
Item 6. Exhibits 21
Signatures 22
Exhibits
Part I - Financial Information
------------------------------
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30 December 31
In thousands, except share data 2008 2007
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(unaudited) (see Note 1)
ASSETS
Current assets:
Cash and cash equivalents $ 3,488 $ 6,591
Available-for-sale securities 170 171
Receivables, less allowance of $872 - 2008 and $892 - 2007 6,534 5,233
Unbilled receivables 118 12
Other receivables 2,580 2,580
Inventories 6,531 6,768
Prepaids and other 1,199 1,204
Assets associated with discontinued operations (Note 2) 25,457 26,712
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Total current assets 46,077 49,271
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Rental equipment 68,261 66,626
Less accumulated depreciation 40,634 37,692
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27,627 28,934
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Property, plant and equipment 7,697 7,323
Less accumulated depreciation 4,863 4,626
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2,834 2,697
Goodwill 1,004 1,004
Other assets 1,814 2,053
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TOTAL ASSETS $79,356 $83,959
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,413 $ 2,439
Accrued liabilities 6,863 6,537
Current portion of long-term debt 11,010 11,002
Liabilities associated with discontinued operations (Note 2) 19,046 16,250
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Total current liabilities 39,332 36,228
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Long-term debt:
8 1/4% Limited convertible senior subordinated notes due 2012 10,129 10,129
9 1/2% Subordinated debentures due 2012 1,057 1,057
Notes payable 7,482 8,833
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18,668 20,019
Deferred credits, deposits and other 3,231 3,116
Stockholders' equity:
Capital stock
Common - $1 par value - 5,500,000 shares authorized,
2,453,591 shares issued in 2008 and 2007 2,453 2,453
Class B - $1 par value - 1,000,000 shares authorized,
286,814 shares issued in 2008 and 2007 287 287
Additional paid-in-capital 14,736 14,733
Retained earnings 5,466 11,848
Accumulated other comprehensive loss (1,354) (1,262)
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21,588 28,059
Less treasury stock - at cost - 433,596 common shares in
2008 and 2007 3,463 3,463
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Total stockholders' equity 18,125 24,596
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $79,356 $83,959
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The accompanying notes are an integral part of these condensed consolidated financial
statements.
1
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
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In thousands, except per share data 2008 2007 2008 2007
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Revenues:
Equipment rentals and maintenance $ 2,845 $ 3,112 $ 5,584 $ 6,232
Equipment sales 7,491 6,295 12,665 11,770
Real estate rentals 81 108 168 216
------- ------- ------- -------
Total revenues 10,417 9,515 18,417 18,218
------- ------- ------- -------
Operating expenses:
Cost of equipment rentals and maintenance 2,409 2,734 4,772 5,486
Cost of equipment sales 5,220 4,533 8,829 8,463
Cost of real estate rentals 24 23 49 46
------- ------- ------- -------
Total operating expenses 7,653 7,290 13,650 13,995
------- ------- ------- -------
Gross profit from operations 2,764 2,225 4,767 4,223
General and administrative expenses (2,791) (3,168) (5,610) (6,509)
Interest income 101 132 132 168
Interest expense (516) (626) (1,054) (1,369)
Debt conversion cost - - - (1,475)
Other income - 593 4 593
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Loss from continuing operations before income taxes (442) (844) (1,761) (4,369)
Income tax (expense) benefit (99) 132 (150) 787
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Loss from continuing operations (541) (712) (1,911) (3,582)
(Loss) income from discontinued operations (4,814) 448 (4,471) 916
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Net loss $(5,355) $ (264) $(6,382) $(2,666)
======= ======= ======= =======
Loss per share continuing operations - basic and diluted $ (0.23) $ (0.30) $ (0.83) $ (1.91)
(Loss) income per share discontinued operations - basic and diluted (2.09) 0.19 (1.94) 0.49
------- ------- ------- -------
Total loss per share - basic and diluted $ (2.32) $ (0.11) $ (2.77) $ (1.42)
======= ======= ======= =======
Weighted average common shares outstanding - basic and diluted 2,307 2,304 2,307 1,884
======= ======= ======= =======
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
June 30
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In thousands 2008 2007
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Cash flows from operating activities
Net loss $(6,382) $(2,666)
Loss (income) from discontinued operations 4,471 (916)
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Loss from continuing operations (1,911) (3,582)
Adjustment to reconcile loss from continuing operations to
net cash provided by operating activities:
Depreciation and amortization 3,280 3,984
Deferred income taxes - (787)
Exchange of 8 1/4% notes for common stock - 1,345
Changes in operating assets and liabilities:
Receivables (1,407) 1,479
Inventories 237 (501)
Prepaids and other assets 143 (494)
Accounts payable and accruals 212 547
Deferred credits, deposits and other 115 (438)
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Net cash provided by operating activities of
continuing operations 669 1,553
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Cash flows from investing activities
Equipment manufactured for rental (1,635) (2,352)
Purchases of property, plant and equipment (374) (105)
------- -------
Net cash used in investing activities of continuing
operations (2,009) (2,457)
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Cash flows from financing activities
Payments of long-term debt (1,343) (1,176)
