UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K
or
(Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to_______
Commission file number 1-2257
TRANS-LUX CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 13-1394750 | ||||||
| (State or other jurisdiction of | (I.R.S. Employer | ||||||
| incorporation or organization) | Identification No.) |
445 Park Avenue, Suite 2001, New York, NY 10022
(Address of registrant’s principal executive offices) (Zip code)
Registrant’s telephone number, including area code: (800) 243-5544
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No X
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No X
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
CONTINUED
TRANS-LUX CORPORATION
2015 Form 10-K Cover Page Continued
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) 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. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12(b)-2 of the Exchange Act.
Large accelerated filer___ Accelerated filer___ Non-accelerated filer___ Smaller reporting company X
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X
The aggregate market value of the registrant’s voting Common Stock held by non-affiliates of the registrant based upon the last sale price of the registrant’s Common Stock reported on OTCQB on June 30, 2015, was approximately $5,018,000, which value solely for the purposes of this calculation excludes shares held by the registrant’s officers and directors. Such exclusion should not be deemed a determination by the registrant that all of such individuals are, in fact, affiliates of the registrant. The registrant has no non-voting common stock.
The number of shares outstanding of the registrant’s Common Stock, par value $0.001 per share, as of the latest practicable date, on March 28, 2016, was 1,710,671 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE:
The information required by Part III of this Form 10-K is incorporated herein by reference to certain portions of a definitive proxy statement which is expected to be filed by the Company pursuant to Regulation 14A within 120 days after the close of its fiscal year.
ITEM 1.
SUMMARY
Trans-Lux Corporation is a Delaware corporation incorporated on February 5, 1920. Our Common Stock is quoted on OTC Pink under the symbol “TNLX.” Our principal executive offices are located at 445 Park Avenue, Suite 2001, New York, NY 10022, where our telephone number is (800) 243-5544.
Unless the context otherwise requires, the terms “Trans-Lux,” the “Company,” the “Corporation,” “we,” “us,” and “our” as used herein refer to Trans-Lux Corporation and its subsidiaries. The Company is a leading designer and manufacturer of digital signage display solutions. The essential elements of these systems are the real-time, programmable digital displays the Company designs, manufactures, distributes and services. These display systems utilize LED (light emitting diode) technologies. Designed to meet the digital signage solutions for any size venue’s indoor and outdoor needs, these display products include full color text, graphic and video displays for stock and commodity exchanges, financial institutions, college and high school sports stadiums, schools, casinos, convention centers, corporate applications, government applications, theatres, retail sites, airports, billboard sites and numerous other applications. In addition, the Company’s LED lighting division provides energy-saving lighting solutions that feature a comprehensive offering of the latest LED lighting technologies that provide facilities and public infrastructure with “green” lighting solutions that emit less heat, save energy and enable creative designs.
DIGITAL DISPLAY PRODUCTS
The Company’s new generation of LED large screen systems features the latest digital display technologies and capabilities. The Company’s product line of high performance state-of-the art digital displays and controllers are used to show full color video and messages in virtually any configuration in a variety of indoor and outdoor applications. Most of the Company’s digital display products include hardware components and sophisticated software. In both the indoor and outdoor markets in which the Company serves, the Company adapts basic product types and technologies for specific use in various niche market applications. The Company also operates a direct service network throughout the United States and parts of Canada, which performs on-site project management, installation, service and maintenance for its customers and others.
The Company employs a modular engineering design strategy, allowing basic “building blocks” of electronic modules to be easily combined and configured in order to meet the broad application requirements of the various industries it serves. This approach ensures product flexibility, reliability, ease of service and minimum spare parts requirements.
The Company’s Digital display market is comprised of two distinct segments: the Digital display sales division and the Digital display lease and maintenance division. Digital displays are used by sports arenas and stadiums; financial institutions, including brokerage firms, banks, energy companies, insurance companies and mutual fund companies; educational institutions; outdoor advertising companies; corporate and government communication centers; retail outlets; casinos, race tracks and other gaming establishments; airports, train stations, bus terminals and other transportation facilities; movie theatres; health maintenance organizations and in various other applications.
Digital Display Sales Division: The Digital display sales division is currently dominated by five categories of users: financial, government/private sector, gaming, sports and outdoor advertising.
The financial sector, which includes trading floors, exchanges, brokerage firms, banks, mutual fund companies and energy companies, has long been a user of electronic information displays due to the need for real-time dissemination of data. The major stock and commodity exchanges depend on reliable information displays to post stock and commodity prices, trading volumes, interest rates and other financial data. Brokerage firms use electronic ticker displays for both customers and brokers; they have also installed other larger displays to post major headline news events in their brokerage offices to enable their sales force to stay up-to-date on events affecting general market conditions and specific stocks. Banks and other financial institutions also use information displays to advertise product offerings to consumers. The financial sector has a product line of advanced last sale price displays, full color LED tickers and graphic/video displays.
The government/private sector includes applications found in major corporations, public utilities and government agencies for the display of real-time, critical data in command/control centers, data centers, help desks, visitor centers, lobbies, inbound/outbound telemarketing centers, retail applications to attract customers and for employee communications. Digital displays have found acceptance in applications for the healthcare industry such as outpatient pharmacies, military hospitals and HMOs to automatically post patient names when prescriptions are ready for pick up. Theatres use digital displays to post current box office and ticket information, directional information and to promote concession sales. Information displays are consistently used in airports, bus terminals and train stations to post arrival and departure times and gate and baggage claim information, all of which help to guide passengers through these facilities.
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The gaming sector includes casinos, Indian gaming establishments and racetracks. These establishments generally use large information displays to post odds for race and sporting events and to display timely information such as results, track conditions, jockey weights, scratches and real-time video. Casinos and racetracks also use digital displays throughout their facilities to advertise to and attract gaming patrons.
The scoreboard sector includes digital displays used by high schools, college sports stadiums, sports venues, municipal sports playing fields, entertainment facilities and recreational facilities to disseminate pertinent game information and advertising to the audience. This sector generally sells through dealers and distributors.
The outdoor advertising sector includes digital displays used by automobile dealerships, churches, military installations, gas stations, highway departments, entertainment facilities and outdoor advertisers, such as digital billboards, attempting to capture the attention of passers-by.
Equipment for the digital display sales segment generally has a lead-time of 30 to 120 days depending on the size and type of equipment ordered and material availability.
Digital Display Lease and Maintenance Division: The Digital display lease and maintenance division leases and performs maintenance on digital displays across all of the sectors under agreement terms ranging from 30 days to 10 years.
Sales Order Backlog (excluding leases): The amount of sales order backlog at December 31, 2015 and 2014 was approximately $2.4 million and $3.1 million, respectively. The December 31, 2015 backlog is expected to be recognized as sales in 2016. These amounts include only the sale of products; they do not include new lease orders or renewals of existing lease agreements that may be presently in-house.
LED LIGHTING
The LED lighting market provides energy-saving lighting solutions that features a comprehensive offering of the latest LED lighting technologies that provide facilities and public infrastructure with “green” lighting solutions that emit less heat, save energy and enable creative designs.
The Company has developed what it believes is a completely unique business model for the LED Lighting market as a source manufacturer and distributor that integrates energy efficiency as well as customer experience solutions into a seamless package that is delivered directly to the end customer. The Company manufactures as well as distributes all lighting solutions from single watt vanity lights to 750-watt facility lighting.
The business model for the lighting sales team is ROI (return on investment) driven and focuses on maximizing rebates and energy incentives to subsidize upfront capital expenses. We believe we provide our customers with the highest quality lights, widest array of financing options and world-class manufacturing with full product warranties and guarantees.
ENGINEERING AND PRODUCT DEVELOPMENT
The Company’s ability to compete and operate successfully depends on its ability to anticipate and respond to the changing technological and product needs of its customers, among other factors. For this reason, the Company continually develops enhancements to its existing product lines and examines and tests new display technologies.
The Company’s TLVisionTM line includes our latest LED Large Screen Systems that feature the latest digital display technologies and capabilities, available in various pitch design, including the industry’s first 1.5mm LED display solution. TLVisionTM consists of full color video products that can be used in a multitude of applications. These applications range from posting alphanumeric data to the displaying of full HD video. The pixel pitches of the products range from 1.5mm for very close distance viewing and up to 50mm for very long distance viewing. The Company also continues to expand its line of scoreboard solutions using its TLVisionTM technology and improved hand-held, simple to operate remotes and wireless control devices.
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As part of its ongoing development efforts, the Company seeks to package certain products for specific market segments as well as continually tracking emerging technologies that can enhance its products. Full color, live video and digital input technologies continue to be enhanced.
The Company maintains a staff that is responsible for product development and support. The engineering, product enhancement and development efforts are supplemented by outside independent engineering consulting organizations, as required.
MARKETING AND DISTRIBUTION
In North America, the Company markets its digital display products in the United States and Canada using a combination of distribution channels, including direct sales representatives and a network of independent dealers and distributors. By working with software vendors and using the internet to expand the quality and quantity of multimedia content that can be delivered to our digital displays, we offer customers relevant, timely information, content management software and display hardware in the form of turnkey display communications packages.
The Company employs a number of different marketing techniques to attract new customers, including direct marketing efforts by its sales force to known and potential users of information displays; internet marketing; advertising in industry publications; and exhibiting at domestic and international trade shows annually.
Headquartered in New York, New York, the Company has sales and service offices in Des Moines, Iowa, and Chicago, Illinois, as well as satellite offices in the United States.
Internationally, the Company uses a combination of internal sales people and independent distributors to market its products outside the United States. The Company has existing relationships with independent distributors worldwide covering Europe, the Middle East, South America, Africa, the Far East and Australia. Foreign revenues represented less than 10% of total revenues for the years ended December 31, 2015 and 2014, respectively.
The Company’s revenues included one multinational customer that accounted for 12.5% and 10.8% of total revenues in 2015 and 2014, respectively.
MANUFACTURING AND OPERATIONS
The Company’s production facilities are located in Des Moines, Iowa. The production facilities consist principally of the manufacturing, assembly and testing of digital display units and related components. The Company performs most subassembly and most final assembly of its digital display products.
All product lines are design engineered by the Company and controlled throughout the manufacturing process. The Company has the ability to produce very large sheet metal fabrications, cable assemblies and surface mount and through-hole designed assemblies. Some of the subassembly processes are outsourced. The Company’s production of many of the subassemblies and final assemblies gives the Company the control opportunity needed for on-time delivery to its customers.
The Company has the ability to rapidly modify its product lines. The Company’s displays are designed with flexibility in mind, enabling the Company to customize its displays to meet different applications with a minimum amount of lead-time. The Company designs certain of its materials to match components furnished by suppliers. If such suppliers are unable to provide the Company with those components, the Company would have to contract with other suppliers to obtain replacement sources. Such replacement might result in engineering design changes, as well as delays in obtaining such replacement components. The Company believes it maintains suitable inventory and has contracts providing for delivery of sufficient quantities of such components to meet its needs. The Company also believes that there are presently other qualified vendors of these components. Other than the LEDs and LED modules which are manufactured by foreign sources, the Company does not acquire significant amounts of components directly from foreign suppliers. The Company’s products are third-party certified for compliance with applicable safety, electromagnetic emissions and susceptibility requirements worldwide.
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SERVICE AND SUPPORT
The Company emphasizes the quality and reliability of its products and the ability of its field service personnel and third-party agents to provide timely and expert service to the Company’s equipment on lease and maintenance bases and other types of customer-owned equipment. The Company believes that the quality and timeliness of its on-site service personnel are important components for the Company’s ongoing and future success. The Company provides turnkey installation and support for the products it leases and sells in the United States and Canada. The Company provides training to end-users and provides ongoing support to users who have questions regarding operating procedures, equipment problems or other issues. The Company provides installation and service to those who purchase and lease equipment. Additionally, the Company’s dealers and distributors offer support for the products they sell in the market segments they cover.
Personnel based in regional and satellite service locations throughout the United States and Canada provide high quality and timely on-site service for the installed equipment on lease and maintenance bases and other types of customer-owned equipment. Purchasers or lessees of the Company’s larger products, such as financial exchanges, casinos and sports stadiums, often retain the Company to provide on-site service through the deployment of a service technician who is on-site daily for scheduled events. The Company operates its National Technical Services and Repair Center from its Des Moines, Iowa facility. Equipment repairs are performed in Des Moines and service technicians are dispatched nationwide from the Des Moines facility. The Company’s field service division is augmented by various service companies in the United States, Canada and overseas. From time to time, the Company uses various third-party service agents to install, service and/or assist in the service of certain displays for reasons that include geographic area, size and height of displays.
COMPETITION
The Company’s availability of short and long-term leases to customers and its nationwide sales, service and installation capabilities are major competitive advantages in the digital display business. The Company believes that it is the largest supplier of large-scale stock, commodity, sports and race book gaming digital displays in the United States, as well as one of the larger digital display and service organizations in the country.
The Company competes with a number of competitors, both larger and smaller than itself, with products based on different forms of technology. There are several competitors whose current products utilize similar technology to the Company’s and who possess the resources necessary to develop competitive and more sophisticated products in the future.
INTELLECTUAL PROPERTY
The Company holds a number of trademarks for its products and considers such trademarks important to its business.
EMPLOYEES
The Company had approximately 84 employees as of March 3, 2016. Approximately 33% of the employees are unionized, pursuant to a collective bargaining agreement, which is in effect through December 31, 2016. The Company believes its employee relations are good.
ITEM 1A.
THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN
Our independent registered public accounting firm has issued an opinion on our Consolidated Financial Statements included in this Annual Report on Form 10-K that states that the Consolidated Financial Statements were prepared assuming we will continue as a going concern and further states that the continuing losses and uncertainty regarding the ability to make the required minimum funding contributions to the defined benefit pension plan and the past due principal and interest payments on our outstanding 8¼% Limited convertible senior subordinated notes due 2012 (the “Notes”) and 9½% Subordinated debentures due 2012 (the “Debentures”) raises substantial doubt about our ability to continue as a going concern. As a result, if we are unable to (i) obtain additional liquidity for working capital, (ii) make the required minimum funding contributions to the defined benefit pension plan and/or (iii) make the required principal and interest payments on the outstanding Notes and Debentures, there would be a significant adverse impact on our financial position and operating results.
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WE HAVE EXPERIENCED OPERATING LOSSES FOR THE PAST SEVERAL YEARS, AND THERE CAN BE NO ASSURANCE THAT WE WILL BE ABLE TO INCREASE OUR REVENUE SUFFICIENTLY TO GENERATE THE CASH REQUIRED TO FUND OUR CURRENT OPERATIONS
While our operations have been improving, we have incurred operating losses for the past several years. During the years ended December 31, 2015 and 2014, we incurred losses of $1.7 million and $4.6 million, respectively. We are dependent upon future operating performance to generate sufficient cash flows in order to continue to run our businesses. Future operating performance is dependent on general economic conditions, as well as financial, competitive and other factors beyond our control. We have experienced a decline in our lease and maintenance bases for the past several years. There can be no assurance that we will be able to increase our revenue sufficiently to generate the cash required to fund our current operations.
WE HAVE RECEIVED WAIVERS, SUBJECT TO CERTAIN CONDITIONS, OF THE 2009, 2010 AND 2012 MINIMUM FUNDING STANDARDS FOR OUR DEFINED BENEFIT PENSION PLAN, WHICH, IF WE FAIL TO FULFILL THE REQUIRED CONDITIONS FOR, MAY RESULT IN THE TERMINATION OF THE PLAN OR REQUIRE US TO MAKE THE UNPAID CONTRIBUTIONS
In March 2010, 2011 and 2013, we submitted to the Internal Revenue Service (the “IRS”) requests for waivers of the 2009, 2010 and 2012 minimum funding standards for our defined benefit pension plan. The waiver requests were submitted as a result of the economic climate and the business hardship that we experienced. The 2009, 2010 and 2012 plan year waivers have been approved and granted subject to certain conditions, and deferred payment of $285,000, $559,000 and $669,000 of the minimum funding standard for the 2009, 2010 and 2012 plan years, respectively. As of December 31, 2015, we have fully repaid the amounts deferred for the 2009 and 2010 plan years and repaid $395,000 of the 2012 plan year waiver, leaving a balance due related to the waivers of $274,000, which is scheduled to be repaid through 2017. If we do not fulfill the conditions of the waivers, the Pension Benefit Guaranty Corporation (the “PBGC”) and the IRS have various enforcement remedies that can be implemented to protect the participant’s benefits, such as termination of the plan or a requirement that we make the unpaid contributions. In support of such enforcement remedies, the PBGC has placed a lien on our assets with respect to amounts owed under the plan. Assuming that the remaining waiver payments in 2016 and 2017 are timely paid, the lien on our assets will be released. In 2015, we made the required $1.2 million of contributions to the plan. At this time, we expect to make our required contributions in 2016 of $1.0 million and have already made $197,000 of such contributions, with approximately $813,000 of contributions remaining for 2016; however there is no assurance that we will be able to make any or all of such remaining payments. If we are unable to fulfill our related obligations, the implementation of any such enforcement remedies would have a material adverse impact on our financial condition, results of operations, and liquidity.
WE HAVE SIGNIFICANT DEBT, WHICH COULD IMPAIR OUR FINANCIAL CONDITION
As of December 31, 2015, we had debt of approximately $1.3 million, $1.0 million of which was reflected under current portion of long-term debt in our consolidated balance sheet. Our ability to satisfy our obligations will be dependent upon our future performance, which is subject to prevailing economic conditions and financial, business and other factors, including factors beyond our control. There can be no assurance that our operating cash flows will be sufficient to meet our long-term debt service requirements or that we will be able to refinance indebtedness at maturity. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”
NON-PAYMENT OF PRINCIPAL AND INTEREST ON OUTSTANDING NOTES AND DEBENTURES HAS RESULTED IN EVENTS OF DEFAULT AND MAY CONTINUE TO NEGATIVELY AFFECT OUR BALANCE SHEET
We have outstanding $626,000 of Notes which are no longer convertible into common shares. The Notes matured as of March 1, 2012 and are currently in default. The trustee, by notice to us, or the holders of 25% of the principal amount of the Notes outstanding, by notice to us and the trustee, may declare the outstanding principal plus interest due and payable immediately.
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We have outstanding $334,000 of Debentures. The Debentures matured as of December 1, 2012 and are currently in default. The trustee, by notice to us, or the holders of 25% of the principal amount of the Debentures outstanding, by notice to us and the trustee, may declare the outstanding principal plus interest due and payable immediately.
COMPETITORS MAY POSSESS SUPERIOR RESOURCES AND DELIVER MORE MARKETABLE PRODUCTS, WHICH WOULD ADVERSELY AFFECT OUR OPERATING MARGINS
Our digital displays compete with a number of competitors, both larger and smaller than us, and with products based on different forms of technology. In addition, there are several competitors whose current products utilize similar technology and who possess the resources to develop competitive and more sophisticated products in the future. Our success is, to some extent, dependent upon our ability to anticipate technological changes in the industry and to successfully identify, obtain, develop and market new products that satisfy evolving industry requirements. There can be no assurance that competitors will not market new products which may have perceived advantages over our products or which, because of pricing strategies, render the products currently sold by us less marketable or would otherwise adversely affect our operating margins.
OUR SUCCESS IS DEPENDENT UPON OUR ABILITY TO OBTAIN THE RENEWAL OF EXISTING LEASES OR ENTER INTO NEW LEASES AS OUR CURRENT LEASES EXPIRE, WHICH MAY NOT BE FEASIBLE. THE INABILITY TO RENEW OR REPLACE OUR LEASES WOULD NEGATIVELY AFFECT OUR OPERATIONS
We derive a substantial percentage of our revenues from the leasing of our digital displays, generally pursuant to leases that have an average term of one to five years. Consequently, our future success is, at a minimum, dependent on our ability to obtain the renewal of existing leases or to enter into new leases as existing leases expire. We also derive a significant percentage of our revenues from maintenance agreements relating to our digital display products. The average term of such agreements is generally one to five years. A portion of the maintenance agreements are cancelable upon 30 days notice. There can be no assurance that we will be successful in obtaining the renewal of existing leases or maintenance agreements, obtaining replacement leases or realizing the value of assets currently under leases that are not renewed. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations.”
WE ARE DEPENDENT ON OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER AND OTHER KEY PERSONNEL
We believe that our President and Chief Executive Officer, Jean-Marc Allain, plays a significant role in our success and the loss of his services could have an adverse effect on us. There can be no assurance that we would be able to find a suitable replacement for Mr. Allain. We have an employment agreement with Mr. Allain that expires on February 16, 2018. We believe that in addition to Mr. Allain, there is a core group of executives that also plays a significant role in our success.
OUR INTERNATIONAL OPERATIONS SUBJECT US TO POTENTIAL FLUCTUATIONS IN EXCHANGE RATES BETWEEN THE UNITED STATES DOLLAR AND FOREIGN CURRENCIES, AS WELL AS INTERNATIONAL LEGAL REQUIREMENTS, WHICH COULD IMPACT OUR PROFITABILITY
Our financial condition, operating results and future growth could be significantly impacted by risks associated with our international activities, including specifically changes in the value of the U.S. dollar relative to foreign currencies and international tax rules. Because a significant portion of our business is done in Canada, fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar could seriously impact our manufacturing and other costs, as well as overall profitability. The risks to our business related to fluctuations in currency exchange rates is further magnified by the current volatility in the currency markets that are characteristic of financial markets, and currency markets in particular.
Compliance with U.S. and foreign laws and regulations that apply to our international operations, including import and export requirements, anti-corruption laws, including the Foreign Corrupt Practices Act, tax laws (including U.S. taxes on foreign subsidiaries), foreign exchange controls, anti-money laundering and cash repatriation restrictions, data privacy requirements, labor laws and anti-competition regulations, increases the costs of doing business in foreign jurisdictions, and may subject us to additional costs which may arise in the future as a result of changes in these laws and regulations or in their interpretation. We have not implemented formal policies and procedures designed to ensure compliance with all of these laws and regulations. Any such violations could individually or in the aggregate materially adversely affect our reputation, financial condition or operating results.
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OUR RELIANCE UPON THIRD PARTY MANUFACTURERS IN CHINA COULD SUBJECT US TO POLITICAL AND LEGAL RISKS BEYOND OUR CONTROL
Many components of our products are produced in China by third-party manufacturers. Our reliance on third-party Chinese manufacturers exposes us to risks that are not in our control, such as unanticipated cost increases or negative fluctuations in currency, which could negatively impact our results of operations and working capital. Any termination of or significant disruption in our relationship with our Chinese suppliers may prevent us from filling customer orders in a timely manner. Given the state of the Chinese political system, we cannot guaranty that our agreements with our Chinese suppliers will remain enforceable pursuant to Chinese law. Furthermore, we cannot guaranty that all rights to payment or performance under our agreements with our Chinese manufacturing partners will be enforceable, and that all debts owing to us, whether in the form of cash or product, will be collectable. While we do not envision any adverse change to our international operations or suppliers, especially given the gradual move towards global integration by the Chinese government and financial markets, adverse changes to these operations as a result of political, governmental, regulatory, economic, exchange rate, labor, logistical or other factors could have a material adverse effect on our future operating results.
SUPPLIERS MAY BE UNABLE OR UNWILLING TO FURNISH US WITH REQUIRED COMPONENTS, WHICH MAY DELAY OR REDUCE OUR PRODUCT SHIPMENTS AND NEGATIVELY AFFECT OUR BUSINESS
We design certain of our products to match components furnished by suppliers. If such suppliers were unable or unwilling to provide us with those components, we would have to contract with other suppliers to obtain replacement sources. In particular, we purchase most of the LEDs and LED module blocks used in our digital displays and lighting from three main suppliers. We do not have long-term supply contracts with these suppliers. A change in suppliers of either LED module blocks or certain other components may result in engineering design changes, as well as delays in obtaining such replacement components. We believe that there are presently other qualified vendors of these components. Our inability to obtain sufficient quantities of certain components as required, or to develop alternative sources at acceptable prices and within a reasonable time, could result in delays or reductions in product shipments that could have a materially adverse effect on our business and results of operations.
WE CURRENTLY HAVE OUTSTANDING SERIES B CONVERTIBLE PREFERRED STOCK
We sold 16,512 shares of Series B Convertible Preferred Stock (“Preferred Stock”) in a rights offering that was consummated on November 19, 2015. The Preferred Stock carries a 6.0% cumulative annual dividend, payable semi-annually on April 15 and October 15 in cash or Common Stock, and is convertible into shares of Common Stock at an initial conversion price of $10.00 per share, representing a conversion ratio of 20 common shares for each share of Preferred Stock held at the time of conversion. Under Delaware law, we may only pay dividends or make a distribution to our stockholders from our surplus (as determined in accordance with Delaware General Corporate Law) or our net profits for the current fiscal year before the dividend or distribution is declared under certain circumstances. Therefore, our ability to pay dividends and make any other distributions in the future will depend upon our financial results, liquidity and financial condition.
The shares of Preferred Stock may be subject to mandatory conversion after three years or as early as one year if the closing sale price of our Common Stock has been greater than or equal to $15.00 for 30 consecutive days. The conversion of all or substantially all of Preferred Stock will be dilutive to our Common Stock holders, and if the holders of the Common Stock received upon conversion of Preferred Stock choose to sell all or some of all these shares of Common Stock, the resulting shares could depress the market value of our Common Stock.
WE HAVE A SIGNIFICANT NUMBER OF OUTSTANDING PREFERRED STOCK AND WARRANTS, THE CONVERSION AND EXERCISE OF WHICH WOULD DILUTE THE THEN-EXISTING STOCKHOLDERS’ PERCENTAGE OWNERSHIP OF OUR COMMON STOCK
As of December 31, 2015, we had outstanding Preferred Stock convertible into 330,240 shares of Common Stock and outstanding warrants to purchase 85,333 shares of Common Stock. If all of the outstanding warrants were exercised, the proceeds to us would average $10.68 per share. In addition, over the next three years up to an additional 59,443 shares of Common Stock are potentially issuable as dividends with respect to the Preferred Stock (based on an assumed dividend rate of 6% per annum). We also had 200,000 shares of Common Stock reserved for issuance under our stock plans with respect to options or restricted stock that have not been granted. The exercise of all of the outstanding warrants, the conversion of the Preferred Stock into Common Stock, the payment of dividends on the Preferred Stock through the issuance of Common Stock, the grant and exercise of additional options and/or the grant of restricted stock would dilute the then-existing stockholders’ percentage ownership of Common Stock, and any sales in the public market of the Common Stock issuable upon such exercise could adversely affect prevailing market prices for the Common Stock. Moreover, the terms upon which we would be able to obtain additional equity capital could be adversely affected because the holders of such securities can be expected to exercise or convert them at a time when we would, in all likelihood, be able to obtain any needed capital on terms more favorable than those provided by such securities.
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EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS AND CONTROL BY EXISTING STOCKHOLDERS
Our Amended and Restated Certificate of Incorporation (our “Certificate of Incorporation”) contains certain provisions that could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company. Such provisions could limit the price that certain investors might be willing to pay in the future for shares of our Common Stock, thus making it less likely that a stockholder will receive a premium on any sale of shares of our Common Stock. Our Board of Directors is divided into three classes, each of which serves for a staggered three-year term, making it more difficult for a third party to gain control of our Board. Our Certificate of Incorporation also contains a provision that requires a four-fifths vote on any merger, consolidation or sale of assets with or to an “Interested Person” or “Acquiring Person.”
Additionally, we are authorized to issue 500,000 shares of preferred stock, of which (i) 416,500 are designated as “Series A Convertible Preferred Stock”, none of which are outstanding, and (ii) 51,000 are designated as Preferred Stock, 16,512 of which are outstanding. The preferred stock contains such rights, preferences, privileges and restrictions as may be fixed by our Board of Directors, which may adversely affect the voting power or other rights of the holders of Common Stock or delay, defer or prevent a change in control of the Company, or discourage bids for the Common Stock at a premium over its market price or otherwise adversely affect the market price of the Common Stock.
These provisions and others that could be adopted in the future could deter unsolicited takeovers or delay or prevent changes in our control or management, including transactions in which stockholders might otherwise receive a premium for their shares over then current market prices. These provisions may also limit the ability of stockholders to approve transactions that they may deem to be in their best interests.
As of March 28, 2016, 10 stockholders who are executive officers and/or directors of the Company beneficially own approximately 37.7% of our Common Stock and 2 stockholders who are neither officers nor directors of the Company beneficially own approximately 42.9% of our Common Stock. Accordingly, such stockholders could exert significant control over any potential stockholder actions.
OUR COMMON STOCK IS QUOTED ON OTC PINK AND MAY BE SUBJECT TO LIMITED TRADING VOLUME AND PRICE VOLATILITY
Our Common Stock is quoted on the OTC Pink, an inter-dealer electronic quotation and trading system for equity securities. Quotation of our Common Stock on OTC Pink may limit the liquidity and price of our Common Stock more than if our Common Stock were quoted or listed on the NASDAQ Stock Market or another national exchange. Some investors may perceive our Common Stock to be less attractive because it is traded in the over-the-counter market. In addition, as an OTC Pink company, we do not attract the extensive analyst coverage that accompanies companies listed on national exchanges. Further, institutional and other investors may have investment guidelines that restrict or prohibit investing in securities traded on OTC Pink. These factors may have an adverse impact on the trading and price of our Common Stock.
Our Common Stock is not widely held and the volume of trading has been relatively low and sporadic. Accordingly, our Common Stock is subject to increased price volatility and reduced liquidity. There can be no assurance that a more active trading market for our Common Stock will develop or be sustained if it does develop. The market price of our Common Stock has been and may continue to be subject to wide fluctuations in response to numerous factors, some of which are beyond our control. These factors include, among other things, the factors described in the sections entitled “Safe Harbor Statement under the Private Securities Reform Act of 1995” and “Risk Factors” in this Annual Report on Form 10-K, the general state of the securities markets and the market for similar stocks, changes in capital markets that affect the perceived availability of capital to companies in our industry, and governmental legislation or regulation, as well as general economic and market conditions.
8
WE ARE DEPENDENT ON A SIGNIFICANT CUSTOMER
For the years ended December 31, 2015 and 2014, we had one customer which accounted for 12.5% and 10.8%, respectively, of our total revenue. The loss of this customer, or a significant reduction in revenue from this customer, could have a material adverse effect on our results of operations.
ITEM 1B.
Not applicable.
ITEM 2.
The Company’s headquarters and principal executive offices are located in a leased facility at 445 Park Avenue, Suite 2001, New York, New York, which is used for its executive and administrative office. Until February 1, 2016, the Company owned a facility in Des Moines, Iowa where its manufacturing operations are maintained. On February 1, 2016, the Company executed a sale/leaseback transaction for this property, which includes a two year lease period at an annual rental of $158,000, during which we are seeking a more modern location for our manufacturing operations.
The Company leases two other locations in North America for use as sales, service and administrative operations.
The aggregate rent expense was $541,000 and $428,000 for the years ended December 31, 2015 and 2014, respectively.
ITEM 3.
The Company is subject to legal proceedings and claims which arise in the ordinary course of its business and/or which are covered by insurance. The Company has accrued reserves individually and in the aggregate for such legal proceedings. Should actual litigation results differ from the Company’s estimates, revisions to increase or decrease the accrued reserves may be required.
ITEM 4.
Not applicable.
ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(a)
The Company’s Common Stock trades on the OTCQB under the symbol “TNLX.” Sales price information is set forth in Item 5(d) below.
(b)
The Company had approximately 205 holders of record of its Common Stock as of March 28, 2016. The number of record holders does not include DTC participants or beneficial owners holding shares through nominee names.
(c)
The Board of Directors did not declare any cash dividends for Common Stock during 2015 and the Company does not anticipate paying any cash dividends on its Common Stock for the foreseeable future. As described herein, the Preferred Stock carries a 6.0% cumulative annual dividend.
9
(d)
The following table sets forth the range of Common Stock prices on the OTCQB:
|
| 2015 | 2014 | |||||||
| High | Low | High | Low | ||||||
| First Quarter | $5.55 | $4.03 | $5.45 | $3.47 | |||||
| Second Quarter | $4.50 | $2.25 | $7.60 | $3.55 | |||||
| Third Quarter | $3.50 | $3.04 | $11.00 | $7.17 | |||||
| Fourth Quarter | $5.80 | $3.50 | $7.75 | $5.55 | |||||
(e)
The Company did not purchase any of its equity securities during any month of the fourth fiscal quarter of 2015.
ITEM 6.
(a)
Not applicable.
(b)
Not applicable.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Trans-Lux is a leading supplier of LED technology for displays and lighting applications. The essential elements of these systems are the real-time, programmable digital displays and lighting fixtures that we design, manufacture, distribute and service. Designed to meet the digital signage solutions for any size venue’s indoor and outdoor needs, these displays are used primarily in applications for the financial, banking, gaming, corporate, advertising, transportation, entertainment and sports markets. The Company’s LED lighting fixtures offer energy-saving lighting solutions that feature a comprehensive offering of the latest LED lighting technologies that provide facilities and public infrastructure with “green” lighting solutions that emit less heat, save energy and enable creative designs. The Company operates in two reportable segments: Digital display sales and Digital display lease and maintenance.
The Digital display sales segment includes worldwide revenues and related expenses from the sales of both indoor and outdoor digital display signage and LED lighting solutions. This segment includes the financial, government/private, gaming, scoreboards and outdoor advertising markets. The Digital display lease and maintenance segment includes worldwide revenues and related expenses from the lease and maintenance of both indoor and outdoor digital display signage. This segment includes the lease and maintenance of digital display signage across all markets.
Going Concern
We do not have adequate liquidity, including access to the debt and equity capital markets, to operate our business. As a result, our short-term business focus has been to preserve our liquidity position. Unless we are successful in obtaining additional liquidity, we believe that we will not have sufficient cash and liquid assets to fund normal operations for the next 12 months. In addition, the Company’s obligations under its defined benefit pension plan exceeded plan assets by $5.3 million at December 31, 2015, including $1.0 million of minimum contributions due over the next 12 months. The 2016 pension minimum contribution includes $134,000 of payments that relate to the 2012 waiver and the balance due related to waivers is $274,000, which is scheduled to be repaid through 2017. The Company is in default on its Notes and Debentures, which have remaining principal balances of $626,000 and $334,000, respectively. As a result, if the Company is unable to (i) obtain additional liquidity for working capital, (ii) make the required minimum funding contributions to the defined benefit pension plan and/or (iii) make the required principal and interest payments on the Notes and the Debentures, there would be a significant adverse impact on the financial position and operating results of the Company.
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Moreover, because of the uncertainty surrounding our ability to obtain additional liquidity and the potential of the noteholders and/or trustees to give notice to the Company of a default on either the Debentures or the Notes, our independent registered public accounting firm has issued an opinion on our Consolidated Financial Statements that states that the Consolidated Financial Statements were prepared assuming we will continue as a going concern and further states that the uncertainty regarding the ability to make the required principal and interest payments on the Notes and the Debentures, in addition to the significant amount due to the Company’s defined benefit pension plan over the next 12 months, raises substantial doubt about our ability to continue as a going concern. See Note 2 to the Consolidated Financial Statements - Going Concern.
Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to uncollectible accounts receivable, slow-moving and obsolete inventories, rental equipment, goodwill, income taxes, warranty reserve, warrant liabilities, pension plan obligations, contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management has discussed the development and selection of these accounting estimates and the related disclosures with the Audit Committee of the Board of Directors.
Management believes the following critical accounting policies, among others, involve its more significant judgments and estimates used in the preparation of its Consolidated Financial Statements:
Uncollectible Accounts Receivable: The Company maintains allowances for uncollectible accounts receivable for estimated losses resulting from the inability of its customers to make required payments. Should non-payment by customers differ from the Company’s estimates, a revision to increase or decrease the allowance for uncollectible accounts receivable may be required.
Slow-Moving and Obsolete Inventories: The Company writes down its inventory for estimated obsolescence equal to the difference between the carrying value of the inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual future demand or market conditions are less favorable than those projected by management, additional inventory write downs may be required.
Rental Equipment: The Company evaluates rental equipment assets for possible impairment annually to determine if the $4.7 million carrying amount of such assets may not be recoverable. The Company uses a cash flow model to determine the fair value under the income approach, based on the remaining lengths of existing leases. Changes in the assumptions used could materially impact our fair value estimates. Assumptions critical to our fair value estimates are projected renewal rates and CPI rate changes. These and other assumptions are impacted by national and global economic conditions including changes in national and international interest rates, taxes, inflation, etc. and will change in the future based on period-specific facts and circumstances, thereby possibly requiring an impairment charge in the future. The December 31, 2015 impairment analysis included a renewal rate estimate of 64.0% and a CPI rate change of approximately 1.0%, which were the actual average rates for the 2 year period ended December 31, 2015. Based on these assumptions, the cash flow model determined a fair value of $5.6 million, exceeding its carrying value by 24.4%, therefore there is no impairment of the Rental Equipment. For every 1-percentage-point change in the renewal rate, the valuation would change by approximately $67,000. For every 0.1-percentage point change in the CPI rate, the valuation would change by approximately $11,000.
Rental equipment is comprised of installed digital displays on lease that are primarily used for indoor trading applications, time and temperature displays and other digital message displays and have estimated useful lives of 10-15 years. For example, the Company is party to contracts for equipment originally installed over 30 or 40 years ago in the 1970’s and 1980’s, as well as dozens of installations from the 1990’s that are still in operation. Current contracts have an average age of 19.9 years from their installation dates through the expiration of their current terms.
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Goodwill: The Company evaluates goodwill for possible impairment annually and when events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company uses the income and the market approach to test for impairment of its goodwill, and considers other factors including economic trends and our market capitalization relative to net book value. The Company weighs these approaches by using a 67% factor for the income approach and a 33% factor for the market approach. Together these two factors estimate the fair value of the reporting unit. The Company’s $744,000 goodwill relates to its digital display sales reporting unit. The Company uses a discounted cash flow model to determine the fair value under the income approach which contemplates a conservative overall weighted average revenue growth rate. If the Company were to reduce its revenue projections on the reporting unit by 5.6 percentage points within the income approach, the fair value of the reporting unit would be below carrying value. The gross profit margins used were consistent with historical margins achieved by the Company during previous years. If there is a margin decline of 5.7 percentage points or more, the model would yield results of a fair value less than the carrying amount. The Company uses a market multiple approach based on revenue to determine the fair value under the market approach which includes a selection of and market price of a group of comparable companies and the performance of the guidelines of the comparable companies and of the reporting unit.
The October 1, 2015 annual review indicated that the fair value of the reporting unit exceeded its carrying value by 174.9%; therefore there was no impairment of goodwill related to our digital display sales reporting unit. Changes in the assumptions used could materially impact our fair value estimates. Assumptions critical to our fair value estimates are: (i) discount rate used to derive the present value factors used in determining the fair value of the reporting unit, (ii) projected average revenue growth rates used in the reporting unit models and (iii) projected long-term growth rates used in the derivation of terminal year values. These and other assumptions are impacted by economic conditions and expectations of management and will change in the future based on period-specific facts and circumstances, thereby possibly requiring an impairment charge in the future.
Restricted cash: The Company classifies cash as restricted when the cash is unavailable for withdrawal or usage for general operations. Restrictions may include legally restricted deposits, contracts entered into with others, or the Company’s statements of intention with regard to particular deposits. In July 2014, the Company deposited $212,000 in a savings account as collateral for a certificate of deposit in favor of the landlord at its New York headquarters as a security deposit. The Company has presented these funds as restricted cash since the use of the funds under the certificate of deposit is restricted.
