UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2010
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Commission file number 1-2257
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TRANS-LUX CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-1394750
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
26 Pearl Street, Norwalk, CT 06850-1647
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(Address of principal executive offices) (Zip code)
(203) 853-4321
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark whether the Registrant 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 (s232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the Registrant was required to file and post such files). Yes X No
--- ---
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of "large accelerated filer," "accelerated filer" and
"smaller reporting company" in Rule 12b-2 of the Exchange Act. (check one)
Large accelerated filer Accelerated filer Non-accelerated filer
--- --- ---
Smaller reporting company X
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Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes No X
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Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Date Class Shares Outstanding
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05/19/10 Common Stock - $1.00 Par Value 2,442,923
TRANS-LUX CORPORATION AND SUBSIDIARIES
Table of Contents
Page No.
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Part I - Financial Information (unaudited)
Item 1. Condensed Consolidated Balance Sheets - March 31,
2010 and December 31, 2009 1
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 2010 and 2009 2
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2010 and 2009 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market
Risk 18
Item 4. Controls and Procedures 19
Part II - Other Information
Item 1. Legal Proceedings 19
Item 1A. Risk Factors 20
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds 20
Item 3. Defaults upon Senior Securities 20
Item 4. (Removed and Reserved) 21
Item 5. Other Information 21
Item 6. Exhibits 21
Signatures 22
Exhibits
Part I - Financial Information
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31 December 31
In thousands, except share data 2010 2009
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(unaudited) (see Note 1)
ASSETS
Current assets:
Cash and cash equivalents $ 462 $ 541
Cash in escrow 337 403
Receivables, less allowance of $1,361 - 2010 and $1,393 - 2009 2,713 1,743
Unbilled receivables - 29
Inventories 5,171 5,149
Prepaids and other 531 619
Current assets associated with discontinued operations 1 55
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Total current assets 9,215 8,539
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Rental equipment 58,605 58,164
Less accumulated depreciation 35,248 34,015
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23,357 24,149
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Property, plant and equipment 7,208 7,206
Less accumulated depreciation 4,743 4,667
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2,465 2,539
Asset held for sale 920 920
Goodwill 810 810
Other assets 829 926
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TOTAL ASSETS $37,596 $37,883
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,401 $ 1,410
Accrued liabilities 6,876 5,658
Current portion of long-term debt 16,525 16,990
Liabilities associated with discontinued operations 405 487
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Total current liabilities 25,207 24,545
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Long-term debt:
8 1/4% Limited convertible senior subordinated notes due 2012 - -
9 1/2% Subordinated debentures due 2012 - -
Notes payable 2,415 2,193
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2,415 2,193
Deferred credits, deposits and other 3,980 3,852
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Total liabilities 31,602 30,590
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Stockholders' equity:
Common - $1 par value - 5,500,000 shares authorized,
2,826,424 shares issued in 2010 and 2009 2,827 2,827
Additional paid-in-capital 14,260 14,657
Accumulated deficit (6,409) (4,989)
Accumulated other comprehensive loss (1,621) (1,739)
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9,057 10,756
Less treasury stock - at cost - 383,596 common shares
in 2010 and 433,596 common shares in 2009 (3,063) (3,463)
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Total stockholders' equity 5,994 7,293
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $37,596 $37,883
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The accompanying notes are an integral part of these condensed consolidated financial
statements.
1
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
March 31
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In thousands, except per share data 2010 2009
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Revenues:
Equipment rentals and maintenance $ 2,268 $ 2,463
Equipment sales 3,054 5,249
Real estate rentals 64 57
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Total revenues 5,386 7,769
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Operating expenses:
Cost of equipment rentals and maintenance 1,879 2,113
Cost of equipment sales 2,555 3,995
Cost of real estate rentals 12 15
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Total operating expenses 4,446 6,123
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Gross profit from operations 940 1,646
General and administrative expenses (1,928) (2,351)
Interest expense, net (421) (408)
Other income 3 -
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Loss before income taxes (1,406) (1,113)
Income tax expense (14) (41)
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Net loss $(1,420) $(1,154)
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Loss per share - basic and diluted $ (0.59) $ (0.50)
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Weighted average common shares outstanding - basic and diluted 2,393 2,307
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The accompanying notes are an integral part of these condensed consolidated financial
statements.