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Net cash used in financing activities of continuing
operations (1,343) (1,176)
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Cash flows from discontinued operations
Cash provided by operating activities of discontinued
operations 300 878
Cash (used in) provided by investing activities of
discontinued operations (1,963) 149
Cash provided by (used in) financing activities of
discontinued operations 1,243 (457)
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Net cash (used in) provided by discontinued operations (420) 570
------- -------
Net decrease in cash and cash equivalents (3,103) (1,510)
Cash and cash equivalents at beginning of year 6,591 5,765
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Cash and cash equivalents at end of period $ 3,488 $ 4,255
======= =======
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Interest paid $ 1,578 $ 2,161
Income taxes paid 5 5
Supplemental disclosures of non-cash financing activities:
Exchange of 8 1/4% notes for common stock - 7,829
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
TRANS-LUX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
(unaudited)
Note 1 - Basis of Presentation
Financial information included herein is unaudited, however, such information
reflects all adjustments (of a normal and recurring nature), which are, in the
opinion of management, necessary for the fair presentation of the condensed
consolidated financial statements for the interim periods. The results for the
interim periods are not necessarily indicative of the results to be expected for
the full year. The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with Rule 10-01 of Regulation S-X
promulgated by the Securities and Exchange Commission and therefore do not
include all information and footnote disclosures required under accounting
principles generally accepted in the United States of America. It is suggested
that the June 30, 2008 condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2007. The condensed consolidated balance sheet at December 31, 2007 is
derived from the December 31, 2007 audited financial statements.
On June 26, 2008, the Board of Directors approved the sale of the assets of the
Entertainment Division. As a result of the sale, the Company has accounted for
the Entertainment Division as discontinued operations in the second quarter of
2008 and recorded non-cash long-lived asset impairment charges of $2.9 million
for the quarter ended June 30, 2008, as well as $2.0 million in disposal costs,
see Note 2.
The Company has incurred net losses from continuing operations for the three and
six months ended June 30, 2008 of $541,000 and $1,911,000, respectively, but has
generated cash provided by operating activities of continuing operations of
$669,000 and $1,553,000 for the six months ended June 30, 2008 and 2007,
respectively. The Company has implemented several initiatives to continue to
improve operational results and cash flows over future periods. The Company's
engineering staff continues to work on areas to improve manufacturing
efficiencies; and improving the outdoor commercial products, particularly
digital billboards and fuel price changers to include larger LED arrays, smaller
LED pixel sizes for higher resolutions and additional features. The Company
believes the outdoor commercial market is a growing industry, and we see
increasing usage of digital signage in the outdoor commercial market. The
Company also continues to explore ways to reduce costs and has relocated its
Norwalk facility to lower operating costs in the future, although the second
quarter of 2008 includes moving costs. The Company continues to take steps to
reduce the cost to maintain the equipment on rental and maintenance. In
addition, the Company is recording less interest expense as a result of the
exchange offer in the first quarter of 2007, see Note 5, and a reduction in
interest rates of its variable rate debt. The Company has positive working
capital of $6.7 million as of June 30, 2008. As of June 30, 2008, the Company
has fully drawn its $5.0 million revolving loan facility, which matures on
August 1, 2009. The Company's objective in regards to the Credit Agreement is
to restructure the existing Credit Agreement or obtain additional funds from
external sources through equity or additional debt financing and is in
discussions with its senior
4
lender and others. While management believes it will be successful, there can
be no assurance that management will be successful in achieving any of the above
objectives. Management further believes that its current cash resources and
cash provided by continuing operations will be sufficient to fund its continuing
operations and its current obligations through June 30, 2009.
Note 2 - Discontinued Operations
On June 26, 2008, the Board of Directors approved the sale of the assets of the
Entertainment Division, which was consummated on July 15, 2008, the Company sold
the assets of its Entertainment division for a purchase price of $24.5 million,
of which $7.4 million was paid in cash, $0.4 million is in escrow and $16.7
million in assumption of debt, which includes $0.3 million of debt of the joint
venture, MetroLux Theatres. The buyer assumed the operating results effective
as of June 27, 2008. In accordance with the provisions of SFAS No. 144,
"Accounting For the Impairment or Disposal of Long-lived Assets," the Company
has accounted for the Entertainment Division as discontinued operations. In
addition to the $24.5 million purchase price, there is a potential additional
purchase price of up to $2.3 million based on the performance of increased
theatre operations at the DreamCatcher Cinema, which was expanded from a
six-plex to a 10-plex in May 2008 and a six-month option to purchase raw land
from the Company in Silver City, New Mexico for $0.9 million. As a result of
the sale, the Company recorded long-lived asset impairment charges of $2.9
million for the quarter ended June 30, 2008, as well as $2.0 million in disposal
costs.