Income Taxes: The Company records a valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely than not to be realized. While the Company has considered future taxable income and ongoing feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. Likewise, should the Company determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made.
Warranty Reserve: The Company provides for the estimated cost of product warranties at the time revenue is recognized. While the Company engages in product quality programs and processes, including evaluating the quality of the component suppliers, the warranty obligation is affected by product failure rates. Should actual product failure rates differ from the Company’s estimates, revisions to increase or decrease the estimated warranty liability may be required.
12
Pension Plan Obligations: The Company is required to make estimates and assumptions to determine the obligation of our pension benefit plan, which include investment returns and discount rates. The Company recorded an after tax gain in unrecognized pension liability in other comprehensive loss of $652,000 in 2015 and a charge of $2.6 million during 2014. Estimates and assumptions are reviewed annually with the assistance of external actuarial professionals and adjusted as circumstances change. Assumed mortality rates of plan participants are a critical estimate in measuring the expected payments a participant will receive over their lifetime and the amount of liability and expense we recognize. In October 2015, the Society of Actuaries ("SOA") published updated mortality tables and an updated mortality improvement scale, which both reflect improved longevity. In determining the appropriate mortality assumptions as of December 31, 2015, we considered the SOA’s updated mortality tables, as well as other mortality information available from the Social Security Administration to develop assumptions aligned with our expectation of future improvement rates. The mortality assumption was changed from the RP-2014 White Collar Employee and Healthy Annuitant Mortality Tables projected with Scale MP-2014 to the RP-2014 White Collar Employee and Healthy Annuitant Mortality Tables projected with the Buck Modified Scale MP-2015. This change decreased the PBO by 2.4%. Use of the updated projection scale is consistent with the Company’s view of long-term mortality trend. The change to the mortality rate assumptions resulted in a decrease in the 2015 year-end pension obligation of approximately $325,000. At December 31, 2015, plan assets were invested 31.5% in fixed income contracts and 68.5% in equity and index funds. The investment return assumption takes the asset mix into consideration. The assumed discount rate reflects the rate at which the pension benefits could be settled. Effective with the 2015 year-end disclosure, the Company has elected to utilize a yield curve in lieu of a single weighted discount rate in determining liabilities and the interest cost for the following year. The purpose of the change in method is to better approximate the term structure of interest-related costs. The liability is unaffected by this change, except for rounding. The interest cost is anticipated to be lower under the new method. Prior to the 2015 year-end disclosure, the Company used the single equivalent discount rate, rounded to the nearest fifth, to determine liabilities and interest cost for the plan. At December 31, 2015, the weighted average rates used for the computation of benefit plan liabilities were: investment returns, 8.00% and discount rate, 4.30%. Net periodic cost for 2016 will be based on the December 31, 2015 valuation. The defined benefit pension plan periodic cost was $485,000 and $322,000 in 2015 and 2014, respectively. At December 31, 2015, assuming no change in the other assumptions, a one-percentage point change in investment returns would affect the net periodic cost by $83,000 and a one-percentage point change in the discount rate would affect the net periodic cost by $127,000.
As of December 31, 2003, the benefit service under the defined benefit pension plan had been frozen and, accordingly, there is no service cost for the years ended December 31, 2015 and 2014. In March 2010, 2011 and 2013, the Company submitted to the IRS requests for waivers of the 2009, 2010 and 2012 minimum funding standard for its defined benefit pension plan. The waiver requests were submitted as a result of the economic climate and the business hardship that the Company experienced. The waivers for the 2009, 2010 and 2012 plan years were approved and granted subject to certain conditions and have deferred payment of $285,000, $559,000 and $669,000 of the minimum funding standard for the 2009, 2010 and 2012 plan years, respectively. As of December 31, 2015, the Company has fully repaid the amounts deferred for the 2009 and 2010 plan years and has repaid $395,000 of the 2012 plan year waiver, leaving a balance due related to the waivers of $274,000, which is scheduled to be repaid through 2017. If the Company does not fulfill the conditions of the waivers, the PBGC and the IRS have various enforcement remedies that can be implemented to protect the participant’s benefits, such as termination of the plan or a requirement that the Company make the unpaid contributions. In support of such enforcement remedies, the PBGC has placed a lien on the Company’s assets with respect to amounts owed under the plan. Assuming that the remaining waiver payments in 2016 and 2017 are timely paid, the lien on our assets will be released. In 2015, the Company made the required $1.2 million of contributions to the plan. At this time, the Company is expecting to make its required contributions in 2016 of $1.0 million and has already made $197,000 of such contributions, with approximately $813,000 of contributions remaining for 2016; however there is no assurance that we will be able to make any or all of such remaining payments.
Contingencies and Litigation: The Company is subject to legal proceedings and claims which arise in the ordinary course of its business and/or which are covered by insurance. The Company has accrued reserves individually and in the aggregate for such legal proceedings. Should actual litigation results differ from the Company’s estimates, revisions to increase or decrease the accrued reserves may be required.
13
Results of Operations
The following table presents our Statements of Operations data, expressed as a percentage of revenue for the years ended December 31, 2015 and 2014:
| In thousands | 2015 | 2014 | ||||
| Revenues: |
|
|
|
| ||
|
| Digital display sales | $19,994 | 84.8 % | $19,479 | 80.0 % | |
|
| Digital display lease and maintenance | 3,573 | 15.2 % | 4,880 | 20.0 % | |
|
|
| Total revenues | 23,567 | 100.0 % | 24,359 | 100.0 % |
| Cost of revenues: |
|
|
|
| ||
|
| Cost of digital display sales | 15,373 | 65.2 % | 15,482 | 63.5 % | |
|
| Cost of digital display lease and maintenance | 2,757 | 11.7 % | 3,965 | 16.3 % | |
|
|
| Total cost of revenues | 18,130 | 76.9 % | 19,447 | 79.8 % |
| Gross profit from operations | 5,437 | 23.1 % | 4,912 | 20.2 % | ||
| General and administrative expenses | (7,589) | (32.2)% | (9,400) | (38.6)% | ||
| Operating loss | (2,152) | (9.1)% | (4,488) | (18.4)% | ||
| Interest expense, net | (306) | (1.3)% | (240) | (1.0)% | ||
| Gain on foreign currency remeasurement | 478 | 2.0 % | 236 | 0.9 % | ||
| Gain on extinguishment of debt | 314 | 1.3 % | - | - % | ||
| Warrant expense and change in warrant liabilities | (60) | (0.2)% | (107) | (0.4)% | ||
| Loss before income taxes | (1,726) | (7.3)% | (4,599) | (18.9)% | ||
| Income tax expense | (23) | (0.1)% | (29) | (0.1)% | ||
| Net loss | $(1,749) | (7.4)% | $(4,628) | (19.0)% | ||
2015 Compared to 2014
Total revenues for the year ended December 31, 2015 decreased 3.3% to $23.6 million from $24.4 million for the year ended December 31, 2014, principally due to a decrease in digital display lease and maintenance revenues, offset by an increase in digital display sales revenues.
Digital display sales revenues increased $515,000 or 2.6% to $20.0 million, primarily due to increases in the catalog scoreboard and LED lighting markets.
Digital display lease and maintenance revenues decreased $1.3 million or 26.8%, primarily due to the continued expected revenue decline in the older outdoor display equipment rental and maintenance bases acquired in the early 1990s. The financial services market continues to be negatively impacted by consolidation within that industry and the wider use of flat-panel screens for smaller applications.
Total operating loss for the year ended December 31, 2015 decreased $2.3 million or 52.0% to $2.2 million from $4.5 million for the year ended December 31, 2014, principally due to a reduction in general and administrative expenses.
Digital display sales operating income (loss) increased $1.9 million to income of $574,000 for 2015 compared to a loss of $1.3 million for 2014, primarily due to a decrease in general and administrative expenses. The cost of Digital display sales represented 76.9% of related revenues in 2015 compared to 79.5% in 2014. The cost of Digital display sales decreased slightly, despite the slight increase in revenues. Digital display sales general and administrative expenses decreased $1.2 million or 23.5%, primarily due to decreases of $543,000 in payroll and benefits and $373,000 in marketing expenses.
Digital display lease and maintenance operating income increased $312,000 or 89.7% to $660,000 in 2015 compared to $348,000 in 2014, primarily as a result of a decrease in general and administrative expenses, offset by the decrease in revenues. The cost of Digital display lease and maintenance represented 77.3% of related revenues in 2015 compared to 81.3% in 2014. Digital display cost of lease and maintenance decreased $1.2 million or 30.5%, primarily due to a $660,000 decrease in field service costs to maintain the equipment and a $571,000 decrease in depreciation expense. The Company periodically addresses the cost of field service to keep it in line with revenues from equipment leases and maintenance. Cost of Digital display lease and maintenance includes field service expenses, plant repair costs, maintenance and depreciation. Digital display lease and maintenance general and administrative expenses decreased $411,000 or 72.5%, primarily due to a decrease in the allowance for bad debts.
14
Corporate general and administrative expenses decreased $158,000 or 4.5%, primarily due to a decrease in payroll and benefits and director fees and a decrease in the accrual for taxes, offset by an increase in pension expenses.
Net interest expense increased $66,000 or 27.5%, primarily due to the increase in outstanding long-term debt during the year.
The gain on foreign currency exchange increased $242,000 or 102.5%, primarily due to greater reductions in the exchange rate between currency in Canada and the United States.
The gain on extinguishment of debt in 2015 relates to the extinguishment of a portion of the outstanding Notes.
The warrant expense and change in warrant liabilities in 2015 is attributable to the amortization of equity warrants granted to directors in 2013. The warrant expense and change in warrant liabilities in 2014 is primarily attributable to the amortization of equity warrants granted to directors in 2013, as well as the change in the fair market value of liability warrants. All liability warrants expired in November 2014.
The effective income tax expense rate for the years ended December 31, 2015 and 2014 was 1.3% and 0.6%, respectively. Both the 2015 and 2014 tax rates are being affected by the valuation allowance on the Company’s deferred tax assets as a result of reporting pre-tax losses.
Liquidity and Capital Resources
Current Liquidity
The Company has incurred significant recurring losses and has a significant working capital deficiency. The Company incurred a net loss of $1.7 million in 2015 and has a working capital deficiency of $2.5 million as of December 31, 2015.
The Company is dependent on future operating performance in order to generate sufficient cash flows in order to continue to run its businesses. Future operating performance is dependent on general economic conditions, as well as financial, competitive and other factors beyond our control. As a result, we have experienced a decline in our lease and maintenance bases. The cash flows of the Company are constrained, and in order to more effectively manage its cash resources in these challenging economic times, the Company has, from time to time, increased the timetable of its payment of some of its payables. There can be no assurance that we will meet our anticipated current and near term cash requirements. Management believes that its current cash resources and cash provided by operations would not be sufficient to fund its anticipated current and near term cash requirements and is seeking additional financing in order to execute our operating plan. We cannot predict whether future financing, if any, will be in the form of equity, debt, or a combination of both. We may not be able to obtain additional funds on a timely basis, on acceptable terms, or at all. The Company continually evaluates the need and availability of long-term capital in order to meet its cash requirements and fund potential new opportunities.
The Company used cash for operating activities of $2.6 million and $1.6 million for the years ended December 31, 2015 and 2014, respectively. The Company has implemented several initiatives to improve operational results and cash flows over future periods, including reducing head count, reorganizing its sales department, outsourcing its human resources department and expanding its sales and marketing efforts in the LED lighting market. The Company continues to explore ways to reduce operational and overhead costs. The Company periodically takes steps to reduce the cost to maintain the digital displays on lease and maintenance agreements.
Cash and cash equivalents decreased $103,000 in 2015. The decrease is primarily attributable to cash used for operations of $2.6 million, payments of long-term debt (net of borrowing proceeds) of $290,000, investment in property and equipment of $175,000 and investment in equipment manufactured for rental of $61,000, offset by net proceeds from the issuance of Preferred Stock of $3.0 million.
Under various agreements, the Company is obligated to make future cash payments in fixed amounts. These include payments under the Company’s long-term debt agreements, payments to the Company’s pension plan, employment agreement payments, warranty liabilities and rental payments required under operating lease agreements. The Company has both variable and fixed interest rate debt. Interest payments are projected based on actual interest payments incurred in 2015 until the underlying debts mature.
15
The following table summarizes the Company’s fixed cash obligations as of December 31, 2015 over the next five fiscal years:
| In thousands | 2016 | 2017 | 2018 | 2019 | 2020 |
| Long-term debt, including interest | $1,597 | $ 89 | $ 89 | $ 89 | $ 22 |
| Pension plan payments | 1,010 | 769 | 459 | 276 | 152 |
| Employment obligations | 362 | 300 | 38 | - | - |
| Estimated warranty liability | 120 | 100 | 80 | 59 | 30 |
| Operating lease payments | 562 | 450 | 101 | 26 | 1 |
| Total | $3,651 | $1,708 | $767 | $450 | $205 |
Of the fixed cash obligations for debt for 2016, $1.6 million, including interest, of Notes and Debentures remains outstanding with consideration of an offer by the Company to settle for $174,000 in accordance with the Company’s restructuring offer made in November 2011. On February 1, 2016, the Des Moines facility was sold and the $333,000 mortgage was satisfied. See Note 20 to the Consolidated Financial Statements – Subsequent Events for further details. The Company has already paid $197,000 of the 2016 pension obligations. The Company is seeking additional financing in order to provide enough cash to cover our remaining current fixed cash obligations as well as providing working capital. However, there can be no assurance as to the amounts, if any, the Company will receive in any such financing or the terms thereof. To the extent the Company issues additional equity securities, it could be dilutive to existing shareholders.
On November 19, 2015, the Company completed a rights offering. The Company received subscriptions and over-subscriptions for a total of 16,512 shares of its Preferred Stock, representing approximately 33% of the shares offered. The Preferred Stock carries a 6.0% cumulative annual dividend and is convertible into shares of Common Stock at an initial conversion price of $10.00 per share, representing a conversion ratio of 20 shares of Common Stock for each share of Preferred Stock held at the time of conversion, subject to adjustment. The shares of Preferred Stock may be subject to mandatory conversion after three years, or as early as one year if the closing sale price of the Common Stock has been greater than or equal to $15.00 for 30 consecutive trading days. All of the subscriptions and over-subscriptions were accepted, for aggregate gross proceeds to the Company of approximately $3.3 million. The Company is using the net proceeds for repayment of debt, required pension plan payments and for general corporate purposes. See Note 13 to the Consolidated Financial Statements – Rights Offering for further details.
On December 22, 2015, the Company consummated a transaction contemplated by Exchange Agreements (the “Exchange Agreements”) dated as of December 15, 2015. The Exchange Agreements were with fourteen holders (the “Note Holders”) of the Company’s Notes (the “Exchanged Notes”). The Exchange Agreements provided that an aggregate of $457,000 of principal under the Notes were exchanged for an aggregate of $228,500 cash and an aggregate of 38,082 shares of the Company’s Common Stock, $0.001 par value per share (the “Common Stock”). As part of the Exchange Agreements, all of the Company’s remaining obligations under the Exchanged Notes, including the payment of interest, were terminated. The Exchange Agreements also provide the Note Holders with piggyback registration rights with respect to the resale of the shares of Common Stock that they received under the Exchange Agreements.
Long-Term Debt
The Company still has outstanding $626,000 of Notes which are no longer convertible into common shares and which matured as of March 1, 2012. The Company also still has outstanding $334,000 of Debentures which matured on December 1, 2012. See Note 11 to the Consolidated Financial Statements – Long-Term Debt for further details.
On April 23, 2015, the Company entered into a Credit Agreement (the “Credit Agreement”) with BFI Capital Fund II, LLC (“Lender”) for a $1.5 million credit line at a fixed rate of interest of 12.00%, with a maturity date of May 1, 2016, which was satisfied and terminated on November 23, 2015. The Company had borrowed $1.0 million under the Credit Agreement, which has been used for working capital. The funds utilized to make the loan included $500,000 of funding provided by Marco Elser, a director of the Company, to the Lender. The Company also issued the Lender a warrant to purchase 10,000 shares of Common Stock at an exercise price of $12.00 per share.
16
The Company, through a subsidiary, had a $333,000 mortgage on its facility located in Des Moines, Iowa at a fixed rate of interest of 5.95% payable in monthly installments, which was due to mature on March 1, 2020 and an average minimum monthly compensating balance of $100,000. On February 1, 2016, the Des Moines facility was sold in a sale/leaseback transaction and the mortgage was satisfied. In conjunction with the sale, the Company entered into a two year lease at the facility at an annual base rental of $158,000. See Note 20 to the Consolidated Financial Statements – Subsequent Events for further details.
At December 31, 2015 and December 31, 2014, there were no warrants classified under the liability method as they had all expired by November 14, 2014.
Pension Plan Contributions
In March 2010, 2011 and 2013, the Company submitted to the IRS requests for waivers of the 2009, 2010 and 2012 minimum funding standards for its defined benefit pension plan. The waiver requests were submitted as a result of the economic climate and the business hardship that the Company experienced. The 2009, 2010 and 2012 waivers have been approved and granted subject to certain conditions, and have deferred payment of $285,000, $559,000 and $669,000 of the minimum funding standard for the 2009, 2010 and 2012 plan years, respectively. As of December 31, 2015, the Company has fully repaid the amounts deferred for the 2009 and 2010 plan years and has repaid $395,000 of the 2012 plan year waiver, leaving a balance due related to the waivers of $274,000, which is scheduled to be repaid through 2017. If the Company does not fulfill the conditions of the waivers, the PBGC and the IRS have various enforcement remedies that can be implemented to protect the participant’s benefits, such as termination of the plan or a requirement that the Company make the unpaid contributions. In support of such enforcement remedies, the PBGC has placed a lien on the Company’s assets with respect to amounts owed under the plan. Assuming that the remaining waiver payments in 2016 and 2017 are timely paid, the lien on our assets will be released. In 2015, the Company made the required approximately $1.2 million of contributions to the plan and in 2016, the Company has already made $197,000 of contributions. At this time, the Company is expecting to make its required $813,000 of contributions remaining for 2016; however there is no assurance that we will be able to make any or all of such remaining payments. If we are unable to fulfill our related obligations, the implementation of any such enforcement remedies would have a material adverse impact on our financial condition, results of operations, and liquidity.
Off-Balance Sheet Arrangements: The Company has no majority-owned subsidiaries that are not included in the Consolidated Financial Statements nor does it have any interests in or relationships with any special purpose off-balance sheet financing entities.
Safe Harbor Statement under the Private Securities Reform Act of 1995
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statement that is not a statement of historical fact should be considered a forward-looking statement. We often use words or phrases of expectation or uncertainty like “believe,” “anticipate,” “plan,” “expect,” “intent,” “project,” “future,” “may,” “will,” “could,” “would” and similar words to help identify forward-looking statements. Examples of forward-looking statements include statements regarding our future financial results, operating results, business strategies, projected costs, product development or future sales, competitive positions and plans and objectives of management for future operations.
We have based these forward-looking statements on our current expectations and projections about future events. However, they are subject to various risks and uncertainties, many of which are outside our control, including the circumstances described in the section entitled “Risk Factors” in this report. Accordingly, our actual results or financial condition could differ materially and adversely from those discussed in, or implied by, these forward-looking statements. We caution you not to place undue reliance on our forward-looking statements. Each forward-looking statement speaks only as of the date on which it is made, and, except to the extent required by federal securities laws, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
17
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to interest rate risk on its long-term debt. The Company manages its exposure to changes in interest rates by the use of variable and fixed interest rate debt. The fair value of the Company’s fixed rate long-term debt is disclosed in Note 11 to the Consolidated Financial Statements – Long-Term Debt. At December 31, 2015, none of the Company’s long-term debt is on a variable interest rate. In addition, the Company is exposed to foreign currency exchange rate risk mainly as a result of investment in its Canadian subsidiary. A 10% change in the Canadian dollar relative to the U.S. dollar would result in a currency exchange expense fluctuation of approximately $243,000, based on dealer quotes, considering current exchange rates. The Company does not enter into derivatives for trading or speculative purposes and did not hold any derivative financial instruments at December 31, 2015.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of Trans-Lux Corporation and its subsidiaries are included on the following pages:
Report of Marcum LLP Independent Registered Public Accounting Firm
19
Report of BDO USA, LLP Independent Registered Public Accounting Firm
20
Consolidated Balance Sheets as of December 31, 2015 and 2014
21
Consolidated Statements of Operations for the Years Ended December 31, 2015 and 2014
22
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2015 and 2014
22
Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2015 and 2014
23
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015 and 2014
24
Notes to Consolidated Financial Statements
25
18
Table of Contents
REPORT OF MARCUM LLP INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Trans-Lux Corporation
New York, New York
We have audited the accompanying consolidated balance sheet of Trans-Lux Corporation and subsidiaries (the “Company”) as of December 31, 2015 and the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Trans-Lux Corporation and subsidiaries as of December 31, 2015, and the results of its consolidated operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a significant working capital deficiency that raise substantial doubt about its ability to continue as a going concern. Further, the Company is in default of the indenture agreements governing its outstanding 9½% subordinated debentures which were due in 2012 (the "Debentures") and its 8¼% limited convertible senior subordinated notes which were due in 2012 (the "Notes") so that the trustees or holders of 25% of the outstanding Debentures and Notes have the right to demand payment immediately. Additionally, the Company has a significant amount due to their pension plan over the next 12 months. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Marcum LLP
Hartford, CT
March 29, 2016
19
Table of Contents
REPORT OF BDO USA, LLP INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Trans-Lux Corporation
New York, New York
We have audited the accompanying consolidated balance sheet of Trans-Lux Corporation as of December 31, 2014 and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the year ended December 31, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Trans-Lux Corporation at December 31, 2014 and the results of its operations and its cash flows for the year ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a significant working capital deficiency that raise substantial doubt about its ability to continue as a going concern. Further, the Company is in default of the indenture agreements governing its outstanding 9½% Subordinated debentures which were due in 2012 (the "Debentures") and its 8¼% Limited convertible senior subordinated notes which were due in 2012 (the "Notes") so that the trustees or holders of 25% of the outstanding Debentures and Notes have the right to demand payment immediately. Additionally, the Company has a significant amount due to their pension plan over the next 12 months. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ BDO USA, LLP
Melville, NY
April 1, 2015
20
| TRANS-LUX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS | |||||
| In thousands, except share data | December 31 2015 | December 31 2014 | |||
| ASSETS | |||||
| Current assets: |
|
|
|
|
|
| Cash and cash equivalents | $ | 547 | $ | 650 | |
| Receivables, net |
| 2,888 |
|
| 2,798 |
| Inventories | 1,876 | 1,811 | |||
| Prepaids and other assets |
| 605 |
|
| 805 |
| Total current assets |
| 5,916 |
|
| 6,064 |
| Rental equipment |
| 21,134 |
|
| 27,825 |
| Less accumulated depreciation |
| 16,452 |
|
| 20,935 |
| Total rental equipment, net |
| 4,682 |
|
| 6,890 |
| Property, plant and equipment | 2,159 | 2,140 | |||
| Less accumulated depreciation |
| 1,003 |
|
| 1,034 |
| Total property, plant and equipment, net |
| 1,156 |
|
| 1,106 |
| Goodwill |
| 744 |
|
| 744 |
| Restricted cash | 215 | 212 | |||
| Other assets |
| 277 |
|
| 229 |
| TOTAL ASSETS | $ | 12,990 |
| $ | 15,245 |
| LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
| Current liabilities: | |||||
| Accounts payable | $ | 1,209 |
| $ | 1,798 |
| Accrued liabilities | 6,136 | 7,857 | |||
| Current portion of long-term debt |
| 1,031 |
|
| 1,811 |
| Total current liabilities | 8,376 |
| 11,466 | ||
| Long-term liabilities: | |||||
| Long-term debt, less current portion |
| 262 |
|
| - |
| Deferred pension liability and other |
| 4,508 |
|
| 5,647 |
| Total long-term liabilities |
| 4,770 |
|
| 5,647 |
| Total liabilities |
| 13,146 |
|
| 17,113 |
| Commitments and contingencies (Note 17) |
|
|
|
|
|
| Stockholders' deficit: | |||||
| Preferred Series A - $20 stated value - 416,500 shares authorized; shares issued and outstanding: 0 in 2015 and 2014 | - | - | |||
| Preferred Series B - $200 stated value - 51,000 shares authorized; shares issued and outstanding: 16,512 in 2015 and 0 in 2014 (liquidation preference $3,325,000) | 3,302 | - | |||
| Common - $0.001 par value - 10,000,000 shares authorized; shares issued: 1,738,511 in 2015 and 1,700,429 in 2014; shares outstanding: 1,710,671 in 2015 and 1,672,589 in 2014 |
| 2 |
|
| 2 |
| Additional paid-in-capital | 27,914 | 27,959 | |||
| Accumulated deficit |
| (23,054) |
|
| (21,305) |
| Accumulated other comprehensive loss | (5,257) | (5,461) | |||
| Treasury stock - at cost - 27,840 common shares in 2015 and 2014 |
| (3,063) |
|
| (3,063) |
| Total stockholders' deficit |
| (156) |
|
| (1,868) |
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 12,990 |
| $ | 15,245 |
|
The accompanying notes are an integral part of these consolidated financial statements. | |||||
21
| TRANS-LUX CORPORATION AND SUBSIDIARIES | |||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
|
|
|
|
|
|
|
| Years Ended December 31 | |||||
| In thousands, except per share data | 2015 |
| 2014 | ||
| Revenues: | |||||
| Digital product sales | $ | 19,994 |
| $ | 19,479 |
| Digital product lease and maintenance |
| 3,573 |
|
| 4,880 |
| Total revenues |
| 23,567 |
|
| 24,359 |
| Cost of revenues: |
|
|
|
|
|
| Cost of digital product sales | 15,373 | 15,482 | |||
| Cost of digital product lease and maintenance |
| 2,757 |
|
| 3,965 |
| Total cost of revenues |
| 18,130 |
|
| 19,447 |
|
|
|
|
|
|
|
| Gross profit | 5,437 | 4,912 | |||
| General and administrative expenses |
| (7,589) |
|
| (9,400) |
| Operating loss | (2,152) | (4,488) | |||
| Interest expense, net |
| (306) |
|
| (240) |
| Gain on foreign currency remeasurement | 478 | 236 | |||
| Gain on extinguishment of debt |
| 314 |
|
| - |
| Warrant expense and change in warrant liabilities |
| (60) |
|
| (107) |
| Loss before income taxes |
| (1,726) |
|
| (4,599) |
| Income tax expense |
| (23) |
|
| (29) |
| Net loss | $ | (1,749) |
| $ | (4,628) |
| Loss per share - basic and diluted | $ | (1.06) |
| $ | (3.38) |
| The accompanying notes are an integral part of these consolidated financial statements. | |||||
| TRANS-LUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | |||||
|
|
|
|
|
|
|
| Years Ended | |||||
| December 31 | |||||
| In thousands |
| 2015 |
|
| 2014 |
| Net loss | $ | (1,749) |
| $ | (4,628) |
| Other comprehensive income (loss): | |||||
| Unrealized foreign currency translation loss |
| (448) |
|
| (269) |
| Change in unrecognized pension costs |
| 652 |
|
| (2,564) |
| Total other comprehensive income (loss), net of tax |
| 204 |
|
| (2,833) |
| Comprehensive loss | $ | (1,545) |
| $ | (7,461) |
|
The accompanying notes are an integral part of these consolidated financial statements. | |||||
22 TRANS-LUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT Accumulated Other Comprehensive Loss Preferred Stock Add'l Paid-in Capital Total Stock-holders' Equity '(Deficit) In thousands, except share data For the two years ended December 31, 2015 Series A Series B Common Stock Accumulated Deficit Treasury Stock Shares Amt Shares Amt Shares Amt Balance January 1, 2014 - $ - - $ - 1,051,253 $ 1 $ 23,868 $ (16,677) $ (2,628) $ (3,063) $ 1,501 Net loss - - - - - - - (4,628) - - (4,628) Warrants exercised - - - - 40,000 - 286 - - - 286 Warrants issued to directors in 2013 - - - - - - 150 - - - 150 Restricted stock issued - - - - 609,176 1 3,655 - - - 3,656 Other comprehensive loss, net of tax: Unrealized foreign currency translation loss - - - - - - - - (269) - (269) Change in unrecognized pension costs - - - - - - - - (2,564) - (2,564) Balance December 31, 2014 - $ - - $ - 1,700,429 $ 2 $ 27,959 $ (21,305) $ (5,461) $ (3,063) $ (1,868) Net loss - - - - - - - (1,749) - - (1,749) Common stock issued for exchange of 8.25% Notes - - - - 38,082 - 152 - - - 152 Preferred stock issued - - 16,512 3,302 - - (278) - - - 3,024 Warrants issued to directors in 2013 - - - - - - 60 - - - 60 Warrants issued to BFI in 2015 - - - - - - 21 - - - 21 Other comprehensive loss, net of tax: Unrealized foreign currency translation loss - - - - - - - - (448) - (448) Change in unrecognized pension costs - - - - - - - - 652 - 652 Balance December 31, 2015 - $ - 16,512 $ 3,302 1,738,511 $ 2 $ 27,914 $ (23,054) $ (5,257) $ (3,063) $ (156) The accompanying notes are an integral part of these consolidated financial statements. 23
Table of Contents
| TRANS-LUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
| |||||
|
|
| Years Ended | |||
| December 31 | |||||
| In thousands |
| 2015 |
|
| 2014 |
| Cash flows from operating activities | |||||
| Net loss | $ | (1,749) |
| $ | (4,628) |
| Adjustment to reconcile net loss to net cash used in operating activities: | |||||
| Depreciation and amortization |
| 2,444 |
|
| 3,003 |
| Loss on disposal of assets | 2 | - | |||
| Gain on extinguishment of debt |
| (314) |
|
| - |
| Gain on foreign currency remeasurement | (478) | (236) | |||
| Amortization of warrants - stock compensation expense |
| 60 |
|
| 150 |
| Bad debts expense | 437 | 841 | |||
| Change in warrant liabilities |
| - |
|
| (43) |
| Changes in operating assets and liabilities: | |||||
| Receivables |
| (544) |
|
| (1,253) |
| Inventories | (65) | 712 | |||
| Prepaids and other assets |
| 144 |
|
| 891 |
| Restricted cash | (3) | (212) | |||
| Accounts payable |
| (589) |
|
| 352 |
| Accrued liabilities | (1,421) | (162) | |||
| Deferred pension liability and other |
| (485) |
|
| (1,020) |
| Net cash used in operating activities |
| (2,561) |
|
| (1,605) |
| Cash flows from investing activities | |||||
| Equipment manufactured for rental | (61) | (44) | |||
| Purchases of property, plant and equipment |
| (175) |
|
| (83) |
| Net cash used in investing activities |
| (236) |
|
| (127) |
| Cash flows from financing activities |
|
|
|
|
|
| Proceeds from issuance of preferred stock, net of costs | 3,024 | - | |||
| Proceeds from long-term debt |
| 500 |
|
| - |
| Proceeds from long-term debt - related parties | 500 | - | |||
| Proceeds from issuance of restricted stock and warrants |
| - |
|
| 2,300 |
| Proceeds from exercise of warrants | - | 100 | |||
| Payments of long-term debt |
| (790) |
|
| (61) |
| Payments of long-term debt - related parties | (500) | - | |||
| Payments for deferred financing fees |
| (31) |
|
| - |
| Net cash provided by financing activities |
| 2,703 |
|
| 2,339 |
| Effect of exchange rate changes |
| (9) |
|
| (12) |
| Net (decrease) increase in cash and cash equivalents |
| (103) |
|
| 595 |
| Cash and cash equivalents at beginning of year |
| 650 | 55 | ||
| Cash and cash equivalents at end of period | $ | 547 |
| $ | 650 |
| Supplemental disclosure of cash flow information: | |||||
| Interest paid | $ | 102 |
| $ | 31 |
| Income taxes paid | 29 | - | |||
| Supplemental non-cash financing activities: |
|
|
|
|
|
| Warrants issued to BFI | 21 | - | |||
| Exchange of Debt for Common Stock |
| 152 |
|
| 1,055 |
|
The accompanying notes are an integral part of these consolidated financial statements. | |||||
24
Notes To Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Trans-Lux Corporation is a leading designer and manufacturer of digital signage displays and LED lighting solutions. The Company sells and leases its digital signage displays and LED lighting solutions.
Principles of consolidation: The Consolidated Financial Statements include the accounts of Trans-Lux Corporation, a Delaware corporation, and all wholly-owned subsidiaries (collectively, the “Company”). Intercompany balances and transactions have been eliminated in consolidation.
Use of estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the period in which the change is determined. Estimates are used when accounting for such items as costs of long-term sales contracts, allowance for uncollectible accounts, inventory valuation allowances, depreciation and amortization, valuation of pension obligations, income taxes, warranty reserve, management’s assessment of going concern, contingencies and litigation.
Cash and cash equivalents: The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company has deposits in United States financial institutions that maintain FDIC deposit insurance on all interest and non-interest bearing accounts, collectively, with an aggregate coverage up to $250,000 per depositor per financial institution. At times, the amount of the deposits exceeds the FDIC limits. The portion of the deposits in excess of FDIC limits represents a credit risk of the Company.
Accounts receivable: Receivables are carried at net realizable value. Credit is extended based on an evaluation of each customer’s financial condition; collateral is generally not required. Reserves for uncollectible accounts receivable are provided based on historical experience and current trends. The Company evaluates the adequacy of these reserves regularly.
The following is a summary of the allowance for uncollectible accounts at December 31:
| In thousands |
| 2015 |
|
| 2014 |
| Balance at beginning of year | $ | 168 |
| $ | 86 |
| Provisions | 437 | 841 | |||
| Deductions |
| (46) |
|
| (759) |
| Balance at end of year | $ | 559 |
| $ | 168 |
Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers, the relatively small account balances within the majority of the Company’s customer base and their dispersion across different businesses. The Company’s revenues included one multinational customer that accounted for 12.5% and 10.8% of total revenues in 2015 and 2014, respectively.
Inventories: Inventories are stated at the lower of cost (first-in, first-out method) or market value. Valuation allowances for slow moving and obsolete inventories are provided based on historical experience and demand for servicing of the displays. The Company evaluates the adequacy of these valuation allowances regularly.
Rental equipment and property, plant and equipment: Rental equipment and property, plant and equipment are stated at cost and depreciated over their respective useful lives using the straight-line method. Leaseholds and improvements are amortized over the lesser of the useful lives or term of the lease.
The estimated useful lives are as follows:
Years | |
| Indoor rental equipment | 5 – 10 |
| Outdoor rental equipment | 15 |
| Buildings and improvements | 10 – 39 |
| Machinery, fixtures and equipment | 3 – 15 |
| Leaseholds and improvements | 3 |
When rental equipment and property, plant and equipment are fully depreciated, retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the accounts.
Goodwill: Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired. The goodwill of $744,000 relates to the Digital display sales segment.
25
Impairment or disposal of long-lived assets: The Company evaluates whether there has been an impairment in value of its long-lived assets if certain circumstances indicate that a possible impairment may exist. An impairment in value may exist when the carrying value of a long-lived asset exceeds its undiscounted cash flows. If it is determined that an impairment in value has occurred, the carrying value is written down to its fair value as determined by a discounted cash flow model. There were no impairments of long-lived assets in 2015 or 2014.
Restricted cash: The Company classifies cash as restricted when the cash is unavailable for withdrawal or usage for general operations. Restrictions may include legally restricted deposits, contracts entered into with others, or the Company’s statements of intention with regard to particular deposits. In July 2014, the Company deposited $212,000 in a savings account as collateral for a certificate of deposit in favor of the landlord at its New York headquarters as a security deposit. The Company has presented these funds as restricted cash since the use of the funds under the certificate of deposit is restricted.
Shipping Costs: The costs of shipping product to our customers ($689,000 in 2015 and $617,000 in 2014) are included in Cost of digital product sales.
Advertising/Marketing Costs: The Company expenses the costs of advertising and marketing at the time that the related advertising takes place. Advertising and marketing costs ($437,000 in 2015 and $811,000 in 2014) are included in General and administrative expenses.
Revenue recognition: Revenues from equipment lease and maintenance contracts are recognized during the term of the respective agreements, which generally run for periods of one month to 10 years. At December 31, 2015, the future minimum lease payments due to the Company under operating leases that expire at varying dates through 2025 for its rental equipment and maintenance contracts, assuming no renewals of existing leases or any new leases, aggregating $4,550,000 are as follows: $1,938,000 – 2016, $1,149,000 – 2017, $1,029,000 – 2018, $233,000 – 2019, $146,000 – 2020 and $55,000 thereafter.
Revenues on equipment sales with long-term receivables are recorded on the installment basis. At December 31, 2015, the future accounts receivables due to the Company under installment sales agreements aggregated $126,000 through 2018. Revenues on equipment sales, other than long-term equipment sales contracts, are recognized upon shipment when title and risk of loss passes to the customer.
Warranty reserve: The Company provides for the estimated cost of product warranties at the time revenue is recognized. While the Company engages in product quality programs and processes, including evaluating the quality of the component suppliers, the warranty obligation is affected by product failure rates. Should actual product failure rates differ from the Company’s estimates, revisions to increase or decrease the estimated warranty liability may be required.
Taxes on income: Deferred income tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at tax rates expected to be in effect when such temporary differences are expected to reverse and for operating loss carryforwards. The temporary differences are primarily attributable to operating loss carryforwards, depreciation and the pension plan. The Company records a valuation allowance against net deferred income tax assets if, based upon the available evidence, it is more-likely-than-not that the deferred income tax assets will not be realized.
26
The Company considers whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets the more-likely-than-not recognition threshold, the position is measured to determine the amount of benefit to recognize in the financial statements. The Company’s policy is to classify interest and penalties related to uncertain tax positions in income tax expense. To date, there have been no interest or penalties charged to the Company in relation to the underpayment of income taxes. The Company’s determinations regarding uncertain income tax positions may be subject to review and adjustment at a later date based upon factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof.
Foreign currency: The functional currency of the Company’s Canadian business operation is the Canadian dollar. The assets and liabilities of such operation are translated into U.S. dollars at the year-end rate of exchange, and the operating and cash flow statements are converted at the average annual rate of exchange. The resulting translation adjustment is recorded in Accumulated Other Comprehensive Loss in the Consolidated Balance Sheets and as a separate item in the Consolidated Statements of Comprehensive Loss. In relation to intercompany balances, these have been classified as short-term in nature and therefore the changes in the foreign currency remeasurement adjustment for intercompany balances are recorded as Gain (loss) on foreign currency remeasurement in the Consolidated Statements of Operations.
Share-based compensation plans: The Company measures share-based payments to employees and directors at the grant date fair value of the instrument. The fair value is estimated on the date of grant using the Black-Scholes valuation model, which requires various assumptions including estimating stock price volatility, expected life of the stock option, estimated forfeiture rate and risk free interest rate. For details on the accounting effect of share-based compensation, see Note 15 – Share-Based Compensation.
Consideration of Subsequent Events: The Company evaluated events and transactions occurring after December 31, 2015 through the date these Consolidated Financial Statements were included in this Form 10-K and filed with the SEC, to identify subsequent events which may need to be recognized or non-recognizable events which would need to be disclosed. See Note 20 – Subsequent Events for transactions identified for disclosure.
Recent accounting pronouncements: In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019), early application is permitted. The Company has not yet determined the effect of the adoption of this standard on the Company’s consolidated financial position and results of operations.