2
TRANS-LUX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31
In thousands 2010 2009
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Cash flows from operating activities
Net loss $(1,420) $(1,154)
Adjustment to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 1,374 1,512
Changes in operating assets and liabilities:
Receivables (941) 768
Inventories (22) 465
Prepaids and other assets 120 261
Accounts payable and accrued liabilities 1,330 (655)
Deferred credits, deposits and other 128 201
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Net cash provided by operating activities 569 1,398
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Cash flows from investing activities
Equipment manufactured for rental (441) (646)
Purchases of property, plant and equipment (2) (126)
Proceeds from sale of available-for-sale securities - 135
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Net cash used in investing activities (443) (637)
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Cash flows from financing activities
Payments of long-term debt (893) (665)
Proceeds from long-term debt 650 -
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Net cash used in financing activities (243) (665)
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Cash flows from discontinued operations
Cash provided by operating activities of discontinued operations 38 24
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Net cash provided by discontinued operations 38 24
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Net (decrease) increase in cash and cash equivalents (79) 120
Cash and cash equivalents at beginning of year 541 1,422
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Cash and cash equivalents at end of period $ 462 $ 1,542
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Supplemental disclosure of cash flow information:
Interest paid $ 125 $ 543
Income taxes paid - -
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The accompanying notes are an integral part of these condensed consolidated financial
statements.
3
TRANS-LUX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
(unaudited)
Note 1 - Basis of Presentation
Financial information included herein is unaudited, however, such information
reflects all adjustments (of a normal and recurring nature), which are, in the
opinion of management, necessary for the fair presentation of the condensed
consolidated financial statements for the interim periods. The results for the
interim periods are not necessarily indicative of the results to be expected for
the full year. The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with rule 10-01 of Regulation S-X
promulgated by the Securities and Exchange Commission and therefore do not
include all information and footnote disclosures required under accounting
principles generally accepted in the United States of America. It is suggested
that the March 31, 2010 condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2009. The Condensed Consolidated Balance Sheet at December 31, 2009 is
derived from the December 31, 2009 audited financial statements.
There have been no material changes in our significant accounting policies
during the three months ended March 31, 2010 as compared to the significant
accounting policies described in our Annual Report on Form 10-K for the year
ended December 31, 2009. The Company has evaluated subsequent events through
the filing date of this Form 10-Q and has determined that there were no
subsequent events to recognize or disclose in these financial statements.
Recent Accounting Pronouncements: In February 2010, the Financial Accounting
Standards Board issued Accounting Standards Update No. 2010-09, "Subsequent
Events: Amendments to Certain Recognition and Disclosure Requirements," which
provides updated guidance on subsequent events and removes the requirement to
disclosure the date though which subsequent events have been evaluated for SEC
filers. This guidance became effective upon issuance and its adoption did not
have an effect on the Company's condensed consolidated financial statements.
Note 2 - Going Concern
The accompanying unaudited condensed consolidated financial statements have been
prepared in conformity with generally accepted accounting principles in the
United States of America, which contemplates continuation of the Company as a
going concern. The Company has incurred significant recurring losses from
continuing operations and has a significant working capital deficiency. The
Company incurred a net loss of $1.4 million for the three months ended March 31,
2010 and has a working capital deficiency of $16.0 million as of March 31, 2010.
In addition, the Company recorded a net loss of $8.8 million for 2009. As
further discussed in Note 6 - Long-Term Debt, the Company did not make the
required sinking fund payment of $105,700 on its 9 1/2% Subordinated debentures
due 2012 (the "Debentures"), which was due on
4
December 1, 2009, and did not make the March 1, 2010 interest payment of
$417,800 on its 8 1/4% Limited convertible senior subordinated notes due 2012
(the "Notes"). Under the terms of the indenture agreements that govern the
Debentures and Notes, the non-payments constitute events of default;
accordingly, the trustees or the holders of 25% of the outstanding Debentures
and Notes have the right to declare the outstanding principal and interest due
and payable immediately. In the event that the Company receives such notice,
the senior lender has the right to demand payment on outstanding amounts on the
Credit Agreement. As such, all outstanding debt under the Credit Agreement has
been classified as current in the accompanying Condensed Consolidated Balance
Sheets. These matters raise substantial doubt about the Company's ability to
continue as a going concern.
In March 2010, the senior lender agreed to extend the maturity date of the
Credit Agreement to May 1, 2011 and has extended payment terms on the term
portion of the debt. The senior lender has retained the right to call the
Credit Agreement in the event that the holders of the Debentures or Notes demand
payment. The Company also refinanced its mortgage on its Des Moines, Iowa
facility in March 2010, which provided an additional $260,000 for working
capital. The Company is currently involved in discussions with various entities
to obtain additional debt and/or equity financing including amounts that could
be used to settle the Debentures and Notes, however there can be no assurance
that the Company will be successful.
