-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DeJ7Yw9BUpM+3Y9eFDQcg0/p9MEBmnEdjRFLmvNbvDbS2b0qrcBUa9GPIrGH8lXA gixq3EUeIZobs2RLbf4zmA== 0001019056-97-000052.txt : 19970326 0001019056-97-000052.hdr.sgml : 19970326 ACCESSION NUMBER: 0001019056-97-000052 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970325 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENLYTE GROUP INC CENTRAL INDEX KEY: 0000833076 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 222584333 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-16960 FILM NUMBER: 97561978 BUSINESS ADDRESS: STREET 1: 2345 VAUXHALL RD CITY: UNION STATE: NJ ZIP: 07083 BUSINESS PHONE: 9088104519 MAIL ADDRESS: STREET 1: 2345 VAUXHALL RD CITY: UNION STATE: NJ ZIP: 07083 10-K 1 THE GENLYTE GROUP INCORPORATED - FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 1996 Commission file number: 0-16960 ---------------- THE GENLYTE GROUP INCORPORATED 2345 Vauxhall Road Union, N. J. 07083-1948 (908) 964-7000 INCORPORATED IN DELAWARE I.R.S. EMPLOYER IDENTIFICATION NO. 22-2584333 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - -------------------------------------------------------------------------------- Common Stock, par value NASDAQ National Market System $.0l per share Number of shares of Common Stock (par value $.0l per share) outstanding as of March 3, 1997: 13,134,074. Aggregate market value of Common Stock (par value $.01 per share) held by non-affiliates on March 3, 1997: $141,191,296. 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 [ ] 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] DOCUMENTS INCORPORATED BY REFERENCE: DOCUMENT PART OF FORM 10-K Annual report to stockholders for the fiscal year ended December 31, 1996 PARTS I, II, AND IV Proxy Statement for the Annual Meeting of Stockholders to be held April 24, 1997 PART III PART I - ------ ITEM 1. BUSINESS -------- The Genlyte Group Incorporated (the "Company" or "Genlyte") designs, manufactures and sells lighting fixtures for a wide variety of applications in the commercial, industrial, and residential markets. The Company operates in one industry segment (lighting fixtures and controls) through the following divisions: Lightolier, Controls, Wide-Lite, Hadco, Diamond F, and Supply (Crescent, ExceLine, and Stonco product lines) in the United States and Mexico, and Canlyte in Canada. The Company markets its products under the following brand names: In the U.S. -- Bronzelite, Crescent, Diamond F, ExceLine, Forecast, Genlyte Controls, Hadco, Lightolier, Stonco, and Wide-Lite In Canada -- Keene-Widelite, Lightolier, Prodel, Stonco, and CFI (Canadian Fluorescent Industries) In Mexico -- Lightolier, Forecast, Wide-Lite, Bronzelite, and Hadco Genlyte's products primarily utilize incandescent, fluorescent, and high-intensity discharge ("HID") light sources and are marketed primarily to distributors who resell the products for use in new residential, commercial, and industrial construction as well as in remodeling existing structures. Because Genlyte does not principally sell directly to the end-user of its products, the Company cannot determine precisely the percentage of its revenues derived from the sale of products installed in each type of building or the percentage of its products sold for new construction versus remodeling. Genlyte's sales, like those of the lighting fixture industry in general, are partly dependent on the level of activity in new construction and remodeling. 1 PRODUCTS AND DISTRIBUTION - ------------------------- Genlyte designs, manufactures, and markets the following types of products: Indoor Fixtures -- Incandescent, fluorescent, and HID lighting fixtures and lighting controls for commercial, industrial, institutional, medical, sports, and residential markets, and task lighting for all markets. Outdoor Fixtures -- HID and incandescent lighting fixtures and accessories for commercial, industrial, institutional, sports, and residential markets. Genlyte's products are marketed by independent sales representatives and Company direct sales personnel who sell to distributors, electrical wholesalers, mass merchandisers, and national accounts. In addition, the Company's products are promoted through architects, engineers, contractors, and building owners. The fixtures are principally sold throughout the United States, Canada, and Mexico. RAW MATERIALS SOURCES & AVAILABILITY - ------------------------------------ Genlyte purchases large quantities of raw materials and components -- mainly steel, aluminum, ballasts, sockets, wire, plastic, lenses, and glass -- from multiple sources. No significant supply problems have been encountered in recent years. Relationships with vendors have been satisfactory. PATENTS AND TRADEMARKS - ---------------------- Genlyte has a number of United States and foreign mechanical patents, design patents, and registered trademarks. Genlyte maintains such protections by periodic renewal of trademarks and payments of maintenance fees for issued patents. Genlyte vigorously enforces its intellectual property rights. Genlyte does not believe that a loss of any presently held patent or trademark is likely to have a material adverse impact on its business. 2 SEASONAL EFFECT ON BUSINESS - --------------------------- There are no predictable significant seasonal effects on Genlyte's results of its operations. WORKING CAPITAL - --------------- There are no unusual significant business practices at Genlyte that affect working capital. Genlyte's terms of sale vary by division but are generally consistent with general practices within the lighting industry. The Company attempts to keep inventory levels at the minimum required to satisfy customer requirements. BACKLOG - ------- Backlog was $42,247,005 as of December 31, 1996, $51,093,000 as of December 31, 1995, and $50,378,300 as of December 31, 1994. Substantially all of the backlog at December 31, 1996 is expected to be shipped in 1997. COMPETITION - ----------- Genlyte's products are sold in competitive markets where there are numerous producers of each type of fixture. The principal measures of competition in indoor and outdoor fixtures for the commercial, residential, and industrial markets are price, service, design, and product performance. RESEARCH AND DEVELOPMENT - ------------------------ Genlyte is constantly monitoring new light sources for incorporation into new product development. Costs incurred for research and development activities, as determined in accordance with generally accepted accounting principles, were $4,148,000, $2,551,000 and $3,006,000, during 1996, 1995, 1994 respectively. 3 EMPLOYEES - --------- At December 31, 1996, Genlyte employed approximately 1,800 unionized and non-unionized production workers and 750 engineering, administrative, and sales personnel. Relationships with unions have been satisfactory. INTERNATIONAL OPERATIONS - ------------------------ The Company has international operations in Canada and Mexico. Information on the Company's operations by geographical area for the last three fiscal years is set forth in the "Notes to the Consolidated Financial Statements" section of Genlyte's 1996 Annual Report to Stockholders, which is incorporated herein by reference. ITEM 2. PROPERTIES ---------- The Company has the following owned and leased property locations as of December 31, 1996:
OWN/ MFG. OFFICE WHSE. OTHER LEASE SPACE SPACE SPACE SPACE ----- ----- ----- ----- ----- LOCATION - -------- LIGHTOLIER: Atlanta, GA Lease x Camargo, Mexico Lease x x x Chesterfield, MO Lease x Columbia, MD Lease x Compton, CA Lease x x Dallas, TX Lease x Denver, CO Lease x Edison, NJ Lease x x Emeryville, CA Lease x Fall River, MA Own x x Farmers Branch, TX Lease x Fontana, CA Own x x x Jacksonville, FL Lease x Louisville, KY Lease x Miami, FL Lease x New York, NY Lease x Norwich, CT Own x x Phoenix, AZ Lease x Pittsburgh, PA Lease x Portland, OR Lease x San Diego, CA Lease x Seattle, WA Lease x Schiller Park, IL Lease x Wilmington, MA Own x x x Winter Park, FL Lease x
4
OWN/ MFG. OFFICE WHSE. OTHER LEASE SPACE SPACE SPACE SPACE ----- ----- ----- ----- ----- LOCATION - -------- HADCO: Cameron, WV Lease x x Littlestown, PA Own x x x SUPPLY: Stonco - Union, NJ * Own x x x Crescent - Barrington, NJ Own x x x WIDE-LITE: San Marcos, TX Own x x x CONTROLS: Garland, TX Own x x x x DIAMOND F: Elgin, IL Own x x x CANLYTE: Cambridge, Ontario (KWL) Own x x x Montreal, Quebec (Lachine-LOL/CHQ) Own x x x x Toronto (LOL/CHQ) Lease x Vancouver (LOL) Lease x Edmonton (LOL) Lease x Cornwall, Ontario (CFI) Own x x x Dorval (LOL) Lease x
* Includes Genlyte headquarters. The Genlyte facility located in Garland, Texas is subject to a $278,000 mortgage due May 1, 2001. Genlyte believes its facilities are suitable and adequate for current and presently projected needs. 5 ITEM 3. LEGAL PROCEEDINGS ----------------- Genlyte has been named as one of a number of corporate and individual defendants in an adversary proceeding filed on June 8, 1995, arising out of the Chapter 11 bankruptcy filing of Keene Corporation ("Keene"). Except for the last count, as discussed below, the claims and causes of action are substantially the same as were brought against Genlyte in the U.S. District Court in New York in August 1993, which have been permanently enjoined from proceeding as a result of Keene's reorganization plan. The new complaint is being prosecuted by the Creditors Trust created for the benefit of Keene's creditors (the "Trust"), seeking from the defendants, collectively, damages in excess of $700 million, rescission of certain asset sale and stock transactions, and other relief. With respect to Genlyte, the complaint principally maintains that certain lighting assets of Keene were sold to a predecessor of Genlyte in 1984 at less than fair value, while both Keene and Genlyte were wholly-owned subsidiaries of Bairnco Corporation. The complaint also challenges Bairnco's spin-off of Genlyte in August 1988. Other allegations are that Genlyte, as well as the other corporate defendants, are liable as corporate successors to Keene. The complaint fails to specify the amount of damages sought against Genlyte. The complaint also alleges a violation of the Racketeer Influenced and Corrupt Organizations Act. Following confirmation of the Keene reorganization plan, the parties have moved to withdraw the case from bankruptcy court to the Southern District of New York Federal District Court. No answer or other pleading shall be due until thirty (30) days following withdrawal of the case. Genlyte believes that it has meritorious defenses to the adversary proceeding and will defend said action vigorously. Additionally, the Company is defendant and/or potentially responsible party, with other companies, in actions and proceedings under state and federal environment laws including the federal Comprehensive Environmental Response Compensation and Liability Act, as amended ("Superfund"). Such actions include, but are not limited to, the Keystone 6 Sanitation Landfill site located in Pennsylvania, in which the United States Environmental Protection Agency has sought remedial action and reimbursement for past costs. Management does not believe that the disposition of the lawsuits and/or proceedings will have a material effect on the Company's financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- None. 7 PART II - ------- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY & RELATED STOCKHOLDER MATTERS --------------------------------------------------------------------- a. and c. Data regarding market price of Genlyte's common stock is included in the "Quarterly Results of Operations" section of Genlyte's 1996 Annual Report to Stockholders, which is incorporated herein by reference. Genlyte's common stock is traded on the NASDAQ National Market System under the symbol "GLYT". Information concerning dividends and restrictions thereon and Preferred Stock Purchase Rights are included in the "Notes to the Consolidated Financial Statements" section of Genlyte's 1996 Annual Report to Stockholders, which is incorporated herein by reference. b. The approximate number of common equity security holders is as follows: APPROXIMATE NUMBER OF HOLDERS OF RECORD AS OF TITLE OF CLASS YEAR-END 1996 --------------------------------------------------------------------- Common Stock, par value $.0l per share 1,705 ITEM 6. SELECTED FINANCIAL DATA ----------------------- The information required for this item is included in Genlyte's 1996 Annual Report to Stockholders, which is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ----------------------------------------------------------------- Reference is made to the "Management's Discussion and Analysis" section of Genlyte's 1996 Annual Report to Stockholders, which is incorporated herein by reference. 