In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which amends Business Combinations (Topic 805). The ASU requires that an acquirer (i) recognize adjustments to provisional amounts from Business Combinations that are identified during the measurement period in the reporting period in which the adjustment amounts are determined, (ii) record, in the same period’s financial statements, the effect on earnings, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date and (iii) disclose the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, which for us would be the first quarter of 2016, and early adoption is permitted. The amendments in this ASU should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this ASU with earlier application permitted for financial statements that have not been issued. We do not expect this ASU to have a material impact on our financial position, results of operations or disclosures.
27
In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) by one year. As a result, the ASU is now effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, which for the Company is the first quarter of 2018. Earlier application is permitted for fiscal years beginning after December 15, 2016, including interim reporting periods within those years, which for the Company is the first quarter of 2017. The Company has not yet determined the effect of the adoption of this standard on the Company’s consolidated financial position and results of operations.
In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (Topic 330). The new guidance changes the subsequent measurement of inventory from lower of cost or market to lower of cost and net realizable value. ASU 2015-11 should be applied on a prospective basis and is effective for the Company beginning in the first fiscal quarter of 2017. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows.
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-90). This guidance describes management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendment should reduce diversity in the timing and content of footnote disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter. Early application is permitted. The Company has not yet determined the effect of the adoption of this standard on the Company's consolidated financial position and results of operations.
Reclassifications: Certain reclassifications of prior years’ amounts have been made to conform to the current year’s presentation.
2. Going Concern
A fundamental principle of the preparation of financial statements in accordance with GAAP is the assumption that an entity will continue in existence as a going concern, which contemplates continuity of operations and the realization of assets and settlement of liabilities occurring in the ordinary course of business. This principle is applicable to all entities except for entities in liquidation or entities for which liquidation appears imminent. In accordance with this requirement, the Company has prepared its accompanying Consolidated Financial Statements assuming the Company will continue as a going concern.
We do not have adequate liquidity, including access to the debt and equity capital markets, to operate our business. The Company incurred a net loss of $1.7 million in 2015 and has a working capital deficiency of $2.5 million as of December 31, 2015. As a result, our short-term business focus has been to preserve our liquidity position. Unless we are successful in obtaining additional liquidity, we believe that we will not have sufficient cash and liquid assets to fund normal operations for the next 12 months. In addition, the Company’s obligations under its pension plan exceeded plan assets by $5.3 million at December 31, 2015 and the Company has a significant amount due to its pension plan over the next 12 months. The Company is in default on its 8¼% Limited convertible senior subordinated notes due 2012 (the "Notes") and 9½% Subordinated debentures due 2012 (the "Debentures"), which have remaining principal balances of $626,000 and $334,000, respectively. As a result, if the Company is unable to (i) obtain additional liquidity for working capital, (ii) make the required minimum funding contributions to the defined benefit pension plan and/or (iii) make the required principal and interest payments on the Notes and the Debentures, there would be a significant adverse impact on the financial position and operating results of the Company. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that may result from the outcome of this uncertainty. See Note 11 - Long-Term Debt for further details.
Of these fixed cash obligations, thus far in 2016 using cash on hand and cash from operating activities, the Company has made $197,000 of payments to the Company’s pension plan, with approximately $813,000 of contributions remaining for 2016. The Pension Benefit Guaranty Corporation (the “PBGC”) has placed a lien on all of the Company’s assets with respect to amounts owed under the plan. The Company continues to consider further exchanges of the $626,000 of remaining Notes and the $334,000 of remaining Debentures. If we are unable to fulfill our related obligations, the enforcement of such lien would have a material adverse impact on our financial condition, results of operations and liquidity.
On November 19, 2015, the Company completed a rights offering of its Series B Convertible Preferred Stock (“Preferred Stock”). The Company received subscriptions and over-subscriptions for a total of 16,512 shares of its Preferred Stock, representing approximately 33% of the shares offered. All of the subscriptions and over-subscriptions were accepted, for aggregate proceeds to the Company of approximately $3.0 million (net of costs of $278,000). The Company is using the net proceeds for repayment of debt, required pension plan payments and for general corporate purposes. See Note 13 – Rights Offering for further details.
The Company is seeking additional financing in order to provide enough cash to cover our remaining current fixed cash obligations as well as providing working capital. However, there can be no assurance as to the amounts, if any, the Company will receive in any additional financings or the terms thereof. To the extent the Company issues additional equity securities, it could be dilutive to existing shareholders.
3. Fair Value
The Company carries its money market funds and cash surrender value of life insurance related to its deferred compensation arrangements at fair value. Under ASC 820, the fair value of all assets and liabilities is determined using a three-tier fair value hierarchy.
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
·
Level 1 – Inputs to the valuation methodology based on unadjusted quoted market prices in active markets that are accessible at the measurement date.
·
Level 2 – Inputs to the valuation methodology that include quoted market prices that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly.
·
Level 3 – Inputs to the valuation methodology that are unobservable and significant to the fair value measurement.
Based on this hierarchy, the Company determined the fair value of its money market funds using quoted market prices, a Level 1 or an observable input, and the cash surrender value of life insurance, a Level 2 based on observable inputs primarily from the counter party. The Company’s money market funds and the cash surrender value of life insurance had carrying amounts of $1,000 and $55,000 at December 31, 2015, respectively, and $1,000 and $55,000 at December 31, 2014, respectively. The carrying amounts of cash equivalents, receivables and accounts payable approximate fair value due to the short maturities of these items. The fair value of the Company’s Notes, using observable inputs, was $164,000 at December 31, 2015 and $244,000 at December 31, 2014. The fair value of the Company’s Debentures, using observable inputs, was $33,000 at December 31, 2015 and December 31, 2014. The fair value of the Company’s remaining long-term debt including current portion approximates its carrying value of $333,000 at December 31, 2015 and $394,000 at December 31, 2014.
The fair value of warrants is calculated using the Black-Scholes method at the time of issuance of the warrants. At December 31, 2015, there were no warrants classified under the liability method as they had all expired by November 14, 2014. The Black-Scholes calculated values totaling $252,000 of the equity warrants issued to directors in 2013 are being amortized over their vesting periods of one, two and three years. The equity warrants issued in 2015 and 2014 were fully vested at the date of issuance, so their Black-Scholes calculated values of $21,000 and $92,000, respectively, were fully charged to the equity section at the date of issuance.
4. Inventories
Inventories consist of the following:
| In thousands | 2015 |
| 2014 | ||
| Raw materials | $ | 1,378 |
| $ | 1,192 |
| Work-in-progress | 409 | 399 | |||
| Finished goods |
| 89 |
|
| 220 |
| Total Inventory | $ | 1,876 |
| $ | 1,811 |
5. Rental Equipment
Rental equipment consists of the following:
|
|
|
|
|
|
|
| In thousands | 2015 |
| 2014 | ||
| Rental equipment | $ | 21,134 |
| $ | 27,825 |
| Less accumulated depreciation |
| 16,452 |
|
| 20,935 |
| Net rental equipment | $ | 4,682 |
| $ | 6,890 |
The Company entered into a Master Agreement for Sale and Assignment of Leases with AXIS Capital, Inc. (the “Assignment Agreement”) and financed the future receivables relating to certain lease contracts. A security interest was granted on the rental equipment underlying the lease contract receivables sold to AXIS Capital, Inc. by the Company pursuant to the Assignment Agreement.
During 2015, $6.8 million of fully depreciated rental equipment was written off. Depreciation expense for rental equipment for the years ended December 31, 2015 and 2014 was $2.3 million and $2.9 million, respectively.
6. Property, Plant and Equipment
Property, plant and equipment consists of the following:
| In thousands | 2015 |
| 2014 | ||
| Land, buildings and improvements | $ | 1,256 |
| $ | 1,250 |
| Machinery, fixtures and equipment | 878 | 863 | |||
| Leaseholds and improvements |
| 25 |
|
| 27 |
| 2,159 |
|
| 2,140 | ||
| Less accumulated depreciation |
| 1,003 |
|
| 1,034 |
| Net property, plant and equipment | $ | 1,156 |
| $ | 1,106 |
Land, buildings and equipment having a net book value of $1.1 million and $1.0 million at December 31, 2015 and 2014, respectively, are pledged as collateral under various mortgage and other financing agreements.
During 2015, $151,000 of fully depreciated property, plant and equipment was written off. Depreciation expense for property, plant and equipment for the years ended December 31, 2015 and 2014 was $123,000 and $138,000, respectively.
29
7. Other Assets
Other assets consist of the following:
| In thousands |
| 2015 |
|
| 2014 |
| Long-term receivables | $ | 76 |
| $ | 126 |
| Prepaids | 55 | 56 | |||
| Deposits and other |
| 146 |
|
| 47 |
|
| $ | 277 |
| $ | 229 |
8. Taxes on Income
The components of income tax expense are as follows:
| In thousands | 2015 |
| 2014 | ||
| Current: |
|
|
|
|
|
| Federal | $ | - | $ | - | |
| State and local |
| - |
|
| - |
| Foreign |
| 23 |
|
| 29 |
|
| $ | 23 |
| $ | 29 |
| Deferred: | |||||
| Federal | $ | - |
| $ | - |
| State and local |
| - |
|
| - |
|
|
| - |
|
| - |
| Income tax expense | $ | 23 |
| $ | 29 |
Loss before income taxes from the United States operations is $2.2 million and $4.7 million for the years ended December 31, 2015 and 2014, respectively. Income before income taxes from Canada is $0.5 million and $0.1 million for the years ended December 31, 2015 and 2014, respectively.
The effective income tax rate differed from the expected federal statutory income tax benefit rate of 34.0% as follows:
|
|
|
|
|
|
|
|
| 2015 |
| 2014 | ||
| Statutory federal income tax benefit rate | 34.0 | % |
| 34.0 | % |
| State income taxes, net of federal benefit | 4.8 | (12.9) | |||
| Foreign income taxed at different rates | 7.5 |
|
| (0.1) |
|
| Deferred tax asset valuation allowance | (46.4) | 123.3 | |||
| Net operating loss limitation | - |
|
| (156.9) |
|
| Other | (1.2) |
|
| 12.0 |
|
| Effective income tax rate | (1.3) | % |
| (0.6) | % |
Significant components of the Company’s deferred income tax assets and liabilities are as follows:
| In thousands | 2015 |
| 2014 | ||
| Deferred income tax asset: | |||||
| Tax credit carryforwards | $ | 897 |
| $ | 897 |
| Operating loss carryforwards | 6,253 | 5,772 | |||
| Net pension costs |
| 2,749 |
|
| 3,052 |
| Accruals | 250 | 259 | |||
| Allowance for bad debts |
| 55 |
|
| 41 |
| Other | 415 | 402 | |||
| Valuation allowance |
| (8,208) |
|
| (7,401) |
| 2,411 | 3,022 | ||||
| Deferred income tax liability: |
|
|
|
|
|
| Depreciation | 1,600 | 2,320 | |||
| Other | 811 | 702 | |||
| 2,411 | 3,022 | ||||
| Net deferred income taxes | $ | - |
| $ | - |
Tax credit carryforwards primarily relate to federal alternative minimum taxes of $865,000 paid by the Company, which may be carried forward indefinitely and applied against regular federal taxes. Operating tax loss carryforwards primarily relate to U.S. federal net operating loss carryforwards of approximately $6.3 million, which begin to expire in 2019. The operating loss carryforwards have been limited by a change in ownership of the Company in 2012 as defined under Section 382 of the Internal Revenue Code. This change in ownership as of June 26, 2012 had limited our operating loss carryforwards at that point to $295,000 per year aggregating $5.9 million. Subsequent losses in the remainder of 2012 and in the years since have increased our operating loss carryforward to its current level.
A valuation allowance has been established for the amount of deferred income tax assets as management has concluded that it is more-likely-than-not that the benefits from such assets will not be realized.
The Company’s determinations regarding uncertain income tax positions may be subject to review and adjustment at a later date based upon factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof. The Company does not have any material uncertain tax positions in 2015 and 2014.
The Company is subject to U.S. federal income tax as well as income tax in multiple state and local jurisdictions and Canadian federal and provincial income tax. Currently, no federal or provincial income tax returns are under examination. The state of Illinois is currently examining the 2011 and 2012 tax years. We do not expect any adverse material outcome from this examination.
30
9. Accrued Liabilities
Accrued liabilities consist of the following:
| In thousands | 2015 |
| 2014 | ||
| Taxes payable | $ | 1,059 |
| $ | 1,063 |
| Current portion of pension liability (see Note 14) | 1,010 | 1,442 | |||
| Deferred revenues |
| 931 |
|
| 1,721 |
| Directors fees | 684 | 532 | |||
| Compensation and employee benefits |
| 614 |
|
| 678 |
| Interest payable | 522 | 640 | |||
| Warranty reserve |
| 389 |
|
| 345 |
| Audit fees | 137 | 194 | |||
| Legal fees payable |
| 68 |
|
| 242 |
| Installation costs | 46 | 197 | |||
| Other |
| 676 |
|
| 803 |
|
| $ | 6,136 |
| $ | 7,857 |
Warranty reserve: The Company provides for the estimated cost of product warranties at the time revenue is recognized. While the Company engages in product quality programs and processes, including evaluating the quality of the component suppliers, the warranty obligation is affected by product failure rates. Should actual product failure rates differ from the Company’s estimates, revisions to increase or decrease the estimated warranty liability may be required. A summary of the warranty liabilities for the years ended December 31, 2015 and 2014 is as follows:
| In thousands | 2015 |
| 2014 | ||
| Balance at beginning of year | $ | 345 |
| $ | 288 |
| Provisions | 492 | 413 | |||
| Deductions |
| (448) |
|
| (356) |
| Balance at end of year | $ | 389 |
| $ | 345 |
10. Warrant Issuances
On April 23, 2015, the Company entered into a Credit Agreement (the “Credit Agreement”) with BFI Capital Fund II, LLC (“Lender”) for a $1.5 million credit line at a fixed rate of interest of 12.00%, with a maturity date of May 1, 2016, which was satisfied and terminated on November 23, 2015. The Company also issued the Lender a warrant to purchase 10,000 shares of Common Stock at an exercise price of $12.00 per share, which expires on April 23, 2020. The fair value of this warrant at the date of issuance was $21,000. This warrant does not include a potential adjustment of the strike price if the Company sells or grants any options or warrants at a price per share less than the strike price of the warrants, so they are considered indexed to the Company’s Common Stock and were accounted for as equity in Additional paid-in-capital in the Consolidated Balance Sheets.
On June 27, 2014, the Company entered into a Securities Purchase Agreement (the “SPA”) with Transtech LED Company Limited (“Transtech”) (formerly known as Retop Industrial (Hong Kong) Limited), pursuant to which Transtech purchased 333,333 shares of the Company’s Common Stock, par value $0.001 per share, for a purchase price of $2,000,000 (the “Purchase”). Yaozhong Shi, a director of the Company, is the Chairman of Transtech. The SPA requires that the proceeds of the Purchase are to be utilized solely in connection with the Company’s LED display business unit, including for working capital and general corporate purposes related thereto. In connection with the SPA, the Company issued warrants to purchase 33,333 shares of the Company’s Common Stock to Transtech at an exercise price of $8.00 per share, which expire on June 27, 2016. These warrants were part of a direct investment in our equity, so they are considered indexed to the Company’s Common Stock and were accounted for as equity.
In November 2012, the Board of Directors approved the issuance to two board members, George W. Schiele and Salvatore J. Zizza, of warrants to purchase 20,000 shares of Common Stock at an exercise price of $12.50 per share. In April 2013, the Board of Directors approved the issuance to one board member, Jean Firstenberg, of warrants to purchase 2,000 shares of Common Stock at an exercise price of $12.50 per share. Each of these warrant issuances was approved by shareholders at the Company’s 2013 Annual Meeting of Shareholders on October 2, 2013. The warrants were issued effective October 2, 2013, began to vest after one year and expire on October 2, 2018. The Company recorded non-cash expenses of $60,000 and $150,000 in the years ended December 31, 2015 and 2014, respectively, related to the value of the warrants issued, which is included in Warrant expense and change in warrant liabilities in the Consolidated Statements of Operations. These warrants do not include a potential adjustment of the strike price if the Company sells or grants any options or warrants at a price per share less than the strike price of the warrants, so they are considered indexed to the Company’s Common Stock and were accounted for as equity.
11. Long-Term Debt
Long-term debt consists of the following:
|
|
|
|
|
|
|
| In thousands | 2015 |
| 2014 | ||
| 8¼% Limited convertible senior subordinated notes due 2012 | $ | 626 |
| $ | 1,083 |
| 9½% Subordinated debentures due 2012 | 334 | 334 | |||
| Real estate mortgage – secured, due in monthly installments through 2020 |
| 333 |
|
| 394 |
| 1,293 | 1,811 | ||||
| Less portion due within one year |
| 1,031 |
|
| 1,811 |
| Long-term debt | $ | 262 |
| $ | - |
31
| In thousands | 2016 | 2017 | 2018 | 2019 | 2020 |
|
| $1,031 | $75 | $80 | $85 | $22 |
The Company has outstanding $626,000 of Notes which are no longer convertible into common shares. The Notes matured as of March 1, 2012 and are currently in default. As of December 31, 2015 and 2014, the Company had accrued $327,000 and $477,000, respectively, of interest related to the Notes, which is included in Accrued Liabilities in the Consolidated Balance Sheets. The trustee, by notice to the Company, or the holders of 25% of the principal amount of the Notes outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately.
On December 22, 2015, the Company consummated a transaction with fourteen holders of the Notes in which an aggregate of $457,000 of principal under the Notes was exchanged for an aggregate of $228,500 cash and an aggregate of 38,082 shares of Common Stock valued at $152,000. As part of the exchange agreements, all of the Company’s remaining obligations under the exchanged Notes, including the payment of accrued interest of $238,000, were terminated. The Company recorded a gain on extinguishment of debt of $314,000. The exchange agreements also provide the note holders with piggyback registration rights with respect to the resale of the shares of Common Stock that they received under the exchange agreements.
The Company has outstanding $334,000 of Debentures. The Debentures matured as of December 1, 2012 and are currently in default. As of December 31, 2015 and 2014, the Company had accrued $193,000 and $161,000, respectively, of interest related to the Debentures, which is included in Accrued Liabilities in the Consolidated Balance Sheets. The trustee, by notice to the Company, or the holders of 25% of the principal amount of the Debentures outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately.
On April 23, 2015, the Company entered into a Credit Agreement (the “Credit Agreement”) with BFI Capital Fund II, LLC (“Lender”) for a $1.5 million credit line at a fixed rate of interest of 12.00%, with a maturity date of May 1, 2016, which was satisfied and terminated on November 23, 2015. The Company had borrowed $1.0 million under the Credit Agreement, which has been used for working capital. The funds utilized to make the loan included $500,000 of funding provided by Marco Elser, a director of the Company, to the Lender. The Company also issued the Lender a warrant to purchase 10,000 shares of Common Stock at an exercise price of $12.00 per share. The Company recorded the fair value of the warrant in the amount of $21,000, as well as deferred financing fees of $31,000. These deferred financing fees have been amortized over the term of the agreement. For the year ended December 31, 2015, amortization expense of the deferred financing fees in the amount of $52,000 was recorded in Interest expense, net in the Consolidated Statement of Operations.
As of December 31, 2014, the Company, through a subsidiary, had a $394,000 mortgage on its facility in Des Moines, Iowa, which was due to mature on March 1, 2015, had a fixed rate of interest of 6.50% and required an average minimum monthly compensating balance of $200,000. On March 1, 2015, the mortgage was amended, extending the maturity to March 1, 2020, reducing the fixed rate of interest to 5.95% and reducing the average minimum monthly compensating balance to $100,000. As of December 31, 2015, the mortgage had a balance of $333,000. On February 1, 2016, the Des Moines facility was sold in a sale/leaseback transaction and the mortgage was satisfied. See Note 20 – Subsequent Events for further details.
12. Stockholders’ Deficit
During 2015 and 2014, the Board of Directors did not declare any quarterly cash dividends on the Company’s Common Stock.
The Company is authorized to issue 500,000 shares of preferred stock, of which (i) 416,500 shares are designated as “Series A Convertible Preferred Stock” (“SACPS”), none of which are outstanding, (ii) 51,000 shares are designated as Preferred Stock, 16,512 of which are outstanding, and (iii) 32,500 shares are not yet designated. The SACPS has a stated price of $20.00 per share and is convertible into 2 shares of Common Stock. The Preferred Stock has a stated price of $200.00 per share and is convertible into 20 shares of Common Stock. The undesignated preferred stock would contain such rights, preferences, privileges and restrictions as may be fixed by our Board of Directors.
Shares of the Company’s Common Stock reserved for future issuance in connection with convertible securities and stock option plans were 675,000 and 275,000 at December 31, 2015 and 2014, respectively.
During 2015 and 2014, certain board members deferred payment of their fees. In lieu of a cash payment, certain board members and former board members have agreed to receive restricted shares of Common Stock of the Company or a combination of cash and restricted shares of Common Stock of the Company, which such restricted shares shall contain a legend under the Securities Act of 1933 and shall not be transferable unless and until registered or otherwise in accordance with applicable securities laws. No restricted stock was issued in lieu of cash payments for directors’ fees in 2015 or 2014.
32
The components of accumulated other comprehensive loss are as follows:
|
|
|
|
|
|
|
|
|
|
| In thousands | Pension plan actuarial (loss) gain |
| Foreign currency translation gain (loss) |
| Total | |||
| Balances at January 1, 2014 | $ | (3,401) |
| $ | 773 |
| $ | (2,628) |
| Actuarial loss | (2,564) | - | (2,564) | |||||
| Translation loss |
| - |
|
| (269) |
|
| (269) |
| Balances at December 31, 2014 | (5,965) | 504 | (5,461) | |||||
| Actuarial gain |
| 652 |
|
| - |
|
| 652 |
| Translation loss |
| - |
|
| (448) |
|
| (448) |
| Balances at December 31, 2015 | $ | (5,313) |
| $ | 56 |
| $ | (5,257) |
13. Rights Offering
On November 19, 2015, the Company completed a rights offering. The Company received subscriptions and over-subscriptions for a total of 16,512 shares of Preferred Stock, representing approximately 33% of the shares offered. All of the subscriptions and over-subscriptions were accepted, for aggregate gross proceeds to the Company of approximately $3.3 million. Costs associated with the offering were approximately $278,000, which were recorded within Additional Paid in Capital. The Company used the net proceeds for repayment of debt, required pension plan payments and for general corporate purposes.
Under the terms of the rights offering, the Company distributed one non-transferrable right for each outstanding share of Common Stock to stockholders of record on September 28, 2015. Thirty-three non-transferable rights entitled the holder to purchase one share of Preferred Stock at a subscription price of $200.00 per share. The Preferred Stock carries a 6.0% cumulative annual dividend, which amounts to $198,000 on an annual basis. The Preferred Stock is convertible into shares of Common Stock at an initial conversion price of $10.00 per share, representing a conversion ratio of 20 shares of Common Stock for each share of Preferred Stock held at the time of conversion, subject to adjustment. For the year ended December 31, 2015, the Company accumulated unpaid dividends related to Preferred Stock of $23,000. The shares of Preferred Stock may be subject to mandatory conversion after three years, or as early as one year if the closing sale price of the Common Stock has been greater than or equal to $15.00 for 30 consecutive trading days.
14. Pension Plan
All eligible salaried employees of Trans-Lux Corporation and certain of its subsidiaries are covered by a non-contributory defined benefit pension plan. Pension benefits vest after five years of service and are based on years of service and final average salary. The Company’s general funding policy is to contribute at least the required minimum amounts sufficient to satisfy regulatory funding standards, but not more than the maximum tax-deductible amount. The benefit service under the pension plan had been frozen since 2003 and, accordingly, there is no service cost for the years ended December 31, 2015 and 2014. In 2009, the compensation increments were frozen, and accordingly, no additional benefits are being accrued under the plan. For 2015 and 2014, the accrued benefit obligation of the plan exceeded the fair value of plan assets, due primarily to the plan’s investment performance and updates to actuarial longevity tables. The Company’s obligations under its pension plan exceeded plan assets by $5.3 million at December 31, 2015.
Assumed mortality rates of plan participants are a critical estimate in measuring the expected payments a participant will receive over their lifetime and the amount of liability and expense we recognize. In October 2015, the Society of Actuaries ("SOA") published updated mortality tables and an updated mortality improvement scale, which both reflect improved longevity. In determining the appropriate mortality assumptions as of December 31, 2015, we considered the SOA’s updated mortality tables to develop assumptions aligned with our expectation of future improvement rates. The mortality assumption was changed from the RP-2014 White Collar Employee and Healthy Annuitant Mortality Tables projected with Scale MP-2014 to the RP-2014 White Collar Employee and Healthy Annuitant Mortality Tables projected with the Buck Modified Scale MP-2015. This change decreased the PBO by 2.4%. Use of the updated projection scale is consistent with the Company’s view of long-term mortality trend. The changes to the mortality rate assumptions resulted in a decrease in the 2015 year-end pension obligation of approximately $325,000.
The Company employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. The intent of this strategy is to minimize plan expenses by outperforming plan liabilities over the long run. Risk tolerance is established through careful consideration of plan liabilities, plan funded status and corporate financial condition. The portfolio contains a diversified blend of equity and fixed income investments. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies and quarterly investment portfolio reviews.
33
At December 31, 2015 and 2014, the Company’s pension plan weighted average asset allocations by asset category are as follows:
| 2015 |
| 2014 | |||
| Equity and index funds | 68.5 | % |
| 69.9 | % |
| Fixed income funds | 31.5 |
|
| 30.1 |
|
|
| 100.0 | % |
| 100.0 | % |
The pension plan asset information included below is presented at fair value as established by ASC 820.
The following table presents the pension plan assets by level within the fair value hierarchy as of December 31, 2015 and 2014:
| In thousands | 2015 |
| 2014 | ||
| Level 1: | |||||
| Equity and index funds | $ | 5,615 |
| $ | 5,551 |
| Fixed income funds |
| 2,578 |
|
| 2,395 |
| Total Level 1 |
| 8,193 |
|
| 7,946 |
| Level 2 | - | - | |||
| Level 3 |
| - |
|
| - |
| Total pension plan assets | $ | 8,193 |
| $ | 7,946 |
The funded status of the plan as of December 31, 2015 and 2014 is as follows:
| In thousands | 2015 |
| 2014 | ||||
| Change in benefit obligation: | |||||||
| Projected benefit obligation at beginning of year | $ | 14,679 |
|
| $ | 11,883 |
|
| Interest cost | 573 | 562 | |||||
| Actuarial (gain) loss |
| (1,192) |
|
|
| 2,764 |
|
| Benefits paid |
| (543) |
|
|
| (530) |
|
| Projected benefit obligation at end of year |
| 13,517 |
|
|
| 14,679 |
|
| Change in plan assets: |
| 7,946 |
|
|
| 7,077 |
|
| Fair value of plan assets at beginning of year | |||||||
| Actual return on plan assets |
| (451) |
|
|
| 441 |
|
| Company contributions | 1,241 | 958 | |||||
| Benefits paid |
| (543) |
|
|
| (530) |
|
| Fair value of plan assets at end of year | 8,193 | 7,946 | |||||
|
|
|
|
|
|
|
|
|
| Funded status (underfunded) | $ | (5,324) |
|
| $ | (6,733) |
|
|
|
|
|
|
|
|
|
|
| Amounts recognized in other accumulated comprehensive loss: | |||||||
| Net actuarial loss | $ | 6,797 |
|
| $ | 7,449 |
|
| Weighted average assumptions as of December 31: | |||||||
| Discount rate: |
|
|
|
|
|
|
|
| Components of cost | 4.00 | % | 4.00 | % | |||
| Benefit obligations |
| 4.30 | % |
|
| 4.80 | % |
| Expected return on plan assets | 8.00 | % | 8.00 | % | |||
| Rate of compensation increase |
| N/A |
|
|
| N/A |
|
The Company determines the long-term rate of return for plan assets by studying historical markets and the long-term relationships between equity securities and fixed income securities, with the widely-accepted capital market principal that assets with higher volatility generate higher returns over the long run. The 8.0% expected long-term rate of return on plan assets is determined based on long-term historical performance of plan assets, current asset allocation and projected long-term rates of return.
Effective with the 2015 year-end disclosure, the Company has elected to utilize a yield curve in lieu of a single weighted discount rate in determining liabilities and the interest cost for the following year. The purpose of the change in method is to better approximate the term structure of interest-related costs. The liability is unaffected by this change, except for rounding. The interest cost is anticipated to be lower under the new method. Prior to the 2015 year-end disclosure, the Company used the single equivalent discount rate, rounded to the nearest fifth, to determine liabilities and interest cost for the plan.
In 2016, the Company expects to amortize $191,000 of actuarial losses to pension expense. The accumulated benefit obligation at December 31, 2015 and 2014 was $13.5 million and $14.7 million, respectively. The minimum required contribution in 2016 is expected to be $1.0 million, which is included in Accrued liabilities in the Consolidated Balance Sheets. The long-term pension liability is $4.3 million and is included in Deferred pension liability and other in the Consolidated Balance Sheets. In March 2010, 2011 and 2013, the Company submitted to the Internal Revenue Service (the “IRS”) requests for waivers of the minimum funding standard for its defined benefit pension plan for the 2009, 2010 and 2012 plan years. The waiver requests were submitted as a result of the economic climate and the business hardship that the Company was experiencing. The waivers for the 2009, 2010 and 2012 plan years were approved and granted subject to certain conditions and have deferred payment of $285,000, $559,000 and $669,000 of the minimum funding standard for the 2009, 2010 and 2012 plan years, respectively. As of December 31, 2015, the Company has fully repaid the amounts deferred for the 2009 and 2010 plan years and has repaid $395,000 of the 2012 plan year waiver, leaving a balance due related to the waivers of $274,000, which is scheduled to be repaid through 2017. If the Company does not fulfill the conditions of the waivers, the PBGC and the IRS have various enforcement remedies that can be implemented to protect the participant’s benefits, such as termination of the plan or a requirement that the Company make the unpaid contributions. In support of such enforcement remedies, the PBGC has placed a lien on the Company’s assets with respect to amounts owed under the plan. In 2015, the Company made the required $1.2 million of contributions to the plan and, in 2016, the Company has already made $197,000 of contributions. At this time, the Company is expecting to make its required $813,000 of contributions remaining for 2016; however there is no assurance that the Company will be able to make any or all such remaining payments. If we are unable to fulfill our related obligations, the implementation of any such enforcement remedies would have a material adverse impact on our financial condition, results of operations, and liquidity.
34
The following estimated benefit payments are expected to be paid by the Company’s pension plan in the next 5 years:
|
|
|
|
|
|
| 2016 | 2017 | 2018 | 2019 | 2020 |
| $630 | $655 | $713 | $886 | $724 |
The following table presents the components of the net periodic pension cost for the years ended December 31, 2015 and 2014:
|
|
|
|
|
|
|
| In thousands | 2015 |
| 2014 | ||
| Interest cost | $ | 573 |
| $ | 562 |
| Expected return on plan assets | (667) | (598) | |||
| Amortization of net actuarial loss |
| 579 |
|
| 358 |
| Net periodic pension cost | $ | 485 |
| $ | 322 |
The following table presents the change in unrecognized pension costs recorded in other comprehensive loss as of December 31, 2015 and 2014:
|
|
|
|
|
|
|
| In thousands | 2015 |
| 2014 | ||
| Balance at beginning of year | $ | 7,449 |
| $ | 4,886 |
| Net actuarial (gain) loss | (73) | 2,921 | |||
| Recognized loss |
| (579) |
|
| (358) |
| Balance at end of year | $ | 6,797 |
| $ | 7,449 |
In addition, the Company provided unfunded supplemental retirement benefits for the retired, former Chief Executive Officer. During 2009 the Company accrued $0.5 million for such benefits, which has not yet been paid, which is included in Accrued liabilities in the Consolidated Balance Sheets. The Company does not offer any post-retirement benefits other than the pension and supplemental retirement benefits described herein.
15. Share-Based Compensation
The Company accounts for all share-based payments to employees and directors, including grants of employee stock options, at fair value and expenses the benefit in the Consolidated Statements of Operations over the service period (generally the vesting period). The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes pricing valuation model, which requires various assumptions including estimating stock price volatility, expected life of the stock option, risk free interest rate and estimated forfeiture rate.
The Company has two stock option plans. As of December 31, 2015, 200,000 shares of Common Stock were available for grant under the 2012 Long-Term Incentive Plan; and 800 shares of Common Stock were available for grant under the Non-Employee Director Stock Option Plan.
Changes in the stock option plans are as follows:
|
|
|
|
|
|
| Weighted Average Exercise Price | |
| Number of Shares | |||||||
|
| Authorized |
| Granted |
| Available |
| |
| Balance January 1, 2014 | 200,860 |
| 60 |
| 200,800 |
| $19.58 |
| Authorized | - | - | - | ||||
| Expired | (20) |
| (20) |
| - |
|
|
| Granted | - |
| - |
| - | - | |
| Balance December 31, 2014 | 200,840 |
| 40 |
| 200,800 |
| 16.25 |
| Authorized | - | - | - | ||||
| Expired | (40) |
| (40) |
| - |
|
|
| Granted | - |
| - |
| - | ||
| Balance December 31, 2015 | 200,800 |
| - |
| 200,800 |
|
|
Under the 2012 Long-Term Incentive Plan, option prices must be at least 100% of the market value of the Common Stock at time of grant. Exercise periods are for ten years from date of grant and terminate at a stipulated period of time after an employee’s termination of employment. At December 31, 2015, no options were outstanding or exercisable. During 2015 and 2014, no options were granted or exercised.
Under the Non-Employee Director Stock Option Plan, option prices must be at least 100% of the market value of the Common Stock at time of grant. No option may be exercised prior to one year after date of grant and the optionee must be a director of the Company at time of exercise, except in certain cases as permitted by the Compensation Committee. Exercise periods are for six years from date of grant and terminate at a stipulated period of time after an optionee ceases to be a director. At December 31, 2015, there were no outstanding options to purchase shares.
The outstanding stock options at December 31, 2014 had no intrinsic value.
As of December 31, 2015, there was no unrecognized compensation cost related to non-vested options granted under the Plans.
35
16. Loss Per Share
The following table presents the calculation of loss per share for the years ended December 31, 2015 and 2014:
| In thousands, except per share data | 2015 |
| 2014 | ||
| Numerator: | |||||
| Net loss, as reported | $ | (1,749) |
| $ | (4,628) |
| Unpaid dividends accumulated on preferred shares |
| (23) |
|
| - |
| Net loss attributable to common shares | $ | (1,772) |
| $ | (4,628) |
| Denominator: | |||||
| Weighted average shares outstanding |
| 1,674 |
|
| 1,371 |
| Basic and diluted loss per share | $ | (1.06) |
| $ | (3.38) |
Basic loss per common share is computed by dividing net loss attributable to common shares by the weighted average number of common shares outstanding for the period. Diluted loss per common share is computed by dividing net loss attributable to common shares, by the weighted average number of common shares outstanding, adjusted for shares that would be assumed outstanding after warrants and stock options vested under the treasury stock method.
At December 31, 2015, the Company accumulated unpaid dividends related to the Preferred Stock issued in November 2015 of $23,000. There were no accumulated unpaid dividends related to Preferred Stock at December 31, 2014.
At December 31, 2015 and 2014, outstanding warrants convertible into 85,300 and 75,300 shares, respectively, of Common Stock were excluded from the calculation of diluted loss per share because their impact would have been anti-dilutive. At December 31, 2014 there were outstanding stock options to purchase 40 shares of Common Stock, which were also excluded from the calculation of diluted loss per share because their impact would have been anti-dilutive.
17. Commitments and Contingencies
Commitments: The Company has employment agreements with its Chief Executive Officer and with the President of its subsidiary Trans-Lux Energy Corporation, which expire in February 2018 and May 2016, respectively. At December 31, 2015, the aggregate commitment for future salaries, excluding bonuses, was approximately $700,000. Contractual salaries expense was $447,000 and $348,000 for the years ended December 31, 2015 and 2014, respectively.
Contingencies: The Company is subject to legal proceedings and claims which arise in the ordinary course of its business and/or which are covered by insurance. The Company believes that it has accrued adequate reserves individually and in the aggregate for such legal proceedings. Should actual litigation results differ from the Company’s estimates, revisions to increase or decrease the accrued reserves may be required.
Operating leases: Certain premises are occupied under operating leases that expire at varying dates through 2019. Certain of these leases provide for the payment of real estate taxes and other occupancy costs. On February 1, 2016, the Company sold its Des Moines, Iowa facility in a sale/leaseback transaction. The lease is for a two year lease period at an annual rental of $158,000.Future minimum lease payments (including amounts due under the new lease of the Des Moines facility) due under operating leases at December 31, 2015 aggregating $1.1 million are as follows: $562,000 - 2016, $450,000 – 2017, $101,000 – 2018, $26,000 – 2019 and $1,000 – 2020. Rent expense was $541,000 and $428,000 for the years ended December 31, 2015 and 2014, respectively.
18. Related Party Transactions
Yaozhong Shi, a director of the Company, is the Chairman of Transtech, which is our primary LED supplier. The Company purchased $3.5 million and $2.4 million of product from Transtech in 2015 and 2014, respectively, at prices that approximate fair market value. Amounts payable by the Company to Transtech were $145,000 and $89,000 as of December 31, 2015 and 2014, respectively.
On June 27, 2014, the Company entered into a Securities Purchase Agreement with Transtech, pursuant to which Transtech purchased 333,333 shares of the Company's Common Stock for a purchase price of $2,000,000. In connection with the agreement, the Company issued warrants to purchase 33,333 shares of the Company's Common Stock to Transtech at an exercise price of $8.00 per share, which expire on June 27, 2016.
Marco Elser, a director of the Company, provided $500,000 of funding to BFI Capital Fund II, LLC, with whom the Company entered into a Credit Agreement (the “Credit Agreement”) on April 23, 2015 for a $1.5 million credit line at a fixed rate of interest of 12.00%, with a maturity date of May 1, 2016. The Company had borrowed $1.0 million under the Credit Agreement, which has been used for working capital. The Credit Agreement was satisfied and terminated on November 23, 2015.
On December 3, 2013, the Company received a $1.0 million loan from Carlisle Investments Inc. ("Carlisle") at a fixed interest rate of 10.00%, which was due to mature on June 1, 2014 with a bullet payment of all principal and accrued interest due at such time, which maturity date was subsequently extended to July 1, 2014. Maro Elser exercises voting and dispositive power as investment manager of Calisle. On June 20, 2014, this loan was converted into shares of the Company's Common Stock at an exchange rate of 1 share for every $6.00 of principal resulting in the issuance of 166,666 shares of Common Stock to Carlisle. On September 3, 2014, the interest was converted into shares of the Company's Common Stock at the exchange rate of 1 share for every $6.00 of interest, resulting in the issuance of 9,178 shares of Common Stock to Carlisle. As a result of the conversion to Common Stock, the loan has been satisfied in full.
In connection with the Company’s rights offering consummated in November 2015, George W. Schiele, Alan K. Greene, and Alberto Shaio, each a director of the Company, exercised rights to purchase 250, 252 and 252 shares of Preferred Stock, respectively.