The Company continues to manage a plan to improve operating results. The plan
includes partnering with an LED supplier and offering several new high
resolution LED large screen systems, seeking ways to reduce costs of components
used in its products and other expenses to improve sales margins, and continue
to look at ways to lower overhead costs, such as compensation and benefits.
There can be no assurance that the Company will achieve higher sales, improved
margins or lower costs.
Because substantially all of the Company's eligible accounts receivable,
inventory and other assets are secured by the Credit Agreement, management
cannot provide any assurance that the Company would have sufficient cash and
liquid assets to fund normal operations during the period of time when it is
required to repay amounts outstanding under the Credit Agreement. Further, if
the Company is unable to obtain waivers or cure the defaults on the Debentures
and Notes, the Debentures and Notes could be called and be immediately due.
Such notice would trigger a default in the Credit Agreement. If the Credit
Agreement, Debentures and Notes are called, the Company would need to obtain new
financing; there can be no assurance that the Company will be able to do so. If
the debt is called and new financing cannot be arranged it is unlikely the
Company will be able to continue as a going concern. The accompanying condensed
consolidated 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 6 - Long-Term Debt for further details.
5
Note 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. The
fair value of these instruments is determined using a three-tier fair value
hierarchy. 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. At March 31, 2010, the
Company's money market funds and the cash surrender value of life insurance had
carrying amounts of $19,000 and $75,000, respectively. The carrying amounts of
cash equivalents, receivables, accounts payable and accrued liabilities
approximate fair value due to the short-term maturities of these items. At
March 31, 2010, the fair value of the Company's Notes and Debentures, using
observable inputs, was $3.7 million and $0.4 million, respectively. At March
31, 2010, the fair value of the Company's remaining long-term-debt, including
current portion, approximates its carrying value of $7.8 million.
Note 4 - Inventories
Inventories are stated at the lower of cost or market and consist of the
following:
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March 31 December 31
In thousands 2010 2009
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Raw materials $3,616 $3,695
Work-in-progress 1,043 1,044
Finished goods 512 410
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$5,171 $5,149
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Note 5 - Other Receivable
The Company had a $2.6 million note receivable that was due June 2008, relating
to the sale/leaseback of the Company's Norwalk, Connecticut facility in 2004.
The receivable was secured by a purchase money mortgage subordinated to a $3.5
million first mortgage in favor of the purchaser's bank. The purchaser
defaulted on this payment and the Company pursued legal remedies. After the
negative results of a foreclosure by sale by the first mortgagee, the Company
wrote off this note receivable and related expense for a total of $2.7 million
in the second quarter of 2009.
Note 6 - Long-Term Debt
The Company has $10.1 million of 8 1/4% Limited convertible senior subordinated
notes due 2012 (the "Notes") which are no longer convertible into common shares;
interest is payable semi-annually and may be redeemed, in whole or in part, at
par. The Company did not remit the March 1, 2010 semi-annual interest payment
of $417,800 to the trustee, which non-payment continued for more than 30 days.
The non-payment constitutes an event of default under the indenture governing
the Notes
6
and the trustee, by notice to the Company, or the holders of 25% of the
principal outstanding, by notice to the Company and the trustee, may declare the
outstanding principal plus interest due and payable immediately. When such
notice is received by the Company, no payment shall be made by the Company to
the holders or trustee until the earlier of such non-payment event of default is
cured or waived or 179 days since receipt by the trustee of notice of such
event, unless the holder of Senior Indebtedness has accelerated the due date
thereof. If the holder of Senior Indebtedness accelerates the due date at any
time, then no payment may be made on the Notes until the default is cured or
waived. At March 31, 2010 and December 31, 2009, the total amount outstanding
is classified as current portion of long-term debt.
The Company has $1.1 million of 9 1/2% Subordinated debentures due 2012 (the
"Debentures") which are due in annual sinking fund payments of $105,700
beginning in 2009, which payment has not been remitted by the Company, with the
remainder due in 2012; interest is payable semi-annually and may be redeemed, in
whole or in part, at par. The non-payment constitutes an event of default under
the indenture governing the Debentures and the trustee, by notice to the
Company, or the holders of 25% of the principal outstanding, by notice to the
Company and the trustee, may declare the outstanding principal plus interest due
and payable immediately. During the continuation of any event which, with
notice or lapse of time or both, would constitute a default under any agreement
under which Senior Indebtedness is issued, if the effect of such default is to
cause, or permit the holder of Senior Indebtedness to become due prior to its
stated maturity, no payment (including any required sinking fund payment) of
principal, premium or interest shall be made on the Debentures unless and until
such default shall have been remedied, if written notice of such default has
been given to the trustee by the Company or the holder of Senior Indebtedness.