8 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- Reference is made to the "Consolidated Financial Statements" and "Quarterly Results of Operations" sections of Genlyte's 1996 Annual Report to Stockholders, which is incorporated herein by reference. Financial statement schedules are included in Part IV of this filing. ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ------------------------------------------------------------------ None. 9 PART III - -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -------------------------------------------------- The information required with respect to the Directors of Genlyte is included in the "Election of Directors" section of the Proxy Statement for the 1997 Annual Meeting of the Stockholders of Genlyte which has been filed with the Securities and Exchange Commission and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION ---------------------- The information with respect to executive compensation is included in the "Compensation of Directors and Executive Compensation" section of the Proxy Statement for the 1997 Annual Meeting of Stockholders of Genlyte which has been filed with the Securities and Exchange Commission and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -------------------------------------------------------------- The information required with respect to security ownership is included in the "Voting Securities and Principal Holders Thereof" section of the Proxy Statement for the 1997 Annual Meeting of Stockholders of Genlyte which has been filed with the Securities and Exchange Commission and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- The information required with respect to relationships is included in the "Compensation Committee Interlocks and Insider Participation" and "Voting Securities and Principal Holders Thereof" section of the Proxy Statement for the 1997 Annual Meeting of Stockholders of Genlyte which has been filed with the Securities and Exchange Commission and is incorporated herein by reference. 10 PART IV - ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K --------------------------------------------------------------- a) 1) FINANCIAL STATEMENTS The following information is incorporated herein by reference to Genlyte's 1996 Annual Report to Stockholders: Report of Independent Public Accountants Consolidated Statements of Income for the years ended December 31, 1996, 1995, and 1994 Consolidated Balance Sheets as of December 31, 1996 and 1995 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995, and 1994 Consolidated Statements of Stockholders' Investment for the years ended December 31, 1996, 1995, and 1994 Notes to Consolidated Financial Statements 2) Financial Statement Schedule Report of Independent Public Accountants on Financial Statement Schedule: Schedule II -- Valuation and Qualifying Accounts Other schedules are omitted because of the absence of conditions under which they are required or because the required information is included in the consolidated financial statements or notes thereto. b) There were no filings on Form 8-K during the fourth quarter of 1996. 11 c) EXHIBITS - -- -------- INCORPORATED BY DESCRIPTION REFERENCE TO - ----------- ------------ - - Amended and Restated Exhibit 3(b) to Genlyte's Certificate of Incorporation Registration Statement on Form 8 as of the Registrant, dated filed with the Securities and August 2, 1988 Exchange Commission on August 3, 1988 - - Amended and Restated Exhibit 3(a) to Genlyte's Form 10-K Certificate of Incorporation filed with the Securities and of the Registrant, dated May Exchange Commission in March 1993 9, 1990 - - Amended and Restated By-Laws Exhibit 3(c) to Genlyte's of the Registrant, as adopted Registration Statement on Form 8 as on May 16, 1988 filed with the Securities and Exchange Commission on August 3, 1988 - - Form of Stock Certificate for Exhibit 4(a) to Genlyte's Genlyte Common Stock Registration Statement on Form 8 as filed with the Securities and Exchange Commission on August 3, 1988 - - Stock Purchase Agreement Exhibit 10(a) to Genlyte's between the Registrant and Registration Statement on Form 8 as purchasers of Class B Stock of filed with the Securities and the Registrant, dated as of Exchange Commission on August 3, June 17, 1988 1988 12 INCORPORATED BY DESCRIPTION REFERENCE TO - ----------- ------------ - - Loan Agreement between The Exhibit 10(b) to Genlyte's Form Genlyte Group Incorporated and 10-K filed with the Securities and the New Jersey Economic Exchange Commission in March 1991 Development Authority dated April 1, 1990, replacing the First Mortgage and Security Agreement between the New Jersey Economic Development Authority and KCS Lighting, Inc., dated December 20, 1984 (assigned to and assumed by the Registrant effective December 31, 1986) - - Loan Agreement between The Exhibit 10(c) to Genlyte's Form Genlyte Group Incorporated and 10-K filed with the Securities and the New Jersey Economic Exchange Commission in March 1991 Development Authority dated June 1, 1990, replacing the Loan Agreement between KCS Lighting, Inc. and the New Jersey Economic Development Authority, dated December 20, 1984 (assigned to and assumed by the Registrant effective December 31, 1986) - - Management Incentive Exhibit 10(i) to Genlyte's Compensation Plan Registration Statement on Form 8 as filed with the Securities and Exchange Commission on August 3, 1988 - - Genlyte 1988 Stock Option Plan Exhibit 10(j) to Genlyte's Registration Statement on Form 8 as filed with the Securities and Exchange Commission on August 3, 1988 13 INCORPORATED BY DESCRIPTION REFERENCE TO - ----------- ------------ - - Tax Sharing Agreement between Exhibit 10(k) to Genlyte's Genlyte and Bairnco Corpora- Registration Statement on Form 8 as tion, dated July 15, 1988 filed with the Securities and Exchange Commission on August 3, 1988 - - Merger and Assumption Agree- Exhibit 10(d) to Genlyte's Form ment, dated as of December 28, 10-K filed with the Securities and 1990, by and between Genlyte Exchange Commission in March 1991 and Lightolier - - Form of Employment Protection Exhibit to Genlyte's Form 10-Q Agreement entered into between filed with the Securities and Genlyte and certain key Exchange Commission in August 1990 executives - - Loan Agreement between The Exhibit 4(c) to Genlyte's Form 10-K Genlyte Group Incorporated and filed with the Securities and Jobs for Fall River, Inc., Exchange Commission in March 1995 dated as of July 13, 1994 - - Amended and Restated Credit Exhibit 4(c) to Genlyte's Form 10-K Agreement between The Genlyte filed with the Securities and Group Incorporated and the Exchange Commission in March 1996 applicable banks named therein, dated as of November 15, 1995 Other Exhibits included herein: (11) Calculation of Primary and Fully Diluted Earnings per Share (13) Annual Report to Stockholders (21) Subsidiaries of the Registrant (23) Consent of Independent Public Accountants (27) Financial Data Schedule 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Genlyte has duly caused this Annual Report to be signed on its behalf by the undersigned thereunto duly authorized. THE GENLYTE GROUP INCORPORATED ------------------------------ Registrant /s/ March 25, 1997 /s/ Neil M. Bardach Date: -------------------- By --------------------------- March 25, 1997 Neil M. Bardach V.P. Finance - CFO & Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed below by the following persons on behalf of Genlyte and in the capacities and on the date indicated. /s/ Avrum I. Drazin 3/20/97 - ------------------------------------------- ------------------ Avrum I. Drazin - Chairman of the Board March 20, 1997 /s/ Larry Powers 3/20/97 - ------------------------------------------- ------------------ Larry Powers, President and Chief March 20, 1997 Executive Officer (Principal Executive Officer) /s/ Glenn W. Bailey 3/20/97 - ------------------------------------------- ------------------ Glenn W. Bailey - Director March 20, 1997 /s/ Robert B. Cadwallader March 20, 1997 - ------------------------------------------- ------------------ Robert B. Cadwallader - Director March 20, 1997 /s/ David M. Engelman 3/20/97 - ------------------------------------------- ------------------ David M. Engelman - Director March 20, 1997 /s/ Fred Heller 3/20/97 - ------------------------------------------- ------------------ Fred Heller - Director March 20, 1997 /s/ Frank Metzger 3/20/97 - ------------------------------------------- ------------------ Frank Metzger - Director March 20, 1997 15 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- ON FINANCIAL STATEMENT SCHEDULE ------------------------------- TO THE GENLYTE GROUP INCORPORATED: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in The Genlyte Group Incorporated Annual Report to Stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 22, 1997. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Item 14a(2) is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/ Arthur Andersen LLP ----------------------- ARTHUR ANDERSEN LLP New York, New York January 22, 1997 16 THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS ($ in thousands)
ADDITIONS BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND AT END OF YEAR EXPENSES DEDUCTIONS OF YEAR ------- -------- ---------- ------- YEAR-ENDED DECEMBER 31, 1996 Allowance for Doubtful Accounts $ 5,302 $ 3,452 $ (532) $ 8,222 YEAR-ENDED DECEMBER 31, 1995 Allowance for Doubtful Accounts $ 3,551 $ 3,315 $(1,564) $ 5,302 YEAR-ENDED DECEMBER 31, 1994 Allowance for Doubtful Accounts $ 3,765 $ 1,334 $(1,548) $ 3,551
17 EX-11 2 EXHIBIT 11 EXHIBIT 11 THE GENLYTE GROUP INCORPORATED AND SUBSIDIARIES Calculation of Primary and Fully Diluted Earnings per Share For the Years Ended December 31, 1996, 1995 and 1994 ($ in thousands - except per share data)
1996 1995 1994 ------- ------- -------- PRIMARY EARNINGS PER SHARE* Net Income $ 12,997 $ 7,909 $ 4,217 Average common shares outstanding 12,859 12,732 12,732 Common shares issuable in respect to common stock equivalents, with a dilutive effect 162 47 6 -------- ------- ------- Total common and equivalent shares 13,021 12,779 12,738 -------- ------- ------- -------- ------- ------- Primary Earnings Per Share $ 1.00 $ 0.62 $ 0.33 ======== ======= ======= FULLY DILUTED EARNINGS PER SHARE** Net Income $12,997 $ 7,909 $ 4,217 Total common and equivalent shares 13,021 12,779 12,738 Additional common shares issuable assuming full dilution 34 25 4 -------- ------- ------- Total common and equivalent shares assuming full dilution 13,055 12,804 12,742 -------- ------- ------- -------- ------- ------- Fully Diluted Earnings Per Share $ 1.00 $ 0.62 $ 0.33 ======== ======= =======