In the beginning of June 2014, the Company received a $200,000 loan from Mr. Schele at a fixed interest rate of 10.00%, which was due to mature on July 1, 2014 with a bullet payment of all principal and accrued interest due at such time. On June 20, 2014, this loan was converted into shares of the Company's Common Stock at an exchange rate of 1 share for every $6.00 of principal, resulting in the issuance of 33,333 shares of Common Stock to Mr. Schiele. As a result of the conversion to Common Stock the loan has been satisfied in full.
On August 27, 2014, the Company entered into a Securities Purchase Agreement with Mr. Greene, pursuant to which Mr. Greene purchases 8,333 shares of the Company's Common Stock for a price of $50,000.
On August 27, 2014, the Company entered into a Securities Purchase Agreement with Mr. Shaio, pursuant to which Mr. Shaio purchased 8,333 shares of the Company's Common Stock for a purchase price of $50,000.
19. Business Segment Data
Operating segments are based on the Company’s business components about which separate financial information is available and are evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance of the business.
36
The Company evaluates segment performance and allocates resources based upon operating income. The Company’s operations are managed in two reportable business segments: Digital display sales and Digital display lease and maintenance. Both design and produce large-scale, multi-color, real-time digital displays and LED lighting, which has a line of energy-saving lighting solutions that provide facilities and public infrastructure with “green” lighting solutions that emit less heat, save energy and enable creative designs. Both operating segments are conducted on a global basis, primarily through operations in the United States. The Company also has operations in Canada. The Digital display sales segment sells equipment and the Digital display lease and maintenance segment leases and maintains equipment. Corporate general and administrative items relate to costs that are not directly identifiable with a segment. There are no intersegment sales.
Foreign revenues represent less than 10% of the Company’s revenues for 2015 and 2014. The foreign operation does not manufacture its own equipment; the domestic operation provides the equipment that the foreign operation leases or sells. The foreign operation operates similarly to the domestic operation and has similar profit margins. Foreign assets are immaterial.
Information about the Company’s operations in its two business segments for the years ended December 31, 2015 and 2014 and as of December 31, 2015 and 2014 were as follows:
| In thousands | 2015 |
| 2014 | ||
| Revenues: | |||||
| Digital display sales | $ | 19,994 |
| $ | 19,479 |
| Digital display lease & maintenance |
| 3,573 |
|
| 4,880 |
| Total revenues | $ | 23,567 |
| $ | 24,359 |
| Operating income (loss): | |||||
| Digital display sales | $ | 574 |
| $ | (1,292) |
| Digital display lease & maintenance | 660 | 348 | |||
| Corporate general and administrative expenses |
| (3,386) |
|
| (3,544) |
| Total operating loss | (2,152) | (4,488) | |||
| Interest expense, net |
| (306) |
|
| (240) |
| Gain on foreign currency remeasurement | 478 | 236 | |||
| Gain on extinguishment of debt |
| 314 |
|
| - |
| Warrant expense and change in warrant liabilities |
| (60) |
|
| (107) |
| Loss before income taxes |
| (1,726) |
|
| (4,599) |
| Income tax expense | (23) | (29) | |||
| Net loss | $ | (1,749) |
| $ | (4,628) |
| Assets: | |||||
| Digital display sales | $ | 6,955 |
| $ | 6,792 |
| Digital display lease & maintenance |
| 5,488 |
|
| 7,802 |
| Total identifiable assets |
| 12,443 |
|
| 14,594 |
| General corporate |
| 547 |
|
| 651 |
| Total assets | $ | 12,990 |
| $ | 15,245 |
| Depreciation and amortization: | |||||
| Digital display sales | $ | 100 |
| $ | 122 |
| Digital display lease & maintenance | 2,268 | 2,868 | |||
| General corporate |
| 75 |
|
| 13 |
| Total depreciation and amortization | $ | 2,443 |
| $ | 3,003 |
| Capital expenditures: |
|
|
|
|
|
| Digital display sales | $ | 169 | $ | 8 | |
| Digital display lease & maintenance |
| 61 |
|
| 44 |
| General corporate |
| 5 |
|
| 75 |
| Total capital expenditures | $ | 235 |
| $ | 127 |
20. Subsequent Events
On February 1, 2016, the Company sold its Des Moines, Iowa facility for $1.1 million in a sale/leaseback transaction. The lease is for a two year period at an annual rental of $158,000. As a result of the sale, the remaining $329,000 mortgage was satisfied. Net proceeds of $661,000 were received. The Company calculated a gain of $267,000, which will be amortized over the 24 month term of the lease, in accordance with ASU 2016-02.
37
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
(a)
Evaluation of disclosure controls and procedures. As of the end of the period covered by this Annual Report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (its principal executive officer and principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)). Our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management (including our Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded these disclosure controls are effective as of December 31, 2015.
(b)
Changes in internal control over financial reporting. There has been no change in the Company’s internal control over financial reporting that occurred in the fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
(c)
Management’s Report on Internal Control Over Financial Reporting. The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. A company’s internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
The Company’s management assessed its internal control over financial reporting as of December 31, 2015 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 1992). Management, including the Company’s Chief Executive Officer and its Chief Financial Officer, based on their evaluation of the Company’s internal control over financial reporting (as defined in Securities Exchange Act Rule 13a-15(f)), have concluded that the Company’s internal control over financial reporting was effective as of December 31, 2015.
38
ITEM 9B.
All information required to be reported in a report on Form 8-K during the fourth quarter covered by this Form 10-K has been reported.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item is incorporated herein by reference to the Sections entitled “Election of Directors,” “Executive Officers,” “Compliance with Section 16(a) of the Securities Exchange Act of 1934,” “Code of Ethics” and “Corporate Governance Policies and Procedures” in the Company’s Proxy Statement.
ITEM 11.
The information required by this Item is incorporated herein by reference to the Section entitled “Executive Compensation and Transactions with Management” in the Company’s Proxy Statement.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated herein by reference to the Section entitled “Security Ownership of Certain Beneficial Owners, Directors and Executive Officers” in the Company’s Proxy Statement.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated herein by reference to the Section entitled “Executive Compensation and Transactions with Management” in the Company’s Proxy Statement.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated herein by reference to the Section entitled “Ratification of Appointment of Independent Registered Public Accounting Firm” in the Company’s Proxy Statement.
39
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
The following documents are filed as part of this report:
1
Consolidated Financial Statements of Trans-Lux Corporation:
Report of Marcum LLP Independent Registered Public Accounting Firm as of
December 31, 2015
Report of BDO USA, LLP Independent Registered Public Accounting Firm as of
December 31, 2014
Consolidated Balance Sheets as of December 31, 2015 and 2014
Consolidated Statements of Operations for the Years Ended December 31, 2015 and 2014
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2015 and 2014
Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2015 and 2014
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015 and 2014
Notes to Consolidated Financial Statements
2
Financial Statement Schedules: Not applicable.
3
Exhibits:
3(a)
Amended and Restated Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 of Form 8-K dated July 2, 2012).
(b)
Amended and Restated Bylaws of the registrant (incorporated by reference to Exhibit 3.2 of Form 8-K dated March 9, 2012).
(c)
Certificate of Designations of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 of Form 8-K dated October 14, 2015).
4(a)
Indenture dated as of December 1, 1994 (form of said indenture is incorporated by reference to Exhibit 6 of Schedule 13E-4 Amendment No. 2 dated December 23, 1994).
(b)
Indenture dated as of March 1, 2004 (form of said indenture is incorporated by reference to Exhibit 12(d) of Schedule TO dated March 2, 2004).
10.1
Form of Indemnity Agreement - Directors (form of said agreement is incorporated by reference to Exhibit 10.1 of Registration No. 333-15481).
10.2
Form of Indemnity Agreement - Officers (form of said agreement is incorporated by reference to Exhibit 10.2 of Registration No. 333-15481).
10.3
Amended and Restated Pension Plan dated January 1, 2016 (filed herewith).
10.4 **
Supplemental Executive Retirement Plan with Michael R. Mulcahy dated January 1, 2009 (incorporated by reference to Exhibit 10.1 of Form 8-K dated January 6, 2009).
10.5 **
Employment Agreement with Jean-Marc Allain dated February 15, 2015 (incorporated by reference to Exhibit 10.5 of Form 10-K dated April 1, 2015).
10.6 **
Employment Agreement with David Pavlik dated May 27, 2014 (incorporated by reference to Exhibit 4.02 of Form 8-K dated June 3, 2014).
10.7 **
Trans-Lux Corporation 2012 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.3 of Form 8-K dated July 2, 2012).
10.8
Master Agreement for Sale and Assignment of Leases with AXIS Capital, Inc. (incorporated by reference to Exhibit 4.01 of Form 8-K dated June 11, 2013).
10.9
Securities Purchase Agreement with Carlisle Investments Inc. (incorporated by reference to Exhibit 4.01 of Form 8-K dated June 23, 2014) and the amendment thereto (incorporated by reference to Exhibit 4.01 of Form 8-K dated September 2, 2014).
10.10
Securities Purchase Agreement with George W. Schiele (incorporated by reference to Exhibit 4.02 of Form 8-K dated June 23, 2014) and the amendment thereto (incorporated by reference to Exhibit 4.02 of Form 8-K dated September 2, 2014).
40
10.11
Securities Purchase Agreement with Alan K. Greene (incorporated by reference to Exhibit 4.03 of Form 8-K dated September 2, 2014).
10.12
Securities Purchase Agreement with Alberto Shaio (incorporated by reference to Exhibit 4.04 of Form 8-K dated September 2, 2014).
10.13
Form of Exchange Agreement with Note Holders (incorporated by reference to Exhibit 10.01 of Form 8-K dated December 24, 2015).
16.1
Letter from former independent registered public accounting firm BDO USA, LLP (incorporated by reference to Exhibit 16.1 of Form 8-K dated December 10, 2015).
21
List of Subsidiaries, filed herewith.
31.1
Certification of Jean-Marc Allain, President and Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
31.2
Certification of Robert J. Conologue, Senior Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.1
Certification of Jean-Marc Allain, President and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.2
Certification of Robert J. Conologue, Senior Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
101
The following interactive data files pursuant to Rule 405 of Regulation S-T from Trans-Lux Corporation’s Annual Report on Form 10-K for the annual period ended December 31, 2015 are formatted in XBRL (eXtensible Business Language): (i) Consolidated Balance Sheets as of December 31, 2015 and 2014, (ii) Consolidated Statements of Operations for the Years Ended December 31, 2015 and 2014, (iii) Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2015 and 2014, (iv) Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2015 and 2014, (v) Consolidated Statements of Cash Flows for the Years Ended December 31, 2015 and 2014 and (vi) Notes to Consolidated Financial Statements. *
*
Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the interactive data files in Exhibit 101 to this Annual Report on Form 10-K is deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended and is deemed not filed for purpose of Section 18 of the Securities Exchange Act of 1934, as amended and otherwise is not subject to liability under these sections.
**
Denotes management contract or compensatory plan or arrangement.
41
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:
TRANS-LUX CORPORATION By: /s/ Robert J. Conologue Robert J. Conologue Senior Vice President and Chief Financial Officer By: /s/ Todd Dupee Todd Dupee Vice President and Controller Dated: March 29, 2016
Trans-Lux Corporation, and each of the undersigned, do hereby appoint J.M. Allain and Robert J. Conologue, and each of them severally, its or his/her true and lawful attorney to execute on behalf of Trans-Lux Corporation and the undersigned any and all amendments to this Annual Report on Form 10-K and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission; each of such attorneys shall have the power to act hereunder with or without the other.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated:
/s/ George W. Schiele March 29, 2016 George W. Schiele, Chairman of the Board /s/ Salvatore J. Zizza March 29, 2016 Salvatore J. Zizza, Vice Chairman of the Board /s/ J.M. Allain March 29, 2016 J.M. Allain, Director, President and Chief Executive Officer (Principal Executive Officer) /s/ Marco Elser March 29, 2016 Marco Elser, Director /s/ Alan K. Greene March 29, 2016 Alan K. Greene, Director /s/ Alberto Shaio March 29, 2016 Alberto Shaio, Director, Senior Vice President and Chief Operating Officer /s/ Yaozhong Shi March 29, 2016 Yaozhong Shi, Director /s/ Robert J. Conologue March 29, 2016 Robert J. Conologue, Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
42
RETIREMENT PENSION PLAN
FOR EMPLOYEES OF
TRANS-LUX CORPORATION
AND
CERTAIN OF ITS SUBSIDIARIES
AND/OR AFFILIATES
Effective January 1, 1945
As Amended and
Restated Effective
January 1, 2016
(Most recent determination letter
dated July 30, 2012)
| INDEX | ||
|
|
|
|
|
|
|
|
| 1 | ||
| 2-20 | ||
| 21-23 | ||
| 24-25 | ||
| 26-33 | ||
| 34-35 | ||
| 36-40 | ||
| 41-45 | ||
| 46 | ||
| 47-51 | ||
| 52 | ||
| 53-65 | ||
| 66-67 | ||
| 68-70 | ||
| 71 | ||
| 72-76 | ||
| 77-92 | ||
| 93-99 | ||
| 100 | ||
| 101-110 | ||
| 111-112 | ||
| 113 | ||
Pursuant to a resolution of the Board of Directors of each of the participating corporations (defined in Section I as the "Company"), the Retirement Pension Plan for the benefit of the eligible employees of each participating corporation was adopted effective as of January 1, 1945. The Plan was amended and restated in its entirety effective as of January 1, 1976. The Plan was again amended and restated effective January 1, 1985 to conform to the applicable provisions of the Tax Equity Act of 1984, the Retirement Equity Act of 1984 and, furthermore, to incorporate amendments generally effective January 1, 1984 with respect to the Tax Equity and Fiscal Responsibility Act. The Plan was again amended and restated for the primary purpose of conformance to the Tax Reform Act of 1986 and other applicable legislation and was subsequently amended to comply with changes required to comply with the Uruguay Round Agreements Act, the Uniformed Services Employment and Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996 and the Taxpayer Relief Act of 1997. The Plan was again amended and restated effective January 1, 2001 to comply with applicable legal requirements, including the Economic Growth and Tax Relief Reconciliation Act of 2001. The Plan was again amended and restated effective January 1, 2011 to incorporate amendments since the 2001 restatement and to make other changes deemed necessary by the Board of Directors. This amendment and restatement of the Plan is effective January 1, 2016 except as may otherwise be provided in the Plan. The Plan as amended and restated shall apply to Employees who have one Hour of Service on and after January 1, 2016. The rights of those Employees who have retired, died or terminated employment shall be governed by the Plan in existence on the date of retirement, death, or termination of employment and shall not be changed by virtue of this Plan as amended or restated unless specifically provided for herein.
1
The following words and phrases shall be defined as stated below, unless a different meaning is clearly indicated by the context.
1.1
"Accrued Benefit" means the annual amount of a Member's retirement benefit under the normal form of payment provided in Section 5.2 hereof and payable as of the Member's Normal Retirement Date or as of the date the Member otherwise ceases to be an Employee, whichever is applicable. A Member's Accrued Benefit shall be computed in accordance with Section 4.1 hereof based on the Member's Salary at the time of computation and his expected years of Credited Service at the date of calculation; provided, however, that the Member’s Credited Service for periods commencing after December 31, 2003 shall not be taken into account and a Member’s Salary after April 30, 2009 shall not be taken into account. A Member's Accrued Benefit shall not be reduced on account of any increase in the Member's age or service.
1.2
"Act" means the Employee Retirement Income Security Act of 1974 and any amendments thereto.
2
1.3
"Actuarial Equivalent," when used with reference to any form of benefit, means a form of benefit which has the same value as the referenced benefit, based on the actuarial factors set forth in Appendix A hereof.
1.4
"Actuary" means a person who is enrolled by the Joint Board for the Enrollment of Actuaries established under the Act and engaged by the Pension Committee on behalf of the Members.
1.5
"Adjustment Factor" means the cost-of-living adjustment factor prescribed by the Secretary of the Treasury under Section 415(d) of the Code for Plan Years beginning after December 31, 1987, applied to such items and in such manner as the Secretary shall prescribe.
1.6
"Affiliated Employer" shall mean the Company and any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Company; any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with the Company; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Section 414(m) of the Code) which includes the Company; and any other entity required to be aggregated with the Company pursuant to regulations under Section 414(o) of the Code.
3
1.7
"Approved Leave of Absence" means an unpaid leave of absence granted by the Company for such reason as the Pension Committee may determine by rules applied in a non-discriminatory manner to persons in similar circumstances.
1.8
"Beneficiary" means any person (including a Contingent Annuitant), designated by the Member to receive any death benefits which may be payable under the Plan in the event of the Member's death. Such Beneficiary designation is subject to the spousal consent requirements of Section 5.1.
1.9
"Board" means the Board of Directors of Trans-Lux Corporation.
1.10
"Code" means the Internal Revenue Code of 1986 as now in effect or as hereafter amended. All citations to sections of the Code are to such sections as they may from time to time be amended or renumbered.
1.11
"Company" means Trans-Lux Corporation and any subsidiary or Affiliated Employer as shall adopt the Plan by resolution of their respective Boards of Directors under the terms and conditions set forth by the Board.
4
1.12
"Contingent Annuitant" means a person designated by a Member, who has elected a Joint and Survivorship Annuity option under Section 6.1(b) hereof, to receive any death benefit payable under such option. Designation of a Contingent Annuitant is subject to the spousal consent requirements of Section 5.1.
1.13
"Credited Service" means for an Employee who first completes an Hour of Service after January 1, 1986, the years of service rendered by an Employee to the Company commencing on the first of the month coincident with or next following the completion of one Year of Eligibility Service and ending on his Deferred, Normal, or Earlier Retirement Date, date of death, or other termination of employment. In the year of a Member's Deferred, Normal or Earlier Retirement Date, date of death or other termination of employment, such Member shall accrue Credited Service at the rate of 1/12th of a year for each month during which he is credited with at least one Hour of Service for the performance of duties.
For an Employee who first performs an Hour of Service prior to January 1, 1986, Credited Service shall begin on the earlier of a) January 1st nearest to the completion of one Year of Eligibility Service or b) the first of the month coincident with or next following the completion of one Year of Eligibility Service.
5
Notwithstanding anything in this Section 1.13 to the contrary, all periods of service in the uniformed services of the United States (as defined in Section 4303(13) and 4303(16) of the Uniformed Services Employment and Reemployment Rights Act of 1994) shall be included in the Employee’s Credited Service if he returns to employment with the Company or an Affiliated Employer having applied to return while his reemployment rights were protected by law.
1.14
"Employee" means any person employed on a salaried basis, including an officer or director who is otherwise regularly employed in the service of the Company, who received earnings from the Company other than a pension, severance pay, retainer, or fee under contract. Effective January 1, 1996, “Employee” shall also include salaried employees of Integrated Systems Engineering, Inc. as well as full-time salaried employees of the theater executive office and theater managers. The term "Employee" shall include “leased employees” (as defined in Section 414(n)(2) of the Code) for purposes of Section 410 of the Code but such employees shall not be eligible for participation in the Plan. Notwithstanding anything to the contrary in this Section, "Employee" does not include any person not deemed by the Company to be a common law employee of the Company in accordance with the Company’s standard practice and does not include any person covered by a collective bargaining agreement to which the Company is a party unless such agreement specifically provides for participation in the Plan. In addition, any person classified as an independent contractor or consultant by the Company shall, during such period, be excluded from the definition of Employee, regardless of such person’s reclassification for such period by the Internal Revenue Service for tax withholding purposes. "Employee" may, however, include the employee of another company whose assets the Company may acquire and the Board admits to membership in the Plan on such terms and conditions as it may in its discretion decide, provided that it shall act in a uniform and non-discriminatory manner.
6
The Chairman of the Board shall not be eligible to participate in the Plan and immediately upon his election as Chairman shall cease to be a member of the Plan.
1.15
"Final Average Salary" means the average of a Member's Salaries during the 60 highest months within the final 120 months of service preceding his Normal, Deferred or Earlier Retirement Date (whichever is applicable), death, or other severance of employment; provided, however, that if such Member has less than 60 months of Salaries as of the applicable date, his average salary for the actual period of service prior to such applicable date shall be used. Notwithstanding anything in the Plan to the contrary, a Member’s Salary for periods after April 30, 2009 shall be disregarded for purposes of determining his Final Average Salary.
1.16
“Highly Compensated Employee” means any employee of the Company or an Affiliated Employer (whether or not eligible for membership in the Plan) who
(i)
was a five percent owner (as defined in Section 416(i) of the Code) for such Plan Year or the Prior Plan Year, or
7
(ii)
for the preceding Plan Year received “statutory compensation” in excess of $80,000, and was among the highest 20 percent of employees for the preceding Plan Year when ranked by “statutory compensation” paid for that year excluding, for purposes of determining the number of such employees, such employees as the Pension Committee may determine on a consistent basis pursuant to Section 414(q) of the Code. The $80,000 dollar amount in the preceding sentence shall be adjusted from time to time for cost of living in accordance with Section 414(q) of the Code.
Notwithstanding the foregoing, employees who are nonresident aliens and who receive no earned income from the Company or an Affiliated Employer which constitutes income from sources within the United States shall be disregarded for all purposes of this Section.
The Company’s top-paid group election as described above, shall be used consistently in determining Highly-Compensated Employees for determination years of all employee benefit plans of the Company and Affiliated Employers for which Section 414(q) of the Code applies (other than a multi-employer plan) that begin with or within the same calendar year, until such election is changed by Plan amendment in accordance with IRS requirements. Notwithstanding the foregoing, the consistency provision in the preceding sentence shall not apply for the Plan Year beginning in 1997, and for the Plan Years beginning in 1998 and 1999, shall apply only with respect to all qualified retirement plans (other than a multi-employer plan) of the Company and Affiliated Employers.
8
The provisions of this Section shall be further subject to such additional requirements as shall be described in Section 414(q) of the Code and its applicable regulations, which shall override any aspects of this Section inconsistent therewith.
For purposes of this Section, “statutory compensation” means the wages, salaries, and other amounts paid in respect of an employee for service actually rendered to the Company or an Affiliated Employer, including by way of example, overtime, bonuses and commissions, but excluding deferred compensation, stock plans, and other distributions which receive special tax benefits under the Code. Any employee’s statutory compensation shall be determined prior to any reduction under a cash or deferred arrangement which meets the requirements of Section 401(k) of the Code or any reductions pursuant to a cafeteria plan under Section 125 of the Code. Statutory compensation shall also include amounts required to be recognized under the provisions of U.S. Treasury Department regulation 1.415(c)-2(e).
9
1.17
"Hour of Service" means:
(a)
each hour for which an Employee is paid or entitled to payment for the performance of duties for an Affiliated Employer;
(b)
each hour for which an Employee is paid or entitled to payment by an Affiliated Employer prior to his termination of employment with the Affiliated Employer, up to a maximum of 501 hours for any single continuous period on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity, (including disability), layoff, jury duty, military duty, or leave of absence. Notwithstanding the preceding sentence, the Employee will not be credited with the Hours of Service if no duties are performed and payment is made or due under a plan maintained solely for the purpose of complying with the applicable workers compensation or unemployment compensation or disability insurance laws and Hours of Service will not be credited for payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee;
10
(c)
each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by an Affiliated Employer, provided, however, that no more than 501 Hours of Service will be credited for payments of back pay to the extent that such back pay is awarded or agreed to for a period during which an Employee did not or would not have performed duties. Hours of Service shall be computed and credited in accordance with paragraphs (b) and (c) of Section 2530.200b-2 of the Department of Labor Regulations which are herein incorporated by reference. Such hours of Service shall be credited under either subparagraphs (a), (b), and (c) of this definition 1.17.
Hours of Service shall include all periods of an Employee’s service in the services of the United States (as defined in Sections 4303(13)and 4303(16)of the Uniformed Services Employment and Reemployment Rights Act of 1994) if the Employee returns to employment with the Company or an Affiliated Company having applied to return while his reemployment rights were protected by law.
11
1.18
"Member" means any Employee participating in the Plan in accordance with Section II hereof.
1.19
"One Year Break in Service" means a Plan Year during which an Employee or Member shall not have accumulated more than 500 Hours of Service.
For Plan Years commencing on or after January 1, 1985,solely for purposes of determining whether a Break in Service has occurred, an Employee will be granted Hours of Service, which otherwise would normally not have been credited up to a maximum of 501 Hours of Service for absences due to pregnancy, birth or adoption of a child or caring for a child following birth or adoption, provided the Employee furnishes the Pension Committee with such timely information as the Committee shall require that such absence from service is the result of the reasons specified under this paragraph. For purposes of the preceding sentence, Hours of Service shall be credited in the Year of Eligibility Service or year of Vesting Service (whichever is applicable) in which such absence occurs if such crediting of Hours of Service would prevent a Break in Service. In each other case, such Hours of Service will be credited in the subsequent Year of Eligibility Service or year of Vesting Service. Commencing August 5, 1993, solely for the purpose of determining whether a Break in Service has occurred, an Employee will be granted Hours of Service for a period of leave on or after such date granted pursuant to the Family and Medical Leave Act of 1993 and its regulations for the birth, adoption, or placement of a child, to care for a spouse or an immediate family member with a serious illness, or for the employee’s own illness.
12
Effective October 13, 1996, a Break in Service shall not be deemed to have occurred if the Employee is absent because of service in the uniformed services of the United States (as defined in Sections 4303(13) and 4303(16) of the Uniformed Services Employment and Reemployment Rights Act of 1994) and he returns to employment with the Company or an Affiliated Employer having applied to return while his reemployment rights were protected by law.
1.20
"Pension Committee" means the committee which shall direct the general administration of the Plan in accordance with Section XVII hereof.
13
1.21
"Plan" means the Retirement Pension Plan for Employees of Trans-Lux Corporation and certain of its subsidiaries and affiliates.
1.22
"Plan Year" means the consecutive 12-month period commencing on January 1 of each year.
1.23
"Qualified Domestic Relations Order" means a judgement, decree, or order which relates to the provision of child support, alimony payments, or marital property rights of a Spouse, former spouse, child or other dependent of a Member made pursuant to a State domestic relations order. Such Qualified Domestic Relations Order must specify the name and address of the Member and alternate payee, the amount or percentage (or a determination thereof) of the Member's benefit to be paid to the alternate payee, the number of payments (or periods) to which the order applies and that the order applies to the Plan.
1.24
"Qualified Joint and Survivor Annuity" means the benefit payable at retirement for the life of the Member with payments continuing after his death to, and for the life of, his Spouse in an amount equal to half of the amount of the benefits payable during the joint lives of the Member and his Spouse and which is the Actuarial Equivalent of a benefit payable for the life of the Member.
14
1.25
"PBGC" means the Pension Benefit Guaranty Corporation.
1.26
"Reemployment Commencement Date" means the date on which an Employee completes his first Hour of Service following his last One Year Break in Service.
1.27
"Retirement Commencement Date" means the first day of the first period for which a Member's retirement benefits are paid as an annuity or in any other form, regardless of the actual date of payment.
1.28
"Retirement Date" means a Member's Normal, Earlier or Deferred Retirement Date as set forth in Section III.
1.29
"Salary" means the basic compensation, excluding overtime, bonuses, and commissions, paid to an Employee of the Company. Salary shall also include amounts elected by the Employee and deferred through a salary reduction feature of a qualified profit sharing plan meeting the requirements of Code Section 401(k). Effective January 1, 1989, Salary for any purpose under the Plan shall be limited to $200,000 in any Plan Year multiplied by the Adjustment Factor, for Plan Years beginning in 1990, and each Plan Year thereafter.
15
Salary for any prior Plan Year that is taken into account in determining benefits in a current Plan Year shall be subject to the applicable Salary limitation of the prior Plan Year. For this purpose, Salary for Plan Years beginning before January 1, 1990, shall be deemed to be limited to $200,000.
Notwithstanding the above, effective for years beginning on and after January 1, 1994, the Salary taken into account under the Plan shall not exceed $150,000 as adjusted by the Adjustment Factor in $10,000 increments rounded down to the nearest $10,000 in accordance with Code Sections 401(a)(17) and 415(d). The limitation of this paragraph shall not operate so as to reduce a Member's Accrued Benefit to an amount which is less than such Member's Accrued Benefit determined on December 31, 1993 without regard to this provision and, further provided that a Member's Salary earned prior to January l, l994 shall continue to be adjusted in accordance with this Section 1.28 as if the $200,000 limitation, and any adjustments thereto, continued to apply.
16
The annual Salary of each Member taken into account in determining benefit accruals in any Plan Year beginning after December 31, 2001, shall not exceed $200,000. Salary means the amount determined in accordance with the first paragraph of this Section for the Plan Year or such other consecutive 12-month period over which Salary is otherwise determined under the Plan (the determination period). For purposes of determining benefit accruals in a Plan Year beginning after December 31, 200l, Salary for any prior determination period shall be limited to $200,000.
Solely to the extent it does not violate the provisions of Section 415 of the Code or any other provision of applicable law, the salary to be used for determining the Accrued Benefit earned by such an Employee during his years in the uniformed services of the United States shall be the salary the Employee would have received but for his service in the uniformed services of the United States or, if the Pension Committee determines that such rate cannot be determined with reasonable certainty, the Employee’s average rate of compensation during the 12-month period (or his entire period of employment, if less) immediately preceding the Employee’s service in the uniformed services of the United States. Notwithstanding anything in the Plan to the contrary, a Member’s Salary for periods after April 30, 2009 shall be disregarded for purposes of determining the Member’s Final Average Salary under Section 1.15 and for determining his Accrued Benefit under Section 1.1 and Section IV of this Plan.
17
1.30
"Spouse" means the legally married husband or wife of a Member. In certain circumstances the Committee shall determine the designation of a Spouse.
1.31
"Social Security Covered Compensation" means, for a Plan Year, the average (without indexing) of the taxable wage bases in effect for each calendar year during the 35-year period ending on the last day of the calendar year in which the Member attains Social Security Retirement Age. In determining a Member's covered compensation for a Plan Year, the taxable wage base for the current Plan Year and any subsequent Plan Year shall be assumed to be the same as the taxable wage base in effect as of the beginning of the Plan Year for which the determination is being made. A Member's covered compensation for a Plan Year after the 35-year period is the Member's covered compensation for the Plan Year during which the Member attained Social Security Retirement Age. A Member's covered compensation before the 35-year period is the taxable wage base in effect as of the beginning of the Plan Year. A Member's covered compensation shall automatically be adjusted for each Plan Year.
18
1.32
"Social Security Retirement Age" means the age used as the retirement age for the Member under Section 216(l) of the Social Security Act, except that such section shall be applied without regard to the age increase factor, and as if the early retirement age under Section 216(i)(2) of such Act were
age 62.
1.33
"Terminated Vested Participant" means a Member who has terminated employment with an Affiliated Employer for reasons other than death or retirement, at any time after he has attained a non-forfeitable interest in his Accrued Benefit in accordance with Section 9.2 or Section 9.3, whichever is applicable.
1.34
"Trust Agreement" means the agreement providing for the Trust Fund.
1.35
"Trustee" means the trustee under the Trust Agreement or any successor trustee.
1.36
"Trust Fund" or "Fund" means the fund established under a Trust Agreement by contributions made by the Company.
19
1.37
"Vesting Service" means the period of service of an Employee with an Affiliated Employer, as determined under Section 9.4 hereof, recognized for purposes of determining eligibility for a nonforfeitable benefit under Section IX of the Plan.
1.38
"Year of Eligibility Service" means the completion of 1,000 Hours of Service in an eligibility computation period. The eligibility computation period is the 12 consecutive month period commencing on the date the Employee first performs an Hour of Service for an Affiliated Employer and each anniversary thereof.
20
2.1
Each Member of the Plan as of December 31, 1975 shall continue to be a Member of the Plan on January 1, 1976.
2.2
Each Employee on and after January 1, 1976 and prior to January 1, 1985 shall become a Member on the January 1 nearest the date on which he completes one Year of Eligibility Service and attains age 25.
2.3
Each other Employee on and after January 1, 1985, shall become a Member on the January 1 nearest the date on which he completes one Year of Eligibility Service and attains age 21.
2.4
A Member, who ceases to be an Employee, due to his becoming covered under another pension or retirement plan established pursuant to a collective bargaining agreement to which the Company is a party, will be deemed to continue as a Member of this Plan with respect to his Accrued Benefit as of the date of such coverage. No Credited Service shall be earned during the period of such coverage. Upon becoming once again an Employee, he shall resume Plan participation as of the date he again becomes an Employee. If such a Member receives credit for service under a plan established pursuant to such collective bargaining agreement, which service is also Credited Service under this Plan, his Accrued Benefit based on such Credited Service under this Plan shall be reduced by the Actuarial Equivalent of the benefit for such service under such other plan.
21
2.5
An Employee who incurs a One Year Break in Service prior to January 1, 1985 and who is not entitled to a nonforfeitable benefit pursuant to Section 9.2 shall be admitted or readmitted to membership on his Reemployment Commencement Date and prior Years of Eligibility Service shall be restored on such date provided that the number of consecutive One Year Breaks in Service does not equal or exceed his aggregate Years of Eligibility Service accrued prior to such One Year Break in Service and is not disregarded as a result of a previous One Year Break in Service, and further provided that, the Employee has satisfied the minimum age and service requirements of this Plan.
An Employee who (i) is not entitled to a nonforfeitable benefit pursuant to Sections 3.1, 9.2, or 9.3 and (ii) incurs a One Year Break in Service on or after January 1, 1985, shall be admitted or readmitted to membership on his Reemployment Commencement Date provided such Employee has met the minimum age and service requirements of this Section II. Prior Years of Eligibility Service, not previously disregarded as a result of a previous One Year Break in Service, shall be restored as of the Reemployment Commencement Date provided the consecutive number of One Year Breaks in Service does not equal or exceed the greater of:
22
(a)
the aggregate number of Years of Eligibility Service completed prior to the One Year Break in Service; or
(b)
5 years.
For purposes of this section 2.5 a One Year Break in Service is a Year of Eligibility Service in which an Employee shall not have accumulated more than 500 Hours of Service.
An Employee entitled to a nonforfeitable benefit shall be restored to membership upon his Reemployment Commencement Date.
Any other Employee, upon reemployment, shall be considered a new Employee and shall be required to satisfy the minimum age and service requirements of this Section II without regard to service prior to a One Year Break in Service or employment termination.
23
3.1
Normal Retirement Date
The Normal Retirement Date for a Member who has completed one Hour of Service on or after January 1, 1988 shall be the first day of the month coinciding with or next following his Normal Retirement Age which shall be the later of his 65th birthday or the fifth anniversary of the date on which he became a Plan Member.
A Member shall be fully (100%) vested in his Accrued Benefit upon attainment of Normal Retirement Age.
3.2
Earlier Retirement Date
Any Member who was such on December 31, 1982, may elect an Earlier Retirement Date which may be the first day of any month not more than ten years prior to his Normal Retirement Date. Any Member who became a Member on or after January 1, 1983, may elect an Earlier Retirement Date which may be the first day of any month which is not more than ten years prior to the Member's Normal Retirement Date, provided that such Member has completed ten years of Credited Service on the Earlier Retirement Date. Effective January 1, 1988, a Member may elect an Earlier Retirement Date which shall be the first day of any month following the attainment of age 55 and completion of 10 Years of Credited Service.
24
3.3
Deferred Retirement Date
A Member who continues employment after Normal Retirement Date may elect to commence payments under the Plan on the first day of any month on or after the attainment of his Normal Retirement Date or defer commencement of payment until the earlier of the first of the month following termination of employment or the April 1 following the calendar year of his attainment of age 70-1/2. In the event a benefit commences under this Section 3.3 prior to the Member's actual retirement date, the benefit accrued under Section 4.1 at the end of each Plan Year, beginning on and after the date in which the Participant attains Normal Retirement Date, shall be reduced by the Actuarial Equivalent of the benefit payments received in such Plan Year. In no event shall the reduction provided in the preceding sentence reduce additional accrual in any Plan Year below zero.
25
4.1
At Normal or Deferred Retirement Date
Effective on and after January 1, 1989, solely for Members who have completed an Hour of Service on or after such date, the annual amount of retirement benefit commencing on or after Normal Retirement shall be equal to: (i) 1% of Final Average Salary plus (ii) .5% of Final Average Salary in excess of Social Security Covered Compensation, multiplied by years (or fractions thereof) of Credited Service.
Notwithstanding the above, in determining the amount of a Member's retirement benefit under this paragraph,
(a)
Such benefit shall not be less than the benefit the Member would have been entitled to receive under (b) or (c) of this Section 4.1 determined on the date so specified;
26
(b)
Effective on and after January 1, 1983, and prior to January 1, 1989, for Members who had not attained Normal Retirement Date as of January 1, 1983, the annual amount of retirement benefit commencing at Normal Retirement Date to such Member who retires on or after Normal Retirement Date shall be equal to (i) 1-1/2% of Final Average Salary determined on December 31, 1988, and without regard to the annual limitation on Salary for years prior to January 1, 1990, (as defined in Section 1.28), (ii) less 1-1/4% for Primary Social Security Benefit, multiplied by the years (and fractions thereof) of his Credited Service determined on December 31, 1988.
For purposes of this subsection (b), Primary Social Security Benefit means an amount equal to the annual old-age primary insurance benefit under the Social Security Act in effect at the Member's Social Security Retirement Age or other date of termination of his employment with the Company, if earlier; provided, however, that if a Member (i) elects to retire on an Earlier Retirement Date prior to his Social Security Retirement Age, or (ii) his employment by the Company is otherwise terminated prior to his Social Security Retirement Age, his Primary Social Security Benefit shall be determined by projecting to Social Security Retirement Age his annual Compensation as of this Early Retirement Date or the date of his last employment, as the case may be, assuming that there shall be no change in the social security wage base or social security benefit schedule caused by the automatic provision with respect to the cost of living under the Social Security Act.
27
The amount of Primary Social Security Benefit shall be estimated based on actual salary in all years for which records are available while an Employee of the Company, and a salary discount assumption applied to Annual Earnings in the year of the last recorded salary and each year prior thereto until age 22, which shall be a level percentage of 6% per year. In the event that within 180 days, beginning on the date which is the later of the date the Member separates from service or the date the Member is notified of the benefit amount, the Member supplies accurate documentation of the Member's actual salary history as determined by the Social Security Administration, the benefit to which the Member is entitled shall be adjusted based on any differences which shall occur.
28
(c)
The benefit of a Member, who was such on December 31, 1982, shall not be less than the Accrued Benefit to which he was entitled under the provisions of the Plan as in effect on December 31, 1982. The benefit payable under the form of payment elected by such a Member shall not be less than benefit payable under the same form of payment based on the Accrued Benefit as of December 31, 1982.
(d)
On and after May 11, 1981, solely for purposes of determining the annual amount of retirement benefit commencing at Normal Retirement Date for a Member who was a member in the Pension Plan for Employees of Canadian Trans-Lux Corporation Limited (the "Canadian Plan"), the Normal Retirement Benefit shall be determined in accordance with this Section 4.1 based on years of Credited Service while a Member of the Plan and Credited Service while a member of the Canadian Plan, but only if such service under the Canadian Plan would qualify as Credited Service under the Plan if such service were performed while a Member of the Plan, reduced by the amount of benefit such individual is entitled to receive under the Canadian Plan. Such reduction shall not reduce the amount such Member is entitled to receive under this Plan to an amount less than zero.
29
(e)
On and after January 1, 1996, solely for purposes of determining the annual amount of retirement benefit commencing at Normal Retirement Date for a Member who was an employee of Integrated Systems Engineering, Inc., as well as full-time salaried employees of the theatre executive office and theatre managers, the Normal Retirement Benefit shall be determined in accordance with this Section 4.1 based on years of Credited Service completed after January 1, 1996.