The Company has agreed not to compete in the theatre business in the Western
states of the United States for five years and has licensed the name "Trans-Lux
Theatres" in connection with such movie theatre circuit. Matthew Brandt and
Thomas Brandt, executive officers of the Company, will become full time officers
of the buyer managing the theatre business purchased. The Company will be
providing certain services on a transition basis for up to six months and will
also be providing consulting services for a year, which consulting services will
be rendered by Richard Brandt, a director and consultant to the Company. The
Company has received an opinion from an independent third party that the
transaction is fair to the stockholders of the Company from a financial point of
view. The net proceeds of the sale were used to prepay the term loan under the
Credit Agreement with its senior lender and have been reclassified as current
portion of long-term debt in the Condensed Consolidated Balance Sheet as of June
30, 2008 and December 31, 2007. A total of $22.4 million of long-term debt has
been paid down or assumed by the buyer as a result of the sale.
5
The assets and liabilities associated with discontinued operations and related
results of operations for the current and prior periods have been reclassified
in the Condensed Consolidated Financial Statements as discontinued operations.
The following table presents the financial results of the discontinued
operations:
Three months ended June 30 Six months ended June 30
In thousands, 2008 2007 2008 2007
------------------------------------------------------------------------------------------------
Revenues $ 3,144 $3,643 $ 6,245 $7,070
Operating expenses 2,623 2,750 4,992 5,219
------- ------ ------- ------
Gross profit 521 893 1,253 1,851
General and administrative expenses (297) (266) (559) (530)
Interest expense, net (224) (311) (470) (629)
Income from joint venture 120 132 239 224
Asset impairment/disposal costs (4,934) - (4,934) -
Income tax expense - - - -
------- ------ ------- ------
(Loss) income from discontinued operations $(4,814) $ 448 $(4,471) $ 916
======= ====== ======= ======
(Loss) earnings per share - basic and diluted $ (2.09) $ 0.19 $ (1.94) $ 0.49
======= ====== ======= ======
------------------------------------------------------------------------------------------------
Interest expense allocated to discontinued operations relates to the
Entertainment Division's long-term debt assumed by the buyer.
The following is a detail of the assets and liabilities reported as discontinued
operations and classified as assets and liabilities associated with discontinued
operations in the Condensed Consolidated Balance Sheet as of June 30, 2008, with
comparative carrying amounts as of December 31, 2007:
June 30 December 31
In thousands 2008 2007
--------------------------------------------------------------------------------
Inventories $ 72 $ 85
Prepaids and other assets 127 171
Property and equipment, net 24,271 25,397
Other assets 987 1,059
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Total assets associated with discontinued operations $25,457 $26,712
======= =======
Current liabilities $ 2,649 $ 1,096
Long-term liabilities 16,397 15,154
------- -------
Total liabilities associated with discontinued operations $19,046 $16,250
======= =======
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Operations of the Joint Venture - Discontinued Operation
The Company has a 50% ownership in a joint venture partnership, MetroLux
Theatres ("MetroLux"), accounted for by the equity method, which is included in
the sold assets of its Entertainment Division. The Company's equity in
partnership net assets is included in the assets associated with discontinued
operations in the Condensed Consolidated Balance Sheets.
6
The following results of operations summary information relates to MetroLux for
the three and six months ended June 30, 2008 and 2007, and summary balance sheet
information relates to MetroLux as of June 30, 2008 and December 31, 2007:
Three months ended June 30 Six months ended June 30
In thousands 2008 2007 2008 2007
---------------------------------------------------------------------------------------------
Revenues $1,367 $1,407 $2,704 $2,700
Gross profit 249 281 500 486
Net income 239 264 478 448
Company's share of partnership net income 120 132 239 224
---------------------------------------------------------------------------------------------
June 30 December 31
In thousands 2008 2007
----------------------------------------------------------------
Current assets $ 529 $ 956
Noncurrent assets 1,435 1,573
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Total assets $1,964 $2,529
====== ======
Current liabilities $ 830 $1,086
Noncurrent liabilities 439 641
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Total liabilities $1,269 $1,727
====== ======
Company's equity in partnership net assets $ 340 $ 417
====== ======
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Note 3 - Other Receivables
The Company has a $2.6 million receivable that was due June 2008, relating to
the sale/leaseback of the Company's Norwalk, Connecticut facility in 2004. The
receivable is secured by a purchase money mortgage subordinated to a $3.5
million first mortgage in favor of the purchaser's bank. The purchaser has
defaulted on this payment and the Company is pursuing legal remedies.
The base four-year term of the sale/leaseback ended 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.
Note 4 - Inventories
Inventories are stated at the lower of cost or market and consist of the
following:
June 30 December 31
In thousands 2008 2007
----------------------------------------------
Raw materials $4,681 $4,743
Work-in-progress 1,253 1,351
Finished goods 597 674
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$6,531 $6,768
====== ======
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7
Note 5 - Long-Term Debt
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 SFAS 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.