* Primary earnings per share include all common stock equivalents ** Fully diluted earnings per share include all common stock equivalents plus the additional shares issuable assuming full dilution 18 EX-13 3 ANNUAL REPORT TO STOCKHOLDERS ================================================================================ GENLYTE LIGHTING THE WAY-TOGETHER 1996 ANNUAL REPORT [Graphic] ================================================================================ The Genlyte Group Incorporated is a leading manufacturer of lighting fixtures and controls for the commercial, industrial and residential markets. Our products are sold under the brand names of Bronzelite, Crescent, Diamond F, ExceLine, Forecast, Genlyte Controls, Hadco, Lightolier, Stonco and Wide-Lite in the U.S. and CFI Fluorescent, Keene-Widelite, Lightolier, Prodel and Stonco in Canada. GENLYTE On the Cover: the TechCenter [trademark] - -------------------------------------------------------------------------------- [graphic of front cover] The TechCenter in Fall River, Massachusetts, is a 5,000 square foot, ultra-modern interactive environment that illustrates lighting design and applications. In its first year, the Center will attract more than 1,000 lighting professionals. Part laboratory, part demonstration facility, part sales tool, the TechCenter exemplifies Genlyte's commitment to education and innovation. http://www.lightolier.com @theForefront At Genlyte, innovation is a tradition. From the invention of track lighting to the first HID floodlight, to the first acrylic refractor globe for street lighting, Genlyte companies have been consistently at the forefront. At Genlyte, innovation is a commitment... a commitment represented by the excellence of our design and engineering staff... by our proven ability to turn the latest advances in lighting into commercially viable products... by our use of the newest technology to communicate with our market. At Genlyte, innovation is a necessity. Lifestyles and workstyles are rapidly changing, creating new lighting needs. Today, energy efficiency and electronically "smart" lighting are the imperatives of product development. To succeed, we must provide what the market wants. With more style. More sophisticated electronics. Greater energy efficiency. Higher quality. Our results this year are a measure of our success. FINANCIAL HIGHLIGHTS (Amounts in thousands except per share data) 1996 1995 1994 ---- ---- ---- OPERATING RESULTS Net Sales .......................... $456,860 $445,660 $432,690 Gross Margin Percentage ............ 33.9% 31.0% 29.7% Operating Profit ................... $ 28,448 $ 21,955 $ 14,659 Net Income ......................... $ 12,997 $ 7,909 $ 4,217 Earnings Per Share ................. $ 1.00 $ 0.62 $ 0.33 BALANCE SHEET DATA Current Assets ..................... $163,839 $151,058 $157,332 Total Assets ....................... $238,115 $231,034 $240,178 Current Liabilities ................ $ 92,473 $ 75,289 $ 70,618 Total Debt ......................... $ 41,898 $ 65,946 $ 88,997 Stockholders' Investment ........... $ 83,783 $ 69,900 $ 61,170 Book Value Per Average Share ....... $ 6.42 $ 5.46 $ 4.77 [The following table represents a graphic chart.] NET OPERATING NET EARNINGS PER SALES PROFIT INCOME SHARE ----- ------ ------ ----- 1994 .......... 432.7 14.7 4.2 0.33 1995 .......... 445.7 22.0 7.9 0.62 1996 .......... 456.9 28.4 13.0 1.00 2 TO OUR STOCK HOLDERS @ GENLYTE We have just completed Genlyte's best year since becoming a public company in 1988. We want to tell you about 1996 and why we are excited about Genlyte's future. Over the past five years, Genlyte sales grew a modest 7% while profits have grown eightfold from 11 cents per share to $1.00 per share; debt has decreased from $118 million to $42 million; and the price of our shares has climbed from a low of $2.50 to a new high of $14.00, and closed 1996 at $12.50. We are proud of our performance but the actions that provided those results were different from the steps we must now take to assure a bright future for the company. Today, Genlyte manufactures more products with fewer factories and less overhead than at any time in the company's history. We have eliminated unprofitable product lines, marginal customers and ineffective channels of distribution. Our balance sheet has never been stronger and we have the best trained, most dedicated work force we have ever had. It is now time for us to focus Genlyte on growth. Growing the company in a mature, slow-growth industry is our major challenge. In order to grow in this type of market, we must focus on accelerating new product development, entering into new markets and improving service. Let us share with you our plans. PRODUCT DEVELOPMENT Many of Genlyte's brands have been recognized for years as leaders in bringing new, innovative products to market utilizing the most efficient light sources available. Competitors can copy our product designs, so we have to work faster and more efficiently to stay ahead of them. During 1996 we increased our spending on research and product development by 75% from 1995, and the results were dramatic. Genlyte introduced over 1,000 new products in 1996 and we were well rewarded for our accomplishments. New products and improved customer service resulted in improved margins. Other industries, even other companies in our industry, spend a greater percentage of their sales dollars on product development, but we do not believe that any of our competitors spend that money as productively as we do. 3 GENLYTE BRAND NAMES Lightolier High quality, innovative residential/commercial lighting: downlighting, track lighting, decorative, fluorescent and controls. Forecast Residential decorative lighting sold through lighting showrooms. Controls Electronic dimming and energy-saving controls for residential/ commercial use. Stonco, Crescent & ExceLine Standard, high-volume, contractor-friendly indoor/outdoor lighting distributed through electrical wholesalers and sold primarily to electrical contractors. Wide-Lite Energy-efficient, HID indoor/outdoor lighting products and controls for commercial, industrial, recreational use. Bronzelite High quality, specification grade commercial landscape lighting. Hadco Specification grade exterior architectural lighting for municipal, industrial, commercial,landscape use. Diamond F Decorative residential lighting sold through do-it-yourself home centers. Canlyte Sale in Canada of Lightolier, CFI, Keene, Wide-lite, Stonco and Hadco product lines. It is easy to copy a design, but few are able to copy our quality. Our customers expect us to manufacture the best fixtures in the industry and we will not disappoint them. We continually invest in improving the quality of our production processes. Because of excess capacity at many of our facilities, we have not been forced to increase our capital expenditures on plant and equipment over the past five years. Instead, we have concentrated our dollars on a smaller number of first-class facilities where we have used our money very effectively. We recently expanded our manufacturing facility in Camargo, Mexico, from which we enjoy significant cost savings as well as employees who have demonstrated that they can consistently produce "Genlyte quality" products. We have four plants within Genlyte that have received ISO certification and we will not rest until every one of our facilities deserves to be called "world-class." Finally, we are investing effectively in improving our sales process. We have revitalized our field sales force, built a national accounts sales organization that is the envy of our industry, and improved our coverage of and relationships with major customers. We hired a record number of new salespeople in 1996, and we have intensified the training we give to all of our sales staff. Our investment in national advertising, trade advertising and sales tools increases every year. In this annual report we highlight our Genlyte TechCenter, unquestionably the finest facility of its kind in the world. We have described it to you in previous letters; as you turn the pages of this annual report, you will see for yourself what a wonderful showcase it is for all of Genlyte's products. SERVICE In the past, Genlyte has not matched its product leadership with a commitment to service. Over the last few years we have invested substantial sums in service improvement and will continue to do so in 1997. 4 We already have the most effective electronic technical support in the industry and our Web site allows a customer access to all of Genlyte's products. We have made a substantial investment by bringing state-of-the-art technology to Genlyte, which, when fully implemented, will allow our customers to place one order to include products from many Genlyte divisions in a single purchase. We also must reduce the number of shipping points we use to supply our customers, thereby reducing the number of shipments they receive and lowering transaction costs for both our customers and ourselves. In the past few years, every measure of Genlyte's performance has improved along with our image in the lighting industry. It is exciting to be part of a successful organization and our people are proud of our accomplishments. Nonetheless, our fundamental goal has not changed and it has not yet been met. Our customers have many choices - every day, every chance they get, we want them to choose Genlyte - and until they do, our job will not be done. As always, we thank you for your support and trust, and we will make 1997 another excellent year for Genlyte. [Photo of Larry K. Powers] /s/ Larry K. Powers - ------------------------- Larry K. Powers President and Chief Executive Officer [Photo of Avrum I. Drazin] /s/ Avrum I. Drazin - ------------------------- Avrum I. Drazin Chairman of the Board 5 @ WORK [Graphic photos] The Advanced Lighting System provides computer-friendly and energy-efficient quality lighting for today's offices. At the Stonco plant in Union, New Jersey, GlowBay HID lights bring more sparkle, brighter light and greater energy efficiency to the factory floor. The NASA Neutral Buoyancy Lab in Houston, Texas, is lit by the F Series floodlight from Wide-Lite. 6 TECHEXPRESS [TRADEMARK] The most advanced information system in lighting, TechExpress includes the new Windows version of GENESYSTM workstation (which can import CAD files, develop a lighting plan, calculate photometrics), CD-ROM Specifier (providing catalog information, specification sheets, IES photometric files), Electronic Bulletin Board, 24-hour FAX-ON-DEMAND, plus an Internet Web site. [Graphic] LIGHT HELPS US WORK BETTER. Quality lighting creates a more humane workplace, and when we are more comfortable and healthy, we are also more productive. At the same time, energy efficiency is an ever-growing concern of business, whether in the office or the factory. While fluorescent lighting is a popular and economical choice for commercial applications, HID and decorative lighting also come into play. The fact is, today's work environment demands a variety of lighting, and Genlyte's strength in this market is built on the ability of our brands to meet these diverse and rapidly changing requirements. OFFICE LIGHTING Glare from overhead lights tires the eyes; too much light makes the computer screen hard to see. These are some of the challenging visual demands that Genlyte's Advanced Lighting System was designed to meet. Consisting of options in overhead lighting, indirect lighting, furniture-mounted task lighting and wall washing as well as energy-saving controls, this is the first system to satisfy the new American Office Lighting Standard: a power density of only one watt per square foot. Another solution is Alter Soft Lights, a family of recessed indirect fluorescent lighting by CFI, which creates an appealing office environment, and is a preferred lighting choice for video conferencing. INDUSTRIAL LIGHTING Genlyte addresses various manufacturing and warehousing requirements with a range of lamp technologies. Fluorescent lighting still dominates this category, and Crescent and CFI are strong players. HID lighting-providing brighter light, especially in spaces with higher ceilings-is an alternative that is gaining popularity. GlowBay from Stonco and SoftBay from ExceLine bring these benefits to the industrial environment. Bi-level dimming technology from Wide-Lite offers significant energy savings in warehouse and other spaces characterized by intermittent use. 7 @ PLAY [Graphic photos] A combination of unobtrusive recessed lighting from Lightolier creates the perfect ambience in this restaurant, using wall washers to create a sense of spaciousness and accent lighting to give each table a special glow. At the National Baseball Hall of Fame Museum in Cooperstown, NY, new ProSpec[trademark] track lights provide lighting befitting the brightest stars of baseball. 