4.2
At Earlier Retirement Date
The annual retirement benefit, commencing at Earlier Retirement Date to a Member who retires on an Earlier Retirement Date, shall be equal to the Actuarial Equivalent (as set forth in Appendix A) of the Accrued Benefit he would have received commencing at Normal Retirement Date, as computed in accordance with Section 4.1 hereof. Notwithstanding the foregoing, a Participant may elect to defer the commencement of benefits until the date the Member would have attained Normal Retirement Date, in which case the benefit shall equal the Member's Accrued Benefit.
30
4.3
Maximum Benefits
(a)
The following provisions of this Section reflecting the increased limitations of Section 415(b) of the Code effective on and after January 1, 2002 shall apply to all current and former Members (with benefits limited by Section 415(b) of the Code) who have an Accrued Benefit under the Plan immediately prior to January 1, 2002 (other than an Accrued Benefit resulting from a benefit increase solely as a result of the increases in limitations under Section 415(b)).
(b)
Notwithstanding any other provision of the Plan, the annual benefit to which a Member is entitled under the Plan shall not, in any calendar year, which shall be the limitation year, be in an amount which would exceed the applicable limitations under Section 415 of the Code and regulations thereof, which are hereby incorporated by reference. If the benefit payable under the Plan would (but for this Section) exceed the limitations of Section 415 of the Code by reason of a benefit payable under another defined benefit plan aggregated with this Plan under Code Section 415(f), the benefit under this Plan shall be reduced only after all reductions have been made under such other plan. As of January 1 of each calendar year commencing on or after January 1, 2002, the dollar limitation as determined by the Commissioner of Internal Revenue for that calendar year shall become effective as the maximum permissible dollar amount of benefit payable under the Plan during the limitation year ending within that calendar year including benefits payable to Members who retired prior to that limitation year.
31
(c)
The term “compensation” for purposes of applying the applicable limitations under Section 415 of the Code with respect to any Member shall mean compensation from the company or any Affiliated Employer as defined in U.S. Treasury Department regulations 1.415(c)-2(d)(4)(i.e., information required to be reported under sections 6041, 6051, and 6052 of the Code (“W-2 Pay”) plus amounts that would be included in wages but for an election under Section 125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b) of the Code). The term “compensation” shall also include amounts required to be recognized under the provisions of U.S. Treasury Department regulation 1.415(c)-2(e) and amounts permitted to be recognized under the provisions of U.S. Treasury Department regulation 1.415(c)-2(e)(2).”
4.4
Limit on Credited Service
Notwithstanding anything in the Plan to the contrary, a Member’s Credited Service for periods on and after January 1, 2004 shall be disregarded for all purposes of this Section IV.
4.5
Accruals After Benefit Commencement
Notwithstanding anything in this Plan to the contrary, the Salary of a Member who has elected to have his benefit commence under this Plan after attaining his Normal Retirement Age but before he terminates his employment with the Company and all Affiliated Employers shall be disregarded for all purposes of this Section IV. However, a Member whose benefit is required to commence in accordance with the provisions of Section 11.1 of the Plan shall not be treated as having elected to have his benefits commence for purposes of this Section.
32
4.6
HEART Act
For years beginning after December 31, 2008:
(a)
an individual receiving a differential wage payment as defined by Code Section 3401(h)(2) is treated as an employee of the employer making the payment;
(b)
the differential wage payment is treated as compensation for purposes of Code Section 415(c)(3) and Treasury Regulation 1.415(c)-2; and
(c)
the Plan is not treated as failing to meet the requirements of a provision described in Code Section 414(u)(1)(c) by reason of any contribution or benefit which is based on the differential wage payment.
33
NORMAL FORM OF BENEFIT AT RETIREMENT
5.1
Subject to the provisions of Section 11.2, effective on and after August 23, 1984, the normal form of payment of retirement benefits for a Member who is married on his Retirement Commencement Date shall be the Qualified Joint and Survivor Annuity. No sooner than 30 days nor later than 90 days prior to a Member Retirement Commencement Date, the Committee shall provide the Member with written explanation of (a) the terms and conditions of the Qualified Joint and Survivor Annuity, (b) the Member's right to revoke and reelect the Qualified Joint and Survivor Annuity, (c) the rights of the Member's Spouse to consent to any revocation of the Qualified Joint and Survivor Annuity, (d) effective on and after August 22, 1988, a general description of the eligibility conditions and other material features of any optional form of benefit and sufficient additional information to explain the relative values of the optional forms of benefit under the Plan, and (e) effective January 1, 2007, a description of the Participant’s right to defer receipt of a distribution and the consequences of failing to defer receipt of a distribution. An election to waive the Qualified Joint and Survivor Annuity must be made within the 90-day period commencing prior to the Member's Retirement Commencement Date. An election to waive the Qualified Joint and Survivor Annuity shall only be effective if the Member's Spouse consents in writing to such election. Spousal consent must acknowledge the effect of such election, specify the alternate form of payment selected, designate the alternate beneficiary who is eligible to receive the benefits under the Plan, if any, and be witnessed by a Plan representative or a notary public. If such Member effectively elects not to receive his retirement benefits in the form of a Qualified Joint and Survivor Annuity, then the Member may elect to receive payment of such retirement benefit in the form of a life annuity as provided in Section 5.2 below, or in any optional form of payment provided in Section 6.1. A Spouse's consent to waive any benefits hereunder shall only be effective with respect to such Spouse. An alternate beneficiary or form of payment consented to by a Spouse in lieu of the form of benefit payable under this Section 5.1 may not be changed unless such change is to the Qualified Joint and Survivor Annuity or the Spouse again consents in writing to such change. In the event a Spouse is legally incompetent to give consent, the legal guardian of the Spouse may give consent.
34
Former Members of the Plan who completed one Hour of Service after September 1, 1974, and separated from service prior to January 1, 1976, and who have not commenced benefits under this Plan, as of August 23, 1984, may elect or revoke the Qualified Joint and Survivor Annuity according to the provisions of the Plan in effect on August 22, 1984.
5.2
Subject to the provisions of Section 11.2, if a Member has no Spouse, his Spouse cannot be located, the Member is legally separated from or has been abandoned by said Spouse (within the meaning of local law) and the Member has a court order to such effect, or the Member is otherwise exempt from the requirements of Section 5.1 pursuant to regulations issued by the Secretary of the Treasury, the normal form of payment of his retirement benefits shall be a monthly life annuity terminating with the last payment preceding his death. A Member who meets the requirements of this Section 5.2 shall be eligible to reject the normal form of payment and elect an optional form of benefit in the same manner and within the same time period prescribed in Section 5.1, except that spousal consent shall not be required.
35
6.1
In lieu of normal form of payment provided under Section 5.1 or Section 5.2 (provided a Member who is married to a Spouse has obtained his Spouse's consent as required by Section 5.1), a Member may elect an optional form of benefit described in this Section 6.1. Any optional form shall be the Actuarial Equivalent of the normal form provided in Section 5.2.
(a)
Ten Year Certain and Life: An actuarially reduced monthly life annuity payable to the Member at his Retirement Commencement Date and terminating with the last payment preceding his death, provided that not less than 120 monthly payments shall be made to him and his Beneficiary.
(b)
Joint and Survivorship Annuity: An actuarially reduced monthly life annuity payable to the Member at his Retirement Commencement Date and providing for the continuation of such reduced retirement benefit in an amount equal to 100%, 75%, 66-2/3% or 50% of such reduced retirement benefit, to the Contingent Annuitant for as long as the Contingent Annuitant lives. Under this option, the amount of reduction in the retirement benefit depends upon the age of the Member and the Contingent Annuitant at the date the benefit is to commence and the amount of the continuing payment elected as stated in Appendix A.
36
(c)
Social Security Offset: A Member who retires prior to his Social Security Retirement Age may elect a retirement benefit, which is the Actuarial Equivalent of the retirement benefit such Member would receive as if Social Security Benefits had commenced as of his date of retirement, so that at the time such Member's old-age benefit under Title II of the Social Security Act actually becomes payable, he will receive a reduced amount from the Plan, and the amount of benefits such Member shall receive both before and after such Social Security benefit commences shall be approximately equal.
(d)
Lump Sum Option: A Member may elect a lump sum form of payment, which is the Actuarial Equivalent determined in accordance with Section 11.2(b) and Appendix A of the retirement benefit otherwise payable to him. Distributions of lump sum amounts shall be permitted at any date which is prior to the Member's Normal Retirement Date only upon the consent of the Member if such Lump Sum amount exceeds $3500, effective through December 31, 1997, and $5,000 on and after January 1, 1998, as determined under Section 11.2(b). Payment of a lump sum amount under this section (d) shall represent a complete discharge of the Plan's liability to such Member.
37
(e)
Two Year Certain Option: Effective for distributions made on or after April 1, 2002, a Member may elect a two-year certain form of payment. The first payment shall be equal to one-half the Actuarial Equivalent lump sum value of the retirement benefit otherwise payable to the Member at his Retirement Commencement Date. The second payment shall be paid on the first anniversary of his Retirement Commencement Date and shall be equal to one-half the Actuarial Equivalent lump sum value of the retirement benefit otherwise payable to him at his Retirement Commencement Date increased with interest for the one-year period at the IRS Interest Rate determined under Appendix A at his Retirement Commencement Date. For purposes of this Section 6.1(e), Actuarial Equivalent shall be determined in accordance with Section 11.2(b) and Appendix A.
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6.2
The optional benefits, as provided in Section 6.1, are subject to the following limitations and restrictions:
With respect to all optional retirement benefits provided hereunder, the Member may elect any one of the options at least 90 days prior to Deferred, Normal or Earlier Retirement Date and shall be effective on the Participant's Deferred, Normal or Earlier Retirement Date, by written notice delivered to the Pension Committee and shall be effective on the date of the Retirement Commencement Date.
No optional form under Section 6.1 of the Plan shall be payable over a period exceeding one of the following:
(a)
the life of a Member or the joint lives of a Member and his Spouse, or designated Beneficiary, as the case may be; or
(b)
the life expectancy of the Member or joint life expectancy of a Member, his Spouse or designated Beneficiary, as the case may be. Life expectancy shall be determined according to Code regulation 1.72-9.
39
Any payments to a Contingent Annuitant or Beneficiary, who is not the Spouse of the Member, shall be subject to the limitation that the present value of payments to the Member, calculated as of the appropriate retirement date, must exceed 50% of the then present value of the total payments to be made to the Member and his Beneficiary.
6.3
Prior to the distribution of any benefit payable hereunder, if the present value of such benefit is in excess of $3,500 through December 31, 1997 and $5,000 on and after January 1, 1998, then such benefit shall not be distributed before the Member’s Normal Retirement date unless the Member and, if applicable, the Member’s Spouse, consent in writing thereto, except that if such benefit is payable as a Qualified Joint and Survivor Annuity and is immediately distributable, written consent to the distribution shall not be required.
40
7.1
Pre-Retirement Spouse's Benefit
(a)
If a Member dies in the active service of the Employer after having satisfied the requirements for Earlier Retirement Date, but prior to his Normal Retirement Date, and is survived by a Spouse, such Spouse shall be entitled to receive a monthly benefit for life commencing on the first day of the month following the date of death of the Member except that if the present value (as determined under Section 11.2) of the benefit payable to the Spouse is $3500 or less though December 31, 1997 or $5,000 or less on and after January 1, 1998, such amount shall be payable under Section 11.2. The annual amount of such benefit shall be the greater of the benefit provided in Section (b) or, on and after August 23, 1984, the benefit provided in Section (c).
(b)
If the surviving Spouse is not more than five years younger than the deceased Member, the benefit shall be 50% of the deceased Member's Accrued Benefit, computed as if such Member had retired on the day before he died.
41
If the surviving Spouse is more than five years younger than the deceased Member, the benefit shall be computed as in the preceding paragraph and such amount shall be reduced by (i) and, if applicable, (ii) below:
(i)
1% for each full year in excess of five years up to a maximum of twenty-five years that the Spouse is younger than the Member; and
(ii)
2% for each full year in excess of twenty- five years that the Spouse is younger than the Member.
(c)
Effective on and after August 23, 1984, in the event of the death of a Member with a Spouse, who is entitled to receive benefits in accordance with Section 9.2 or 9.3 (whichever is applicable) and who has not commenced benefits under the Plan, a survivor annuity shall be payable to his Spouse for such Spouse's lifetime, with monthly payments commencing on the first day of the month coincident with or next following the later of (i) the date of the Member's death, or (ii) the date the Member would have attained age 55 if he had completed 10 Years of Credited Service as of his date of death, unless the Spouse elects to defer such payment until the date the Member would have attained Normal Retirement Date, or in any other case, the date the Member would have attained age 65. Notwithstanding the preceding sentence, if the present value (determined under Section 11.2) of the survivor annuity is less than $3500 effective through December 31, 1997 or $5,000 on and after January 1, 1998, then the benefit shall automatically be distributed in a single cash payment as provided under Section 11.2. The survivor annuity shall be equal to Member's Accrued Benefit payable as a Qualified Joint and Survivor Annuity determined as follows:
42
(i)
In the case of a Member who has attained Earliest Retirement Age as of his death, such Qualified Joint and Survivor Annuity shall be determined as if the Member had retired on the date of death and Section 4.2 of the Plan applied.
(ii)
In the case of a Member who had not attained Earliest Retirement Age as of his date of death, such Qualified Joint and Survivor Annuity shall be determined as if the Member had:
43
(A)
separated from service on his date of death or termination of employment whichever is earlier; and
(B)
survived until Earliest Retirement Age and Section 4.2 of the Plan applied, and;
(C)
died on the day following his Earliest Retirement Age.
For the purposes of this section, "Earliest Retirement Age" shall mean age 55 if a Member had completed 10 Years of Credited Service as of his date of death or separation from service, whichever occurs first, or in any other case, age 65.
A former Member who has one Hour of Service on and after January 1, 1976, who has separated from service prior to August 23, 1984, and who has a vested benefit in accordance with Section 9.2 as of his date of termination, shall have this Section 7.1(c) apply upon the occasion of his death provided such former Member had not commenced payment of his vested benefit under the Plan as of August 23, 1984.
44
(d)
Applicable Provisions on Death - If either (i) a Spouse's benefit shall have become payable under the provisions of Section 7.1(b) or (c) or (ii) the benefit shall have become effective under the provisions of Section V or Section VI, the death benefit, if any, shall be that provided by such applicable section.
7.2
Military Service
In the case of the death occurring on or after January 1, 2007, if a Participant dies while performing qualified military service (as defined in Code Section 414(u)), the Participant’s Beneficiary is entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) provided under the Plan as if the Participant had resumed employment and then terminated employment on account of death. Moreover, the Plan will credit the Participant’s qualified military service as service for vesting purposes, as though the Participant had resumed employment under the Uniformed Services Employment and Reemployment Rights Act immediately prior to the Participant’s death.
45
8.1
The Company, in accordance with the requirements of Code Section 412, shall make contributions to the Trustee as are actuarially necessary to provide the retirement benefits under the Plan. Contributions shall be made conditioned upon their deductibility under Code Section 404. Any contribution which is made under this Section 8.1 which is determined by an Actuary to be non-deductible under Code Section 404 shall be returned to the Employer within the next following one-year period, provided the Actuary certifies to the non-deductibility of such contribution under Section 404 of the Code. No contributions will be required of Members.
8.2
The Company reserves the right to reduce, suspend, or discontinue its contributions for any reason at any time, provided that it shall be impossible, at any time prior to the satisfaction of all liabilities with respect to all Members, Spouses, Contingent Annuitants, and Beneficiaries under the Plan, for any part of the Trust Fund to revert to the Company, or to be used for, or diverted to, any purpose other than their exclusive benefit. Any assets remaining in the Trust upon a Plan termination or a discontinuance of contributions to the Plan, after satisfaction of liabilities with respect to all Members, Spouses, Contingent Annuitants and Beneficiaries under the Plan, shall revert to the Company.
46
9.1
Before 10 Years of Vesting Service
(a)
A Member whose service with the Company is terminated prior to January 1, 1989, for reasons other than total and permanent disability and before his Normal or Earlier Retirement Date and before completing at least 10 years of Vesting Service shall not be entitled to any benefits under the Plan.
(b)
Any forfeitures arising as a result of this Section 9.1 shall be used to reduce the Company's cost under the Plan.
9.2
With 10 or More Years of Vesting Service
(a)
A Member, whose service with the Company is terminated after December 31, 1975, but before January 1, 1989, and before his Normal or Earlier Retirement Date, having completed at least 10 years of Vesting Service, shall be entitled to his Accrued Benefit as of his date of such termination with benefits commencing at his Normal Retirement Date.
47
(b)
A Member, who is entitled to a retirement benefit under subparagraph (a) above, may elect to receive his retirement benefit commencing at an Earlier Retirement Date which shall be the first day of any specified month subsequent to the date of his election. In such event,the retirement benefit then payable shall be equal to the Actuarial Equivalent of the Accrued Benefit which he was entitled to receive at his Normal Retirement Date.
9.3
Provisions effective on and after January 1, 1989
(a)
A Member whose service with the Employer is terminated for reasons other than total and permanent disability and before his Normal or Earlier Retirement Date and before completing at least 5 years of Vesting Service shall not be entitled to any benefits under the Plan. Any forfeitures arising as a result of this Section (a) shall be used to reduce the Company's cost under the Plan.
(b)
A Member, whose service with the Employer is terminated before his Normal or Earlier Retirement Date, having completed at least 5 years of Vesting Service shall be entitled to his Accrued Benefit as of the date of such termination with benefits commencing at his Normal Retirement Date.
48
(c)
A Member, who is entitled to a retirement benefit under subparagraph (b) above, may elect to receive his retirement benefit commencing at an Earlier Retirement Date provided the Member has satisfied the provisions of Section 3.2, which shall be the first day of any specified month subsequent to the date of his election. In such event, the retirement benefit then payable shall be equal to the Actuarial Equivalent of the Accrued Benefit which he was entitled to receive at his Normal Retirement Date.
9.4
Vesting service
(a)
Service Prior to January 1, 1976
Vesting Service for Plan Years beginning prior to January 1, 1976, shall be equal to the continuous service recognized under the provisions of the Plan as in effect prior to January 1, 1976.
49
(b)
Service on and after January 1, 1976
The computation period for the determination of Vesting Service on and after January 1, 1976 shall be the Plan Year. An Employee shall accrue one year of Vesting Service for each Plan Year in which he completed 1,000 Hours of Service. If an Employee has a One Year Break in Service (commencing on or after January 1, 1976) and is later reemployed, his period of Vesting Service prior to his Reemployment Commencement Date shall be restored, provided such Employee completes a Year of Eligibility Service and further provided that, if such Employee was not vested in accordance with Section 9.2(a) or 9.3(b) at the time his One Year Break in Service commenced, the period of his Vesting Service prior to such occurrence shall not be taken into account if the number of consecutive One Year Breaks in Service equals or exceeds the greater of a) his aggregate years of Vesting Service accrued before such One Year Break in Service, or b) on and after January 1, 1985, five years.
50
(c)
An employee who became a Member on or after January 1, 1985, shall not accrue Vesting Service for services rendered prior to the Plan Year in which the Employee's 18th birthday occurs.
(d)
Solely for determining the nonforfeitability of any benefit under the Plan, former Members who terminated employment with the Company for immediate employment with a Gulf & Western entity (hereinafter called the "Corporation") because of the sale of certain subsidiaries and divisions to the Corporation on July 25, 1986, shall continue to accrue Vesting Service under this Plan for so long as they are employed by the Corporation provided such service conforms to the requirements of Vesting Service set forth in Section 1.36 as if such Vesting Service was performed for the Company, and further provided that the Corporation provides such timely information as may be required to determine Vesting Service with respect to such former Members.
The above paragraph shall not be construed as establishing or continuing any contract of employment between the Company and former Members.
51
10.1
In the event a Member is determined by the Pension Committee to be totally and permanently disabled according to Section 10.2 and has attained age 45 and completed at least 15 years of Vesting Service, he shall be entitled to a disability benefit as defined in Section 10.3.
10.2
The Pension Committee shall determine that a Participant is totally and permanently disabled if the Participant is in receipt of a Social Security disability benefit.
10.3
The disability benefit shall be equal to the Member's Accrued Benefit at the date of disability. Such benefit shall be reduced for immediate payment according to the Actuarial Equivalent early retirement factors of the Plan. However, if an Employee is below age 55, the Actuarial Equivalent reduction factor used for immediate payment will not be less than the factor that would be used as if the Employee was age 55.
10.4
Disability benefits shall be payable in the same manner and form as set forth in Section V, unless the Member, and if applicable, the Member's Spouse, consent in accordance with Section 5.1 to receive an optional form of benefit under Section VI.
52
TIME OF COMMENCEMENT OF PAYMENT
11.1
Commencement of Payment
Unless a Member elects otherwise, the payment to him of his retirement benefit shall begin not later than the 60th day after the close of the Plan Year in which occurs the later of:
(a)
the Member's Normal Retirement Date, or
(b)
the fifth anniversary of the Member's participation in the Plan, or
(c)
the date the Member terminates his service with the Company.
In no event, however, shall a retirement benefit becoming payable under this Plan commence later than the April 1 following the calendar year in which the Member attains age 70-1/2.
53
In the event a Member’s benefit otherwise required to commence on the Member’s Normal Retirement Date is delayed because the Pension Committee is unable to locate the Member or for any other reason, the Pension Committee shall commence payment within 90 days after the date the Member is located. Unless the Member elects an optional form of payment in accordance with the provisions of Section 6.1, payment shall be in the normal (automatic) form as set forth in Section V applicable to the Member of his Annuity Starting Date. The benefit payable to the Member as of his Annuity Starting Date shall be in the amount that would have been payable to the Member if payments had commenced on the Member’s Normal Retirement Date (“retroactive Annuity Starting Date”) in the form elected by the member under the provisions of Section 5.1, 5.2 or 6.1, as applicable; plus one lump sum payment equal to the sum of the monthly payments the Member would have received during the period beginning on his Normal Retirement Date and ending with the month preceding his Annuity Starting Date, together with interest at the rate of 6.5 percent per annum, compounded annually. The amount of the monthly payments shall be determined as of the Member’s Normal Retirement Date on the basis of the single life annuity form of payment. The lump sum shall be paid on or as soon as practicable following the date the Member’s Pension commences.
54
11.2
Payment of Lump Sum Benefits
Notwithstanding any other provision of the Plan, a Member’s benefit shall be payable in a lump sum payment as follows:
(i)
If the present value of the Member’s benefit amounts to $1,000 or less as of his Retirement Commencement Date, a lump sum payment equal to the present value of the benefit shall be made in lieu of all benefits.
(ii)
If the present value of the Member’s benefit exceeds $1,000 but does not exceed $5,000, the only form of payment he may elect is a lump sum payment. He may elect to receive the lump sum payment as soon as practicable following his termination of employment or as of the first day of any later month that precedes his Normal Retirement Date. Spousal consent to the Member’s election of the lump sum is not required.
55
The present value of the member’s benefit and amount of a lump sum payment payable under this paragraph shall be determined by using the IRS Mortality Table and the IRS Interest Rate in Appendix A and, in the case of a lump sum benefit payable prior to a Member’s Normal Retirement Date, shall be of equivalent value to the benefit which would otherwise have been provided commencing at the Member’s Normal Retirement Date. In the event the present value of a Member’s benefit exceeds $1,000 upon an initial determination as to its present value, the present value of the benefit shall be redetermined annually as of the first day of each subsequent Plan Year. The lump sum payment shall be made as soon as practicable following the determination that the amount qualifies for distribution under this paragraph.
11.3
No portion of the Member's Accrued Benefit may commence to be distributed under the Plan prior to the Member's Normal Retirement Date unless:
(a)
the Member and such Member's Spouse, if applicable, consents in writing to such distribution within the 90-day period prior to the Retirement Commencement Date; or
(b)
the benefit is provided in accordance with Section 5.1 or 5.2. Notwithstanding the foregoing, no consent shall be required if the Member’s Accrued Benefit determined in accordance with Section 11.2 is less than $3,500 for Plan Years ending on or before December 31, 1977 or $5,000 for Plan Years ending on or after January 1, 1998.
56
Notwithstanding anything in the Plan to the contrary, after having received any required written explanation of his benefits, a Member may (with any applicable spousal consent) affirmatively elect to have his benefit commence sooner than 30 days following his receipt of the written explanation, provided all of the following requirements are met:
(i)
the Pension Committee clearly informs the Member that he has a period of at least 30 days after receiving the notice to decide when to have his benefits begin and, if applicable, to choose a particular optional form of payment;
(ii)
the Member affirmatively elects a date for his benefits to begin and, if applicable, an optional form of payment, after receiving the written explanation;
(iii)
the member is permitted to revoke his election until the later of his Retirement Commencement Date or seven days following the day he received the written explanation; and
57
(iv)
payment does not commence less than seven days following the day after the written explanation is received by the Member.
11.4
Distribution Requirements
Notwithstanding any other provision of this Plan, all distributions from this Plan shall conform to Section 401(a)(9) of the Code, U. S. Treasury Department Regulation Sections 1.401(a)(9)-2 through 1.401(a)(9)-9, and the incidental death benefit requirements of Section 401(a)(9)(G) of the Code. Further, such regulations shall override any plan provision that is inconsistent with Section 401(a)(9) of the Code. If a Member dies after the Pension payments have commenced, any payments continuing on to his spouse or Beneficiary shall be distributed at least as rapidly as under the method of distribution being used as of the member’s date of death.
58
All distributions shall be subject to the following rules:
(a)
Any additional benefits accruing to a Member in a calendar year will be distributed beginning with the first payment interval ending in the calendar year immediately following the calendar year in which such amount accrues.
(b)
If the Member’s benefit is being distributed in the form of a joint and survivor annuity for the joint lives of the Member and a non-spouse beneficiary, annuity payments to be made on or after the Member’s required beginning date to the designated beneficiary after the Member’s death must not at any time exceed the applicable percentage of the annuity payment for such period that would have been payable to the Member using the table set forth in Q&A2 of Section 1.401(a)(9)-6T of the U.S. Treasury Department regulations. If the form of distribution combines a joint and survivor annuity for the joint lives of the Member and a non-spouse beneficiary and a period certain annuity, the requirement in the preceding sentence will apply to annuity payments to be made to the designated beneficiary after the expiration of the period certain. If the Annuity Starting Date precedes the year in which the Member reaches age 70, in determining the applicable percentage, the Member/Beneficiary age difference is reduced by the number of years that the Member is younger than 70.
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(c)
If the Member’s benefit is being distributed in the form of a period certain and life annuity option, the period certain may not exceed the applicable distribution period for the Member under the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury regulations for the calendar year that contains the Annuity Starting Date. If the Annuity Starting Date precedes the year in which the Member reaches age 70, the applicable distribution period for the Member is the distribution period for age 70 under the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury regulations plus the excess of 70 over the age of the Member as of the Member’s birthday in the year that contains the Annuity Starting Date.
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(d)
For purposes of this Section, the following definitions apply:
(i)
Designated Beneficiary. The individual who is designated as the beneficiary under Section 401(a)(9)of the Code and Section 1.401(a)(9)-4 of the Treasury regulations.
(ii)
Distribution calendar year. A calendar year for which a minimum distribution is required. For distributions beginning before the Member’s death, the first distribution calendar year is the calendar year immediately preceeding the calendar year which contains the Member’s required beginning date.
(iii)
Life expectancy. Life expectancy as computed using the Single Life Table in Section 1.401(a)(9)-9, Q&A1 of the Treasury Regulations.
(iv)
Required beginning date. The date specified in
Section 11.1.
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11.5
Direct Rollover Distribution
(a)
Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee’s election under this Section, a distribute may elect, at the time and in the manner prescribed by the Pension Committee, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.
(b)
The following definitions apply to the terms used in this Section 11.5:
(i)
“Eligible rollover distribution” means any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include:
(A)
any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee’s designated beneficiary, or for a specified period of ten years or more; and
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(B)
any distribution to the extent such distribution is required under Section 401(a)(9) of the Code.
(ii)
“Eligible retirement plan” means any of the following types of plans that accept the distributee’s eligible rollover distribution:
(A)
a qualified plan described in Section 401(a) of the Code;
(B)
an annuity plan described in Section 403(a) of the Code;
(C)
an individual retirement account or individual retirement annuity described in Section 408(a) or 408(b) of the Code, respectively;
(D)
an annuity contract described in Section 403(b) of the Code;
(E)
an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan; and
(F)
effective January 1, 2008, a Roth IRA described in Section 408A of the Code.
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(iii)
“Distributee” means an employee or former employee, an employee’s or former employee’s surviving spouse, and an employee’s or former employee’s spouse or former spouse who is an alternate payee under a qualified domestic relations order as defined in Section 414(p) of the Code with respect to the interest of such alternate payee); and
(iv)
“Direct Rollover means a payment by the Plan to the eligible retirement plan specified by the distributee.
(c)
Effective for distributions made after December 31, 2009, the term “Distributee” also includes a Participant’s nonspouse beneficiary designated pursuant to the terms of the Plan. In the case of a nonspouse beneficiary, a direct rollover may be made only to an individual retirement account or annuity described in Section 408(a) or Section 408(b) of the Code (“IRA”) that is established on behalf of the designated beneficiary and that will be treated as an inherited IRA pursuant to the provisions of Section 402(c)(11) of the Code. Also, in this case, the determination of any required minimum distribution under Section 401(a)(9) of the Internal Revenue Code that is ineligible for rollover shall be made in accordance with IRS Notice 2007-7, or any applicable successor guidance issued by the IRS.
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(d)
The Member shall be required to represent the Pension Committee that any recipient plan is (or is intended to be) an eligible retirement plan and to provide any other reasonable information the Pension Committee shall require (including the name, address and account numbers with respect to a recipient plan).
(e)
A Member failing to elect the rollover option under this Section 11.5 prior to a Retirement Commencement Date shall be deemed not to have elected a rollover option.
(f)
The Pension Committee may adopt any reasonable procedures to accomplish the direct rollover, as a trustee to trustee transfer, including distribution in the form of a restricted check payable to a fund or a trustee for the benefit of the Member.
(g)
Amounts eligible for direct rollover may be distributed to a maximum of three recipient plans.
(h)
A Member shall be permitted to divide a distribution in the form of a percentage or dollar amount to be rolled over to a recipient plan and the remainder to be received currently by the Member.
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12.1
If any retired Member is reemployed by the Company prior to his Normal Retirement Date, his retirement benefit payments, if any, shall cease; any election of an optional benefit in effect thereunder shall become void and the provisions of Section 5.1 hereof shall again become effective. Any Credited Service to which he was entitled when he retired shall be restored to him, and upon subsequent retirement, his retirement benefits shall be redetermined based on his Salary and Credited Service before and after the period of prior retirement reduced by the Actuarial Equivalent of the benefits previously received, if any. Such reduction shall not reduce the benefit payable to the Member to an amount which is less than the benefit payable to the Member prior to the Member's reemployment.
12.2
If any Member, who received or is receiving a disability benefit under Section X hereof, is reemployed by the Company prior to his Normal Retirement Date, any disability benefit payments he was receiving shall cease and the provisions of Section 5.1 hereof shall again become effective. Any Vesting Service and Credited Service to which he was entitled when he became disabled shall be restored to him, and upon subsequent retirement or termination of service his benefit shall be redetermined based on his Salary and Credited Service before and after his disability, reduced by the Actuarial Equivalent of the benefits previously received, if any.
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12.3
If a former Member who terminated service after he had earned a vested interest under Section 9.2(a) or Section 9.3(b) is reemployed he shall thereupon again become a Member of the Plan. Any Credited Service to which he was entitled shall be restored to him and upon subsequent retirement or termination of service his benefit shall be based on his Salary and Credited Service before and after his initial termination of service reduced by the Actuarial Equivalent of the benefits previously received, if any.
12.4
If a former Employee who terminated service in accordance with Section 9.1 or Section 9.3(a) is reemployed, his entitlement to membership and his prior Vesting Service shall be determined as provided in Section 2.5 and 9.4(a) and (b). Any Credited Service recognized for the period of Vesting Service restored pursuant to said Section shall also be restored to him.
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The benefits payable hereunder to any Member, Spouse, Beneficiary, or Contingent Annuitant, if any, shall not be assigned, commuted, anticipated, alienated, sold, transferred, pledged, encumbered or charged, and shall not be subject by attachment or otherwise to the claims of any creditors of the Member, Spouse, Beneficiary or Contingent Annuitant.
Notwithstanding the above, the Committee shall direct the Trustees to comply with a Qualified Domestic Relations Order provided such order does not require a form of benefit not otherwise provided under the Plan, or require increased benefits, or require the payment of benefits to an Alternate Payee (as described below) which are required to be paid to another Alternate Payee under a previous Qualified Domestic Relations Order. Payments in compliance with a Qualified Domestic Relations Order may commence, in the case of a Member who has not separated from service no earlier than the first day of the month coincident with or next following the date the Member attains "Earliest Retirement Age" as defined in Section 414(p) of the Code, based on the Actuarial Equivalent of the Member's Accrued Benefit on the date payments are to begin.
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For purposes of this Section an Alternate Payee shall mean a Spouse, former Spouse, child or dependent of the Member who is recognized by a domestic relations order as having the right to receive all or a portion of, the benefits payable under the Plan to the Member.
The Pension Committee shall notify each Member and any Alternate Payee of its receipt of any domestic relations order, the Plan procedures for determining the qualified statute of such order, and the procedures for the administration of such distributions.
If the present value of any series of payments meeting the criteria set forth for Qualified Domestic Relations Orders amounts to $5,000 or less, an Actuarial Equivalent lump sum payment, determined in the manner described in Section 5.1, shall be made in lieu of the series of payments.
Notwithstanding the first paragraph of this Section, a Member’s benefits under the Plan shall be offset by the amount the Member is required to pay to the Plan under the circumstances set forth in Section 401(a)(13)(C) of the Code.
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Except as otherwise provided in this Section, no part of the corpus or income of the funds of the Plan shall be used for, or diverted to, purposes other than for the exclusive benefit of Members and other persons entitled to benefits under the Plan and paying Plan expenses not otherwise paid by the Company, before the satisfaction of all liabilities with respect to them. No person shall have any interest in or right to any part of the earnings of the funds of the Plan or any right in, or to, any part of the assets held under the Plan, except as and to the extent expressly provided in the Plan.
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LIMITATION OF RIGHTS OF THE EMPLOYEE
This Plan is a voluntary program on the part of the Company and shall not be deemed to constitute a contract between an Employer and any Member or to be a consideration for, or inducement of, employment for any Employee or Member. Nothing contained in the Plan shall be deemed to give a) a Member the right to be retained in the service of an Employer or to interfere with the right of an Employer to discharge or retire the Member, or b) any Member, Spouse, or Beneficiary any right or claim to any payment under the Plan, except as such payment may be provided for under the terms of the Plan and then only to the extent that assets are available in the hands of the Trustee for the making of such payment.
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AMENDMENT TO OR TERMINATION OF THE PLAN
15.1
Amendment
(a)
The Board reserves the right to amend the Plan at any time to any extent that it may, in its sole and complete discretion, deem advisable, including any amendment deemed necessary to ensure initial qualification or continued qualification of the Plan under the Code or any other applicable Federal or State laws.
(b)
No such amendment shall increase the duties or responsibilities of the Trustee without its written consent thereto.
(c)
No such amendment shall have the effect of diverting any part of the principal or income of the Trust Fund for purposes other than the exclusive benefit of its Members and their Spouses, Contingent Annuitants and any other designated Beneficiaries, prior to the satisfaction of all liabilities under the Plan.
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(d)
Except to the maximum extent permitted or required by the Code or any other applicable section of the law and the regulations issued thereunder, no amendment or modification shall be made which would:
(i)
retroactively impair any rights to any benefit under the Plan which any Member, Beneficiary, Spouse or other eligible survivor would otherwise have been entitled to as of the date of such amendment,
(ii)
permit the elimination or reduction of a subsidy or an early retirement benefit (as defined in Code regulations) prior to the effective date of such amendment, or
(iii)
permit the elimination of an optional form of benefit with respect to benefits attributable to Vesting Service prior to the effective date of such amendment. In the case of a retirement type subsidy, this subsection (iii) shall apply only with respect to a Member who satisfies (either prior to or subsequent to the effective date of the amendment) preamendment conditions for such subsidy. Notwithstanding the preceding, the Accrued Benefit of a Member, early retirement benefit, retirement-type subsidy, or optional form of benefit may be reduced to the extent permitted under Section 412(c)(8) of the Code (as it read before the first day of the 2008 Plan Year), Section 412(d)(2) of the code (as it reads for Plan Years beginning on and after January 1, 2008), or to the extent permitted under the Sections 1.411(d)-(3) and 1.411(d)-(4) of the U.S. Treasury Department regulations.
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15.2
Termination
The Company reserves the right to terminate the Plan in whole or in part at any time by action of its Board of Directors. Upon complete or partial termination of the Plan, the nonforfeitable benefits of each Member (or, in the event of a partial termination, each Member affected by such partial termination) shall become nonforfeitable as of the date of such termination. In the event of such termination, after providing for the expenses of the Plan, the assets of the Plan applicable to Members affected by such termination shall be used and applied for the satisfaction of all liabilities under the Plan in the manner prescribed by Section 4044 of the Act (or corresponding provision of any subsequent applicable law in effect at the time). The Pension Committee may direct that benefits may be provided by the purchase of annuities, by continuing the Fund in existence and making provision thereunder for the payment of retirement benefits or by immediate distribution from the Fund. If, upon satisfaction of all benefit liabilities under the Plan with respect to Members, former Members, their Spouses and Beneficiaries, there is a balance remaining in the Fund, such balance shall be returned to the Company.
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15.3
Amendment Following Change in Control
Notwithstanding the provisions of Subsection 15.1(a), the Board of Directors shall have the right to amend or terminate the Plan at any time; provided, however, that for a period of three years following a "change in control" (as such term is defined in Section 15.4), the provisions of the Plan may not be amended if any amendment would adversely affect the rights, expectancies or benefits of any Member, Spouse or other designated Beneficiary provided by the Plan as in effect immediately prior to the Change in Control.
15.4
Termination Following Change in Control
Notwithstanding the preceding provisions of this Section or any other provision of this Plan, in the event this Plan is terminated within three years following a "change in control" (as hereinafter defined), the assets of the Plan shall be applied in accordance with the preceding provisions of this Section 15.2 to satisfy all liabilities to retired Members, Members, Spouses, Contingent Annuitants and Beneficiaries. If, after satisfaction of such liabilities, there are assets remaining in the Plan, such assets shall be applied on a pro rata basis to increase the benefits to Members who are in active service of the Company on the date of such termination; provided, however, that if any portion of an allocation of such assets, when added to any other payments to any individual who is a "disqualified individual," as such term is defined in Section 280G(c) of the Code, would result in the imposition of an excise tax pursuant to Section 4999 of the Code (as determined by the Trustee), then such allocation shall be reduced until either no portion of the allocation would result in the imposition of such excise tax or such allocation is reduced to zero. For purposes hereof, a "change in control" shall mean:
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(a)
the acquisition by any corporation, person, or business entity of more than 20% of the then outstanding voting stock of the Company, other than through a transaction consented to by the Board of Directors of the Company prior to such acquisition of more than 20% of such then outstanding voting stock, and which consent of the Board of Directors of the Company is contained in a resolution of such Board adopted on a date which is both prior to such acquisition and subsequent to January 1, 1986, or
(b)
the purchase of shares of voting stock of the Company pursuant to a tender offer or exchange offer which is opposed by a majority of the members then serving on the Company's Board of Directors. Notwithstanding, the provisions of Section 15.1(a) hereof, the foregoing provisions of this paragraph may not be amended, following a "change in control", without the written consent of a majority, in both number and interest, of the Members who are in active service with the Company on the date of such amendment.