The Company has a bank Credit Agreement that 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 4.71% to 5.00% at June 30, 2008). The Credit
Agreement matures on August 1, 2009. Effective December 31, 2006, $6.1 million
of the non-revolving line of credit was converted into a four-year term loan
also maturing August 1, 2009. At June 30, 2008, 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 loan-to-value ratio of not more than 50%, a
leverage ratio and maintaining accounts with an average monthly compensating
balance of not less than $750,000. Subsequent to the end of the quarter, the
fixed charge coverage ratio was modified to 1.25 to 1.00 and the minimum
tangible net worth covenant was modified to $17.0 million as of June 30, 2008.
As of June 30, 2008, the Company was in compliance with the forgoing financial
covenants, but was not in compliance with the cap on capital expenditures. The
senior lender waived the non-compliance subsequent to the end of the quarter.
The amounts outstanding under the Credit Agreement are collateralized by all of
the Display Division assets.
Note 6 - Reporting Comprehensive Loss
Total comprehensive loss for the three and six months ended June 30, 2008 and
2007 is as follows:
Three months ended June 30 Six months ended June 30
In thousands 2008 2007 2008 2007
--------------------------------------------------------------------------------------------------------
Net loss, as reported $(5,256) $(264) $(6,283) $(2,666)
------- ----- ------- -------
Other comprehensive income:
Unrealized foreign currency translation gain (loss) 20 243 (91) 270
Unrealized holding gain (loss) on
available-for-sale securities 2 (11) (2) (7)
Income tax benefit related to items of other
comprehensive income - 5 1 3
------- ----- ------- -------
Total other comprehensive income (loss), net of tax 22 237 (92) 266
------- ----- ------- -------
Comprehensive loss $(5,234) $ (27) $(6,375) $(2,400)
======= ===== ======= =======
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8
Note 7 - Income Taxes
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 2004 through 2007 remain open to examination
by the major taxing jurisdictions and the 2003 tax year remains open to
examination by some state and local taxing jurisdictions to which the Company is
subject.
A valuation allowance has been established 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.
Estimates of the annual effective tax rate benefit at the end of interim periods
are, of necessity, based on evaluations of possible future events and
transactions and may be subject to subsequent revision.
Note 8 - Pension Plan
As of December 31, 2003, the benefit service under the pension plan had been
frozen and, accordingly, there is no service cost for the three and six months
ended June 30, 2008 and 2007.
The following table presents the components of net periodic pension cost:
Three months ended June 30 Six months ended June 30
In thousands 2008 2007 2008 2007
---------------------------------------------------------------------------------
Interest cost $ 160 $ 160 $ 320 $ 320
Expected return on plan assets (158) (168) (316) (336)
Amortization of prior service cost 4 4 8 8
Amortization of net actuarial loss 66 71 132 142
----- ----- ----- -----
Net periodic pension cost $ 72 $ 67 $ 144 $ 134
===== ===== ===== =====
---------------------------------------------------------------------------------
As of June 30, 2008, the Company has recorded current and long-term pension
liabilities of $0.1 million and $3.1 million, respectively. The minimum
required contribution for 2008 is expected to be $0.2 million, of which $0.1
million has already been contributed.
9
Note 9 - Stock Option Plans
The Company issued options for 3,000 shares with an exercise price of $3.85 per
share under the Non-Employee Director Stock Option Plan in June 2008; none were
issued during the six-month period ended June 30, 2007. The unrecognized
compensation costs related to unvested stock options granted under the Company's
stock option plans was nominal.
Expected volatility is based on historical volatility of the Company's stock and
the expected life of options is based on historical data with respect to
exercise periods.
The following summarizes the activity of the Company's stock options for the six
months ended June 30, 2008:
Weighted
Weighted Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Options Price ($) Term (Yrs) Value ($)
----------------------------------------------------------------------------------------------
Outstanding at beginning of year 65,000 6.08
Granted 3,000 3.85
Exercised - -
Terminated (2,000) 5.69
------
Outstanding at end of period 66,000 5.99 3.2
====== ===
Vested and expected to vest at end of period 66,000 5.99 3.2 -
====== ===
Exercisable at end of period 60,500 6.12 2.9 -
====== ===
----------------------------------------------------------------------------------------------
Note 10 - 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. At June 30, 2008
and 2007, outstanding stock options to purchase 66,000 and 66,300 shares,
respectively, of Common Stock were excluded from the calculation of diluted loss
per share because their impact would have been anti-dilutive.
Note 11 - Legal Proceedings and Claims
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 results of operations of the
Company.
Note 12 - Business Segment Data
The Company evaluates segment performance and allocates resources based upon
operating income. The Company's continuing operations are managed in three
reportable business segments. The
10
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 Real
estate segment owns an income-producing real estate property. Segment operating
income is shown after operating expenses and sales, general and administrative
expenses directly associated with the segment. Corporate general and
administrative items relate to costs that are not directly identifiable with a
segment. There are no intersegment sales. Of the total goodwill of $1.0
million, $0.9 million relates to the Outdoor display segment and $0.1 million
relates to the Indoor display segment.