8 AT THE TECHCENTER A Hospitality space, including Bistro and Lobby Bar, creates the atmosphere for multiple lighting scenes, including track, decorative, recessed, surface and controls products. A Retail space, outfitted with a storefront window, transaction counter, display racks, shelving, and a myriad of lighting systems, makes it easy to evaluate and choose the right lighting equipment. [Graphic Photos] LIGHT ENHANCES OUR PLEASURES. Imagine a romantic dinner in a restaurant without soft, flattering lighting. Lighting adds drama and intrigue. Imagine a sporting event without the excitement of the darkened stadium and spot-lit stars. Light focuses our attention. Imagine a shop or a museum without well-lit displays to beckon to us. In the diverse world of commercial lighting, Genlyte brands offer high performance and mainstream options tailored to specific applications. LIGHTING FOR SELLING, VIEWING AND ENTERTAINING In the retail environment, lighting must not only display merchandise, but also communicate the store's distinctive image. Genlyte brands offer lighting solutions for retailers from specialty shops to mass merchandisers. Lightolier's Sof-Tech[registration mark] Track series has been expanded to include metal halide ring fixtures-ideal for merchandising areas where dramatic effects must be achieved even with high levels of ambient light. The Constar series from ExceLine brings cost-effective lighting and the sparkle-look of HID luminaires to retail chains. Museums are served by Lightolier's new ProSpec [trademark] Track, which delivers a high-performance system with a clean, unobtrusive look. Restaurants and hotels need to look their best, and Lightolier's decorative, track and recessed fixtures and its lighting controls offer solutions that perform well and can be aesthetically integrate into almost any space. LIGHTING FOR ARENA EVENTS A leader and innovator in arena lighting, Wide-Lite was not only the first to develop television broadcast lighting, but also the first to design a shuttered lighting system, making it possible to create theatrical effects like total blackouts. This year, Wide-Lite's new Eclipse II shutter system introduces higher efficiency to help offset the increased fixture counts required in the '90's. 9 @ HOME [Graphic photos] A pendant light creates a dramatically luminous centerpiece that focuses attention over the dining table while providing softly diffused illumination that plays gently on faces. In the bedroom, the versatility of Lightolier's Sof-Tech [registration mark] lighting is enhanced by a choice of stem length. Hadco landscape lighting, including underwater lights, gives the power to recreate the outdoor environment. 10 ON THE AIR [Graphic Photo] Encouraged by the success of our first Designing with LightSM television program, Genlyte produced a second program in 1996. The new show focuses on lighting solutions for the living room, and aired on Lifetime Television around the country. Another media highlight was the taping of an episode of "This Old House" at the TechCenter. The show aired on PBS stations. LIGHT TOUCHES US WHERE WE LIVE. It brightens a cloudy day...keeps the early winter darkness at bay...creates the warmth and intimacy of the evening hours....makes home more comfortable, functional and beautiful. Home lighting both reflects our lifestyle and enhances it. In this category, Genlyte really shines-indoors and out-with an exceptional range of decorative lighting, recessed downlighting, track lighting, fluorescent and landscape lighting delivered through multiple channels to reach the widest market. DECORATIVE LIGHTING In the fashion-oriented decorative lighting market, styles change quickly and success depends on being able to catch the wave with fresh designs. Genlyte brands introduced more than 1,000 new products this year. Lightolier, known for distinctive clean line aesthetics and sensitive use of materials, introduced a contemporary line of pendants and wall brackets. Forecast and Diamond F, positioned to offer the consumer high style at affordable prices, brought out new collections featuring the latest earthtone and "weathered" finishes. TASK, ACCENT & GENERAL LIGHTING Lightolier, the most recognized name in track lighting and quality downlighting in the United States and Canada, continues its innovative tradition. Responding to the new focus on task lighting in the home, Lightolier introduced The Illuminator [trademark], a new halogen under-cabinet light with the unique ability to join end to end with plugs instead of requiring wiring on the job. This exciting product has been successfully marketed to all channels via Forecast, Crescent, Diamond F and Canlyte. Genlyte's home center brand, Diamond F, launched the new Homelyter line, bringing a full package of lighting and control products to this fast-growing channel. LANDSCAPE LIGHTING A pioneer in cast aluminum and outdoor lighting, Hadco was the first to introduce a line of non-metallic composite fixtures designed to withstand the harshest environments. This year, Hadco expanded this Harsh Environment line to light the entire landscape. 11 @ NIGHT [Graphic Photos] The Buckingham Fountain in Chicago lights up the night with glowing colors and dramatic style using Bronzelite GM 6000's designed to withstand the harsh environment of the windy city. Among the bright lights of Las Vegas, the MGM Grand hotel chooses Wide-Lite F Series architectural floodlights to show off a handsome facade. 12 DECORATIVE STREET LIGHTING [Graphic photo] WE NEED LIGHT TO TAME THE NIGHT. As we stroll down the sidewalks, we feel safer when the buildings and streets are well lit and shadow free. At the ATM or in the parking lot, we care about security. As we drive, the beauty of a dramatically lit building, monument or bridge creates a familiar, distinctive landmark. In darkness or rain or snow, lighting helps get us home safe and sound. Genlyte brands make unique contributions to tame the night-enhancing the quality of life in our cities, towns and neighborhoods. From city streets to college campuses, from the boardwalks of Atlantic City to the sidewalks of Main Street, Hadco's revolutionary refractive globe luminaires are making streetscapes brighter, safer and more beautiful. This HID lighting, mounted on Hadco decorative, durable aluminum poles, produces greater illumination and uniformity while reducing glare, energy costs and installation costs. FLOODLIGHTING This year, architectural floodlighting became a lot more colorful-as Wide-Lite's product spectrum grew-literally-with the integration of colored lamp technology into heavy-duty floodlights, creating brilliantly colorful dramatic lighting possibilities for even harsh outdoor environments. Wide-Lite's tradition of innovative, high-performance floodlighting technology-which began with the invention of the HID floodlight-continues today with new, state-of-the-art additions to the industry-renowned Effex series of compact architectural HID fixtures, available in Canada through Keene-Widelite. SITE LIGHTING Strong optical performance, ease of installation and cost-effective designs are the focus of outdoor lighting products from Stonco and ExceLine, making their vertical lighting and wallpacks popular choices for schools, strip malls and the growing ATM area of the banking industry. [Photo] In the Disney-created town of Celebration, custom-designed streetlights from Hadco reflect the community's commitment to quality. 13 @ THE CONTROLS [Graphic Photos] Controls mean more power in the boardroom, as, with the touch of a button, the general lights dim, the screen comes down and the spotlight turns on the speaker's podium. A "cooking" setting on the Multi-set provides bright light in the workspaces, while a separate "dining" setting dims the counters and creates a warm glow at the dining table. In a restaurant, "breakfast," "lunch," "cocktails" and "dinner" settings establish the right atmosphere-repeatable daily with one touch. 14 AT THE TECHCENTER [Photo] All of the TechCenter's application environments along with the funnel-shaped theatrical lighting area are enhanced by Genlyte controls: MultiSet Preset systems, Brilliance Central Control Systems and/or computer interface. A separate "Controls" room graphically demonstrates the basic principles of electronic dimming systems on a complete wall of lighting controls technology. WE WANT TO CONTROL OUR ENVIRONMENT. It's human nature. No wonder electronic lighting controls are a fast growing market for both residential and commercial users. Electronics bring a whole new world of control to our fingertips: we can turn a ballroom into a conference room, or a kitchen into a dining room; change the mood from work to play; turn on the house lights before we enter; save energy by adjusting electric light to available daylight; or simply save ourselves a trip upstairs to turn lights off. Genlyte is a leader in the high-tech realm of digital lighting controls and the only major manufacturer with its own research and development department for electronics in lighting. AESTHETIC CONTROLS Multi-scene controls make it possible to adapt one space to multiple moods and functions. With Lightolier's revolutionary Multi-Set [trademark] System, five different distinctive pre-set lighting scenes can be created and re-created with the touch of a button. Commercial users, like restaurants and hotels, were quick to respond to this technology. Today, as family rooms become sophisticated home entertainment centers, homeowners are also discovering the advantages of multi-scene controls. ENERGY-SAVING CONTROLS Cutting down on energy consumption-and costs!-is a concern at work and at home. EnergySmart [registration mark] controls from Lightolier use two strategies: occupancy sensors that automatically turn lights off when a room is vacant; and photocells that automatically dim lights when more daylight is available. EnergySmart controls are a critical part of the Advanced Lighting System, which combines luminaires and controls in one totally integrated, warranteed system. [Photo] Brilliance Whole House Control System: The large illuminated buttons give convenient control of lights throughout the home. 15 SELECTED FINANCIAL DATA