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16.1
Limitation Concerning Highly Compensated Employees or Highly Compensated Former Employees
(a)
The provisions of this Section shall apply (i) in the event the Plan is terminated, to any Member who is a highly compensated employee or highly compensated former employee (as those terms are defined in Section 414(q) of the Code) of the Company or an Affiliated Employer and (ii) in any other event, to any Member who is one of the 25 highly compensated employees or highly compensated former employees of the Company or Affiliated Employer with the greatest compensation in any Plan Year. The amount of the annual payments to any one of the Members to whom this Section applies shall not be greater than an amount equal to the annual payments that would be made on behalf of the Member during the year under a single life annuity that is the Actuarial Equivalent to the sum of the Member’s Accrued Benefit and the Member’s other benefits under the Plan.
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(b)
If, (i) after payment of Accrued Benefits or other benefits to any one of the Members to whom this Section applies, the value of Plan assets equals or exceeds 110 percent of the value of current liabilities (as that term is defined in Section 412(l)(7) of the Code) of the Plan, (ii) the value of the Accrued Benefit and other benefits of any one of the Members to whom this Section applies is less than one percent of the value of current liabilities of the Plan, or (iii) the value of the benefits payable to a Member to whom this Section applies does not exceed the amount described in Section 411(a)(11)(A) of the Code, the provisions of paragraph (a) above will not be applicable to the payment of benefits to such Member.
(c)
If any Member to whom this Section applies elects to receive a lump sum payment in lieu of his Pension and the provisions of paragraph (b) above are not met with respect to such Member, the Member shall be entitled to receive his benefit in full provided he shall agree to repay to the Plan any portion of the lump sum payment which would be restricted by operation of the provisions of paragraph (a) and shall provide adequate security to guarantee that repayment.
(d)
Notwithstanding paragraph (a) of this Section, in the event the Plan is terminated, the restriction of this Section shall not be applicable if the benefit payable to any highly compensated employee and any highly compensated former employee is limited to a benefit that is nondiscriminatory under Section 401(a)(4) of the Code.
(e)
If it should subsequently be determined by statute, court decision acquiesced in by the Commissioner of Internal Revenue, or ruling by the Commissioner of Internal Revenue that the provisions of this Section are no longer necessary to qualify the Plan under the Code, this Section shall be ineffective without the necessity of further amendment to the Plan.
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16.2
Limitations Applicable If the Plan's Adjusted Funding Target Attainment Percentage Is Less Than 80 Percent, But Not Less Than 60 Percent. Notwithstanding any other provisions of the Plan, if the Plan's adjusted funding target attainment percentage for a Plan Year is less than 80 percent (or would be less than 80 percent to the extent described in Section 16.2(b) below) but is not less than 60 percent, then the limitations set forth in this Section 16.2 apply.
(a)
50 Percent Limitation on Single Sum Payments, Other Accelerated Forms of Distribution, and Other Prohibited Payments. A Member or Beneficiary is not permitted to elect, and the Plan shall not pay, a single sum payment or other optional form of benefit that includes a prohibited payment with an annuity starting date on or after the applicable section 436 measurement date, and the Plan shall not make any payment for the purchase of an irrevocable commitment from an insurer to pay benefits or any other payment or transfer that is a prohibited payment, unless the present value of the portion of the benefit that is being paid in a prohibited payment does not exceed the lesser of:
(i)
50 percent of the present value of the benefit payable in the optional form of benefit that includes the prohibited payment; or
(ii)
100 percent of the PBGC maximum benefit guarantee amount (as defined in § 1.436-1(d)(3)(iii)(C) of the Treasury Regulations).
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The limitation set forth in this Section 16.2(a) does not apply to any payment of a benefit which under § 411(a)(11) of the Internal Revenue Code may be immediately distributed without the consent of the Participant. If an optional form of benefit that is otherwise available under the terms of the Plan is not available to a Member or Beneficiary as of the annuity starting date because of the application of the requirements of this Section 6.06(a), the Member or Beneficiary, is permitted to elect to bifurcate the benefit into unrestricted and restricted portions (as described in § 1.436-1(d)(3)(iii)(D) of the Treasury Regulations).
The Member or Beneficiary may also elect any other optional form of benefit otherwise available under the Plan at that annuity starting date that would satisfy the 50 percent/PBGC maximum benefit guarantee amount limitation described in 12 this Section 1(a), or may elect to defer the benefit in accordance with any general right to defer commencement of benefits under the Plan.
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(b)
Plan Amendments Increasing Liability for Benefits. No amendment to the Plan that has the effect of increasing liabilities of the Plan by reason of increases in benefits, establishment of new benefits, changing the rate of benefit accrual, or changing the rate at which benefits become nonforfeitable shall take effect in a Plan Year if the adjusted funding target attainment percentage for the Plan Year is:
(i)
Less than 80 percent; or
(ii)
80 percent or more, but would be less than 80 percent if the benefits attributable to the amendment were taken into account in determining the adjusted funding target attainment percentage.
The limitation set forth in this Section 16.2(b) does not apply to any amendment to the Plan that provides a benefit increase under a Plan formula that is not based on compensation, provided that the rate of such increase does not exceed the contemporaneous rate of increase in the average wages of Members covered by the amendment.
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16.3
Limitations Applicable If the Plan’s Adjusted Funding Target Attainment Percentage Is Less Than 60 Percent.
Notwithstanding any other provisions of the Plan, if the Plan’s adjusted funding target attainment percentage for a Plan year is less than 60 percent (or would be less than 60 percent to the extent described in Section 16.3(b) below), then the limitations in this Section 16.3 apply.
(a)
Single Sums, Other Accelerated Forms of Distribution, and Other Prohibited Payments Not Permitted. A Member or Beneficiary is not permitted to elect, and the Plan shall not pay, a single sum payment or other optional form of benefit that includes a prohibited payment with an annuity starting date on or after the applicable section 436 measurement date, and the Plan shall not make any payment for the purchase of an irrevocable commitment from an insurer to pay benefits or any other payment or transfer that is a prohibited payment. The limitation set forth in this Section 16.3 does not apply to any payment of a benefit which under § 411(a)(11) of the Internal Revenue Code may be immediately distributed without the consent of the Member.
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(b)
Shutdown Benefits and Other Unpredictable Contingent Event Benefits Not Permitted to Be Paid. An unpredictable contingent event benefit with respect to an unpredictable contingent event occurring during a Plan year shall not be paid if the adjusted funding target attainment percentage for the Plan Year is:
(i)
Less than 60 percent; or
(ii)
60 percent or more, but would be less than 60 percent if the adjusted funding target attainment percentage were redetermined applying an actuarial assumption that the likelihood of occurrence of the unpredictable contingent event during the Plan Year is 100 percent.
(c)
Benefit Accruals Frozen. Benefit accruals under the Plan shall cease as of the applicable section 436 measurement date. In addition, if the Plan is required to cease benefit accruals under this Section 16.3(c), then the Plan is not permitted to be amended in a manner that would increase the liabilities of the Plan by reason of an increase in benefits or establishment of new benefits.
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16.4
Limitations Applicable If the Plan Sponsor Is In Bankruptcy. Notwithstanding any other provisions of the Plan, a Member or Beneficiary is not permitted to elect, and the Plan shall not pay, a single sum payment or other optional form of benefit that includes a prohibited payment with an annuity starting date that occurs during any period in which the Plan sponsor is a debtor in a case under title 11, United States Code, or similar Federal or State law, except for payments made within a Plan year with an annuity starting date that occurs on or after the date on which the Plan’s enrolled actuary certifies that the Plan’s adjusted funding target attainment percentage for that Plan year is not less than 100 percent. In addition, during such period in which the Plan sponsor is a debtor, the Plan shall not make any payment for the purchase of an irrevocable commitment from an insurer to pay benefits or any other payment or transfer that is a prohibited payment, except for payments that occur on a date within a Plan year that is on or after the date on which the Plan’s enrolled actuary certifies that the Plan’s adjusted funding target attainment percentage for that Plan year is not less than 100 percent. The limitation set forth in this Section 16.4 does not apply to any payment of a benefit which under § 411(a)(11) of the Internal Revenue Code may be immediately distributed without the consent of the Member.
16.5
Provisions Applicable After Limitations Cease to Apply.
(a)
Resumption of Prohibited Payments. If a limitation on prohibited payments under Section 16.2(a), Section 16.3(a), or Section 16.4 applied to the Plan as of a section 436 measurement date, but that limit no longer applies to the Plan as of a later section 436 measurement date, then that limitation does not apply to benefits with annuity starting dates that are on or after that later section 436 measurement date.
(b)
Resumption of Benefit Accruals. If a limitation on benefit accruals under Section 16.3(c) applied to the Plan as of a section 436 measurement date, but that limitation no longer applies to the Plan as of a later section 436 measurement date, then benefit accruals shall resume prospectively and that limitation does not apply to benefit accruals that are based on service on or after that later section 436 measurement date, except as otherwise provided under the Plan. The Plan shall comply with the rules relating to partial years of participation and the prohibition on double proration under Department of Labor regulation 29 CFR § 2530.204-2(c) and (d).
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(c)
Shutdown and Other Unpredictable Contingent Event Benefits. If an unpredictable contingent event benefit with respect to an unpredictable contingent event that occurs during the Plan Year is not permitted to be paid after the occurrence of the event because of the limitation of Section 16.3(b), but is permitted to be paid later in the same Plan Year (as a result of additional contributions or pursuant to the enrolled actuary’s certification of the adjusted funding target attainment percentage for the Plan year that meets the requirements of § 1.436-1(g)(5)(ii)(B) of the Treasury Regulations), then that unpredictable contingent event benefit shall be paid, retroactive to the period that benefit would have been payable under the terms of the Plan (determined without regard to Section 16.3(b)). If the unpredictable contingent event benefit does not become payable during the Plan year in accordance with the preceding sentence, then the Plan is treated as if it does not provide for that benefit.
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(d)
Treatment of Plan Amendments That Do Not Take Effect. If a Plan amendment does not take effect as of the effective date of the amendment because of the limitation of Section 16.2(b) or Section 16.3(c), but is permitted to take effect later in the same Plan Year (as a result of additional contributions or pursuant to the enrolled actuary’s certification of the adjusted funding target attainment percentage for the Plan year that meets the requirements of § 1.436-1(g)(5)(ii)(C) of the Treasury Regulations), then the Plan amendment must automatically take effect as of the first day of the Plan Year (or, if later, the original effective date of the amendment). If the Plan amendment cannot take effect during the same Plan Year, then it shall be treated as if it were never adopted, unless the Plan amendment provides otherwise.
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16.6
Notice Requirement. See section 101(j) of ERISA for rules requiring the Plan administrator of a single employer defined benefit pension Plan to provide a written notice to Members and beneficiaries within 30 days after certain specified dates if the Plan has become subject to a limitation described in Section 16.2(a), Section 16.3, or Section 16.4.
16.7
Methods to Avoid or Terminate Benefit Limitations. See § 436(b)(2), (c)(2), (e)(2), and (f) of the Internal Revenue Code and § 1.436-1(f) of the Treasury Regulations for rules relating to employer contributions and other methods to avoid or terminate the application of the limitations set forth in Sections 16.2 through 16.4 for a Plan Year. In general, the methods a Plan sponsor may use to avoid or terminate one or more of the benefit limitations under Sections 16.2 through 16.4 for a Plan Year include employer contributions and elections to increase the amount of Plan assets which are taken into account in determining the adjusted funding target attainment percentage, making an employer contribution that is specifically designated as a current year contribution that is made to avoid or terminate application of certain of the benefit limitations, or providing security to the Plan.
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16.8
Special Rules.
(a)
Rules of Operation for Periods Prior to and After Certification of Plan’s Adjusted Funding Target Attainment Percentage.
(i)
In General. Section 436(h) of the Internal Revenue Code and § 1.436-1(h) of the Treasury Regulations set forth a series of presumptions that apply (1) before the Plan’s enrolled actuary issues a certification of the Plan’s adjusted funding target attainment percentage for the Plan Year and (2) if the Plan’s enrolled actuary does not issue a certification of the Plan’s adjusted funding target attainment percentage for the Plan year before the first day of the 10th month of the Plan Year (or if the Plan’s enrolled actuary issues a range certification for the Plan year pursuant to § 1.436-1(h)(4)(ii) of the Treasury Regulations but does not issue a certification of the specific adjusted funding target attainment percentage for the Plan by the last day of the Plan year). For any period during which a presumption under § 436(h) of the Internal Revenue Code and § 1.436-1(h) of the Treasury Regulations applies to the Plan, the limitations under Sections 16.2 through 16.4 are applied to the Plan as if the adjusted funding target attainment percentage for the Plan year were the presumed adjusted funding target attainment percentage determined under the rules of § 436(h) of the Internal Revenue Code and § 1.436-1(h)(1), (2), or (3) of the Treasury Regulations. These presumptions are set forth in Section 16.8 (a)(ii) though (iv).
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(ii)
Presumption of Continued Underfunding Beginning First Day of Plan Year. If a limitation under Section 16.2, 16.3, or 16.4 applied to the Plan on the last day of the preceding Plan Year, then, commencing on the first day of the current Plan year and continuing until the Plan’s enrolled actuary issues a certification of the adjusted funding target attainment percentage for the Plan for the current Plan year, or, if earlier, the date Section 16.8(a)(iii) or Section 16.8(a)(iv) applies to the Plan:
1.
The adjusted funding target attainment percentage of the Plan for the current Plan year is presumed to be the adjusted funding target attainment percentage in effect on the last day of the preceding Plan year; and
2.
The first day of the current Plan year is a section 436 measurement date.
(iii)
Presumption of Underfunding Beginning First Day of 4th Month. If the Plan’s enrolled actuary has not issued a certification of the adjusted funding target attainment percentage for the Plan year before the first day of the 4th month of the Plan Year and the Plan’s adjusted funding target attainment percentage for the preceding Plan year was either at least 60 percent but less than 70 percent or at least 80 percent but less than 90 percent, or is described in § 1.436-1(h)(2)(ii) of the Treasury Regulations, then, commencing on the first day of the 4th month of the current Plan year and continuing until the Plan’s enrolled actuary issues a certification of the adjusted funding target attainment percentage for the Plan for the current Plan year, or, if earlier, the date Section 16.8(a)(iv) applies to the Plan:
1.
The adjusted funding target attainment percentage of the Plan for the current Plan Year is presumed to be the Plan’s adjusted funding target attainment percentage for the preceding Plan Year reduced by 10 percentage points; and
2.
The first day of the 4th month of the current Plan Year is a section 436 measurement date.
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(iv)
Presumption of Underfunding On and After First Day of 10th Month. If the Plan’s enrolled actuary has not issued a certification of the adjusted funding target attainment percentage for the Plan Year before the first day of the 10th month of the Plan Year (or if the Plan’s enrolled actuary has issued a range certification for the Plan year pursuant to § 1.436-1(h)(4)(ii) of the Treasury Regulations but has not issued a certification of the specific adjusted funding target attainment percentage for the Plan by the last day of the Plan year), then, commencing on the first day of the 10th month of the current Plan Year and continuing through the end of the Plan Year:
1.
The adjusted funding target attainment percentage of the Plan for the current Plan year is presumed to be less than 60 percent; and
2.
The first day of the 10th month of the current Plan year is a 36 measurement date.
(b)
New Plans, Plan Termination, Certain Frozen Plans, and Other Special Rules.
(i)
First 5 Plan Years. The limitations in Section 16.2(b), Section 16.3(b), and Section 16.4(c) do not apply to a new Plan for the first 5 Plan years of the Plan, determined under the rules of § 436(i) of the Internal Revenue Code and § 1.436-1(a)(3)(i) of the Treasury Regulations.
90
(ii)
Plan Termination. The limitations on prohibited payments in Section 16.2(a), Section 16.3(a), and Section 16.9 do not apply to prohibited payments that are made to carry out the termination of the Plan in accordance with applicable law. Any other limitations under this section of the Plan do not cease to apply as a result of termination of the Plan.
(iii)
Exception to Limitations on Prohibited Payments Under Certain Frozen Plans. The limitations on prohibited payments set forth in Sections 16.2(a), 16.3(a), and 16.4 do not apply for a Plan year if the terms of the Plan, as in effect for the period beginning on September 1, 2005, and continuing through the end of the Plan year, provide for no benefit accruals with respect to any Members. This Section 16.8(b)(iii) shall cease to apply as of the date any benefits accrue under the Plan or the date on which a Plan amendment that increases benefits takes effect.
(iv)
Special Rules Relating to Unpredictable Contingent Event Benefits and Plan Amendments Increasing Benefit Liability. During any period in which none of the presumptions under Section 16.8(a) apply to the Plan and the Plan’s enrolled actuary has not yet issued a certification of the Plan’s adjusted funding target attainment percentage for the Plan year, the limitations under Section 16.2(b) and Section 16.3(b) shall be based on the inclusive presumed adjusted funding target attainment percentage for the Plan, calculated in accordance with the rules of § 1.436-1(g)(2)(iii) of the Treasury Regulations.
91
(c)
Special Rules Under PRA 2010.
(i)
Payments Under Social Security Leveling Options. For purposes of determining whether the limitations under Section 16.2(a) or 16.3(a) apply to payments under a social security leveling option, within the meaning of § 436(j)(3)(C)(i) of the Internal Revenue Code, the adjusted funding target attainment percentage for a Plan year shall be determined in accordance with the “Special Rule for Certain Years” under § 436(j)(3) of the Internal Revenue Code and any Treasury Regulations or other published guidance thereunder issued by the Internal Revenue Service.
(ii)
Limitation on Benefit Accruals. For purposes of determining whether the accrual limitation under Section 16.3(c) applies to the Plan, the adjusted funding target attainment percentage for a Plan Year shall be determined in accordance with the “Special Rule for Certain Years” under § 436(j)(3) of the Internal Revenue Code (except as provided under section 203(b) of the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, if applicable).
(d)
Interpretation of Provisions. The limitations imposed by this section of the Plan shall be interpreted and administered in accordance with § 436 of the Internal Revenue Code and § 1.436-1 of the Treasury Regulations.
16.9
Definitions. The definitions in the following Treasury Regulations apply for purposes of Sections 1 through 7: § 1.436-1(j)(1) defining adjusted funding target attainment percentage; § 1.436-1(j)(2) defining annuity starting date; § 1.436-1(j)(6) defining prohibited payment; § 1.436-1(j)(8) defining section 436 measurement date; and § 1.436-1(j)(9) defining an unpredictable contingent event and an unpredictable contingent event benefit.
92
17.1
The general administration of the Plan shall be placed in a Pension Committee consisting of not less than three nor more than nine persons who shall be appointed, from time to time, by the Board to serve at the pleasure of said Board. The members of the Pension Committee shall collectively be the Plan Administrator and Named Fiduciary, as such terms are defined under the Act.
17.2
Any person appointed as a member of the Pension Committee shall signify his acceptance in writing to the Board. Any member of the Pension Committee may resign by delivering his written resignation to the Board and such resignation shall become effective upon delivery or any later date specified therein.
17.3
The members of the Pension Committee will serve without compensation for services as such, but the Company on an equitable basis shall pay or reimburse the Pension Committee for all expenses reasonably incurred by the Pension Committee and shall indemnify the Pension Committee and each member thereof against all loss, liability and expense occasioned by any act or omission to act taken or determined upon by it, or him, except any such act or omission which is due to willful misconduct, fraud or lack of good faith.
93
17.4
A majority of the members of the Pension Committee, at the time in office, may do any act which this Plan authorizes or requires the Pension Committee to do, and the action of such majority of the members expressed from time to time by a vote at a meeting, or in writing without a meeting, shall constitute the action of the Pension Committee and shall have the same effect for all the members at the time in office. The Pension Committee may, by a writing signed by a majority of its members, delegate to any one member of the Pension Committee the authority to give certified notice in writing of any action taken by the Pension Committee and may assign specific duties and responsibilities to one or more of its members.
17.5
Subject to the limitations of the Plan, the Pension Committee shall establish rules for the administration of the Plan and the transaction of its business. The determination of the Pension Committee as to any questions involving the general administration of the Plan or the proper interpretation of any of its provisions shall be conclusive.
94
17.6
The Pension Committee's determination, as to which Employees are eligible to be Members and of a Member's period of Credited Service and Salary, shall be conclusive. Any discretionary actions to be taken under this Plan by the Pension Committee with respect to the classification of Members or benefits shall be uniform in their nature and applicable to all Members similarly situated and shall be taken with care, skill, prudence and diligence that a prudent man acting in a like capacity under circumstances similar to those then prevailing would use. The Pension Committee shall have complete and discretionary authority to determine eligibility for benefits, the amount of benefits and to otherwise interpret and administer the provisions of the Plan. The Pension Committee may appoint accountants, attorneys, Actuaries or other agents as it may deem necessary or advisable in order to properly administer and implement the Plan, and may delegate to such appointees appropriate ministerial duties consistent with their background and experience, to the extent that such duties are properly delegable under the Act. The Pension Committee shall not be liable for any act or omission of such accountant, attorney, Actuary, or other agent in carrying out their delegated responsibilities provided that the Pension Committee does not fail to conduct itself in the manner described above with respect to such designation of agents and allocation of duties, and provided further, that the Pension Committee does not
(i)
knowingly participate in or knowingly undertake to conceal an act or omission of such agent, knowing that such act or omission is inconsistent with the requirements of the Plan and of the Act, or
(ii)
through a failure to comply with the prudent action described above enable such agent to commit such an improper act or omission, or
(iii)
have knowledge of such improper act or omission on the part of such agent, and yet fail to make reasonable efforts under the circumstances to remedy such improper act or omission.
95
17.7
The Pension Committee shall keep in convenient form such data as may be necessary for actuarial valuations with respect to the operation and administration of the Plan and may
(a)
adopt standards for use in all actuarial calculations required in connection with the Plan;
(b)
establish the rate of contribution required to maintain the Plan; and
(c)
advise the Company of the rate so established.
The Pension Committee shall submit annually to the Board a report showing, in reasonable summary, the financial condition of the Trust Fund and giving a brief account of the operations of the Plan for the past year, and any further information which the Board may require.
17.8
The members of the Pension Committee, and the Company and its officers and directors shall be entitled to rely upon all tables, valuations, certificates and reports made by any Actuary or accountant so selected, and upon all opinions given by any legal counsel so selected, and the members of the Pension Committee shall be fully protected with respect to any actions taken or suffered by them in good faith in reliance upon such Actuary, accountant, or counsel, and all action so taken or suffered shall be conclusive upon each of them and upon all Members, retired Members, Spouses, Contingent Annuitants and Beneficiaries.
96
17.9
The Pension Committee shall make all reports and give all notices with respect to the Plan and the administration thereof which may be required under the provisions of the Code or of the Act and the regulations promulgated thereunder.
17.10
Denial of Claims Procedure
Any application for benefits by a Member, his Spouse, or other designated Beneficiary, submitted to the Pension Committee on appropriate form shall constitute a claim. In any instance where such claim is denied in whole or in part by the Pension Committee, their decision shall be submitted in writing to the Member, Spouse, or Beneficiary, within 90 days following receipt of such claim, unless special circumstances require additional time, which may be up to an additional 90 days provided the claimant is notified within the initial 90-day period, setting forth the following:
(a)
basis for denial of claim;
(b)
plan provision on which denial is based;
(c)
description of any additional information required of the Member, his Spouse, or other Beneficiary;
(d)
an explanation of why such information is necessary; and
(e)
an explanation of the procedures for reviewing claims under the Plan.
97
Upon receipt of denial of a claim by the Member, Spouse, Contingent Annuitant, or Beneficiary, an appeal requesting further review may be submitted to the Pension Committee within 60 days following receipt of such denial. Upon receipt of a request for review, the Pension Committee will meet and render a decision within 60 days following the receipt of an appeal unless special circumstances exist which may permit an extension of time, in which case a decision shall be made as soon as possible after the 60-day period, but may in no event be extended beyond 120 days following receipt of appeal. The Pension Committee's ultimate decision shall be submitted to the Member, Spouse, or Beneficiary in writing, setting forth the specific reasons for the decision and specific references to the provisions of the Plan on which the decision is based.
98
17.11
Facility of Payment
If the Pension Committee shall find that a Member or other person entitled to a benefit is unable to care for his affairs because of illness or accident or because he is a minor, the Pension Committee may direct that any benefit due him, unless claim shall have been made for the benefit by a duly appointed legal representative, be paid to his spouse, a child, a parent or other blood relative, or to a person with whom he resides. Any payment so made shall be a complete discharge of the liabilities of the Plan for that benefit.
Furthermore, if the Pension Committee receives on behalf of a Member a power of attorney with respect to such Member valid under state law, the Pension Committee shall comply with the instructions of the named attorney to the extent that the Pension Committee would comply with such instructions if given by the Member and such instructions are consistent with the power of attorney.
99
18.1
As a part of this Plan the Company has entered into a Trust Agreement under which the Trustee shall receive the contribution of the Company under this Plan to the Trust Fund on behalf of the Members and shall hold, invest and distribute such fund in accordance with the terms and provisions of the Plan and the Trust Agreement.
18.2
The Company intends that this shall be a permanent Plan for the exclusive benefit of its Members and expects to contribute to the Trust Fund the amounts which will provide in full the benefits payable under the Plan. The Company may rely upon the estimates made by the Pension Committee of the amount of contributions needed to fund the Plan in accordance with the requirements of Section 412 of the Code. Neither the Company, the Pension Committee, nor the Trustee shall be liable under the Plan if the Trust Fund should be insufficient to provide for the payment of such benefits. Such benefits are to be payable from the Trust Fund only and to the extent that such Trust Fund shall suffice therefore.
100
19.1
Definitions
The following words and phrases in this Section XIX shall have the following meanings, unless the context clearly indicates otherwise.
(a)
Key Employee - Members, retired and former Members, Spouses, Beneficiaries and Contingent Annuitants who during the current Plan Year or any of the four preceding Plan Years are considered "Key Employees" under Code Section 416(i) and regulations issued thereunder.
(b)
Participant - A Member or former Member of a plan included within the aggregation group set forth in Section 19.2. On and after January 1, 1985, the term "Participant" shall not include an individual who has not performed services for the Company within a five-year period ending on a Determination Date.
(c)
Determination Date - December 31, 1983, and each subsequent December 31st thereafter.
(d)
Top Heavy Year - Any Plan Year in which the Plan is determined to be Top Heavy under subsection 19.2.
(e)
Effective Date - January 1, 1984.
101
19.2
Top-Heavy Plan Defined
(a)
Plan Aggregation
All defined benefit plans and defined contribution plans maintained by the Company or an Affiliated Employer shall be aggregated (Aggregate Group of Plans) for purposes of this Section 19.2 as if all Employees included in the Aggregate Group were Employees of the Company. The Required Aggregation Group of the Company includes each plan of the Aggregate Group in which a Key Employee participates and each other plan of the Company which enables any plan in which a Key Employee participates to meet the requirements of Section 401(a)(4) or 410 of the Code. The Permissive Aggregation Group shall consist of plans of the Aggregate Group that are in a Required Aggregation Group plus one or more plans that are not part of a Required Aggregation Group, but that satisfy the requirements of Sections 401(a)(4) and 410 of the Code when considered together with a Required Aggregation Group. The Company shall determine on each Determination Date as to whether the Required Aggregation Group or Permissive Aggregation Group is to be applied to Top Heavy determination.
(b)
Determination of Top Heavy
This Plan shall be a Top Heavy Plan with respect to any Plan Year starting on or after the Effective Date of this Section XIX only if on the Determination Date applicable to such Plan Year the sum of:
102
(i)
The present value of Accrued Benefits for Key Employees, as determined under the provisions of this Section applicable to Defined Benefit Plans for all such plans included within the Required Aggregation Group or the Permissive Aggregation Group, and
(ii)
The aggregate of the account balances of Key Employees (as adjusted under the provisions of this Article applicable to Defined Contribution Plans), under all such plans included within the Required Aggregation Group or the permissive Aggregation Group; exceeds 60% of a similar sum determined for all Participants in such Required or Permissive Aggregation Groups.
103
(c)
Adjustments to the Present Value of Accrued Benefits for Defined Benefit Plans.
For any defined benefit plan included within the Required or Permissive Aggregation Group, the present value of Accrued Benefits of any Participant shall be increased to reflect any distribution from the Plan with respect to such Participant during the five-year period ending on the Determination Date.
Solely for purposes of determining if the Plan, or any other plan included in a Required Aggregation Group of which this Plan is a part, is top heavy (within the meaning of Section 416(g) of the Code) the Accrued Benefit of an Employee other than a Key Employee shall be determined under the method, if any, that uniformly applies for accrual purposes under all Plans maintained by the Employer, or if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rate of Code Section 411(1)(c).
(d)
Adjustment to the Value of Account Balance for Defined Contribution Plans.
For any defined contribution plan included within the Aggregate Group, the total Account Balances shall be increased to reflect the value of any distributions made to a Participant by the Plan during the five-year period ending on the Determination Date and reduced to eliminate the value of any rollover contributions included in such participant's Account Balances made after December 31, 1983, provided such rollover contribution is initiated by the Participant and not made from an Aggregate Group Plan. In addition, Account Balances of participants shall be reduced by the portion of such balances attributable to qualified voluntary employee contributions made pursuant to Section 219 of the Internal Revenue Code.
104
(e)
Adjustment for Prior Key Employees.
Employee in prior Plan Years who is not a Key Employee with respect to a current Plan Year shall be excluded entirely in computing the percentage in Section 19.2.
(f)
Present value of Accrued Benefits for Defined Benefit Plans shall be determined, for the purposes of Section 19.2(2)(a), according to the 1984 - UP Mortality Table and a 7-1/2% interest rate.
19.3
Minimum Benefit
For any Top Heavy Plan Year, the following provisions will apply.
(a)
Notwithstanding the provisions of Section 4.1, for each non-Key Employee covered under this Plan and a defined contribution plan, if the Company maintains a defined contribution plan and, if minimum benefits as defined by Code Section 416(c) and subsequent IRS regulations are provided such that the requirements of Code Section 416(f) are satisfied for such Plan Year, then no minimum benefits will be provided under this Plan for that Plan Year.
105
(b)
If the conditions under paragraph (a) above are not met with respect to any Plan Year during which the Plan is a Top Heavy Plan, the Accrued Benefit, derived from Company contributions, of a Member who is not a Key Employee shall not be less than 2% of such Member's Average Compensation multiplied by his Years of Service (not to exceed ten years).
(c)
For purposes of this Section, the following definitions are applicable:
(i)
Years of Service shall be the Member's Years of Vesting Service, except that the following Years of Vesting Service shall be disregarded:
(A)
Any Plan Year during which the Plan was not a Top Heavy Plan; and
(B)
Any Plan Year beginning before 1984.
(ii)
Average Compensation shall be the Member's Compensation from the Company during that period of five consecutive Top Heavy Plan Years (or actual Top Heavy Plan Years, if less than five) which produce the highest average.
(iii)
Accrued Benefit shall be an annual benefit payable in the form of a single life annuity (with no ancillary benefits) and beginning at Normal Retirement Date.
106
19.4
Vesting
(a)
An active Member in a Top Heavy Plan shall have a nonforfeitable interest in his Accrued Benefit derived from Company contributions as provided under the following schedule:
| Years of Vesting Service |
| Nonforfeitable Percentage |
|
| ||
|
|
|
|
| Less than 2 |
| 0% |
| 2 |
| 20% |
| 3 |
| 40% |
| 4 |
| 60% |
| 5 or more |
| 100% |
Accrued Benefit, for the purposes of this subsection, shall include that portion of Accrued Benefits which the Member earned during all prior Plan Years, whether or not the Plan was a Top Heavy Plan during such prior Plan Years.
(b)
If a Member has completed fewer than three Years of Vesting Service on or before the last day of the most recent Plan Year for which the Plan was a Top Heavy Plan, the vesting provisions of Section 19.4(a) shall continue to be applicable to the portion of his Accrued Benefit determined as of the last day of the Plan Year in which the Plan was a Top Heavy Plan, and Section 9.2(a) shall again be applicable with respect to the remaining portion of his Accrued Benefit; provided, however, that in no event shall the vested percentage of such remaining portion be less than the percentage determined under the above as of the last day of the most recent Plan Year for which the Plan was a Top Heavy Plan.
107
19.5
Notwithstanding anything in this Section XIX to the contrary, the following provisions shall apply for Plan Years beginning on or after January 1, 2002, for purposes of determining whether the Plan is Top Heavy and whether it satisfies the minimum benefit requirements of Section 416(c) of the Code.
(a)
Key employee. Key employee means any employee or former employee (including any deceased employee) who at any time during the Plan Year that includes the determination date was an officer of the Company having annual compensation greater than $130,000 (as adjusted under Section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002), a 5-percent owner of the Company, or a 1-percent owner of the Company having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of Section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with Section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.
108
(b)
Determination of present values and amounts. This Subsection (b) shall apply for purposes of determining the present values of Employee’s accrued benefits as of the determination date.
(i)
Distributions during year ending on the determination date. The present values of an Employee’s accrued benefit of the determination date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Section 416(g)(2) of the Code during the 1-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting “5-year period" for "1–year period.”
109
(ii)
Employees not performing services during year ending on the determination date. The accrued benefit of any individual who has not performed services for the Company during the 1-year period ending on the determination date shall not be taken into account.
(c)
Minimum benefits.
(i)
Matching contributions. For purposes of satisfying the minimum benefit requirements of Section 416(c)(1) of the Code and the Plan, in determining years of service with the Company, any service with the Company shall be disregarded to the extent such service occurs during a Plan Year when the Plan benefits (within the meaning of Section 410(b) of the Code) no Key Employee or former Key Employee.
110
20.1
Effect of Plan Merger
In the event of a merger or consolidation of the Plan with any other plan or a transfer of assets or liabilities of the Plan to any other plan or a transfer of assets or liabilities of any other plan to the Plan, each Member (if the Plan or the plan to which assets or liabilities have been transferred then terminated) shall be entitled to receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer if the Plan or the plan from which the transfer to the Plan was made had been terminated. No transfer of assets or liabilities shall be made from the Plan to another plan which does not have a provision similar to this Section 20.1.
Notwithstanding the preceding provisions of Section 20.1 or any other provision of this Plan, in the event of any such merger, consolidation or transfer of assets or liabilities which is effected within three years following a "change in control" (as defined in Section 15.4), the accrued benefit of each Member who is in active service of the Company on the date of such merger, consolidation or transfer of assets or liabilities, other than any person who is a "disqualified individual," as such term is defined in Section 280G(c) of the Code, shall be increased in accordance with the provisions of Section 15.2 such that any excess, as of the date of any such transaction, of the fair market value of the assets of the Plan over the present value of accrued benefits hereunder (determined as if the Plan had terminated immediately prior to such transaction) is exhausted. Notwithstanding the provisions of Section 15.1(a) hereof, the foregoing provisions of this paragraph may not be amended, following a "change in control", without the written consent of a majority, in both number and interest, of the Members who are in active service with the Company on the date of such amendment.
111
20.2
Construction
This Plan shall be administered, construed and enforced according to the Act and, to the extent not preempted by the Act, the laws of the State of New York.
The foregoing constitutes the Retirement Pension Plan, as amended, restated and adopted by Trans-Lux Corporation for its employees and the employees of its designated subsidiaries, effective January 1, 2016.
IN WITNESS WHEREOF, the proper officer of Trans-Lux Corporation has caused this Plan to be executed this ______ day of ___________________, 2016.
|
|
| TRANS-LUX CORPORATION |
| ATTEST: |
|
|
112
The following option factors shall be used in determining actuarial equivalency:
(a)
IRS Interest Rate means, with respect to determining the amount of a benefit with a Retirement Commencement Date on or after January 1, 2008, the interest rate prescribed under Section 417(e)(3)(C) of the Code (as it reads effective on and after the first day of the 2008 Plan Year) as in effect the second full calendar month preceding the applicable Stability Period.
"IRS Mortality Table" means, with respect to determining the amount of a benefit with a Retirement Commencement Date on or after January 1, 2008, the mortality table prescribed under Section 417(e)(3)(b) of the Code (as it reads effective on and after the first day of the 2008 Plan Year).
“Stability Period” means the calendar year in which the Retirement Commencement Date for a distribution occurs.
(b)
Early Retirement Factors are based on the following table (factors are interpolated to reflect an employee's attained age expressed in years and completed months).
| AGE |
| EARLY RETIREMENT FACTOR |
| 65 |
| 1.00 |
| 64 |
| .94 |
| 63 |
| .88 |
| 62 |
| .82 |
| 61 |
| .76 |
| 60 |
| .70 |
| 59 |
| .67 |
| 58 |
| .64 |
| 57 |
| .61 |
| 56 |
| .58 |
| 55 |
| .55 |
(c)
All options approved by the Pension Committee, including the qualified joint and survivor annuity, the 100%, 75%, 66-2/3%, and 50% joint and survivor annuities, 10-year certain annuity and Social Security leveling option are based on an interest rate of 6.5%, compounded annually, and the 94 Group Annuity Reserve mortality table projected to 2002, scale AA, as prescribed by Revenue Ruling 2001-62.
113
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
A. As of December 31, 2015 the following are subsidiaries more than 50% owned (included in the consolidated financial statements):
|
Jurisdiction of Incorporation | Percentage Owned | |||
| Name | ||||
| Trans-Lux Canada Ltd. | Canada | 100% | ||
| Trans-Lux Commercial Corporation | Utah | 100 | ||
| Trans-Lux Display Corporation | Delaware | 100 | ||
| Trans-Lux Experience Corporation | New York | 100 | ||
| Trans-Lux Energy Corporation | Connecticut | 100 | ||
| Trans-Lux Midwest Corporation | Iowa | 100 | ||
| Trans-Lux Seaport Corporation | New York | 100 | ||
| Trans-Lux Investment Corporation | Delaware | 100 | ||
| Trans-Lux Southwest Corporation | New Mexico | 100 |
EXHIBIT 31.1
TRANS-LUX CORPORATION
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT
I, Jean-Marc Allain, certify that:
1.
I have reviewed this annual report on Form 10-K of Trans-Lux Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Not applicable;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
| /s/ Jean-Marc Allain |
| Date: March 29, 2016 | Jean-Marc Allain |
|
| President and Chief Executive Officer |
EXHIBIT 31.2
TRANS-LUX CORPORATION
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT
I, Robert J. Conologue, certify that:
1.