The failure to make the sinking fund payment is an event of default under the
Credit Agreement since it involves indebtedness over $500,000 and no payment can
be made to the trustee or the holders at this time as such event has not been
waived. Likewise, the failure to pay the interest on the Notes is an event
preventing payments on the Debentures, as the Notes are Senior Indebtedness with
respect to the Debentures. At March 31, 2010, the total amount outstanding is
classified as current portion of long-term debt.
The Company has a bank Credit Agreement, which provides for a term loan of $10.0
million, a non-revolving line of credit of up to $6.2 million (which is no
longer available) to finance the redemption of one-half of the 7 1/2%
Subordinated notes due 2006 (which were redeemed in June 2006 and no longer
outstanding), and a revolving loan of up to $5.0 million, based on eligible
accounts receivable and inventory, at a variable rate of interest of Prime plus
2.00%, with a floor of 6.00% (6.00% at March 31, 2010), which was due to mature
April 1, 2010. On April 13, 2010, the maturity of the Credit Agreement was
extended to May 1, 2011. As of March 31, 2010, the Company has drawn $3.9
million against the revolving loan facility and none was available for
additional borrowing. The Credit Agreement, as amended, requires an annual
facility fee on the unused commitment of 0.25% and requires compliance with
certain financial covenants, as defined in the Credit Agreement, which include a
senior debt coverage ratio of not less than 1.25 to 1.0, a loan-to-value ratio
of not of not more than 50% and a $1.0 million cap on capital expenditures per
quarter beginning with the quarter ended June 30, 2010. In addition, the April
13, 2010 amendment waived the default on the Notes and Debentures, but in the
event that the holders of the Notes or Debentures or trustees declare a default
and begin to exercise any of their rights and remedies in connection with the
non-payment
7
defaults, this shall constitute a separate and distinct event of default and the
senior lender may exercise any and all rights and remedies it may have. As a
result, at March 31, 2010 the total amount outstanding under the Credit
Agreement is classified as current portion of long-term debt. In addition, the
April 13, 2010 amendment waived the default of non-payment of certain pension
plan contributions, but in the event that any government agency takes any
enforcement action or otherwise exercises any rights and remedies it may have,
this shall constitute a separate and distinct event of default and the senior
lender may exercise any and all rights and remedies it may have. The amounts
outstanding under the Credit Agreement are collateralized by all of the Display
division assets.
On March 1, 2010, the Company refinanced its existing mortgage on its facility
located in Des Moines, Iowa, which was scheduled to mature in 2009. The
refinancing was for $650,000 at a fixed rate of interest of 6.50% payable in
monthly installments, which matures on March 1, 2015 and requires a compensating
balance of $200,000. The Company used proceeds of $390,000 to settle the prior
debt and will use the $260,000 balance for working capital needs. The Company
also has a mortgage on its real estate rental property located in Santa Fe, New
Mexico at a variable rate of interest of Prime, with a floor of 6.75%, which was
the interest rate in effect at March 31, 2010, payable in monthly installments
through 2012.
Note 7 - Reporting Comprehensive Loss
Total comprehensive loss is as follows:
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Three months ended March 31
In thousands 2010 2009
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Net loss, as reported $(1,420) $(1,154)
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Other comprehensive income (loss):
Unrealized foreign currency translation gain (loss) 118 (15)
Income tax benefit related to items of other
comprehensive income (loss) - -
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Total other comprehensive income (loss), net of tax 118 (15)
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Comprehensive loss $(1,302) $(1,169)
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Note 8 - Pension Plan
As of December 31, 2003, the benefit service under the pension plan had been
frozen and, accordingly, there is no service cost. As of April 30, 2009, the
compensation increments have been frozen and, accordingly, no additional
benefits are being accrued under the plan.
The following table presents the components of net periodic pension cost:
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Three months ended March 31
In thousands 2010 2009
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Interest cost $ 135 $ 150
Expected return on plan assets (104) (119)
Amortization of prior service cost - 4
Amortization of net actuarial loss 76 105
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Net periodic pension cost $ 107 $ 140
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8
As of March 31, 2010, the Company has recorded a current pension liability of
$0.1 million, which is included in accrued liabilities on the Condensed
Consolidated Balance Sheets, and a long-term pension liability of $3.9 million,
which is included in deferred credits, deposits and other on the Condensed
Consolidated Balance Sheets. The minimum required contribution for 2010 is
expected to be $0.1 million.
The pension plan asset information included below is presented at fair value.