(Amounts in thousands except per share data) 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- SUMMARY OF OPERATIONS Net sales ....................................... $456,860 445,660 432,690 429,143 425,388 Gross profit .................................... $154,722 138,120 128,720 127,735 123,493 Facility rationalization expense ................ $ -- -- -- -- 6,150 Operating profit ................................ $ 28,448 21,955 14,659 14,256 5,144 Interest expense, net ........................... $ 5,649 7,986 7,505 8,086 8,949 Income (loss) before income taxes and cumulative effect of a change in accounting principle .................. $ 22,799 13,969 7,154 6,170 (3,805) Income tax provision (benefit) .................. $ 9,802 6,060 2,937 2,697 (1,507) Net income (loss) before cumulative effect ...... $ 12,997 7,909 4,217 3,473 (2,298) of a change in accounting principle Cumulative effect of a change in accounting principle .................. -- -- -- -- (3,670) Net income ...................................... $ 12,997 7,909 4,217 3,473 1,372 Return on: Net sales ............................. 2.8% 1.8% 1.0% 0.8% 0.3% Average stockholders' investment ...... 16.9% 12.1% 7.1% 6.1% 2.4% Average capital employed .............. 12.3% 8.6% 5.6% 4.8% 1.7% year end position Working capital ................................. $ 71,366 75,769 86,714 83,039 97,120 Plant and equipment, net ........................ $ 60,380 64,149 68,895 73,633 82,139 Total assets .................................... $238,115 231,034 240,178 241,762 254,018 Capital employed: Total debt ............................ $ 41,898 67,182 90,047 100,419 117,797 Stockholders' investment .............. $ 83,783 69,900 61,170 58,068 55,630 Total capital employed .............. $125,681 137,082 151,217 158,487 173,427 per share data Net income (Primary and fully diluted) .......... $ 1.00 0.62 0.33 0.27 0.11 Stockholders' investment per average share outstanding ..................... $ 6.42 5.46 4.77 4.53 4.33 Market range: High .................................. $ 14 8 5 1\2 7 7 1\4 Low ................................... $ 6 4 3 1\2 2 3\8 4 1\4 Other data: Orders on hand .................................. $ 42,247 51,093 50,379 43,246 49,495 Depreciation and amortization ................... $ 14,550 15,657 16,886 16,308 18,639 Capital expenditures (a) ........................ $ 10,474 10,368 11,884 10,261 8,850 Average shares outstanding (b) .................. 13,055 12,804 12,834 12,807 12,848 Current ratio ................................... 1.8 2.0 2.2 2.2 2.7 Interest coverage ratio ......................... 5.0 2.7 2.0 1.8 0.6 Debt to total capital employed .................. 33.3% 49.0% 59.5% 63.4% 67.9% Number of stockholders .......................... 1,705 1,865 1,970 2,153 2,334 Average number of employees ..................... 2,581 2,657 2,838 2,999 3,051 Sales per employee .............................. $177,009 167,731 152,463 143,095 139,400
- -------------- (a) Exclusive of acquired businesses' plant and equipment at date of acquisition (b) Including common stock equivalents 16 MANAGEMENT'S DISCUSSION AND ANALYSIS - ------------------------------------ RESULTS OF OPERATIONS - --------------------- NET SALES Net sales for 1996 were $456.9 million, an $11.2 million, or 2.5 percent increase from 1995, following a $13.0 million, or 3.0 percent increase from 1994 to 1995. A high volume of new product introduction contributed to this growth. In addition, Lightolier's national television advertising campaign improved name recognition as did our entrance to electronic marketing via a World Wide Web site. We completed the Fall River TechCentertrademark, a state-of-the-art facility that showcases products from all Genlyte divisions and enables our sales professionals to show their customers the full capabilities of Genlyte's lighting applications and total lighting solutions. These efforts have favorably affected domestic net sales, which have grown from $374.7 million in 1994 to $381.5 million in 1995 and to $396.4 million in 1996. This growth has been partially offset by a decrease in net foreign sales from $64.2 million in 1995 to $60.4 million in 1996, primarily due to a weakening Canadian economy. GROSS PROFIT/COST OF SALES Gross profit increased to $154.7 million in 1996 from $138.1 million in 1995, a 12.0 percent increase followng a $9.4 million, or 7.3 percent growth in gross profit from 1994 to 1995. Cost of sales continued to decrease from 70.3 percent of sales in 1994 to 69.0 percent in 1995 to 66.1 percent in 1996. These trends are a result of ongoing productivity improvements, improved customer service, facility rationalization, and the elimination of lower margin products. SELLING AND ADMINISTRATIVE Selling and administrative expenses as a percentage of sales increased to 27.6 percent in 1996 from 26.1 in 1995 after slightly decreasing from 26.4 percent in 1994. Research and product development spending increased 75% over 1995. A record number of new sales people were hired in 1996, and our investment in national advertising, trade advertising and sales tools continued to increase as we position ourselves for growth in 1997. These increases were partially offset by the benefits generated from continued reductions in headcount and other cost containment measures such as facility consolidation. OPERATING PROFIT Operating profit increased in 1996 to $28.4 million, a 29.6 percent improvement from 1995. This followed an increase from 1994 to 1995 of $7.3 million, or a 49.8 percent increase. The improvement in operating profit was attributable to the improved product mix, principally in the commercial and outdoor divisions, and a continued focus on costs in each of the divisions. A significant element of this cost focus is the facility optimization plan, which in 1996 included negotiation of a partial lease termi nation of our Compton, CA, manufacturing facility, the sale of our Tijuana, Mexico, property, the relocation of our corporate headquarters from a leased facility to a company-owned facility and the termination of our long-term lease in Edison, NJ. NET INTEREST EXPENSE Net interest expense amounted to $5.6 million, representing a decrease of $2.3 million, or 29.3 percent, from 1995. This decrease was attributable to lower average borrowings. Net interest expense increased in 1995 when compared to 1994 by $0.5 million due to higher interest rates, partially offset by lower average borrowings. The favorable impact of a net pay down in debt since 1994 of approximately $48 million will continue into 1997. TAXES ON INCOME The effective tax rate was approximately 43.0 percent in 1996 and 1995 and 41.0 percent in 1994. The increase in 1995 over 1994 was due to increased federal and state rates, which remained level into 1996. ACCOUNTING CHANGE The Company changed its method of determining the cost of certain inventories from last-in, first-out (LIFO) to first-in, first-out (FIFO). Prior periods have been restated to reflect this change in accounting methodology in accordance with the requirements of generally accepted accounting principles. 17 MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) - ------------------------------------------------ LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- LIQUIDITY AND CAPITAL RESOURCES The Company's financial position continues to remain strong. Cash and cash equivalents totaled $2.9 million at December 31, 1996, compared to $0.3 million and $3.2 million at December 31, 1995 and 1994, respectively. The Company had working capital of $71.4 million at December 31, 1996. The primary source of cash in 1996 consisted of funds provided by operating activities of $37.4 million. The primary uses of cash in 1996 consisted of repayment of debt, $25.3 million, and capital expenditures, $10.5 million. The Company maintains a revolving credit facility, originally entered into on November 15, 1995, of $110.0 million, which reduces to $70.0 million by year 2000. Amounts outstanding under the facility are secured by liens on U.S. accounts receivable, inventories and machinery and equipment, as well as the investments in certain Company subsidiaries. The approximate fair value of the assets subject to lien at December 31, 1996, exceeds the facility amount outstanding. Long-term debt has decreased approximately $24.0 million since year end 1995. This followed a reduction in 1995 from 1994 of $23.1 million. The Company's ratio of total debt to total capitalization was 33.3 percent, 49.0 percent and 59.5 percent at December 31, 1996, 1995 and 1994, respectively, with total capitalization defined as total debt and total stockholders' investment. The decrease in the Company's total debt is a direct result of generating significant internal funds. The Company believes that currently available cash, borrowing facilities and its ability to increase its credit line if needed, combined with internally generated funds, should be sufficient to fund capital expenditures as well as any increase in working capital that would be required to accommodate a higher level of business activity. CONSOLIDATED STATEMENTS OF INCOME - ---------------------------------
THE GENLYTE GROUP INCORPORATED & SUBSIDIARIES (Amounts in thousands except per share data) For the year ended December 31, 1996 1995 1994 ---- ---- ---- SUMMARY OF OPERATIONS Net Sales .......................................$456,860 $445,660 $432,690 Cost of sales ......................... 302,138 307,540 303,970 ------- ------- ------- Gross Profit .................................... 154,722 138,120 128,720 Selling & administrative expenses ..... 126,274 116,165 114,061 ------- ------- ------- Operating Profit ................................ 28,448 21,955 14,659 Interest expense, net ................. 5,649 7,986 7,505 Income Before Income Taxes ...................... 22,799 13,969 7,154 Income tax provision .................. 9,802 6,060 2,937 ----- ----- ----- Net Income ......................................$ 12,997 $ 7,909 $ 4,217 -------- -------- -------- Earnings Per Share ..............................$ 1.00 $ 0.62 $ 0.33
The accompanying notes are an integral part of these consolidated financial statements. 18 CONSOLIDATED BALANCE SHEETS - ---------------------------