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 U.S. 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 for
the three and six months ended June 30, 2008 and 2007 is as follows:
Three months ended June 30 Six months ended June 30
In thousands 2008 2007 2008 2007
---------------------------------------------------------------------------------------------
Revenues:
Indoor display $ 3,374 $ 2,714 $ 6,082 $ 5,232
Outdoor display 6,962 6,693 12,167 12,770
Real estate 81 108 168 216
------- ------- ------- -------
Total revenues $10,417 $ 9,515 $18,417 $18,218
======= ======= ======= =======
Operating income (loss):
Indoor display $ 221 $ (436) $ 82 $ (922)
Outdoor display 775 542 1,088 833
Real estate 54 81 113 164
------- ------- ------- -------
Total operating income 1,050 187 1,283 75
Other income - 593 4 593
Corporate general and administrative expenses (1,077) (1,130) (2,126) (2,361)
Interest expense - net (415) (494) (922) (1,201)
Debt conversion cost - - - (1,475)
Income tax (expense) benefit (99) 132 (150) 787
------- ------- ------- -------
Net loss from continuing operations (541) (712) (1,911) (3,582)
Net (loss) income from discontinued operations (4,814) 448 (4,471) 916
------- ------- ------- -------
Net loss $(5,355) $ (264) $(6,382) $(2,666)
======= ======= ======= =======
---------------------------------------------------------------------------------------------
Note 13 - Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("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 measurement.
In February 2008, the FASB amended SFAS 157 and issued FASB Staff Position No.
157-2 ("FSP 157-2"). FSP 157-2 excludes fair value lease calculations pursuant
to SFAS 13, as amended, from SFAS 157, but does not exclude assets and
liabilities acquired pursuant to SFAS
11
141R. FSP 157-2 defers the effective date of SFAS 157 for non-financial assets
and liabilities that are not recognized or disclosed at fair value on a
recurring basis by one year. The adoption of SFAS 157 and the related FSPs on
January 1, 2008 did not have a material impact on the financial condition or
results of operations of the Company.
In February 2007, the FASB issued SFAS 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. The adoption of SFAS 159 on
January 1, 2008 did not have a material impact on the financial condition or
results of operations of the Company.
In December 2007, the FASB issued SFAS No. 141R, "Business Combinations" ("SFAS
141R"), which replaces SFAS 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 SFAS 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. Early
adoption is prohibited. We have not yet determined the impact, if any, that the
implementation of SFAS 160 will have on our results of operations or financial
condition.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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, advertising,
transportation, entertainment and sports industries. In addition to its display
business, the Company owns and operates an income producing rental property.
The Company operates in three reportable segments: Indoor display, Outdoor
display and Real estate.
On June 26, 2008, the Board of Directors approved the sale of the assets of the
Entertainment Division. As a result of the sale, the Company has accounted for
the Entertainment Division as discontinued operations in the second quarter of
2008 and recorded non-cash long-lived asset impairment charges of $2.9 million
for the quarter ended June 30, 2008, as well as $2.0 million in disposal costs,
see Note 2. The following discussion and analysis of financial condition and
results of operations relates only to continuing operations.
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 Real estate segment
includes the operations of an income-producing real estate property.
Results of Operations
Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
Total revenues for the six months ended June 30, 2008 increased $199,000 or 1.1%
from $18.2 million to $18.4 million for the six months ended June 30, 2007.
Indoor display sales revenues increased, but were offset by decreases in Indoor
display rental and maintenance revenues, Outdoor display revenues and Real
estate rentals revenues.
Indoor display revenues increased $850,000 or 16.2%. Of this increase, Indoor
display equipment sales increased $1.1 million or 79.4%, primarily due to an
increase in sales from the gaming and transportation markets. Indoor display
equipment rentals and maintenance revenues decreased $292,000 or 7.7%, 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 ongoing consolidation within
that industry and the wider use of flat-panel screens.
Outdoor display revenues decreased $603,000 or 4.7%. Of this decrease, Outdoor
display equipment sales decreased $247,000 or 2.4%, primarily in the commercial
market. Outdoor display equipment
13
rentals and maintenance revenues decreased $356,000 or 14.6%, primarily due to
the continued expected revenue decline in the older Outdoor display equipment
rental and maintenance bases acquired in the early 1990s.
Real estate revenues decreased $48,000 or 22.2%, primarily due to less than full
occupancy of the sub-leased portion of our Norwalk, CT location, which
sub-leases terminated in June 2008.
Total operating income for the six months ended June 30, 2008 increased $1.2
million to $1.3 million compared to $75,000 for the six months ended June 30,
2007, principally due to the increase in Indoor sales revenues and a reduction
in general and administrative expenses in the Indoor display segment.
Indoor display operating income increased to $82,000 in 2008 compared to a loss
of $922,000 in 2007, primarily as a result of the increase in revenues in the
gaming and transportation markets. The cost of Indoor displays represented
75.4% of related revenues in 2008 compared to 78.4% in 2007. The cost of Indoor
displays as a percentage of related revenues decreased primarily due to a
$249,000 decrease in depreciation expense, offset by a $153,000 increase in
field service costs to maintain the equipment. The Company continues to address
the cost of field service to align with revenue levels. 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 $582,000 or 90.5%, primarily due to the increase in revenues. There
was an increase in the gross margin of Indoor display equipment sales due to the
product mix of sales. Indoor display general and administrative expenses
decreased $640,000 or 31.1%, primarily due to a reduction in selling payroll and
benefits and related expenses and a $275,000 decrease in the allowance for
uncollectable accounts.