ASC 820 establishes a framework for measuring fair value and required
disclosures about assets and liabilities measured at fair value. The fair value
of these assets is determined using a three-tier fair value hierarchy. Based on
this hierarchy, the Company determined the fair value of its money market funds,
equity and index funds and guaranteed investment contracts using quoted market
prices, a Level 1 or an observable input, and bonds, a Level 2 based on
observable inputs and quoted prices in markets that are not active. The Company
does not have any Level 3 pension assets, which such valuation would be based on
unobservable measurements and management's estimates.
The following table presents the pension plan assets by level within the fair
value hierarchy as of December 31, 2009:
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In thousands Level 1 Level 2 Level 3 Total
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Guaranteed investment contracts $2,540 $ - $ - $2,540
Equity and index funds 2,807 - - 2,807
Bonds - 82 - 82
Money market funds 17 - - 17
-----------------------------------
Total pension plan assets $5,364 $82 $ - $5,446
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In March 2010, the Company submitted to the Internal Revenue Service a request
for waiver of the minimum funding standard for its defined benefit plan. The
waiver request was submitted as a result of the current economic climate and the
current business hardship that the Company is experiencing. The waiver, if
granted, will defer payment of $285,000 of the minimum funding standard for the
2009 plan year. If the waiver is not granted, the Pension Benefit Guaranty
Corporation and the Internal Revenue Service have various enforcement remedies
they can implement to protect the participant's benefits; such as termination of
the plan and require the Company to make the unpaid contributions. The senior
lender has waived the default of non-payment of certain pension plan
contributions. In the event that any government agency takes any enforcement
action or otherwise exercises any rights and remedies it may have, this shall
constitute a separate and distinct event of default and the senior lender may
exercise any and all rights and remedies it may have. At this time, the Company
is anticipating making its required contributions for the 2010 plan year;
however there is no assurance that the Company will be able to make all
payments.
Note 9 - Stock Option Plans
The Company did not issue any stock options during the three months ended March
31, 2010 and 2009. The unrecognized compensation costs related to unvested
stock options granted under the Company's stock option plans was nominal.
9
The following table summarizes the activity of the Company's stock options for
the three months ended March 31, 2010:
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Weighted
Weighted Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Options Price ($) Term (Yrs) Value
-----------------------------------------------------------------------------------------
Outstanding at beginning of year 26,000 4.57
Granted - -
Exercised - -
Terminated - -
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Outstanding at end of period 26,000 4.57 2.8
=============================
Vested and expected to vest at end of period 22,500 5.14 2.4 -
=============================
Exercisable at end of period 22,500 5.14 2.4 -
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The Board granted Mr. Jean-Marc Allain, the Company's new President and Chief
Executive Officer, 50,000 shares of restricted stock from treasury shares which
vest 50% after one year and the ramaining 50% after two years.
Note 10 - Loss Per Common Share
Basic and diluted loss per common share is computed by dividing net loss by the
weighted average number of common shares outstanding for the period. In periods
when the Company reports net income, diluted per common share amounts are
calculated by adjusting net income by the weighted average number of common
shares outstanding, adjusted for shares that would be assumed outstanding after
convertible debt conversion and stock options vested under the treasury stock
method. At March 31, 2010 and 2009, there were outstanding stock options to
purchase 26,000 and 31,500 shares of Common Stock, respectively, which were
excluded from the calculation of diluted loss per share because their impact
would have been anti-dilutive.
Note 11 - Legal Proceedings and Claims
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business and/or which are covered by insurance that it
believes individually and in the aggregate will not have a material adverse
effect on the consolidated financial position or operations of the Company.
Note 12 - Business Segment Data
The Company evaluates segment performance and allocates resources based upon
operating income. The Company's operations are managed in three reportable
business segments. The Display Division comprises two operating segments,
Indoor display and Outdoor display. Both design, produce, lease, sell and
service large-scale, multi-color, real-time electronic information displays.
10
Both operating segments are conducted on a global basis, primarily through
operations in the U.S. The Company also has operations in Canada. The Indoor
display and Outdoor display segments are differentiated primarily by the
customers they serve. The Real estate rental segment owns an income-producing
property. Segment operating income is shown after operating expenses and sales,
general and administrative expenses directly associated with the segment.
Corporate general and administrative expenses relate to costs that are not
directly identifiable with a segment. There are no intersegment sales. Of the
total goodwill of $0.8 million, $0.7 million relates to the Outdoor display
segment and $0.1 million relates to the Indoor display segment.
Foreign revenues represent less than 10% of the Company's revenues and therefore
are not separately disclosed. The foreign operation does not manufacture 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.