THE GENLYTE GROUP INCORPORATED & SUBSIDIARIES (Amounts in thousands except per share data) As of December 31, 1996 1995 ---- ---- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 2,895 $ 263 Accounts receivable (less allowances for doubtful accounts of $8,222 and $5,302 in 1996 and 1995, respectively) ........ 65,036 62,024 Inventories: Raw materials and supplies .................................. 31,798 25,891 Work in progress ............................................ 6,429 9,288 Finished goods .............................................. 42,772 41,042 ------- ------- 80,999 76,221 Other current assets .................................................. 14,909 12,550 ------- ------- Total current assets ........................................ 163,839 151,058 Plant and Equipment: Land ........................................................ 4,969 5,831 Buildings and leasehold interests and improvements .......... 54,205 59,248 Machinery and equipment ..................................... 152,175 164,337 ------- ------- 211,349 229,416 Less: Accumulated depreciation and amortization ....................... 150,969 165,267 ------- ------- 60,380 64,149 Cost in Excess of Net Assets of Purchased Businesses .................. 11,755 12,026 Other Assets .......................................................... 2,141 3,801 -------- -------- Total Assets ................................................ $238,115 $231,034 -------- -------- Liabilities and Stockholders' Investment Current Liabilities: Short-term borrowings ................................................. $ -- $ 1,236 Current maturities of long-term debt .................................. 51 50 Accounts payable-trade ................................................ 44,440 38,795 Accrued expenses Salaries and wages .......................................... 8,863 7,994 Income taxes payable ........................................ 6,963 6,254 Other accrued expenses ...................................... 32,156 20,960 -------- -------- 47,982 35,208 -------- -------- Total current liabilities ................................... 92,473 75,289 Long-term Debt ........................................................ 41,847 65,896 Deferred Income Taxes ................................................. 3,368 4,662 Other Liabilities ..................................................... 16,644 15,287 Stockholders' Investment Common stock ($.01 par value, 30,000,000 shares authorized, 13,092,900 and 12,833,928 shares issued at December 31, 1996 and 1995; 12,990,782 and 12,731,810 shares outstanding at December 31, 1996 and 1995, respectively) ................... 131 129 Additional paid-in capital ............................................ 8,999 8,115 Retained earnings ..................................................... 74,653 61,656 -------- -------- Total stockholders' investment .............................. 83,783 69,900 -------- -------- Total Liabilities and Stockholders' Investment .............. $238,115 $231,034 -------- --------
The accompanying notes are an integral part of these consolidated financial statements. 19 CONSOLIDATED STATEMENTS OF CASH FLOWS - -------------------------------------
THE GENLYTE GROUP INCORPORATED & SUBSIDIARIES (Amounts in thousands) For the year ended December 31, 1996 1995 1994 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income .................................................... $ 12,997 $ 7,909 $ 4,217 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation and amortization ..................... 14,550 15,657 16,886 Gain (loss) from disposal of plant and equipment .. 41 (61) 437 (Increase) decrease in: Accounts receivable ...................... (3,012) 3,462 (6,495) Inventories .............................. (4,778) 2,522 832 Other current assets ..................... (2,359) (2,687) 1,492 Other assets ............................. 1,423 (2,500) (22) Increase (decrease) in: Accounts payable and accrued expenses .... 18,419 4,480 6,383 Deferred income tax liabilities .......... (1,294) (1,119) (1,727) Other liabilities ........................ 1,357 1,630 1,030 All other, net .................................... 91 (291) 415 ------- ------- ------- Net cash flows provided by operating activities ............... 37,435 29,002 23,448 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of plant and equipment ............................... (10,474) (10,368) (11,884) Proceeds from disposal of plant and equipment ................. 69 136 620 ------- ------- ------- Net cash flows used in investing activities ................... (10,405) (10,232) (11,264) ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Sale of stock, net of tax benefit ............................. 994 255 -- Repayment of debt, net ........................................ (25,284) (22,866) (10,372) --------- --------- --------- Net cash flows used in financing activities ................... (24,290) (22,611) (10,372) --------- --------- --------- EFFECT OF EXCHANGE RATE CHANGES: .............................. (108) 864 (1,891) --------- --------- --------- Net increase (decrease) in cash and cash equivalents .......... 2,632 (2,977) (79) Cash and cash equivalents at beginning of year ................ 263 3,240 3,319 --------- --------- --------- Cash and cash equivalents at end of year ...................... $ 2,895 $ 263 $ 3,240 --------- --------- --------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION CASH PAID DURING THE YEAR FOR: Interest .......................................... $ 5,286 $ 7,355 $ 7,537 --------- --------- --------- Income taxes ...................................... $ 9,853 $ 6,043 $ 3,358 --------- --------- ---------
The accompanying notes are an integral part of these consolidated financial statements. 20 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT - ---------------------------------------------------
THE GENLYTE GROUP INCORPORATED & SUBSIDIARIES (Amounts in thousands) PAID-IN STOCK CAPITAL EARNING ----- ------- ------- BALANCE, DECEMBER 31, 1993, AS PREVIOUSLY REPORTED $ 128 $ 8,411 $ 52,303 Adjustment for the cumulative effect on prior years of applying retroactively the new method of valuing certain inventories (Note 2) -- -- (2,773) BALANCE, DECEMBER 31, 1993, AS ADJUSTED $ 128 $ 8,411 $ 49,530 -------- -------- -------- Net income -- -- 4,217 Foreign currency translation adjustments -- (1,116) -- Exercise of stock options -- -- -- BALANCE, DECEMBER 31, 1994 $ 128 $ 7,295 $ 53,747 -------- -------- -------- Net income -- -- 7,909 Foreign currency translation adjustments -- 566 -- Exercise of stock options 1 254 -- BALANCE, DECEMBER 31, 1995 $ 129 $ 8,115 $ 61,656 -------- -------- -------- Net income -- -- 12,997 Foreign currency translation adjustments -- (108) -- Exercise of stock options 2 992 -- BALANCE, DECEMBER 31, 1996 $ 131 $ 8,999 $ 74,653 -------- -------- --------
The accompanying notes are an integral part of these consolidated financial statements. QUARTERLY RESULTS OF OPERATIONS (Unaudited)
THE GENLYTE GROUP INCORPORATED & SUBSIDIARIES (Amounts in Thousands except per share data) Quarter 1996 1st 2nd 3rd 4th Full Year - ---- --- --- --- --- --------- Net sales ........................................................... $ 108,662 $ 112,440 $ 116,036 $ 119,722 $ 456,860 Operating Profit .................................................... 5,576 6,373 7,385 9,114 28,448 Net Income .......................................................... 2,293 2,751 3,436 4,519 12,997 Earnings per Share .................................................. 0.18 0.21 0.26 0.35 1.00 Market Price: High ...................................................... 8 1\4 8 9 7\8 14 14 Low ....................................................... 6 3\16 7 1\4 6 8 3\4 6 1995 1st 2nd 3rd 4th Full Year Net Sales ........................................................... $ 110,238 $ 110,967 $ 112,908 $ 111,547 $ 445,660 Operating Profit .................................................... 4,790 5,302 5,610 6,253 21,955 Net Income .......................................................... 1,531 1,792 2,064 2,522 7,909 Earnings per Share .................................................. 0.12 0.14 0.16 0.20 0.62 Market Price: High ...................................................... 5 1\8 6 1\4 6 7\8 8 8 Low ....................................................... 4 4 1\2 5 1\8 5 1\8 4
21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS IN THOUSANDS EXCEPT PER SHARE DATA NOTE DESCRIPTION OF BUSINESS The Genlyte Group Incorporated ("Genlyte" or the "Company") is a United-States based multinational corporation. Genlyte designs, manufactures and sells lighting fixtures and controls for a wide variety of applications in the commercial, industrial and residential markets. Genlyte's products are marketed primarily to distributors who resell the products for use in residential, commercial and industrial construction and remodeling. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of Genlyte after elimination of all material intercompany accounts and transactions. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. INVENTORIES: Inventories are stated at the lower of cost or market and include materials, labor and overhead. During the third quarter of 1996, the Company changed its method of accounting for certain inventories from the last-in, first-out ("LIFO") method of accounting to the first-in, first-out ("FIFO") method. This change, applied through the retroactive restatement of all prior period financial statements, was made for the following reasons: (1) it will improve the measurement of operating results in light of reduced inflation rates; (2) it will enhance the comparability of the Company's financial statements by changing to the predominant method utilized in the industry; and (3) it will allow the Company to reduce the costs incurred in administering the existing LIFO system. Although this change in method did not affect net income in 1996, it decreased net income by $421, or 3 cents per share in 1995, and $863, or 7 cents per share in 1994. PLANT AND EQUIPMENT: The Company provides for depreciation of plant and equipment principally on a straight line basis over the useful lives of the assets. Useful lives vary among the several classifications, as well as among the constituent items in each classification, but generally fall within the following ranges: Buildings and leasehold interests and improvements 10 - 40 years Machinery and Equipment 3 - 10 years When the Company sells or otherwise disposes of property, the asset cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the Consolidated Statement of Income. Leasehold interests and improvements are amortized over the terms of the respective leases, or over their estimated useful lives, whichever is shorter. Maintenance and repairs are expensed as incurred. Renewals and betterments are capitalized and depreciated or amortized over the remaining useful lives of the respective assets. Accelerated methods of depreciation are used for income tax purposes and appropriate provisions are made for the related deferred income taxes. COST IN EXCESS OF NET ASSETS OF PURCHASED BUSINESSES: Cost in excess of net assets of purchased businesses acquired prior to 1971 is not amortized since, in the opinion of management, there has been no diminution in value. For businesses acquired subsequent to 1970, the cost in excess of net assets, aggregating $9,801, is being amortized 22 over 20-40 years. For the years ended December 31, 1996 and 1995, accumulated amortization was $2,969 and $2,697, respectively. RESEARCH AND DEVELOPMENT COSTS: Research and development costs are expensed as incurred. These expenses were $4,475 in 1996, $2,551 in 1995, and $3,006 in 1994. TRANSLATION OF FOREIGN CURRENCIES: Balance sheet accounts of foreign subsidiaries are translated at the rates of exchange in effect as of the balance sheet date. The cumulative effects of such adjustments were $2,126 and $2,019 at December 31, 1996 and 1995, respectively, and have been charged to the Additional paid-in-capital account in Stockholders' Investment. Income and expenses are translated at the average exchange rates prevailing during the year. Gains or losses resulting from foreign currency transactions are included in net income. CASH EQUIVALENTS: For the purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying amount of cash equivalents, letters of credit, and long-term debt approximate fair value. EARNINGS PER COMMON SHARE Earnings per share are calculated utilizing the weighted average shares outstanding with the fully dilutive effect of outstanding stock options taken into account. 