Outdoor display operating income increased $255,000 or 30.6% to $1.1 million in
2008 compared to $833,000 in 2007, primarily as a result of a decrease in field
service costs to maintain the equipment on rental and maintenance contracts.
The cost of Outdoor displays represented 74.1% of related revenues in 2008
compared to 77.1% in 2007. Outdoor display cost of equipment sales decreased
$216,000 or 2.8%, principally due to the decrease in volume. Outdoor display
cost of equipment rentals and maintenance decreased $617,000 or 30.4%, primarily
due to a $324,000 decrease in field service costs to maintain the equipment and
a $293,000 decrease in depreciation expense. Outdoor display general and
administrative expenses decreased slightly. Cost of Outdoor display equipment
rentals and maintenance includes field service expenses, plant repair costs,
maintenance and depreciation.
Real estate rentals operating income decreased $51,000 or 31.1%, primarily due
to the decrease in revenues. Cost of Real estate rentals remained level. The
cost of Real estate rentals represented 29.2% of related revenues in 2008
compared to 21.3% in 2007. The cost of Real estate rentals as a percentage of
related revenues increased primarily due the reduction in revenues. Real estate
rentals general and administrative expenses remained level.
Corporate general and administrative expenses decreased $234,000 or 9.9%,
primarily due to decreases in benefits, legal and general insurance expenses and
a foreign currency gain of $20,000 compared to a foreign currency loss of
$73,000 in the prior year, offset by an increase in audit fees.
14
The Company continues to monitor and reduce certain overhead costs.
Net interest expense decreased $279,000, due to lower interest rates of the
variable debt and a reduction in total debt. The debt conversion cost of $1.5
million relates to the one-time, non-cash, non-tax deductible charge for the
exchange of debt for Common Stock relating to the exchange offer, that was
completed March 14, 2007, see Note 5.
Other income of $593,000 in 2007 relates to a gain resulting from the
termination of an office lease.
The effective tax rate for the six months ended June 30, 2008 and 2007 was 2.4%
and 22.8%, respectively. The 2008 rate was affected by the $2.5 million
increase in the valuation allowance on its deferred tax assets as a result of
reporting a pre-tax loss. The 2007 rate was affected by the $1.5 million
one-time, non-cash, non-tax deductible charge relating to exchange of debt for
Common Stock, see Note 5. The Company adopted the provisions of FIN 48 on
January 1, 2007, see Note 7. The current year's income tax expense relates to
the Company's Canadian subsidiary.
Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
Total revenues for the three months ended June 30, 2008 increased $902,000 or
9.5% to $10.4 million from $9.5 million for the three months ended June 30,
2007, primarily due to increases in both Indoor and Outdoor display sales
revenues, offset by decreases in both Indoor and Outdoor display rentals and
maintenance revenues.
Indoor display revenues increased $660,000 or 24.3%. Of this increase, Indoor
display equipment sales increased $748,000 or 88.0%, primarily due to an
increase in sales from the gaming and transportation markets. Indoor display
equipment rentals and maintenance revenues decreased $88,000 or 4.7%, 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 ongoing consolidation within
that industry.
Outdoor display revenues increased $269,000 or 4.0%. Of this increase, Outdoor
display equipment sales increased $448,000 or 8.2%, primarily in the outdoor
catalog sports market, offset by a decrease in the outdoor commercial market.
Outdoor display equipment rentals and maintenance revenues decreased $179,000 or
14.3%, primarily due to the continued expected revenue decline in the older
Outdoor display equipment rental and maintenance bases acquired in the early
1990s.
Real estate revenues decreased $27,000 or 25.0%, primarily due to less than full
occupancy of the sub-leased portion of our Norwalk, CT location, which
sub-leases terminated in June 2008.
Total operating income for the three months ended June 30, 2008 increased
$863,000 to $1.1 million from $187,000 for the three months ended June 30, 2007,
principally due to the increases in the Indoor and Outdoor sales revenues.
Indoor display operating income increased $657,000 to $221,000 in 2008 compared
to a loss of $436,000 in 2007, primarily as a result of the increase in revenues
in the gaming and transportation markets. The cost of Indoor displays
represented 73.1% of related revenues in 2008 compared to
15
79.4% in 2007. The cost of Indoor displays as a percentage of related revenues
decreased primarily due to a $127,000 decrease in depreciation expense and an
improvement in the gross profit margin of equipment sales due to the product mix
of sales, offset by a $124,000 increase in field services costs to maintain the
equipment. The Company continues to address the cost of field service to align
with revenue levels. 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 $314,000 or
70.7%, primarily due to the increase in revenues. Indoor display general and
administrative expenses decreased $309,000 or 31.0%, primarily due to a
reduction in selling payroll and benefits and related expenses and a $118,000
decrease in the allowance for uncollectable accounts.