Information about the Company's operations in its three business segments for
the three months ended March 31, 2010 and 2009 is as follows:
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Three months ended March 31
In thousands 2010 2009
-------------------------------------------------------------------------
Revenues:
Indoor display $ 1,683 $ 2,375
Outdoor display 3,639 5,337
Real estate rental 64 57
----------------------
Total revenues $ 5,386 $ 7,769
----------------------
Operating (loss) income:
Indoor display $ (320) $ (219)
Outdoor display 187 337
Real estate rental 49 39
----------------------
Total operating (loss) income (84) 157
Other income 3 -
Corporate general and administrative expenses (904) (862)
Interest expense, net (421) (408)
----------------------
Loss from operations before income taxes (1,406) (1,113)
Income tax expense (14) (41)
----------------------
Net loss $(1,420) $(1,154)
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Trans-Lux is a full service provider of integrated multimedia systems for
today's communications environments. The essential elements of these systems
are the real-time, programmable electronic information displays we manufacture,
distribute and service. Designed to meet the evolving communications needs of
both the indoor and outdoor markets, these displays are used primarily in
applications for the financial, banking, gaming, corporate, advertising,
transportation, entertainment
11
and sports industries. In addition to its display business, the Company owns
and operates an income producing rental property. The Company operates in three
reportable segments: Indoor display, Outdoor display and Real estate rental.
The Indoor display segment includes worldwide revenues and related expenses from
the rental, maintenance and sale of indoor displays. This segment includes the
financial, government/private and gaming markets. The Outdoor display segment
includes worldwide revenues and related expenses from the rental, maintenance
and sale of outdoor displays. Included in this segment are catalog sports,
retail and commercial markets. The Real estate rental segment includes the
operations of an income-producing real estate property.
Going Concern
In light of the unprecedented instability in the financial markets and the
severe slowdown in the overall economy, we do not have adequate liquidity,
including access to the debt and equity capital markets, to operate our business
in the manner in which we have historically operated. As a result, our
short-term business focus has been to preserve our liquidity position. We have
been successful in negotiating the renewal of the bank Credit Agreement, which
was scheduled to mature on April 1, 2010. The senior lender has reduced the
monthly principal payments and modified the maturity of the Credit Agreement to
May 1, 2011. Substantially all of our eligible accounts receivable, inventory
and other assets are secured by the Credit Agreement. We cannot provide any
assurance that we would have sufficient cash and liquid assets to fund normal
operations during the period of time when we are required to repay amounts
outstanding under the Credit Agreement. 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 twelve months. In
addition, the Company has not made the required sinking fund payment of
$105,700 on its 9 1/2% Subordinated debentures due 2012 (the "Debentures")
which was due on December 1, 2009 and did not make the March 1, 2010 interest
payment of $417,800 on its 8 1/4% Limited convertible senior subordinated notes
due 2012 (the "Notes"). As a result, if the Company is unable to (i) to obtain
additional liquidity for working capital, (ii) make the required sinking fund
payment or interest payments on its Debentures, (iii) make the required interest
payment on its Notes and (iv) make the required payments under the Credit
Agreement when due, there would be a significant adverse impact on the financial
position and operating results of the Company.
Moreover, because of the uncertainty surrounding our inability to obtain
additional liquidity and the potential of the noteholders and/or trustee to give
notice to the Company of a default on either the Debentures or the Notes, our
independent registered public accounting firm for the year ended December 31,
2009 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, however the opinion further states that the uncertainty
regarding the inability to make the required sinking fund payment on the
Debentures and the interest payment on the Notes and the potential of the senior
lender accelerating the payments on the Credit Agreement due to an event of
default on the Debentures and Notes raises substantial doubt about our ability
to continue as a going concern.
12
Results of Operations
Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009
Total revenues for the three months ended March 31, 2010 decreased $2.4 million
or 30.7% to $5.4 million from $7.8 million for the three months ended March 31,
2009, primarily due to decreases in both the Outdoor display and Indoor display
sales revenues.
Indoor display revenues decreased $693,000 or 29.2%. Of this decrease, Indoor
display equipment sales decreased $441,000 or 56.0%, primarily due to a decrease
in sales from the financial services and gaming markets. Indoor display
equipment rentals and maintenance revenues decreased $251,000 or 15.8%,
primarily due to disconnects and non-renewals of equipment on rental on existing
contracts in the financial services market. The financial services market
continues to be negatively impacted by the current investment climate resulting
in consolidation within that industry and the wider use of flat-panel screens
for smaller applications. Also, the global recession has negatively impacted
Indoor sales and rentals and maintenance revenues.