I have reviewed this annual report on Form 10-K of Trans-Lux Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Not applicable;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
| /s/ Robert J. Conologue |
| Date: March 29, 2016 | Robert J. Conologue |
|
| Senior Vice President and Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), I, Jean-Marc Allain, President and Chief Executive Officer of Trans-Lux Corporation (the “Registrant”), do hereby certify, to the best of my knowledge that:
(1) The Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 being filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
This Certification accompanies this Form 10-K as an exhibit, but shall not be deemed as having been filed for purposes of Section 18 of the Securities Exchange Act of 1934 or as a separate disclosure document of the Registrant or the certifying officer.
|
| /s/ J.M. Allain |
| Date: March 29, 2016 | Jean-Marc Allain |
|
| President and Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), I, Robert J. Conologue, Senior Vice President and Chief Financial Officer of Trans-Lux Corporation (the “Registrant”), do hereby certify, to the best of my knowledge that:
(1) The Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 being filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
This Certification accompanies this Form 10-K as an exhibit, but shall not be deemed as having been filed for purposes of Section 18 of the Securities Exchange Act of 1934 or as a separate disclosure document of the Registrant or the certifying officer.
|
| /s/ Robert J. Conologue |
| Date: March 29, 2016 | Robert J. Conologue |
|
| Senior Vice President and Chief Financial Officer |
Document And Entity Information - USD ($) |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2015 |
Mar. 28, 2016 |
Jun. 30, 2015 |
|
| Document and Entity Information [Abstract] | |||
| Entity Registrant Name | TRANS LUX CORP | ||
| Document Type | 10-K | ||
| Current Fiscal Year End Date | --12-31 | ||
| Entity Common Stock, Shares Outstanding | 1,710,671 | ||
| Entity Public Float | $ 5,018,000 | ||
| Amendment Flag | false | ||
| Entity Central Index Key | 0000099106 | ||
| Entity Current Reporting Status | Yes | ||
| Entity Voluntary Filers | No | ||
| Entity Filer Category | Smaller Reporting Company | ||
| Entity Well-known Seasoned Issuer | No | ||
| Document Period End Date | Dec. 31, 2015 | ||
| Document Fiscal Year Focus | 2015 | ||
| Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Common Stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Common Stock, shares authorized | 10,000,000 | 10,000,000 |
| Common Stock, shares issued | 1,738,511 | 1,700,429 |
| Common Stock, shares outstanding | 1,710,671 | 1,672,589 |
| Treasury Stock, shares | 27,840 | 27,840 |
| Series A Preferred Stock [Member] | Convertible Preferred Stock [Member] | ||
| Preferred stock , par value (in Dollars per share) | $ 20.00 | $ 20 |
| Preferred stock, shares authorized | 416,500 | 416,500 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Series B Preferred Stock [Member] | Convertible Preferred Stock [Member] | ||
| Preferred stock , par value (in Dollars per share) | $ 200.00 | $ 200 |
| Preferred stock, shares authorized | 51,000 | 51,000 |
| Preferred stock, shares issued | 16,512 | 0 |
| Preferred stock, shares outstanding | 16,512 | 0 |
| Preferred stock, liquidation preference (in Dollars) | $ 3,325,000 |
CONSOLIDATED STATEMENTS OF OPERATION - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Revenues: | ||
| Digital product sales | $ 19,994 | $ 19,479 |
| Digital product lease and maintenance | 3,573 | 4,880 |
| Total revenues | 23,567 | 24,359 |
| Cost of revenues: | ||
| Cost of digital product sales | 15,373 | 15,482 |
| Cost of digital product lease and maintenance | 2,757 | 3,965 |
| Total cost of revenues | 18,130 | 19,447 |
| Gross profit | 5,437 | 4,912 |
| General and administrative expenses | (7,589) | (9,400) |
| Operating loss | (2,152) | (4,488) |
| Interest expense, net | (306) | (240) |
| Gain on foreign currency remeasurement | 478 | $ 236 |
| Gain on extinguishment of debt | 314 | |
| Warrant expense and change in warrant liabilities | (60) | $ (107) |
| Loss before income taxes | (1,726) | (4,599) |
| Income tax expense | (23) | (29) |
| Net loss | $ (1,749) | $ (4,628) |
| Loss per share - basic and diluted (in Dollars per share) | $ (1.06) | $ (3.38) |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Net loss | $ (1,749) | $ (4,628) |
| Other comprehensive income (loss): | ||
| Unrealized foreign currency translation loss | (448) | (269) |
| Change in unrecognized pension costs | 652 | (2,564) |
| Total other comprehensive income (loss), net of tax | 204 | (2,833) |
| Comprehensive loss | $ (1,545) | $ (7,461) |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS` EQUITY - USD ($) $ in Thousands |
Director [Member]
Additional Paid-in Capital [Member]
|
Director [Member] |
BFI [Member]
Additional Paid-in Capital [Member]
|
BFI [Member] |
Series B Preferred Stock [Member] |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
AOCI Attributable to Parent [Member] |
Treasury Stock [Member] |
Total |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2013 | $ 1 | $ 23,868 | $ (16,677) | $ (2,628) | $ (3,063) | $ 1,501 | |||||
| Balance (in Shares) at Dec. 31, 2013 | 1,051,253 | ||||||||||
| Net loss | (4,628) | (4,628) | |||||||||
| Warrants exercised | 286 | 286 | |||||||||
| Warrants exercised (in Shares) | 40,000 | ||||||||||
| Warrants issued | $ 150 | $ 150 | |||||||||
| Restricted stock issued | $ 1 | 3,655 | 3,656 | ||||||||
| Restricted stock issued (in Shares) | 609,176 | ||||||||||
| Other comprehensive loss, net of tax: | |||||||||||
| Unrealized foreign currency translation loss | (269) | (269) | |||||||||
| Change in unrecognized pension costs | (2,564) | (2,564) | |||||||||
| Balance at Dec. 31, 2014 | $ 2 | 27,959 | (21,305) | (5,461) | (3,063) | (1,868) | |||||
| Balance (in Shares) at Dec. 31, 2014 | 1,700,429 | ||||||||||
| Net loss | (1,749) | (1,749) | |||||||||
| Common stock issued for exchange of 8.25% Notes | 152 | 152 | |||||||||
| Common stock issued for exchange of 8.25% Notes (in Shares) | 38,082 | ||||||||||
| Preferred stock issued | $ 3,302 | (278) | 3,024 | ||||||||
| Preferred stock issued (in Shares) | 16,512 | ||||||||||
| Warrants issued | $ 60 | $ 60 | $ 21 | $ 21 | |||||||
| Other comprehensive loss, net of tax: | |||||||||||
| Unrealized foreign currency translation loss | (448) | (448) | |||||||||
| Change in unrecognized pension costs | 652 | 652 | |||||||||
| Balance at Dec. 31, 2015 | $ 3,302 | $ 2 | $ 27,914 | $ (23,054) | $ (5,257) | $ (3,063) | $ (156) | ||||
| Balance (in Shares) at Dec. 31, 2015 | 16,512 | 1,738,511 |
Summary of Significant Accounting Policies |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
| Significant Accounting Policies [Text Block] | 1. Summary of Significant Accounting Policies Trans-Lux Corporation is a leading designer and manufacturer of digital signage displays and LED lighting solutions. The Company sells and leases its digital signage displays and LED lighting solutions. Principles of consolidation: The Consolidated Financial Statements include the accounts of Trans-Lux Corporation, a Delaware corporation, and all wholly-owned subsidiaries (collectively, the “Company”). Intercompany balances and transactions have been eliminated in consolidation. Use of estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the period in which the change is determined. Estimates are used when accounting for such items as costs of long-term sales contracts, allowance for uncollectible accounts, inventory valuation allowances, depreciation and amortization, valuation of pension obligations, income taxes, warranty reserve, management’s assessment of going concern, contingencies and litigation. Cash and cash equivalents: The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company has deposits in United States financial institutions that maintain FDIC deposit insurance on all interest and non-interest bearing accounts, collectively, with an aggregate coverage up to $250,000 per depositor per financial institution. At times, the amount of the deposits exceeds the FDIC limits. The portion of the deposits in excess of FDIC limits represents a credit risk of the Company. Accounts receivable: Receivables are carried at net realizable value. Credit is extended based on an evaluation of each customer’s financial condition; collateral is generally not required. Reserves for uncollectible accounts receivable are provided based on historical experience and current trends. The Company evaluates the adequacy of these reserves regularly. The following is a summary of the allowance for uncollectible accounts at December 31:
Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers, the relatively small account balances within the majority of the Company’s customer base and their dispersion across different businesses. The Company’s revenues included one multinational customer that accounted for 12.5% and 10.8% of total revenues in 2015 and 2014, respectively. Inventories: Inventories are stated at the lower of cost (first-in, first-out method) or market value. Valuation allowances for slow moving and obsolete inventories are provided based on historical experience and demand for servicing of the displays. The Company evaluates the adequacy of these valuation allowances regularly. Rental equipment and property, plant and equipment: Rental equipment and property, plant and equipment are stated at cost and depreciated over their respective useful lives using the straight-line method. Leaseholds and improvements are amortized over the lesser of the useful lives or term of the lease. The estimated useful lives are as follows:
When rental equipment and property, plant and equipment are fully depreciated, retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the accounts. Goodwill: Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired. The goodwill of $744,000 relates to the Digital display sales segment. The Company annually evaluates the value of its goodwill on October 1 and determines if it is impaired by comparing the carrying value of goodwill to its estimated fair value. Changes in the assumptions used could materially impact the fair value estimates. Assumptions critical to our fair value estimates are: (i) discount rate used to derive the present value factors used in determining the fair value of the reporting unit, (ii) projected average revenue growth rates used in the reporting unit models and (iii) projected long-term growth rates used in the derivation of terminal year values. These and other assumptions are impacted by economic conditions and expectations of management and will change in the future based on period-specific facts and circumstances. The Company uses the income and the market approach when testing for goodwill impairment. The Company weighs these approaches by using a 67% factor for the income approach and a 33% factor for the market approach. Together these two factors estimate the fair value of the reporting unit. The Company uses a discounted cash flow model to determine the fair value under the income approach which contemplates a conservative overall weighted average revenue growth rate. If the Company were to reduce its revenue projections on the reporting unit by 5.6% within the income approach, the fair value of the reporting unit would be below carrying value. The gross profit margins used are consistent with historical margins achieved by the Company during previous years. If there is a margin decline of 5.7% or more, the model would yield results of a fair value less than carrying amount. The Company uses a market multiple approach based on revenue to determine the fair value under the market approach which includes a selection of and market price of a group of comparable companies and the performance of the guidelines of the comparable companies and of the reporting unit. The impairment test for goodwill is a two-step process. The first step of the goodwill impairment test compares the fair value of the reporting unit with its carrying amount. If the carrying amount of the reporting unit exceeds its fair value, a second step is performed to calculate the implied fair value of the goodwill of the reporting unit by deducting the fair value of all of the individual assets and liabilities of the reporting unit from the respective fair values of the reporting unit as a whole. To the extent the calculated implied fair value of the goodwill is less than the recorded goodwill, an impairment charge is recorded for the difference. Fair value is determined using cash flow and other valuation models (generally Level 3 inputs in the fair value hierarchy described in Note 3 – Fair Value). There was no impairment of goodwill in 2015 or 2014. Impairment or disposal of long-lived assets: The Company evaluates whether there has been an impairment in value of its long-lived assets if certain circumstances indicate that a possible impairment may exist. An impairment in value may exist when the carrying value of a long-lived asset exceeds its undiscounted cash flows. If it is determined that an impairment in value has occurred, the carrying value is written down to its fair value as determined by a discounted cash flow model. There were no impairments of long-lived assets in 2015 or 2014. Restricted cash: The Company classifies cash as restricted when the cash is unavailable for withdrawal or usage for general operations. Restrictions may include legally restricted deposits, contracts entered into with others, or the Company’s statements of intention with regard to particular deposits. In July 2014, the Company deposited $212,000 in a savings account as collateral for a certificate of deposit in favor of the landlord at its New York headquarters as a security deposit. The Company has presented these funds as restricted cash since the use of the funds under the certificate of deposit is restricted. Shipping Costs: The costs of shipping product to our customers ($689,000 in 2015 and $617,000 in 2014) are included in Cost of digital product sales. Advertising/Marketing Costs: The Company expenses the costs of advertising and marketing at the time that the related advertising takes place. Advertising and marketing costs ($437,000 in 2015 and $811,000 in 2014) are included in General and administrative expenses. Revenue recognition: Revenues from equipment lease and maintenance contracts are recognized during the term of the respective agreements, which generally run for periods of one month to 10 years. At December 31, 2015, the future minimum lease payments due to the Company under operating leases that expire at varying dates through 2025 for its rental equipment and maintenance contracts, assuming no renewals of existing leases or any new leases, aggregating $4,550,000 are as follows: $1,938,000 – 2016, $1,149,000 – 2017, $1,029,000 – 2018, $233,000 – 2019, $146,000 – 2020 and $55,000 thereafter. Revenues on equipment sales with long-term receivables are recorded on the installment basis. At December 31, 2015, the future accounts receivables due to the Company under installment sales agreements aggregated $126,000 through 2018. Revenues on equipment sales, other than long-term equipment sales contracts, are recognized upon shipment when title and risk of loss passes to the customer. Warranty reserve: The Company provides for the estimated cost of product warranties at the time revenue is recognized. While the Company engages in product quality programs and processes, including evaluating the quality of the component suppliers, the warranty obligation is affected by product failure rates. Should actual product failure rates differ from the Company’s estimates, revisions to increase or decrease the estimated warranty liability may be required. Taxes on income: Deferred income tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at tax rates expected to be in effect when such temporary differences are expected to reverse and for operating loss carryforwards. The temporary differences are primarily attributable to operating loss carryforwards, depreciation and the pension plan. The Company records a valuation allowance against net deferred income tax assets if, based upon the available evidence, it is more-likely-than-not that the deferred income tax assets will not be realized. The Company considers whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets the more-likely-than-not recognition threshold, the position is measured to determine the amount of benefit to recognize in the financial statements. The Company’s policy is to classify interest and penalties related to uncertain tax positions in income tax expense. To date, there have been no interest or penalties charged to the Company in relation to the underpayment of income taxes. The Company’s determinations regarding uncertain income tax positions may be subject to review and adjustment at a later date based upon factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof. Foreign currency: The functional currency of the Company’s Canadian business operation is the Canadian dollar. The assets and liabilities of such operation are translated into U.S. dollars at the year-end rate of exchange, and the operating and cash flow statements are converted at the average annual rate of exchange. The resulting translation adjustment is recorded in Accumulated Other Comprehensive Loss in the Consolidated Balance Sheets and as a separate item in the Consolidated Statements of Comprehensive Loss. In relation to intercompany balances, these have been classified as short-term in nature and therefore the changes in the foreign currency remeasurement adjustment for intercompany balances are recorded as Gain (loss) on foreign currency remeasurement in the Consolidated Statements of Operations. Share-based compensation plans: The Company measures share-based payments to employees and directors at the grant date fair value of the instrument. The fair value is estimated on the date of grant using the Black-Scholes valuation model, which requires various assumptions including estimating stock price volatility, expected life of the stock option, estimated forfeiture rate and risk free interest rate. For details on the accounting effect of share-based compensation, see Note 15 – Share-Based Compensation. Consideration of Subsequent Events: The Company evaluated events and transactions occurring after December 31, 2015 through the date these Consolidated Financial Statements were included in this Form 10-K and filed with the SEC, to identify subsequent events which may need to be recognized or non-recognizable events which would need to be disclosed. See Note 20 – Subsequent Events for transactions identified for disclosure. Recent accounting pronouncements: In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019), early application is permitted. The Company has not yet determined the effect of the adoption of this standard on the Company’s consolidated financial position and results of operations. In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which amends Business Combinations (Topic 805). The ASU requires that an acquirer (i) recognize adjustments to provisional amounts from Business Combinations that are identified during the measurement period in the reporting period in which the adjustment amounts are determined, (ii) record, in the same period’s financial statements, the effect on earnings, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date and (iii) disclose the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, which for us would be the first quarter of 2016, and early adoption is permitted. The amendments in this ASU should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this ASU with earlier application permitted for financial statements that have not been issued. We do not expect this ASU to have a material impact on our financial position, results of operations or disclosures. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) by one year. As a result, the ASU is now effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, which for the Company is the first quarter of 2018. Earlier application is permitted for fiscal years beginning after December 15, 2016, including interim reporting periods within those years, which for the Company is the first quarter of 2017. The Company has not yet determined the effect of the adoption of this standard on the Company’s consolidated financial position and results of operations. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (Topic 330). The new guidance changes the subsequent measurement of inventory from lower of cost or market to lower of cost and net realizable value. ASU 2015-11 should be applied on a prospective basis and is effective for the Company beginning in the first fiscal quarter of 2017. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-90). This guidance describes management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendment should reduce diversity in the timing and content of footnote disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter. Early application is permitted. The Company has not yet determined the effect of the adoption of this standard on the Company's consolidated financial position and results of operations. Reclassifications: Certain reclassifications of prior years’ amounts have been made to conform to the current year’s presentation. |
Going Concern |
12 Months Ended |
|---|---|
Dec. 31, 2015 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Substantial Doubt about Going Concern [Text Block] | 2. Going Concern A fundamental principle of the preparation of financial statements in accordance with GAAP is the assumption that an entity will continue in existence as a going concern, which contemplates continuity of operations and the realization of assets and settlement of liabilities occurring in the ordinary course of business. This principle is applicable to all entities except for entities in liquidation or entities for which liquidation appears imminent. In accordance with this requirement, the Company has prepared its accompanying Consolidated Financial Statements assuming the Company will continue as a going concern. We do not have adequate liquidity, including access to the debt and equity capital markets, to operate our business. The Company incurred a net loss of $1.7 million in 2015 and has a working capital deficiency of $2.5 million as of December 31, 2015. As a result, our short-term business focus has been to preserve our liquidity position. Unless we are successful in obtaining additional liquidity, we believe that we will not have sufficient cash and liquid assets to fund normal operations for the next 12 months. In addition, the Company’s obligations under its pension plan exceeded plan assets by $5.3 million at December 31, 2015 and the Company has a significant amount due to its pension plan over the next 12 months. The Company is in default on its 8¼% Limited convertible senior subordinated notes due 2012 (the "Notes") and 9½% Subordinated debentures due 2012 (the "Debentures"), which have remaining principal balances of $626,000 and $334,000, respectively. As a result, if the Company is unable to (i) obtain additional liquidity for working capital, (ii) make the required minimum funding contributions to the defined benefit pension plan and/or (iii) make the required principal and interest payments on the Notes and the Debentures, there would be a significant adverse impact on the financial position and operating results of the Company. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that may result from the outcome of this uncertainty. See Note 11 - Long-Term Debt for further details. Of these fixed cash obligations, thus far in 2016 using cash on hand and cash from operating activities, the Company has made $197,000 of payments to the Company’s pension plan, with approximately $813,000 of contributions remaining for 2016. The Pension Benefit Guaranty Corporation (the “PBGC”) has placed a lien on all of the Company’s assets with respect to amounts owed under the plan. The Company continues to consider further exchanges of the $626,000 of remaining Notes and the $334,000 of remaining Debentures. If we are unable to fulfill our related obligations, the enforcement of such lien would have a material adverse impact on our financial condition, results of operations and liquidity. On November 19, 2015, the Company completed a rights offering of its Series B Convertible Preferred Stock (“Preferred Stock”). The Company received subscriptions and over-subscriptions for a total of 16,512 shares of its Preferred Stock, representing approximately 33% of the shares offered. All of the subscriptions and over-subscriptions were accepted, for aggregate proceeds to the Company of approximately $3.0 million (net of costs of $278,000). The Company is using the net proceeds for repayment of debt, required pension plan payments and for general corporate purposes. See Note 13 – Rights Offering for further details. The Company is seeking additional financing in order to provide enough cash to cover our remaining current fixed cash obligations as well as providing working capital. However, there can be no assurance as to the amounts, if any, the Company will receive in any additional financings or the terms thereof. To the extent the Company issues additional equity securities, it could be dilutive to existing shareholders. |
Fair Value |
12 Months Ended |
|---|---|
Dec. 31, 2015 | |
| Fair Value Disclosures [Abstract] | |
| Fair Value Disclosures [Text Block] | 3. Fair Value The Company carries its money market funds and cash surrender value of life insurance related to its deferred compensation arrangements at fair value. Under ASC 820, the fair value of all assets and liabilities is determined using a three-tier fair value hierarchy. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows: • Level 1 – Inputs to the valuation methodology based on unadjusted quoted market prices in active markets that are accessible at the measurement date. • Level 2 – Inputs to the valuation methodology that include quoted market prices that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly. • Level 3 – Inputs to the valuation methodology that are unobservable and significant to the fair value measurement. Based on this hierarchy, the Company determined the fair value of its money market funds using quoted market prices, a Level 1 or an observable input, and the cash surrender value of life insurance, a Level 2 based on observable inputs primarily from the counter party. The Company’s money market funds and the cash surrender value of life insurance had carrying amounts of $1,000 and $55,000 at December 31, 2015, respectively, and $1,000 and $55,000 at December 31, 2014, respectively. The carrying amounts of cash equivalents, receivables and accounts payable approximate fair value due to the short maturities of these items. The fair value of the Company’s Notes, using observable inputs, was $164,000 at December 31, 2015 and $244,000 at December 31, 2014. The fair value of the Company’s Debentures, using observable inputs, was $33,000 at December 31, 2015 and December 31, 2014. The fair value of the Company’s remaining long-term debt including current portion approximates its carrying value of $333,000 at December 31, 2015 and $394,000 at December 31, 2014. The fair value of warrants is calculated using the Black-Scholes method at the time of issuance of the warrants. At December 31, 2015, there were no warrants classified under the liability method as they had all expired by November 14, 2014. The Black-Scholes calculated values totaling $252,000 of the equity warrants issued to directors in 2013 are being amortized over their vesting periods of one, two and three years. The equity warrants issued in 2015 and 2014 were fully vested at the date of issuance, so their Black-Scholes calculated values of $21,000 and $92,000, respectively, were fully charged to the equity section at the date of issuance. |
Inventories |
12 Months Ended | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2015 | |||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||
| Inventory Disclosure [Text Block] | 4. Inventories Inventories consist of the following:
|
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Rental Equipment |
12 Months Ended | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2015 | |||||||||||||||||||||||||||||||
| Rental Equipment [Abstract] | |||||||||||||||||||||||||||||||
| Rental Equipment [Text Block] | 5. Rental Equipment Rental equipment consists of the following:
The Company entered into a Master Agreement for Sale and Assignment of Leases with AXIS Capital, Inc. (the “Assignment Agreement”) and financed the future receivables relating to certain lease contracts. A security interest was granted on the rental equipment underlying the lease contract receivables sold to AXIS Capital, Inc. by the Company pursuant to the Assignment Agreement. During 2015, $6.8 million of fully depreciated rental equipment was written off. Depreciation expense for rental equipment for the years ended December 31, 2015 and 2014 was $2.3 million and $2.9 million, respectively. |
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Property, Plant and Equipment |
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| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment Disclosure [Text Block] | 6. Property, Plant and Equipment Property, plant and equipment consists of the following:
Land, buildings and equipment having a net book value of $1.1 million and $1.0 million at December 31, 2015 and 2014, respectively, are pledged as collateral under various mortgage and other financing agreements. During 2015, $151,000 of fully depreciated property, plant and equipment was written off. Depreciation expense for property, plant and equipment for the years ended December 31, 2015 and 2014 was $123,000 and $138,000, respectively. |
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Other Assets |
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| Disclosure Text Block Supplement [Abstract] | |||||||||||||||||||||||||||||||
| Other Assets Disclosure [Text Block] | 7. Other Assets Other assets consist of the following:
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Taxes on Income |
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| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Text Block] | 8. Taxes on Income The components of income tax expense are as follows:
Loss before income taxes from the United States operations is $2.2 million and $4.7 million for the years ended December 31, 2015 and 2014, respectively. Income before income taxes from Canada is $0.5 million and $0.1 million for the years ended December 31, 2015 and 2014, respectively. The effective income tax rate differed from the expected federal statutory income tax benefit rate of 34.0% as follows:
Significant components of the Company’s deferred income tax assets and liabilities are as follows:
Tax credit carryforwards primarily relate to federal alternative minimum taxes of $865,000 paid by the Company, which may be carried forward indefinitely and applied against regular federal taxes. Operating tax loss carryforwards primarily relate to U.S. federal net operating loss carryforwards of approximately $6.3 million, which begin to expire in 2019. The operating loss carryforwards have been limited by a change in ownership of the Company in 2012 as defined under Section 382 of the Internal Revenue Code. This change in ownership as of June 26, 2012 had limited our operating loss carryforwards at that point to $295,000 per year aggregating $5.9 million. Subsequent losses in the remainder of 2012 and in the years since have increased our operating loss carryforward to its current level. A valuation allowance has been established for the amount of deferred income tax assets as management has concluded that it is more-likely-than-not that the benefits from such assets will not be realized. The Company’s determinations regarding uncertain income tax positions may be subject to review and adjustment at a later date based upon factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof. The Company does not have any material uncertain tax positions in 2015 and 2014. The Company is subject to U.S. federal income tax as well as income tax in multiple state and local jurisdictions and Canadian federal and provincial income tax. Currently, no federal or provincial income tax returns are under examination. The state of Illinois is currently examining the 2011 and 2012 tax years. We do not expect any adverse material outcome from this examination. |
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Accrued Liabilities |
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| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Payable and Accrued Liabilities Disclosure [Text Block] | 9. Accrued Liabilities Accrued liabilities consist of the following:
Warranty reserve: The Company provides for the estimated cost of product warranties at the time revenue is recognized. While the Company engages in product quality programs and processes, including evaluating the quality of the component suppliers, the warranty obligation is affected by product failure rates. Should actual product failure rates differ from the Company’s estimates, revisions to increase or decrease the estimated warranty liability may be required. A summary of the warranty liabilities for the years ended December 31, 2015 and 2014 is as follows:
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Warrant Issuances |
12 Months Ended |
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Dec. 31, 2015 | |
| Warrant Liabilities [Abstract] | |
| Warrant Liabilities [Text Block] | 10. Warrant Issuances On April 23, 2015, the Company entered into a Credit Agreement (the “Credit Agreement”) with BFI Capital Fund II, LLC (“Lender”) for a $1.5 million credit line at a fixed rate of interest of 12.00%, with a maturity date of May 1, 2016, which was satisfied and terminated on November 23, 2015. The Company also issued the Lender a warrant to purchase 10,000 shares of Common Stock at an exercise price of $12.00 per share, which expires on April 23, 2020. The fair value of this warrant at the date of issuance was $21,000. This warrant does not include a potential adjustment of the strike price if the Company sells or grants any options or warrants at a price per share less than the strike price of the warrants, so they are considered indexed to the Company’s Common Stock and were accounted for as equity in Additional paid-in-capital in the Consolidated Balance Sheets. On June 27, 2014, the Company entered into a Securities Purchase Agreement (the “SPA”) with Transtech LED Company Limited (“Transtech”) (formerly known as Retop Industrial (Hong Kong) Limited), pursuant to which Transtech purchased 333,333 shares of the Company’s Common Stock, par value $0.001 per share, for a purchase price of $2,000,000 (the “Purchase”). Yaozhong Shi, a director of the Company, is the Chairman of Transtech. The SPA requires that the proceeds of the Purchase are to be utilized solely in connection with the Company’s LED display business unit, including for working capital and general corporate purposes related thereto. In connection with the SPA, the Company issued warrants to purchase 33,333 shares of the Company’s Common Stock to Transtech at an exercise price of $8.00 per share, which expire on June 27, 2016. These warrants were part of a direct investment in our equity, so they are considered indexed to the Company’s Common Stock and were accounted for as equity. In November 2012, the Board of Directors approved the issuance to two board members, George W. Schiele and Salvatore J. Zizza, of warrants to purchase 20,000 shares of Common Stock at an exercise price of $12.50 per share. In April 2013, the Board of Directors approved the issuance to one board member, Jean Firstenberg, of warrants to purchase 2,000 shares of Common Stock at an exercise price of $12.50 per share. Each of these warrant issuances was approved by shareholders at the Company’s 2013 Annual Meeting of Shareholders on October 2, 2013. The warrants were issued effective October 2, 2013, began to vest after one year and expire on October 2, 2018. The Company recorded non-cash expenses of $60,000 and $150,000 in the years ended December 31, 2015 and 2014, respectively, related to the value of the warrants issued, which is included in Warrant expense and change in warrant liabilities in the Consolidated Statements of Operations. These warrants do not include a potential adjustment of the strike price if the Company sells or grants any options or warrants at a price per share less than the strike price of the warrants, so they are considered indexed to the Company’s Common Stock and were accounted for as equity. |
Long-Term Debt |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Text Block] | 11. Long-Term Debt Long-term debt consists of the following:
Payments of long-term debt due for the next five years are:
The Company has outstanding $626,000 of Notes which are no longer convertible into common shares. The Notes matured as of March 1, 2012 and are currently in default. As of December 31, 2015 and 2014, the Company had accrued $327,000 and $477,000, respectively, of interest related to the Notes, which is included in Accrued Liabilities in the Consolidated Balance Sheets. The trustee, by notice to the Company, or the holders of 25% of the principal amount of the Notes outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately. On December 22, 2015, the Company consummated a transaction with fourteen holders of the Notes in which an aggregate of $457,000 of principal under the Notes was exchanged for an aggregate of $228,500 cash and an aggregate of 38,082 shares of Common Stock valued at $152,000. As part of the exchange agreements, all of the Company’s remaining obligations under the exchanged Notes, including the payment of accrued interest of $238,000, were terminated. The Company recorded a gain on extinguishment of debt of $314,000. The exchange agreements also provide the note holders with piggyback registration rights with respect to the resale of the shares of Common Stock that they received under the exchange agreements. The Company has outstanding $334,000 of Debentures. The Debentures matured as of December 1, 2012 and are currently in default. As of December 31, 2015 and 2014, the Company had accrued $193,000 and $161,000, respectively, of interest related to the Debentures, which is included in Accrued Liabilities in the Consolidated Balance Sheets. The trustee, by notice to the Company, or the holders of 25% of the principal amount of the Debentures outstanding, by notice to the Company and the trustee, may declare the outstanding principal plus interest due and payable immediately. On April 23, 2015, the Company entered into a Credit Agreement (the “Credit Agreement”) with BFI Capital Fund II, LLC (“Lender”) for a $1.5 million credit line at a fixed rate of interest of 12.00%, with a maturity date of May 1, 2016, which was satisfied and terminated on November 23, 2015. The Company had borrowed $1.0 million under the Credit Agreement, which has been used for working capital. The funds utilized to make the loan included $500,000 of funding provided by Marco Elser, a director of the Company, to the Lender. The Company also issued the Lender a warrant to purchase 10,000 shares of Common Stock at an exercise price of $12.00 per share. The Company recorded the fair value of the warrant in the amount of $21,000, as well as deferred financing fees of $31,000. These deferred financing fees have been amortized over the term of the agreement. For the year ended December 31, 2015, amortization expense of the deferred financing fees in the amount of $52,000 was recorded in Interest expense, net in the Consolidated Statement of Operations. As of December 31, 2014, the Company, through a subsidiary, had a $394,000 mortgage on its facility in Des Moines, Iowa, which was due to mature on March 1, 2015, had a fixed rate of interest of 6.50% and required an average minimum monthly compensating balance of $200,000. On March 1, 2015, the mortgage was amended, extending the maturity to March 1, 2020, reducing the fixed rate of interest to 5.95% and reducing the average minimum monthly compensating balance to $100,000. As of December 31, 2015, the mortgage had a balance of $333,000. On February 1, 2016, the Des Moines facility was sold in a sale/leaseback transaction and the mortgage was satisfied. See Note 20 – Subsequent Events for further details. |
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Stockholders' Deficit |
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| Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity Note Disclosure [Text Block] | 12. Stockholders’ Deficit During 2015 and 2014, the Board of Directors did not declare any quarterly cash dividends on the Company’s Common Stock. The Company is authorized to issue 500,000 shares of preferred stock, of which (i) 416,500 shares are designated as “Series A Convertible Preferred Stock” (“SACPS”), none of which are outstanding, (ii) 51,000 shares are designated as Preferred Stock, 16,512 of which are outstanding, and (iii) 32,500 shares are not yet designated. The SACPS has a stated price of $20.00 per share and is convertible into 2 shares of Common Stock. The Preferred Stock has a stated price of $200.00 per share and is convertible into 20 shares of Common Stock. The undesignated preferred stock would contain such rights, preferences, privileges and restrictions as may be fixed by our Board of Directors. Shares of the Company’s Common Stock reserved for future issuance in connection with convertible securities and stock option plans were 675,000 and 275,000 at December 31, 2015 and 2014, respectively. During 2015 and 2014, certain board members deferred payment of their fees. In lieu of a cash payment, certain board members and former board members have agreed to receive restricted shares of Common Stock of the Company or a combination of cash and restricted shares of Common Stock of the Company, which such restricted shares shall contain a legend under the Securities Act of 1933 and shall not be transferable unless and until registered or otherwise in accordance with applicable securities laws. No restricted stock was issued in lieu of cash payments for directors’ fees in 2015 or 2014.