Outdoor display operating income increased $233,000 or 42.9% to $775,000 in 2008
compared to $542,000 in 2007, primarily as a result of a reduction in the cost
of Outdoor equipment rentals and maintenance. The cost of Outdoor displays
represented 74.2% of related revenues in 2008 compared to 76.4% in 2007.
Outdoor display cost of equipment sales increased $373,000 or 9.1%, principally
due to the increase in volume and the volume mix. Outdoor display cost of
equipment rentals and maintenance decreased $322,000 or 31.4%, primarily due to
a $176,000 decrease in field service costs to maintain the equipment and a
$146,000 decrease in depreciation expense. Outdoor display general and
administrative expenses remained level. Cost of Outdoor display equipment
rentals and maintenance includes field service expenses, plant repair costs,
maintenance and depreciation.
Real estate operating income decreased $27,000 or 33.3%, primarily due to the
decrease in revenues. Cost of Real estate rentals remained level. The cost of
Real estate rentals represented 28.4% of related revenues in 2008 compared to
21.3% in 2007. The cost of Real estate rentals as a percentage of related
revenues increased primarily due to the reduction in revenues. Real estate
rental general and administrative expenses remained level.
Corporate general and administrative expenses decreased $53,000 or 4.6%,
primarily due to a decrease in benefits, legal and general insurance expenses
and a foreign currency gain of $10,000 compared to a foreign currency loss of
$70,000 in the prior year, offset by an increase in audit fees. The Company
continues to monitor and reduce certain overhead costs.
Net interest expense decreased $79,000, due to lower interest rates of the
variable debt and a reduction in total debt. Other income in 2007 of $593,000
related to a gain resulting from the termination of an office lease.
The effective tax rate for the three months ended June 30, 2008 and 2007 was
1.9% and 33.3%, respectively. The 2008 rate was affected by the $2.1 million
increase in the valuation allowance on its deferred tax assets as a result of
reporting a pre-tax loss. The current year's income tax expense relates to the
Company's Canadian subsidiary.
Liquidity and Capital Resources
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
16
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 an additional
amortization of prepaid financing costs aggregating $1.5 million in debt
conversion cost as a result of the exchange offer.
During the six months ended June 30, 2008, long-term debt, including current
portion, decreased $1.3 million due to regularly scheduled payments of
long-term.
The Company has a bank Credit Agreement that 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% Convertible Subordinated
Notes due December 1, 2006 (the "7 1/2% Notes") in June 2006 and a revolving
loan of up to $5.0 million at variable interest rates ranging from LIBOR plus
2.25% to Prime (ranging from 4.71% to 5.00% at June 30, 2008). The Credit
Agreement matures on August 1, 2009. Effective December 31, 2006, $6.1 million
of the non-revolving line of credit was converted into a four-year term loan
also maturing August 1, 2009. At June 30, 2008, 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 loan-to-value ratio of not more than 50%, a
leverage ratio and maintaining accounts with an average monthly compensating
balance of not less than $750,000. Subsequent to the end of the quarter, the
fixed charge coverage ratio was modified to 1.25 to 1.00 and the minimum
tangible net worth covenant was modified to $17.0 million as of June 30, 2008.
As of June 30, 2008, the Company was in compliance with the forgoing financial
covenants, but was not in compliance with the cap on capital expenditures. The
senior lender waived the non-compliance subsequent to the end of the quarter.
The Company continues to be in discussion with its senior lenders and others to
restructure the Credit Agreement or refinance to further extend the maturity
date and obtain additional liquidity.
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's long-term debt
requires interest payments. The Company has both variable and fixed interest
rate debt. Interest payments are projected based on current interest rates
until the underlying debts mature.
17
The following table summarizes the Company's fixed cash obligations of its
continuing operations as of June 30, 2008 for the remainder of 2008 and the next
four years:
Remainder of
In thousands 2008 2009 2010 2011 2012
-----------------------------------------------------------------------------------------
Long-term debt, including interest $4,874 $14,016 $1,362 $1,345 $13,736
Employment and consulting agreement obligations 628 912 427 303 198
Operating lease payments 293 419 381 388 272
------ ------- ------ ------ -------
Total $5,795 $15,347 $2,170 $2,036 $14,206
====== ======= ====== ====== =======
-----------------------------------------------------------------------------------------
From continuing operations, cash and cash equivalents decreased $2.7 million for
the six months ended June 30, 2008 compared to a decrease of $2.1 million for
the six months ended June 30, 2007. The decrease in 2008 is primarily
attributable to the investment in equipment for rental of $1.6 million and $1.3
million of scheduled payments of long-term debt, offset by $0.7 million of cash
provided by operating activities of continuing operations. The decrease in 2007
is primarily attributable to the investment in equipment for rental of $2.4
million and $1.2 million of scheduled payments of long-term debt, offset by $1.6
million of cash provided by operating activities of continuing operations.