Outdoor display revenues decreased $1.7 million or 31.8%. Of this decrease,
Outdoor display equipment sales decreased $1.8 million or 39.3%, primarily in
the catalog sports and commercial markets, offset by a slight increase in
Outdoor display equipment rentals and maintenance revenues of $56,000 or 6.4%.
Also, the global recession has negatively impacted the Outdoor sales revenues.
Real estate rental revenues increased $7,000 or 12.3%, due to an increase in
rental income in our Santa Fe, New Mexico rental property.
Total operating income for the three months ended March 31, 2010 decreased
$241,000 to an operating loss of $84,000 from an operating income of $157,000
for the three months ended March 31, 2009, principally due to the decline in
revenues, offset by a decrease in general and administrative expenses.
Indoor display operating loss increased $101,000 to $320,000 in 2010 compared to
$219,000 in 2009, primarily as a result of the decline in both sales and rentals
and maintenance revenues, offset by a decrease in general and administrative
expenses. The cost of Indoor displays represented 93.3% of related revenues in
2010 compared to 83.2% in 2009. Indoor displays cost of equipment rentals and
maintenance as a percentage of related revenues increased primarily due to an
increase in material costs, offset by a $135,000 decrease in depreciation
expense and a $61,000 decrease in field service costs. The Company continually
addresses the cost of field service to keep it in line with revenues from
equipment rentals and maintenance. Cost of Indoor display equipment rentals and
maintenance includes field service expenses, plant repair costs, maintenance and
depreciation. Indoor display cost of equipment sales decreased $211,000 or
46.6%, primarily due to the decrease in revenues offset by an increase in
material costs. Indoor display general and administrative expenses decreased
$183,000 or 29.7%, primarily due to a reduction in payroll and benefits and
related expenses, as well as a decrease in bad debt expense. Due to the current
economic condition, during the first quarter of 2009, certain personnel and
related expenses of the Indoor display business were
13
reduced, resulting in annual cash savings of approximately $1.3 million.
Outdoor display operating income decreased $150,000 or 44.5%, primarily as a
result of a decrease in revenues, offset by a decrease in general and
administrative expenses. The cost of Outdoor displays represented 78.7% of
related revenues in 2010 compared to 77.4% in 2009. Outdoor display cost of
equipment sales decreased $1.2 million or 34.7%, principally due to the decrease
in volume. Outdoor display cost of equipment rentals and maintenance decreased
$37,000 or 6.3%, primarily due to a $29,000 decrease in field service costs to
maintain the equipment and an $8,000 decrease in depreciation expense. Outdoor
display general and administrative expenses decreased $282,000 or 32.4%,
primarily due to a reduction in selling payroll and benefits and related
expenses, as well as a decrease in bad debt expense. Cost of Outdoor display
equipment rentals and maintenance includes field service expenses, plant repair
costs, maintenance and depreciation. Due to the current economic condition,
during the first quarter of 2009, certain personnel and related expenses of the
commercial business were reduced, and all non-union personnel salaries were
reduced, resulting in an annual cash savings of approximately $1.2 million.
Real estate rental operating income increased $10,000 or 25.6%, primarily due to
the increase in rental revenues. The cost of Real estate rental represented
18.8% of related revenues in 2010 compared to 26.3% in 2009. Real estate rental
general and administrative expenses remained level.
Corporate general and administrative expenses increased $42,000 or 4.9%. The
2010 corporate general and administrative expenses includes a $126,000 negative
effect in the Canadian currency exchange, while 2009 included a $6,000 gain in
the Canadian currency exchange, a difference of $132,000. The Company continues
to monitor and reduce certain overhead costs such as benefit and medical costs.
Due to the current economic condition, during the first quarter of 2009, certain
corporate personnel salaries and consulting fees were reduced, resulting in an
annual savings of approximately $0.3 million.
Net interest expense increased $13,000 or 3.2%, due to an increase in the
interest rates of the variable rate debt.
The effective tax rate for the three months ended March 31, 2010 and 2009 was
1.0% and 3.7%, respectively. Both the 2010 and 2009 tax rate are being affected
by the valuation allowance on the Company's deferred tax assets as a result of
reporting pre-tax losses. The income tax expense relates to the Company's
Canadian subsidiary.