The components of accumulated other comprehensive loss are as follows:
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Rights Offering |
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Dec. 31, 2015 | |
| Rights Offering [Abstract] | |
| Rights Offering [Text Block] | 13. Rights Offering On November 19, 2015, the Company completed a rights offering. The Company received subscriptions and over-subscriptions for a total of 16,512 shares of Preferred Stock, representing approximately 33% of the shares offered. All of the subscriptions and over-subscriptions were accepted, for aggregate gross proceeds to the Company of approximately $3.3 million. Costs associated with the offering were approximately $278,000, which were recorded within Additional Paid in Capital. The Company used the net proceeds for repayment of debt, required pension plan payments and for general corporate purposes. Under the terms of the rights offering, the Company distributed one non-transferrable right for each outstanding share of Common Stock to stockholders of record on September 28, 2015. Thirty-three non-transferable rights entitled the holder to purchase one share of Preferred Stock at a subscription price of $200.00 per share. The Preferred Stock carries a 6.0% cumulative annual dividend, which amounts to $198,000 on an annual basis. The Preferred Stock is convertible into shares of Common Stock at an initial conversion price of $10.00 per share, representing a conversion ratio of 20 shares of Common Stock for each share of Preferred Stock held at the time of conversion, subject to adjustment. For the year ended December 31, 2015, the Company accumulated unpaid dividends related to Preferred Stock of $23,000. The shares of Preferred Stock may be subject to mandatory conversion after three years, or as early as one year if the closing sale price of the Common Stock has been greater than or equal to $15.00 for 30 consecutive trading days. |
Pension Plan |
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| Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pension and Other Postretirement Benefits Disclosure [Text Block] | 14. Pension Plan All eligible salaried employees of Trans-Lux Corporation and certain of its subsidiaries are covered by a non-contributory defined benefit pension plan. Pension benefits vest after five years of service and are based on years of service and final average salary. The Company’s general funding policy is to contribute at least the required minimum amounts sufficient to satisfy regulatory funding standards, but not more than the maximum tax-deductible amount. The benefit service under the pension plan had been frozen since 2003 and, accordingly, there is no service cost for the years ended December 31, 2015 and 2014. In 2009, the compensation increments were frozen, and accordingly, no additional benefits are being accrued under the plan. For 2015 and 2014, the accrued benefit obligation of the plan exceeded the fair value of plan assets, due primarily to the plan’s investment performance and updates to actuarial longevity tables. The Company’s obligations under its pension plan exceeded plan assets by $5.3 million at December 31, 2015. Assumed mortality rates of plan participants are a critical estimate in measuring the expected payments a participant will receive over their lifetime and the amount of liability and expense we recognize. In October 2015, the Society of Actuaries ("SOA") published updated mortality tables and an updated mortality improvement scale, which both reflect improved longevity. In determining the appropriate mortality assumptions as of December 31, 2015, we considered the SOA’s updated mortality tables to develop assumptions aligned with our expectation of future improvement rates. The mortality assumption was changed from the RP-2014 White Collar Employee and Healthy Annuitant Mortality Tables projected with Scale MP-2014 to the RP-2014 White Collar Employee and Healthy Annuitant Mortality Tables projected with the Buck Modified Scale MP-2015. This change decreased the PBO by 2.4%. Use of the updated projection scale is consistent with the Company’s view of long-term mortality trend. The changes to the mortality rate assumptions resulted in a decrease in the 2015 year-end pension obligation of approximately $325,000. The Company employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. The intent of this strategy is to minimize plan expenses by outperforming plan liabilities over the long run. Risk tolerance is established through careful consideration of plan liabilities, plan funded status and corporate financial condition. The portfolio contains a diversified blend of equity and fixed income investments. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies and quarterly investment portfolio reviews. At December 31, 2015 and 2014, the Company’s pension plan weighted average asset allocations by asset category are as follows:
The pension plan asset information included below is presented at fair value as established by ASC 820. The following table presents the pension plan assets by level within the fair value hierarchy as of December 31, 2015 and 2014:
The funded status of the plan as of December 31, 2015 and 2014 is as follows:
The Company determines the long-term rate of return for plan assets by studying historical markets and the long-term relationships between equity securities and fixed income securities, with the widely-accepted capital market principal that assets with higher volatility generate higher returns over the long run. The 8.0% expected long-term rate of return on plan assets is determined based on long-term historical performance of plan assets, current asset allocation and projected long-term rates of return. Effective with the 2015 year-end disclosure, the Company has elected to utilize a yield curve in lieu of a single weighted discount rate in determining liabilities and the interest cost for the following year. The purpose of the change in method is to better approximate the term structure of interest-related costs. The liability is unaffected by this change, except for rounding. The interest cost is anticipated to be lower under the new method. Prior to the 2015 year-end disclosure, the Company used the single equivalent discount rate, rounded to the nearest fifth, to determine liabilities and interest cost for the plan. In 2016, the Company expects to amortize $191,000 of actuarial losses to pension expense. The accumulated benefit obligation at December 31, 2015 and 2014 was $13.5 million and $14.7 million, respectively. The minimum required contribution in 2016 is expected to be $1.0 million, which is included in Accrued liabilities in the Consolidated Balance Sheets. The long-term pension liability is $4.3 million and is included in Deferred pension liability and other in the Consolidated Balance Sheets. In March 2010, 2011 and 2013, the Company submitted to the Internal Revenue Service (the “IRS”) requests for waivers of the minimum funding standard for its defined benefit pension plan for the 2009, 2010 and 2012 plan years. The waiver requests were submitted as a result of the economic climate and the business hardship that the Company was experiencing. The waivers for the 2009, 2010 and 2012 plan years were approved and granted subject to certain conditions and have deferred payment of $285,000, $559,000 and $669,000 of the minimum funding standard for the 2009, 2010 and 2012 plan years, respectively. As of December 31, 2015, the Company has fully repaid the amounts deferred for the 2009 and 2010 plan years and has repaid $395,000 of the 2012 plan year waiver, leaving a balance due related to the waivers of $274,000, which is scheduled to be repaid through 2017. If the Company does not fulfill the conditions of the waivers, the PBGC and the IRS have various enforcement remedies that can be implemented to protect the participant’s benefits, such as termination of the plan or a requirement that the Company make the unpaid contributions. In support of such enforcement remedies, the PBGC has placed a lien on the Company’s assets with respect to amounts owed under the plan. In 2015, the Company made the required $1.2 million of contributions to the plan and, in 2016, the Company has already made $197,000 of contributions. At this time, the Company is expecting to make its required $813,000 of contributions remaining for 2016; however there is no assurance that the Company will be able to make any or all such remaining payments. If we are unable to fulfill our related obligations, the implementation of any such enforcement remedies would have a material adverse impact on our financial condition, results of operations, and liquidity. The following estimated benefit payments are expected to be paid by the Company’s pension plan in the next 5 years:
The following table presents the components of the net periodic pension cost for the years ended December 31, 2015 and 2014:
The following table presents the change in unrecognized pension costs recorded in other comprehensive loss as of December 31, 2015 and 2014:
In addition, the Company provided unfunded supplemental retirement benefits for the retired, former Chief Executive Officer. During 2009 the Company accrued $0.5 million for such benefits, which has not yet been paid, which is included in Accrued liabilities in the Consolidated Balance Sheets. The Company does not offer any post-retirement benefits other than the pension and supplemental retirement benefits described herein. |
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Share-Based Compensation |
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| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | 15. Share-Based Compensation The Company accounts for all share-based payments to employees and directors, including grants of employee stock options, at fair value and expenses the benefit in the Consolidated Statements of Operations over the service period (generally the vesting period). The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes pricing valuation model, which requires various assumptions including estimating stock price volatility, expected life of the stock option, risk free interest rate and estimated forfeiture rate. The Company has two stock option plans. As of December 31, 2015, 200,000 shares of Common Stock were available for grant under the 2012 Long-Term Incentive Plan; and 800 shares of Common Stock were available for grant under the Non-Employee Director Stock Option Plan. Changes in the stock option plans are as follows:
Under the 2012 Long-Term Incentive Plan, option prices must be at least 100% of the market value of the Common Stock at time of grant. Exercise periods are for ten years from date of grant and terminate at a stipulated period of time after an employee’s termination of employment. At December 31, 2015, no options were outstanding or exercisable. During 2015 and 2014, no options were granted or exercised. Under the Non-Employee Director Stock Option Plan, option prices must be at least 100% of the market value of the Common Stock at time of grant. No option may be exercised prior to one year after date of grant and the optionee must be a director of the Company at time of exercise, except in certain cases as permitted by the Compensation Committee. Exercise periods are for six years from date of grant and terminate at a stipulated period of time after an optionee ceases to be a director. At December 31, 2015, there were no outstanding options to purchase shares. The outstanding stock options at December 31, 2014 had no intrinsic value. As of December 31, 2015, there was no unrecognized compensation cost related to non-vested options granted under the Plans. |
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Loss Per Share |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Text Block] | 16. Loss Per Share The following table presents the calculation of loss per share for the years ended December 31, 2015 and 2014:
Basic loss per common share is computed by dividing net loss attributable to common shares by the weighted average number of common shares outstanding for the period. Diluted loss per common share is computed by dividing net loss attributable to common shares, by the weighted average number of common shares outstanding, adjusted for shares that would be assumed outstanding after warrants and stock options vested under the treasury stock method. At December 31, 2015, the Company accumulated unpaid dividends related to the Preferred Stock issued in November 2015 of $23,000. There were no accumulated unpaid dividends related to Preferred Stock at December 31, 2014. At December 31, 2015 and 2014, outstanding warrants convertible into 85,300 and 75,300 shares, respectively, of Common Stock were excluded from the calculation of diluted loss per share because their impact would have been anti-dilutive. At December 31, 2014 there were outstanding stock options to purchase 40 shares of Common Stock, which were also excluded from the calculation of diluted loss per share because their impact would have been anti-dilutive. |
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Commitments and Contingencies |
12 Months Ended |
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Dec. 31, 2015 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies Disclosure [Text Block] | 17. Commitments and Contingencies Commitments: The Company has employment agreements with its Chief Executive Officer and with the President of its subsidiary Trans-Lux Energy Corporation, which expire in February 2018 and May 2016, respectively. At December 31, 2015, the aggregate commitment for future salaries, excluding bonuses, was approximately $700,000. Contractual salaries expense was $447,000 and $348,000 for the years ended December 31, 2015 and 2014, respectively. Contingencies: The Company is subject to legal proceedings and claims which arise in the ordinary course of its business and/or which are covered by insurance. The Company believes that it has accrued adequate reserves individually and in the aggregate for such legal proceedings. Should actual litigation results differ from the Company’s estimates, revisions to increase or decrease the accrued reserves may be required. Operating leases: Certain premises are occupied under operating leases that expire at varying dates through 2019. Certain of these leases provide for the payment of real estate taxes and other occupancy costs. On February 1, 2016, the Company sold its Des Moines, Iowa facility in a sale/leaseback transaction. The lease is for a two year lease period at an annual rental of $158,000.Future minimum lease payments (including amounts due under the new lease of the Des Moines facility) due under operating leases at December 31, 2015 aggregating $1.1 million are as follows: $562,000 - 2016, $450,000 – 2017, $101,000 – 2018, $26,000 – 2019 and $1,000 – 2020. Rent expense was $541,000 and $428,000 for the years ended December 31, 2015 and 2014, respectively. |
Related Party Transactions |
12 Months Ended |
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Dec. 31, 2015 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions Disclosure [Text Block] | 18. Related Party Transactions Yaozhong Shi, a director of the Company, is the Chairman of Transtech, which is our primary LED supplier. The Company purchased $3.5 million and $2.4 million of product from Transtech in 2015 and 2014, respectively, at prices that approximate fair market value. Amounts payable by the Company to Transtech were $145,000 and $89,000 as of December 31, 2015 and 2014, respectively. On June 27, 2014, the Company entered into a Securities Purchase Agreement with Transtech, pursuant to which Transtech purchased 333,333 shares of the Company’s Common Stock for a purchase price of $2,000,000. In connection with the agreement, the Company issued warrants to purchase 33,333 shares of the Company’s Common Stock to Transtech at an exercise price of $8.00 per share, which expire on June 27, 2016. Marco Elser, a director of the Company, provided $500,000 of funding to BFI Capital Fund II, LLC, with whom the Company entered into a Credit Agreement (the “Credit Agreement”) on April 23, 2015 for a $1.5 million credit line at a fixed rate of interest of 12.00%, with a maturity date of May 1, 2016. The Company had borrowed $1.0 million under the Credit Agreement, which has been used for working capital. The Credit Agreement was satisfied and terminated on November 23, 2015. On December 3, 2013, the Company received a $1.0 million loan from Carlisle Investments Inc. (“Carlisle”) at a fixed interest rate of 10.00%, which was due to mature on June 1, 2014 with a bullet payment of all principal and accrued interest due at such time, which maturity date was subsequently extended to July 1, 2014. Marco Elser exercises voting and dispositive power as investment manager of Carlisle. On June 20, 2014, this loan was converted into shares of the Company’s Common Stock at an exchange rate of 1 share for every $6.00 of principal, resulting in the issuance of 166,666 shares of Common Stock to Carlisle. On September 3, 2014, the interest was converted into shares of the Company’s Common Stock at an exchange rate of 1 share for every $6.00 of interest, resulting in the issuance of 9,178 shares of Common Stock to Carlisle. As a result of the conversion to Common Stock, the loan has been satisfied in full. In connection with the Company’s rights offering consummated in November 2015, George W. Schiele, Alan K. Greene and Alberto Shaio, each a director of the Company, exercised rights to purchase 250, 252 and 252 of Preferred Stock, respectively. In the beginning of June 2014, the Company received a $200,000 loan from Mr. Schiele at a fixed interest rate of 10.00%, which was due to mature on July 1, 2014 with a bullet payment of all principal and accrued interest due at such time. On June 20, 2014, this loan was converted into shares of the Company’s Common Stock at an exchange rate of 1 share for every $6.00 of principal, resulting in the issuance of 33,333 shares of Common Stock to Mr. Schiele. As a result of the conversion to Common Stock, the loan has been satisfied in full. On August 27, 2014, the Company entered into a Securities Purchase Agreement with Mr. Greene, pursuant to which Mr. Greene purchased 8,333 shares of the Company’s Common Stock for a purchase price of $50,000. On August 27, 2014, the Company entered into a Securities Purchase Agreement with Mr. Shaio, pursuant to which Mr. Shaio purchased 8,333 shares of the Company’s Common Stock for a purchase price of $50,000. |
Business Segment Data |
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| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting Disclosure [Text Block] | 19. Business Segment Data Operating segments are based on the Company’s business components about which separate financial information is available and are evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance of the business. The Company evaluates segment performance and allocates resources based upon operating income. The Company’s operations are managed in two reportable business segments: Digital display sales and Digital display lease and maintenance. Both design and produce large-scale, multi-color, real-time digital displays and LED lighting, which has a line of energy-saving lighting solutions that provide facilities and public infrastructure with “green” lighting solutions that emit less heat, save energy and enable creative designs. Both operating segments are conducted on a global basis, primarily through operations in the United States. The Company also has operations in Canada. The Digital display sales segment sells equipment and the Digital display lease and maintenance segment leases and maintains equipment. Corporate general and administrative items relate to costs that are not directly identifiable with a segment. There are no intersegment sales. Foreign revenues represent less than 10% of the Company’s revenues for 2015 and 2014. The foreign operation does not manufacture its own equipment; the domestic operation provides the equipment that the foreign operation leases or sells. The foreign operation operates similarly to the domestic operation and has similar profit margins. Foreign assets are immaterial. Information about the Company’s operations in its two business segments for the years ended December 31, 2015 and 2014 and as of December 31, 2015 and 2014 were as follows:
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Subsequent Events |
12 Months Ended |
|---|---|
Dec. 31, 2015 | |
| Subsequent Events [Abstract] | |
| Subsequent Events [Text Block] | 20. Subsequent Events On February 1, 2016, the Company sold its Des Moines, Iowa facility for $1.1 million in a sale/leaseback transaction. The lease is for a two year period at an annual rental of $158,000. As a result of the sale, the remaining $329,000 mortgage was satisfied. Net proceeds of $661,000 were received. The Company calculated a gain of $267,000, which will be amortized over the 24 month term of the lease, in accordance with ASU 2016-02. |
Accounting Policies, by Policy (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||
| Consolidation, Policy [Policy Text Block] | Principles of consolidation: The Consolidated Financial Statements include the accounts of Trans-Lux Corporation, a Delaware corporation, and all wholly-owned subsidiaries (collectively, the “Company”). Intercompany balances and transactions have been eliminated in consolidation. |
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| Use of Estimates, Policy [Policy Text Block] | Use of estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the period in which the change is determined. Estimates are used when accounting for such items as costs of long-term sales contracts, allowance for uncollectible accounts, inventory valuation allowances, depreciation and amortization, valuation of pension obligations, income taxes, warranty reserve, management’s assessment of going concern, contingencies and litigation. |
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| Cash and Cash Equivalents, Policy [Policy Text Block] | Cash and cash equivalents: The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company has deposits in United States financial institutions that maintain FDIC deposit insurance on all interest and non-interest bearing accounts, collectively, with an aggregate coverage up to $250,000 per depositor per financial institution. At times, the amount of the deposits exceeds the FDIC limits. The portion of the deposits in excess of FDIC limits represents a credit risk of the Company. |
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| Receivables, Policy [Policy Text Block] | Accounts receivable: Receivables are carried at net realizable value. Credit is extended based on an evaluation of each customer’s financial condition; collateral is generally not required. Reserves for uncollectible accounts receivable are provided based on historical experience and current trends. The Company evaluates the adequacy of these reserves regularly. The following is a summary of the allowance for uncollectible accounts at December 31:
Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers, the relatively small account balances within the majority of the Company’s customer base and their dispersion across different businesses. The Company’s revenues included one multinational customer that accounted for 12.5% and 10.8% of total revenues in 2015 and 2014, respectively. |
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| Inventory, Policy [Policy Text Block] | Inventories: Inventories are stated at the lower of cost (first-in, first-out method) or market value. Valuation allowances for slow moving and obsolete inventories are provided based on historical experience and demand for servicing of the displays. The Company evaluates the adequacy of these valuation allowances regularly. |
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| Property, Plant and Equipment, Policy [Policy Text Block] | Rental equipment and property, plant and equipment: Rental equipment and property, plant and equipment are stated at cost and depreciated over their respective useful lives using the straight-line method. Leaseholds and improvements are amortized over the lesser of the useful lives or term of the lease. The estimated useful lives are as follows:
When rental equipment and property, plant and equipment are fully depreciated, retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the accounts. |
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| Goodwill and Intangible Assets, Policy [Policy Text Block] | Goodwill: Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired. The goodwill of $744,000 relates to the Digital display sales segment. The Company annually evaluates the value of its goodwill on October 1 and determines if it is impaired by comparing the carrying value of goodwill to its estimated fair value. Changes in the assumptions used could materially impact the fair value estimates. Assumptions critical to our fair value estimates are: (i) discount rate used to derive the present value factors used in determining the fair value of the reporting unit, (ii) projected average revenue growth rates used in the reporting unit models and (iii) projected long-term growth rates used in the derivation of terminal year values. These and other assumptions are impacted by economic conditions and expectations of management and will change in the future based on period-specific facts and circumstances. The Company uses the income and the market approach when testing for goodwill impairment. The Company weighs these approaches by using a 67% factor for the income approach and a 33% factor for the market approach. Together these two factors estimate the fair value of the reporting unit. The Company uses a discounted cash flow model to determine the fair value under the income approach which contemplates a conservative overall weighted average revenue growth rate. If the Company were to reduce its revenue projections on the reporting unit by 5.6% within the income approach, the fair value of the reporting unit would be below carrying value. The gross profit margins used are consistent with historical margins achieved by the Company during previous years. If there is a margin decline of 5.7% or more, the model would yield results of a fair value less than carrying amount. The Company uses a market multiple approach based on revenue to determine the fair value under the market approach which includes a selection of and market price of a group of comparable companies and the performance of the guidelines of the comparable companies and of the reporting unit. The impairment test for goodwill is a two-step process. The first step of the goodwill impairment test compares the fair value of the reporting unit with its carrying amount. If the carrying amount of the reporting unit exceeds its fair value, a second step is performed to calculate the implied fair value of the goodwill of the reporting unit by deducting the fair value of all of the individual assets and liabilities of the reporting unit from the respective fair values of the reporting unit as a whole. To the extent the calculated implied fair value of the goodwill is less than the recorded goodwill, an impairment charge is recorded for the difference. Fair value is determined using cash flow and other valuation models (generally Level 3 inputs in the fair value hierarchy described in Note 3 – Fair Value). There was no impairment of goodwill in 2015 or 2014. |
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| Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | Impairment or disposal of long-lived assets: The Company evaluates whether there has been an impairment in value of its long-lived assets if certain circumstances indicate that a possible impairment may exist. An impairment in value may exist when the carrying value of a long-lived asset exceeds its undiscounted cash flows. If it is determined that an impairment in value has occurred, the carrying value is written down to its fair value as determined by a discounted cash flow model. There were no impairments of long-lived assets in 2015 or 2014. |
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| Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block] | Restricted cash: The Company classifies cash as restricted when the cash is unavailable for withdrawal or usage for general operations. Restrictions may include legally restricted deposits, contracts entered into with others, or the Company’s statements of intention with regard to particular deposits. In July 2014, the Company deposited $212,000 in a savings account as collateral for a certificate of deposit in favor of the landlord at its New York headquarters as a security deposit. The Company has presented these funds as restricted cash since the use of the funds under the certificate of deposit is restricted. |
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| Shipping and Handling Cost, Policy [Policy Text Block] | Shipping Costs: The costs of shipping product to our customers ($689,000 in 2015 and $617,000 in 2014) are included in Cost of digital product sales. |
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| Advertising Costs, Policy [Policy Text Block] | Advertising/Marketing Costs: The Company expenses the costs of advertising and marketing at the time that the related advertising takes place. Advertising and marketing costs ($437,000 in 2015 and $811,000 in 2014) are included in General and administrative expenses. |
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| Revenue Recognition, Policy [Policy Text Block] | Revenue recognition: Revenues from equipment lease and maintenance contracts are recognized during the term of the respective agreements, which generally run for periods of one month to 10 years. At December 31, 2015, the future minimum lease payments due to the Company under operating leases that expire at varying dates through 2025 for its rental equipment and maintenance contracts, assuming no renewals of existing leases or any new leases, aggregating $4,550,000 are as follows: $1,938,000 – 2016, $1,149,000 – 2017, $1,029,000 – 2018, $233,000 – 2019, $146,000 – 2020 and $55,000 thereafter. Revenues on equipment sales with long-term receivables are recorded on the installment basis. At December 31, 2015, the future accounts receivables due to the Company under installment sales agreements aggregated $126,000 through 2018. Revenues on equipment sales, other than long-term equipment sales contracts, are recognized upon shipment when title and risk of loss passes to the customer. |
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| Standard Product Warranty, Policy [Policy Text Block] | Warranty reserve: The Company provides for the estimated cost of product warranties at the time revenue is recognized. While the Company engages in product quality programs and processes, including evaluating the quality of the component suppliers, the warranty obligation is affected by product failure rates. Should actual product failure rates differ from the Company’s estimates, revisions to increase or decrease the estimated warranty liability may be required. |
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| Income Tax, Policy [Policy Text Block] | Taxes on income: Deferred income tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at tax rates expected to be in effect when such temporary differences are expected to reverse and for operating loss carryforwards. The temporary differences are primarily attributable to operating loss carryforwards, depreciation and the pension plan. The Company records a valuation allowance against net deferred income tax assets if, based upon the available evidence, it is more-likely-than-not that the deferred income tax assets will not be realized. The Company considers whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets the more-likely-than-not recognition threshold, the position is measured to determine the amount of benefit to recognize in the financial statements. The Company’s policy is to classify interest and penalties related to uncertain tax positions in income tax expense. To date, there have been no interest or penalties charged to the Company in relation to the underpayment of income taxes. The Company’s determinations regarding uncertain income tax positions may be subject to review and adjustment at a later date based upon factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof. |
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| Foreign Currency Transactions and Translations Policy [Policy Text Block] | Foreign currency: The functional currency of the Company’s Canadian business operation is the Canadian dollar. The assets and liabilities of such operation are translated into U.S. dollars at the year-end rate of exchange, and the operating and cash flow statements are converted at the average annual rate of exchange. The resulting translation adjustment is recorded in Accumulated Other Comprehensive Loss in the Consolidated Balance Sheets and as a separate item in the Consolidated Statements of Comprehensive Loss. In relation to intercompany balances, these have been classified as short-term in nature and therefore the changes in the foreign currency remeasurement adjustment for intercompany balances are recorded as Gain (loss) on foreign currency remeasurement in the Consolidated Statements of Operations. |
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| Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] | Share-based compensation plans: The Company measures share-based payments to employees and directors at the grant date fair value of the instrument. The fair value is estimated on the date of grant using the Black-Scholes valuation model, which requires various assumptions including estimating stock price volatility, expected life of the stock option, estimated forfeiture rate and risk free interest rate. For details on the accounting effect of share-based compensation, see Note 15 – Share-Based Compensation. |
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| Subsequent Events, Policy [Policy Text Block] | Consideration of Subsequent Events: The Company evaluated events and transactions occurring after December 31, 2015 through the date these Consolidated Financial Statements were included in this Form 10-K and filed with the SEC, to identify subsequent events which may need to be recognized or non-recognizable events which would need to be disclosed. See Note 20 – Subsequent Events for transactions identified for disclosure. |
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| New Accounting Pronouncements, Policy [Policy Text Block] | Recent accounting pronouncements: In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019), early application is permitted. The Company has not yet determined the effect of the adoption of this standard on the Company’s consolidated financial position and results of operations. In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which amends Business Combinations (Topic 805). The ASU requires that an acquirer (i) recognize adjustments to provisional amounts from Business Combinations that are identified during the measurement period in the reporting period in which the adjustment amounts are determined, (ii) record, in the same period’s financial statements, the effect on earnings, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date and (iii) disclose the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, which for us would be the first quarter of 2016, and early adoption is permitted. The amendments in this ASU should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this ASU with earlier application permitted for financial statements that have not been issued. We do not expect this ASU to have a material impact on our financial position, results of operations or disclosures. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) by one year. As a result, the ASU is now effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, which for the Company is the first quarter of 2018. Earlier application is permitted for fiscal years beginning after December 15, 2016, including interim reporting periods within those years, which for the Company is the first quarter of 2017. The Company has not yet determined the effect of the adoption of this standard on the Company’s consolidated financial position and results of operations. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (Topic 330). The new guidance changes the subsequent measurement of inventory from lower of cost or market to lower of cost and net realizable value. ASU 2015-11 should be applied on a prospective basis and is effective for the Company beginning in the first fiscal quarter of 2017. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-90). This guidance describes management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendment should reduce diversity in the timing and content of footnote disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter. Early application is permitted. |
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| Reclassification, Policy [Policy Text Block] | Reclassifications: Certain reclassifications of prior years’ amounts have been made to conform to the current year’s presentation. |
Summary of Significant Accounting Policies (Tables) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||
| Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block] |
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| Schedule Of Property Plant And Equipment Estimated Useful Life [Table Text Block] |
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Inventories (Tables) |
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| Schedule of Inventory, Current [Table Text Block] |
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Rental Equipment (Tables) |
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||
| Rental Equipment [Abstract] | |||||||||||||||||||||||||||||||
| Rental Equipment [Table Text Block] |
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Property, Plant and Equipment (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Table Text Block] |
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Other Assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||
| Disclosure Text Block Supplement [Abstract] | |||||||||||||||||||||||||||||||
| Schedule of Other Assets [Table Text Block] |
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Taxes on Income (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Components of Income Tax Expense (Benefit) [Table Text Block] |
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| Schedule of Effective Income Tax Rate Reconciliation [Table Text Block] |
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| Schedule of Deferred Tax Assets and Liabilities [Table Text Block] |
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Accrued Liabilities (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accrued Liabilities [Table Text Block] |
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| Schedule of Product Warranty Liability [Table Text Block] |
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Long-Term Debt (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Long-term Debt Instruments [Table Text Block] |
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| Schedule of Maturities of Long-term Debt [Table Text Block] |
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Stockholders' Deficit (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retained Earnings [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Deficit (Tables) [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Amounts Recognized in Other Comprehensive Income (Loss) [Table Text Block] |
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Pension Plan (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pension Plan (Tables) [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Allocation of Plan Assets [Table Text Block] |
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| Schedule of Defined Benefit Plans Disclosures [Table Text Block] |
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| Schedule of Net Funded Status [Table Text Block] |
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| Schedule of Expected Benefit Payments [Table Text Block] |
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| Schedule of Net Benefit Costs [Table Text Block] |
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| Pension Costs [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pension Plan (Tables) [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Amounts Recognized in Other Comprehensive Income (Loss) [Table Text Block] |
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Share-Based Compensation (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block] |
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Loss Per Share (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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Business Segment Data (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Segment Reporting Information, by Segment [Table Text Block] |
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Summary of Significant Accounting Policies (Details) - Summary of the allowance for uncollectible accounts - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Summary of the allowance for uncollectible accounts [Abstract] | ||
| Balance at beginning of year | $ 168 | $ 86 |
| Provisions | 437 | 841 |
| Deductions | (46) | (759) |
| Balance at end of year | $ 559 | $ 168 |
Going Concern (Details) - USD ($) |
12 Months Ended | ||
|---|---|---|---|
Nov. 19, 2015 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Going Concern (Details) [Line Items] | |||
| Net Income (Loss) Attributable to Parent | $ (1,749,000) | $ (4,628,000) | |
| Working Capital Deficit | 2,500,000 | ||
| Defined Benefit Plan, Funded Status of Plan | (5,324,000) | $ (6,733,000) | |
| Pension Contributions | 197,000 | ||
| Defined Benefit Plans, Estimated Future Employer Contributions in Current Fiscal Year | 813,000 | ||
| Preferred Stock, Shares Subscribed but Unissued (in Shares) | 16,512 | ||
| Preferred Stock, Value, Subscriptions | $ 3,000,000 | ||
| Adjustments to Additional Paid in Capital, Stock Issued, Issuance Costs | $ 278,000 | ||
| 8¼% Limited Convertible Senior Subordinated Notes Due 2012 [Member] | |||
| Going Concern (Details) [Line Items] | |||
| Convertible Notes Payable | 626,000 | ||
| 9½% Subordinated Debentures Due 2012 [Member] | |||
| Going Concern (Details) [Line Items] | |||
| Convertible Notes Payable | $ 334,000 | ||
Fair Value (Details) - USD ($) |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|---|---|---|---|
| Fair Value (Details) [Line Items] | |||
| Money Market Funds, at Carrying Value | $ 1,000 | $ 1,000 | |
| Cash Surrender Value of Life Insurance | 55,000 | 55,000 | |
| Long-term Debt, Fair Value | 333,000 | 394,000 | |
| Equity, Fair Value Disclosure | 21,000 | 92,000 | $ 252,000 |
| 8¼% Limited Convertible Senior Subordinated Notes Due 2012 [Member] | |||
| Fair Value (Details) [Line Items] | |||
| Convertible Debt, Fair Value Disclosures | 164,000 | 244,000 | |
| 9½% Subordinated Debentures Due 2012 [Member] | |||
| Fair Value (Details) [Line Items] | |||
| Debt Instrument, Fair Value Disclosure | $ 33,000 | $ 33,000 |
Inventories (Details) - Inventories - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Inventories [Abstract] | ||
| Raw materials | $ 1,378 | $ 1,192 |
| Work-in-progress | 409 | 399 |
| Finished goods | 89 | 220 |
| Total Inventory | $ 1,876 | $ 1,811 |
Rental Equipment (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Rental Equipment (Details) [Line Items] | ||
| Depreciation | $ 123,000 | $ 138,000 |
| Rental Equipment [Member] | ||
| Rental Equipment (Details) [Line Items] | ||
| Asset Impairment Charges | 6,800,000 | |
| Depreciation | $ 2,300,000 | $ 2,900,000 |
Rental Equipment (Details) - Schedule Of Rental Equipment - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Schedule Of Rental Equipment [Abstract] | ||
| Rental equipment | $ 21,134 | $ 27,825 |
| Less accumulated depreciation | 16,452 | 20,935 |
| Net rental equipment | $ 4,682 | $ 6,890 |
Property, Plant and Equipment (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Property, Plant and Equipment (Details) [Line Items] | ||
| Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property | $ 151,000 | |
| Depreciation | 123,000 | $ 138,000 |
| Land, Building and Equipment [Member] | ||
| Property, Plant and Equipment (Details) [Line Items] | ||
| Pledged Assets Separately Reported, Real Estate Pledged as Collateral, at Fair Value | $ 1,100,000 | $ 1,000,000 |
Property, Plant and Equipment (Details) - Property, plant and equipment consists of the following: - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property, plant and equipment, Gross | $ 2,159 | $ 2,140 |
| Less accumulated depreciation | 1,003 | 1,034 |
| Net property, plant and equipment | 1,156 | 1,106 |
| Land, Buildings and Improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, plant and equipment, Gross | 1,256 | 1,250 |
| Machinery, Fixture and Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, plant and equipment, Gross | 878 | 863 |
| Leasehold Improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, plant and equipment, Gross | $ 25 | $ 27 |
Other Assets (Details) - Schedule of Other Assets - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Schedule of Other Assets [Abstract] | ||
| Long-term receivables | $ 76 | $ 126 |
| Prepaids | 55 | 56 |
| Deposits and other | 146 | 47 |
| Total | $ 277 | $ 229 |
Taxes on Income (Details) - USD ($) |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Jun. 26, 2012 |
|
| Taxes on Income (Details) [Line Items] | |||
| Income (Loss) from Continuing Operations before Income Taxes, Domestic | $ 2,200,000 | $ 4,700,000 | |
| Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 34.00% | 34.00% | |
| Deferred Tax Assets, Tax Credit Carryforwards, Alternative Minimum Tax | $ 865,000 | ||
| Operating Loss Carryforwards | $ 295,000 | ||
| Deferred Tax Assets, Operating Loss Carryforwards | 6,253,000 | $ 5,772,000 | $ 5,900,000 |
| CANADA | |||
| Taxes on Income (Details) [Line Items] | |||
| Income (Loss) from Continuing Operations before Income Taxes, Foreign | 500,000 | $ 100,000 | |
| Domestic Tax Authority [Member] | |||
| Taxes on Income (Details) [Line Items] | |||
| Operating Loss Carryforwards | $ 6,300,000 | ||
Taxes on Income (Details) - Components of income tax expense (benefit) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Current: | ||
| Federal | ||
| State and local | ||
| Foreign | $ 23 | $ 29 |
| Income tax (expense) benefit, current | $ 23 | $ 29 |
| Deferred: | ||
| Federal | ||
| State and local | ||
| Income tax (expense) benefit, deferred | ||
| Income tax expense | $ 23 | $ 29 |
Taxes on Income (Details) - Income tax rate reconciliation |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Income tax rate reconciliation [Abstract] | ||
| Statutory federal income tax benefit rate | 34.00% | 34.00% |
| State income taxes, net of federal benefit | 4.80% | (12.90%) |
| Foreign income taxed at different rates | 7.50% | (0.10%) |
| Deferred tax asset valuation allowance | (46.40%) | 123.30% |
| Net operating loss limitation | (156.90%) | |
| Other | (1.20%) | 12.00% |
| Effective income tax rate | (1.30%) | (0.60%) |
Taxes on Income (Details) - Significant components of the Company`s deferred income tax assets and liabilities - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
Jun. 26, 2012 |
|---|---|---|---|
| Deferred income tax asset: | |||
| Tax credit carryforwards | $ 897 | $ 897 | |
| Operating loss carryforwards | 6,253 | 5,772 | $ 5,900 |
| Net pension costs | 2,749 | 3,052 | |
| Accruals | 250 | 259 | |
| Allowance for bad debts | 55 | 41 | |
| Other | 415 | 402 | |
| Valuation allowance | (8,208) | (7,401) | |
| Deferred income tax asset, Total | 2,411 | 3,022 | |
| Deferred income tax liability: | |||
| Depreciation | 1,600 | 2,320 | |
| Other | 811 | 702 | |
| Deferred income tax liability, Total | $ 2,411 | $ 3,022 | |
| Net deferred income taxes |
Accrued Liabilities (Details) - Accrued liabilities - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|---|---|---|---|
| Accrued liabilities [Abstract] | |||
| Taxes payable | $ 1,059 | $ 1,063 | |
| Current portion of pension liability (see Note 14) | 1,010 | 1,442 | |
| Deferred revenues | 931 | 1,721 | |
| Directors fees | 684 | 532 | |
| Compensation and employee benefits | 614 | 678 | |
| Interest payable | 522 | 640 | |
| Warranty reserve | 389 | 345 | $ 288 |
| Audit fees | 137 | 194 | |
| Legal fees payable | 68 | 242 | |
| Installation costs | 46 | 197 | |
| Other | 676 | 803 | |
| Accrued Liabilities, Total | $ 6,136 | $ 7,857 |
Accrued Liabilities (Details) - Warranty obligations - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Warranty obligations [Abstract] | ||
| Balance at beginning of year | $ 345 | $ 288 |
| Provisions | 492 | 413 |
| Deductions | (448) | (356) |
| Balance at end of year | $ 389 | $ 345 |
Long-Term Debt (Details) - Long-term debt - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Debt Instrument [Line Items] | ||
| Long-term debt, including current portion | $ 1,293 | $ 1,811 |
| Less portion due within one year | 1,031 | $ 1,811 |
| Long-term debt | 262 | |
| 8¼% Limited Convertible Senior Subordinated Notes Due 2012 [Member] | ||
| Debt Instrument [Line Items] | ||
| Long-term debt, including current portion | 626 | $ 1,083 |
| 9½% Subordinated Debentures Due 2012 [Member] | ||
| Debt Instrument [Line Items] | ||
| Long-term debt, including current portion | 334 | 334 |
| Real Estate Mortgage Secured [Member] | ||
| Debt Instrument [Line Items] | ||
| Long-term debt, including current portion | $ 333 | $ 394 |
Long-Term Debt (Details) - Payments of long-term debt due $ in Thousands |
Dec. 31, 2015
USD ($)
|
|---|---|
| Payments of long-term debt due [Abstract] | |
| Long-term debt due | $ 1,031 |
| Long-term debt due | 75 |
| Long-term debt due | 80 |
| Long-term debt due | 85 |
| Long-term debt due | $ 22 |
Pension Plan (Details) - Weighted average asset allocations by asset category |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Pension Plan (Details) - Weighted average asset allocations by asset category [Line Items] | ||
| Total pension plan assets | 100.00% | 100.00% |
| Equity And Index Funds [Member] | ||
| Pension Plan (Details) - Weighted average asset allocations by asset category [Line Items] | ||
| Total pension plan assets | 68.50% | 69.90% |
| Fixed Income Funds [Member] | ||
| Pension Plan (Details) - Weighted average asset allocations by asset category [Line Items] | ||
| Total pension plan assets | 31.50% | 30.10% |
Pension Plan (Details) - Pension plan assets by level within the fair value hierarchy - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|---|---|---|---|
| Level 1: | |||
| Fair Value, Pension plan assets, Total | $ 8,193 | $ 7,946 | $ 7,077 |
| Fair Value, Inputs, Level 1 [Member] | |||
| Level 1: | |||
| Fair Value, Pension plan assets, Total | 8,193 | 7,946 | |
| Fair Value, Inputs, Level 1 [Member] | Equity And Index Funds [Member] | |||
| Level 1: | |||
| Fair Value, Pension plan assets, Total | 5,615 | 5,551 | |
| Fair Value, Inputs, Level 1 [Member] | Fixed Income Funds [Member] | |||
| Level 1: | |||
| Fair Value, Pension plan assets, Total | $ 2,578 | $ 2,395 | |
| Fair Value, Inputs, Level 2 [Member] | |||
| Level 1: | |||
| Fair Value, Pension plan assets, Total | |||
| Fair Value, Inputs, Level 3 [Member] | |||
| Level 1: | |||
| Fair Value, Pension plan assets, Total |
Pension Plan (Details) - The funded status of the plan - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
| Change in benefit obligation: | |||
| Projected benefit obligation at beginning of year | $ 14,679 | $ 11,883 | |
| Interest cost | 573 | 562 | |
| Actuarial (gain) loss | (1,192) | 2,764 | |
| Fair value of plan assets at beginning of year | 7,946 | 7,077 | |
| Actual return on plan assets | (451) | 441 | |
| Company contributions | 1,241 | 958 | |
| Benefits paid | (543) | (530) | |
| Fair value of plan assets at end of year | 8,193 | 7,946 | |
| Funded status (underfunded) | (5,324) | (6,733) | |
| Projected benefit obligation at end of year | 13,517 | 14,679 | |
| Amounts recognized in other accumulated comprehensive loss: | |||
| Net actuarial loss | $ 6,797 | $ 7,449 | $ 4,886 |
| Discount rate: | |||
| Components of cost | 4.00% | 4.00% | |
| Benefit obligations | 4.30% | 4.80% | |
| Expected return on plan assets | 8.00% | 8.00% | |
| Rate of compensation increase | |||
Pension Plan (Details) - Expected projected benefit payments due $ in Thousands |
Dec. 31, 2015
USD ($)
|
|---|---|
| Expected projected benefit payments due [Abstract] | |
| Estimated Benefit Payments | $ 630 |
| Estimated Benefit Payments | 655 |
| Estimated Benefit Payments | 713 |
| Estimated Benefit Payments | 886 |
| Estimated Benefit Payments | $ 724 |
Pension Plan (Details) - Components of the net periodic pension cost - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Components of the net periodic pension cost [Abstract] | ||
| Interest cost | $ 573 | $ 562 |
| Expected return on plan assets | (667) | (598) |
| Amortization of net actuarial loss | 579 | 358 |
| Net periodic pension cost | $ 485 | $ 322 |
Pension Plan (Details) - Change in unrecognized pension costs recorded in other comprehensive loss - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Change in unrecognized pension costs recorded in other comprehensive loss [Abstract] | ||
| Balance at beginning of year | $ 7,449 | $ 4,886 |
| Net actuarial (gain) loss | (73) | 2,921 |
| Recognized loss | (579) | (358) |
| Balance at end of year | $ 6,797 | $ 7,449 |
Share-Based Compensation (Details) - Activity of the Company`s stock options - $ / shares |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Activity of the Company`s stock options [Abstract] | ||
| Balance January 1, 2014 | 200,840 | 200,860 |
| Balance January 1, 2014 | 40 | 60 |
| Balance January 1, 2014 | 200,800 | 200,800 |
| Balance January 1, 2014 (in Dollars per share) | $ 16.25 | $ 19.58 |
| Number of Shares Authorized, Expired | (40) | (20) |
| Number of Shares Granted, Expired | (40) | (20) |
| Number of Shares Authorized,Balance | 200,800 | 200,840 |
| Number of Shares Granted,Balance | 40 | |
| Number of Shares Available,Balance | 200,800 | 200,800 |
| Weighted Average Exercise Price, Balance (in Dollars per share) | $ 16.25 | |
Loss Per Share (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Loss Per Share (Details) [Line Items] | ||
| Preferred Stock, Amount of Preferred Dividends in Arrears (in Dollars) | $ (23,000) | |
| Warrant [Member] | ||
| Loss Per Share (Details) [Line Items] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 85,300 | 75,300 |
| Employee Stock Option [Member] | ||
| Loss Per Share (Details) [Line Items] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 40 | |
Loss Per Share (Details) - Calculation of Income (Loss) Per Common Share - USD ($) $ / shares in Units, shares in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Numerator: | ||
| Net loss, as reported | $ (1,749,000) | $ (4,628,000) |
| Unpaid dividends accumulated on preferred shares | (23,000) | |
| Net loss attributable to common shares | $ (1,772,000) | $ (4,628,000) |
| Denominator: | ||
| Weighted average shares outstanding (in Shares) | 1,674 | 1,371 |
| Basic and diluted loss per share (in Dollars per share) | $ (1.06) | $ (3.38) |
Commitments and Contingencies (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Commitments and Contingencies Disclosure [Abstract] | ||
| Commitment For Future Salaries | $ 700,000 | |
| Contractual Salaries Expense | $ 447,000 | $ 348,000 |
| Lessee Leasing Arrangements, Operating Leases, Term of Contract | 2 years | |
| Lease Agreement, Frequency of Rental Payments | annual | |
| Sale Leaseback Transaction, Annual Rental Payments | $ 158,000 | |
| Operating Leases, Future Minimum Payments Due | 1,100,000 | |
| Operating Leases, Future Minimum Payments Due, Next Twelve Months | 562,000 | |
| Operating Leases, Future Minimum Payments, Due in Two Years | 450,000 | |
| Operating Leases, Future Minimum Payments, Due in Three Years | 101,000 | |
| Operating Leases, Future Minimum Payments, Due in Four Years | 26,000 | |
| Operating Leases, Future Minimum Payments, Due in Five Years | 1,000 | |
| Operating Leases, Rent Expense | $ 541,000 | $ 428,000 |
Business Segment Data (Details) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Business Segment Data (Details) [Line Items] | ||
| Number of Reportable Segments | 2 | |
| Concentration Risk, Percentage | 12.50% | 10.80% |
| Sales Revenue, Net [Member] | Foreign [Member] | ||
| Business Segment Data (Details) [Line Items] | ||
| Concentration Risk, Percentage | 10.00% | |
Subsequent Events (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Feb. 01, 2016 |
Dec. 31, 2015 |
|
| Subsequent Events (Details) [Line Items] | ||
| Sale Leaseback Transaction, Annual Rental Payments | $ 158,000 | |
| Subsequent Event [Member] | ||
| Subsequent Events (Details) [Line Items] | ||
| Sale Leaseback Transaction, Date | February 1, 2016 | |
| Sale Leaseback Transaction, Historical Cost | $ 1,100,000 | |
| Sale Leaseback Transaction, Lease Terms | lease is for a two year period | |
| Sale Leaseback Transaction, Annual Rental Payments | $ 158,000 | |
| Mortgage Loans on Real Estate, Foreclosures | 329,000 | |
| Sale Leaseback Transaction, Net Proceeds, Financing Activities | 661,000 | |
| Sale Leaseback Transaction, Current Period Gain Recognized | $ 267,000 | |
| Regulatory Asset, Amortization Period | 24 months |