Although the Company has incurred losses from continuing operations, it believes
that cash generated from continuing operations together with cash and cash
equivalents on hand should be sufficient to fund anticipated current and near
term cash requirements. The Company is in discussions with its senior lender
and other lenders to restructure its existing Credit Agreement, which includes
the revolving loan facility, to extend the maturity, reduce the annual
amortization and obtain additional liquidity. The Company continually evaluates
the need and availability of long-term capital in order to meet its cash
requirements.
Safe Harbor Statement under the Private Securities Litigation 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 3. 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. In addition the Company is exposed to foreign
currency exchange rate risk mainly as a result of its investment in its Canadian
subsidiary. The Company may, from time to time, enter into derivative contracts
to manage its interest risk. The Company does not enter into derivatives for
trading or speculative purposes. At June 30, 2008, the Company did not hold any
derivative financial instruments.
18
A one-percentage point change in interest rates would result in an annual
interest expense fluctuation of approximately $158,000. A 10% change in the
Canadian dollar relative to the U.S. dollar would result in a currency exchange
expense fluctuation of approximately $249,000, based on dealer quotes,
considering current exchange rates.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. As required by Rule 13a-15
under the Securities Exchange Act of 1934, as of the end of the period covered
by this report, we have carried out an evaluation, under the supervision and
with the participation of our management, including our Co-Chief Executive
Officers and Chief Financial Officer (our principal executive officers and
principal financial officer), of the effectiveness of the design and operation
of our disclosure controls and procedures. 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 June 30, 2008.
Changes in Internal Control over Financial Reporting. There has been no change
in the Company's internal control over financial reporting, that occurred in
2008, that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.
Part II - Other Information
Item 1A. Risk Factors
The Company is subject to a number of risks including general business and
financial risk factors. Any or all of such factors could have a material
adverse effect on the business, financial condition or results of operations of
the Company. You should carefully consider the following risk factors, in
addition to those identified in our Annual Report on Form 10-K for the year
ended December 31, 2007.
On June 26, 2008, the Board of Directors approved the sale of the assets of the
Entertainment Division. As a result of the sale, the Company has accounted for
the Entertainment Division as discontinued operations in the second quarter of
2008 and recorded non-cash long-lived asset impairment charges of $2.9 million
for the quarter ended June 30, 2008, as well as $2.0 million in disposal costs,
see Note 2.
19
The Company has incurred net losses from continuing operations for the three and
six months ended June 30, 2008 of $541,000 and $1,911,000, respectively, but has
generated cash provided by operating activities of continuing operations of
$669,000 and $1,553,000 for the six months ended June 30, 2008 and 2007,
respectively, and has positive working capital of $6.7 million as of June 30,
2008. As of June 30, 2008, the Company has fully drawn its $5.0 million
revolving loan facility, which matures on August 1, 2009. The Company's
objective in regards to the Credit Agreement is to restructure the existing
Credit Agreement or obtain additional funds from external sources through equity
or additional debt financing and is in discussions with its senior lender and
others. While management believes it will be successful, there can be no
assurance that management will be successful in achieving any of the above
objectives. Management further believes that its current cash resources and
cash provided by operations will be sufficient to fund its operations and its
current obligations through June 30, 2009.
Item 2. Unregistered Sales of Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of Trans-Lux Corporation was held on June 4,
2008 for the purpose of electing directors and ratifying the retention of
auditors as set forth below.
All of management's nominees for directors for a three-year term as listed in
the proxy statement were elected by the following vote:
For Withheld
--- --------
Matthew Brandt 3,641,387 75,720
Howard S. Modlin 3,637,963 79,144
Michael R. Mulcahy 3,642,287 74,820
The following directors are continuing their terms as directors:
Richard Brandt - One Year Remaining
Thomas Brandt - One Year Remaining
Howard M. Brenner - One Year Remaining
Jean Firstenberg - Two Years Remaining
Gene Jankowski - Two Years Remaining
Victor Liss - Two Years Remaining
20
The recommendation to ratify the retention of Eisner LLP as the independent
auditors for the Company was approved by the following vote:
For Against Abstain
--- ------- -------
Totals 3,716,528 500 79
Item 5. Other Information
Subsequent to the annual meeting ratifying Eisner LLP as the independent
auditors for the Company, see Item 4, on July 10, 2008, the Company filed a Form
8-K announcing it has replaced Eisner LLP with UHY LLP as its independent
registered public accountants.
Item 6. Exhibits
10.1 Amendment No. 9 to the Amended and Restated Commercial Loan and
Security Agreement with People's United Bank dated July 15, 2008,
filed herewith.
10.2 Employment Agreement with Al Miller dated as of April 1, 2008,
filed herewith.
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.
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.
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.
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.
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.
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.
21
SIGNATURES
Pursuant to the requirements 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
---------------------
(Registrant)
Date: August 14, 2008
by /s/ Angela D. Toppi
---------------------
Angela D. Toppi
Executive Vice President and
Chief Financial Officer
22