1996 1995 1994 ---- ---- ---- Income Before Income Taxes: Domestic .......................... $ 19,277 $ 10,992 $ 4,879 Foreign ........................... $ 3,522 $ 2,977 $ 2,275 $ 22,799 $ 13,969 $ 7,154 Provisions (Benefit) for Income Taxes: Domestic: Currently Payable ............. $ 11,332 $ 7,787 $ 2,606 Deferred ...................... (2,857) (2,982) (469) Foreign: Currently Payable ............. $ 1,475 $ 1,230 $ 784 Deferred ...................... (148) 25 16 $ 9,802 $ 6,060 $ 2,937 INCOME TAXES The components of income before income taxes and the provisions for income taxes are as follows: Undistributed earnings of non-US subsidiaries included in consolidated retained earnings amounted to $14,903 at December 31, 1996. These earnings, which reflected full provision for non-US income taxes, are indefinitely reinvested in non-US operations or will be remitted substantially free of additional tax. Accordingly, no material provision has been made for taxes that may be payable upon remittance of such earnings nor is it practicable to determine the amount of this liability. The provision for income taxes includes a deferred component that arose from the recording of certain items in different periods for financial reporting and income tax purposes. The sources of the domestic differences and the related tax effect are as follows: 23 1996 1995 1994 ---- ---- ---- Depreciation ............................ $(1,083) $(1,344) $(1,186) Inventory Valuation ..................... 410 (134) (505) Facility Rationalization Reserve ........ -- 386 1,500 Pension Accruals ........................ (118) (2) (470) Bad Debt Reserve ........................ (1,259) (733) 82 Other Accruals/Reserves ................. (850) (1,201) 94 Other, Net .............................. 43 46 16 Total Domestic Deferred Tax Provision .............. $(2,857) $(2,982) $ (469) ------- ------- ------- 1996 1995 1994 ---- ---- ---- Statutory Federal Rate .................. $ 7,979 $ 4,890 $ 2,432 State & Local Taxes, Net of Federal Tax Benefit .............. 1,334 899 543 Other, Net .............................. 489 271 (38) Total Provision for Income Taxes ........................ $ 9,802 $ 6,060 $ 2,937 In 1996, 1995 and 1994, the Company's effective tax rates were 43%, 43% and 41%, respectively, of income before income taxes. An analysis of the differences between the actual provision for income taxes and the provision at the U.S. Federal statutory tax rate follows: The Company is currently being audited by the Internal Revenue Service for tax years 1993 and 1994. While the audit has not been finalized, the Company believes it has adequately provided for any additional taxes that may result. LONG-TERM DEBT 1996 1995 ---- ---- Revolving Credit Notes ..................... $31,000 $55,000 Industrial Revenue Bonds ................... 10,500 10,500 Other ...................................... 398 446 $41,898 $65,946 Less: Current Maturities ................... 51 50 Total ...................................... $41,847 $65,896 The Company maintains a revolving credit facility (the "Facility") of $110,000, which reduces to $70,000 by 2000. The total borrowings under the Facility as of December 31, 1996 and 1995 were $31,000 and $55,000, respectively. In addition, the Company has issued approximately $8,500 of letters of credit, which reduce the amount available to borrow under the Facility. The interest rate on amounts borrowed under the Facility is a floating rate related to, at the option of the Company, either (1) a reference rate determined by the agent bank plus a fixed spread, or (2) the London Interbank Offered Rate (LIBOR) plus a fixed spread. The Company pays a commitment fee on the unused portion of the Facility. In June 1996 the Company entered into a one-year inte rest rate cap that limited the maximum interest rate to 6.0% on $20,000 of loans under the Facility. The amount outstanding under the Facility is secured by liens on U.S. accounts receivable, inventories and machinery and equipment, as well as the investments in certain subsidiaries of the Company. The approximate fair value of assets subject to lien at December 31, 1996, was $169,802. 24 The terms of the Facility include various covenants that, among others, limit the amounts that can be expended for cash dividends and purchases of Company stock. No dividends were paid in 1996 or 1995. At December 31, 1996 and 1995, the Company was in compliance with all provisions of the Facility. The Company expects that funds generated from operations combined with amounts available under the Facility will fulfill anticipated cash requirements for the Company through 1997. The Company has $10,500 of variable rate demand Industrial Revenue Bonds comprised of three issues of $5,000, $4,500 and $1,000 payable in 2010, 2009 and 2009, respectively. During 1996, the average interest rate on these bonds was 3.99%. The bonds are backed by a bank's letter of credit for the life of the bonds to guarantee payment of the bonds on the Company's behalf. The letter of credit is subject to annual renewals by the bank. The bonds are also secured by liens on the related facilities and equipment. The Company has mortgages and other debt at interest rates of 4.8% to 9.1% due from 1997 through 2002. The annual maturities of long-term debt are summarized as follows: YEAR ENDING DECEMBER 31 - ----------------------- 1998 59 1999 142 2000 31,054 2001 59 2002 and thereafter 10,533 Total Long-Term Debt $41,847 STOCK OPTIONS The Genlyte 1988 Stock Option Plan (the "Plan") was established in 1988 for the benefit of key employees and directors of Genlyte. The Plan provides that an aggregate of 2,000,000 shares of Genlyte Common Stock may be granted as nonqualified stock options, provided that no options may be granted if the number of shares of Genlyte Common Stock that may be issued upon the exercise of outstanding options would exceed the greater of 1,000,000 shares of Genlyte Common Stock or 10% of the issued and outstanding shares of Genlyte Common Stock. The option exercise prices are established by the Board of Directors of Genlyte and cannot be less than the higher of the book value or the fair market value of a share of common stock on the date of the grant. There are two types of options issued to key employees under the Plan. Merit options are exercisable at the rate of 50% per year commencing two years after the date of the grant. Performance options are granted as incentives to certain key employees for obtaining specific financial goals. 25 Transactions under the Plan are summarized below:
OPTION PRICE PER SHARE WEIGHTED SHARES LOW HIGH AVERAGE ------ --- ---- ------- Outstanding December 31, 1993 930,883 $4.53 $12.75 5.16 Granted 176,750 4.75 5.50 4.82 Canceled (94,250) 4.53 12.75 5.97 Outstanding December 31, 1994 1,013,383 $4.53 $8.75 5.02 Granted 337,067 4.875 7.625 6.99 Exercised (52,985) 4.53 5.50 4.81 Canceled (218,750) 4.53 8.75 5.38 Outstanding December 31, 1995 1,078,715 $4.53 $7.625 5.58 Granted 211,750 7.50 10.25 8.44 Exercised (208,741) 4.53 7.00 4.80 Canceled (59,751) 4.53 8.00 5.48 Outstanding December 31, 1996 1,021,973 $4.53 $10.25 6.33 Exercisable at end of year 247,631 $4.53 $ 6.25 4.93
The weighted average fair values of options granted in 1996 and 1995 were $4.12 and $3.33, respectively. The options outstanding at December 31, 1996, have a weighted average remaining contractual life of 2.83 years. The Company accounts for this plan under APB Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for the plan been determined consistent with SFAS No. 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts as follows: 1996 1995 ---- ---- Net Income As Reported $12,997 $7,909 Pro Forma $12,658 $7,844 EPS As Reported $ 1.00 $ 0.62 Pro Forma $ 0.97 $ 0.61 Because method of accounting in SFAS No. 123 has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. The fair value of an option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: weighted average risk-free interest rates of 6.34 percent and 5.82 percent in 1996 and 1995, respectively; no dividend payments; expected option lives of five years; and expected volatility of 45.8 percent for the Company's common stock. 26 PREFERRED STOCK PURCHASE RIGHTS In August 1989, the Company declared a dividend of one preferred stock purchase right on each share of the Company's common stock. Under certain conditions, each right may be exercised to purchase one one-hundredth share of a new series of junior participating cumulative preferred stock at an exercise price of $75.00 per share. The right may only be exercised within ten (10) business days after a person or group of persons (the "Holder") acquire, or commence a tender offer to acquire, 20% or more of Genlyte's outstanding common stock, or upon declaration by the Board of Directors. Upon the acquisition by the Holder of 20% or more of the Company's outstanding common stock, each right would represent the right to purchase, for $75.00, shares of the Company's common stock with a market value of $150.00. The rights may be redeemed by the Company at a price of $.01 per right and can be amended by the Company's Directors during the 10 day period prior to the exercise date. These rights expire in 1999. The preferred stock purchased upon exercise of the rights will be entitled to a minimum annual preferential dividend of $1.00 and a minimum liquidation payment of $1.00 per one-hundredth share of preferred stock. If the Company were to enter into certain business combination or disposition transactions with the Holder, each right would also be entitled to purchase, for $75.00, shares of the Holder's common stock with a market value of $150.00. PENSION PLANS The Company has five pension plans, which cover the majority of its employees. The Genlyte Corporation Retirement Plan is the Company's principal retirement plan and covers most of the employees of the Company. Benefits under that plan are based on years of service and highest average compensation during any five consecutive years within the last 10 years of employment. The Company's pension plan assets consist primarily of publicly traded equity or debt securities. Pension costs under the Company's retirement plans are actuarially computed. Annual contributions are made to the plans in amounts approximately equal to the amounts accrued for pension expense. The Company's pension cost for 1996, 1995 and 1994 consists of the following:
1996 1995 1994 ---- ---- ---- Service cost benefits earned during the year $1,278 $1,147 $1,052 Interest cost on benefits earned in prior years 3,358 3,265 3,006 Actual return on plan assets (3,991) (5,938) (2) Deferred gain (loss) 1,329 3,585 (2,426) Amortization of transition amounts 442 428 289 Net pension cost $2,416 $2,487 $ 1,919
27 At December 31, 1996, all of the Company's pension plans had accumulated benefit obligations that exceeded plan assets. The following table summarizes the funded status of the Company's pension plans and the related amounts that are recognized as liabilities in the consolidated balance sheet:
1996 1995 ---- ---- Actuarial present value of benefit obligations: Vested benefit obligation ................................................... $ 42,061 $ 41,861 Non-vested benefit obligation ............................................... 552 536 Accumulated benefit obligation .............................................. 42,613 42,397 Effect of estimated future increases in compensation ........................ 4,048 4,342 Projected benefit obligation ................................................ 46,661 46,739 Plan assets at fair value ................................................................ 40,622 36,333 Projected benefit obligation in excess of plan assets .................................... 6,039 10,406 Unrecognized net obligation at adoption ..................................... (737) (914) Unrecognized net benefit since adoption ..................................... 7,615 3,237 Unrecognized prior service cost ............................................. (2,109) (2,327) Accrued pension liability as of December 31 .............................................. $ 10,808 $ 10,402
The discount rates and rates of increase in future compensation levels used in determining the actuarial present value of the liabilities recognized on the consolidated balance sheet were 7.75% and 5.0%, respectively, at September 30, 1996, and 7.5% and 5.0%, respectively, at September 30, 1995. The expected long-term rate of return on plan assets was 9.0% at September 30, 1996, and 8.5% at September 30, 1995. The Company has a number of plans for hourly personnel, primarily union (single or multi-employer) pension plans, for which the Company's obligation is a defined contribution amount. The basis for the contribution includes union contract amounts, usually based on an amount per hour worked, and percentages of employee contributions. Expense amounts recorded under these plans were $344, $355 and $491 in 1996, 1995 and 1994, respectively. Genlyte also maintains four defined benefit plans covering substantially all of the employees of its Canadian subsidiary (Canlyte, Inc.). Net pension costs for these plans included the following:
1996 1995 1994 ----- ----- ----- Service cost benefits earned during the year .............................. $ 145 $ 121 $ 114 Interest cost on benefits earned in prior years ........................... 264 246 222 Actual return on plan assets .............................................. (706) (183) (502) Deferred gain (loss) ...................................................... 394 (81) 243 Amortization of transition amounts ........................................ (3) (3) (4) Net pension cost .......................................................... $ 94 $ 100 $ 73
28 The funded status of the plan is as follows:
1996 1995 ---- ---- Actuarial present value of benefit obligations: Vested benefit obligation .................................................... $ 3,060 $ 2,952 Non-vested benefit obligation ................................................ 50 100 Accumulated benefit obligation ............................................... 3,110 3,052 Effect of estimated future increases in compensation ......................... 449 284 Projected benefit obligation ................................................. 3,559 3,336 Plan assets at fair value ................................................................ 4,219 3,615 Projected benefit obligation less than of plan assets .................................... (660) (279) Unrecognized net obligation .................................................. 46 34 Unrecognized net benefit since adoption ...................................... 227 (81) Prepaid pension cost as of December 31 ................................................... $ (387) $ (326)
The discount rates and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligations were 8% and 5%, respectively, at both December 31, 1996 and 1995. The expected long-term rate of return on assets was 8% at both December 31, 1996 and 1995. LEASE COMMITMENTS The Company rents office space, equipment and computers under noncancellable operating leases. Rental expense during 1996, 1995 and 1994 amounted to $2,446, $4,127 and $4,828, respectively. Future required minimum rental payments as of December 31, 1996, were as follows: 1997 $3,052 1998 1,767 1999 1,067 2000 646 2001 574 After 2001 2,466 Total $9,572 29 CONTINGENCIES Genlyte has been named as one of a number of corporate and individual defendants in an adversary proceeding filed on June 8, 1995, arising out of the Chapter 11 bankruptcy filing of Keene Corporation ("Keene"). Except for the last count, as discussed below, the claims and causes of action are substantially the same as were brought against Genlyte in the U.S. District Court in New York in August 1993, which have been permanently enjoined from proceedings as a result of Keene's reorganization plan. The new complaint is being prosecuted by the Creditors Trust created for the benefit of Keene's creditors (the "Trust"), seeking from the defendants, collectively, damages in excess of $700 million, rescission of certain asset sale and stock transactions, and other relief. With respect to Genlyte, the complaint principally maintains that certain lighting assets of Keene were sold to a predecessor of Genlyte in 1984 at less than fair value, while both Keene and Genlyte were wholly-owned subsidiaries of Bairnco Corporation. The complaint also challenges Bairnco's spin-off of Genlyte in August 1988. Other allegations are that Genlyte, as well as other corporate defendants, are liable as corporate successors to Keene. The complaint fails to specify the amount of damages sought against Genlyte. The complaint also alleges a violation of the Racketeer Influenced and Corrupt Organizations Act. Following confirmation of the Keene reorganization plan, the parties have moved to withdraw the case from bankruptcy court to the Southern District of New York Federal District Court. No answer or other pleading shall be due until thirty (30) days following withdrawal of the case. Genlyte believes that it has meritorious defenses to the adversary proceedings and will defend said action vigorously. Additionally, the Company is a defendant and/or potentially responsible party, with other companies, in actions and proceeding under state and federal environment laws including the federal Comprehensive Environmental Response Compensation and Liability Act, as amended ("Superfund"). Such actions include, but are not limited to, the Keystone Sanitation Landfill site located in Pennsylvania, in which the United States Environmental Protection Agency has sought remedial action and reimbursement for past costs. Management does not believe that the disposition of the lawsuits and/or proceedings will have a material effect on the Company's financial condition or results of operations. Operating Net Sales Profit Assets --------- ------ ------ 1996 United States $396,444 $25,139 $207,279 Foreign 60,416 3,309 31,286 Total $456,860 $28,448 $238,565 1995 United States $381,489 $18,960 $199,849 Foreign 64,171 2,995 31,185 Total $445,660 $21,955 $231,034 1994 United States $374,677 $12,466 $210,797 Foreign 58,013 2,193 29,381 Total $432,690 $14,659 $240,178 GEOGRAPHICAL INFORMATION The Company has operations throughout North America. Information about the Company's operations by geographical area for the years ended December 31, 1996, 1995 and 1994, is as follows: 30 Report of Independent Public Accountants To the Stockholders of The Genlyte Group Incorporated We have audited the accompanying consolidated balance sheets of The Genlyte Group Incorporated (a Delaware corporation) and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, cash flows and stockholders' investment for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion of these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overal l financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Genlyte Group Incorporated and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. As discussed in Note 2 to the financial statements, in 1996 the Company has given retroactive effect to the change in its method of accounting for certain inventories from lifo to fifo. /s/ Arthur Anderson LLP - ------------------------- Arthur Andersen LLP New York, New York January 22, 1997 31 BOARD OF DIRECTORS [Photograph] ROBERT B. CADWALLADER DIRECTOR [Photograph] AVRUM I. DRAZIN* CHAIRMAN [Photograph] DAVID M. ENGELMAN DIRECTOR [Photograph] GLENN W. BAILEY DIRECTOR [Photograph] FRANK METZGER DIRECTOR [Photograph] LARRY K. POWERS* PRESIDENT AND CHIEF EXECUTIVE OFFICER [Photograph] FRED HELLER DIRECTOR & CHAIRMAN EMERITUS EXECUTIVE COMMITTEE [Photograph] STEVEN R. CARSON VICE PRESIDENT & GENERAL MANAGER CONTROLS [Photograph] ZIA EFTEKHAR PRESIDENT, LIGHTOLIER [Photograph] MICHAEL J. FARRELL PRESIDENT, KEENE-WIDELITE [Photograph] NEIL M. BARDACH+ VICE PRESIDENT & CHIEF FINANCIAL OFFICER [Photograph] CHARLES M. HAVERS PRESIDENT, SUPPLY DIVISION [Photograph] RENE MARINEAU PRESIDENT, LIGHTOLIER CANADA/CFI [Photograph] DENNIS W. MUSSELMAN VICE PRESIDENT & GENERAL MANAGER HADCO/BRONZELITE [Photograph] HENRY M. GLOVER VICE PRESIDENT & GENERAL MANAGER WIDE-LITE [Photograph] DONNA R. RATLIFF+ VICE PRESIDENT - ADMINISTRATION & CORPORATE SECRETARY [Photograph] JON SAYAH VICE PRESIDENT & GENERAL MANAGER DIAMOND F/DECORATIVE * Also an officer and member of the Executive Committee + Also an officer of the company 32 Stockholder information CORPORATE OFFICES 2345 Vauxhall Road P.O. Box 3148 Union, NJ 07083-1948 INVESTOR RELATIONS Information and Form 10-K Please call or write the Investor Relations Department at (908) 810-4536 STOCK LISTING Genlyte common stock is traded on the NASDAQ National Market System under the symbol GLYT TRANSFER AGENT Bank of New York 101 Barclay Street New York, NY 10286 (800) 524-4458 INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP 1345 Avenue of the Americas New York, NY 10505 ANNUAL MEETING The Annual Stockholders' Meeting will be held at 1345 Avenue of the Americas, 3rd floor, New York, N Yon April 24, 1997 Credits: page 8, bottom left: Photograph by Milo Stewart Jr., courtesy of the the National Baseball Hall of Fame Library, Cooperstown, N.Y. page 12, top left: Photograph by Ron Schramm page 14, bottom right: Photograph courtesy of the Hotel Inter-Continental, New York. Design: George/Gerard Design, NYC [BACK COVER] GENLYTE [GRAPHIC] 2345 Vauxhall Road P.O. Box 3148 Union, NJ 07083-1948 EX-21 4 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT The Genlyte Group Incorporated does business under the names of Bronzelite, Crescent, Diamond F, ExceLine, Forecast, Genlyte Controls, Hadco, Lightolier, Stonco, and Wide-Lite. Genlyte has the following subsidiaries: 1. Canlyte, Inc., a Canadian Corporation. Canlyte does business under the names of Keene-Widelite, Lightolier, Prodel, Stonco and CFI (Canadian Fluorescent Industries). 2. Diaman-Mexo, S.A. de C.V., a Mexican Corporation. 3. Lightolier de Mexico, S.A. de C.V., a Mexican Corporation. EX-23 5 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE GENLYTE GROUP INCORPORATED: As independent public accountants, we hereby consent to the incorporation of (a) our report dated January 22, 1997 included in The Genlyte Group Incorporated's (the "Company's") Annual Report to Shareholders for the year ended December 31, 1996 into the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (the "Form 10-K") and (b) our reports dated January 22, 1997 included and incorporated into the Form 10-K, into the Company's previously filed Registration Statements on Form S-8 (Registration No.'s: 33-30722 and 33-27190). /s/ Arthur Andersen LLP ------------------- ARTHUR ANDERSEN LLP New York, New York March 25, 1997 EX-27 6 FDS
5 Financial Data Schedule 0000833076 The Genlyte Group Incorporated 1 12-mos Dec-31-1996 Jan-01-1996 Dec-31-1996 2,895 0 65,036 8,222 80,999 163,839 211,349 150,969 238,115 92,473 41,847 0 0 131 83,652 238,115 456,860 456,860 302,138 428,412 0 0 5,649 22,799 9,802 12,997 0 0 0 12,997 1.00 1.00
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