Liquidity and Capital Resources
The accompanying unaudited condensed consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. The
Company has incurred significant recurring losses from continuing operations and
has a significant working capital deficiency. The Company incurred a net loss
of $1.4 million for the three months ended March 31, 2010 and has a working
capital deficiency of $16.0 million as of March 31, 2010. In addition, the
Company reported a loss from continuing operations of $8.8 million for 2009. As
further discussed in Note 6 -
14
Long-Term Debt, the Company did not make the required sinking fund payment of
$105,700 on its 9 1/2% Subordinated debentures due 2012 (the "Debentures"),
which was due on December 1, 2009, and did not make the March 1, 2010 interest
payment of $417,800 on its 8 1/4% Limited convertible senior subordinated notes
due 2012 (the "Notes"). Under the terms of the indenture agreements that govern
the Debentures and Notes, the non-payments constitute events of default;
accordingly, the trustees or the holders of 25% of the outstanding Debentures
and Notes have the right to declare the outstanding principal and interest due
and payable immediately. In the event that the Company receives such notice,
the senior lender has the right to demand payment on outstanding amounts on the
Credit Agreement. As such, the outstanding Debentures, Notes and Credit
Agreement debt have been classified as current portion of long-term debt on the
accompanying Condensed Consolidated Balance Sheets. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
The Company has a bank Credit Agreement, which provides for a term loan of $10.0
million, a non-revolving line of credit of up to $6.2 million (which is no
longer available) to finance the redemptions of one-half of the 7 1/2%
Subordinated notes due 2006 (which were redeemed in June 2006 and no longer
outstanding), and a revolving loan of up to $5.0 million, based on eligible
accounts receivable and inventory, at a variable rate of interest of Prime plus
2.00%, with a floor of 6.00% (6.00% at March 31, 2010). On April 13, 2010, the
maturity of the Credit Agreement was extended to May 1, 2011. As of March 31,
2010, the Company has drawn $3.9 million against the revolving loan facility and
none was available for additional borrowing. The Credit Agreement, as amended,
requires an annual facility fee on the unused commitment of 0.25% and requires
compliance with certain financial covenants as defined in the Credit Agreement,
which include a senior debt coverage ratio of not less than 1.25 to 1.0, a
loan-to-value ratio of not of not more than 50%, and a $1.0 million cap on
capital expenditures per quarter beginning with the quarter ended June 30, 2010.
In addition, the April 13, 2010 amendment waived the default on the Notes and
Debentures, but in the event that the holders of the Notes or Debentures or
trustees declare a default and begins to exercise any of their rights and
remedies in connection with the non-payment defaults, this shall constitute a
separate and distinct event of default and the senior lender may exercise any
and all rights and remedies it may have. As a result, at March 31, 2010 the
total amount outstanding under the Credit Agreement is classified as current
portion of long-term debt. In addition, the April 13, 2010 amendment waived the
default of non-payment of certain pension plan contributions, but in the event
that any government agency takes any enforcement action or otherwise exercises
any rights and remedies it may have, this shall constitute a separate and
distinct event of default and the senior lender may exercise any and all rights
and remedies it may have. The Company's objective in regards to the Credit
Agreement is to obtain additional funds from external sources through equity or
additional debt financing and the Company is in discussions with senior lenders
and others to obtain additional borrowing capacity, which management believes
will be difficult to accomplish within the next twelve months given the current
global credit markets, economic conditions and operating results of the Company.
While management hopes it can be successful in the long run, there can be no
assurance that management will be successful in achieving these objectives. 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
amounts outstanding under the Credit Agreement are collateralized by all of the
Display division assets.
15
On March 1, 2010, the Company refinanced its existing mortgage on its facility
located in Des Moines, Iowa, which was scheduled to mature in 2009. The
refinancing was for $650,000 at a fixed rate of interest of 6.50% payable in
monthly installments, which matures on March 1, 2015. The Company used proceeds
of $390,000 to settle the prior debt and will use the $260,000 balance for
working capital needs. The Company also has a mortgage on its real estate
rental property located in Santa Fe, New Mexico at a variable rate of interest
of Prime, with a floor of 6.75%, which was the interest rate in effect at March
31, 2010, payable in monthly installments through 2012.
The Company has generated cash provided by operating activities of $0.6 million
and $1.4 million for the three months ended March 31, 2010 and 2009,
respectively. The Company has implemented several initiatives to improve
operational results and cash flows over future periods. The Company continues
to explore ways to reduce costs and has negotiated lower rent expense on its
Norwalk facility in the second quarter of 2010 to lower operating costs in the
future. The Company continually takes steps to reduce the cost to maintain the
equipment on rental and maintenance.
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 sales and lease 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. The Company's objective in regards to the Credit Agreement is to
obtain additional funds from external sources through equity or additional debt
financing prior to the maturity of the Credit Agreement on May 1, 2011, and is
in discussions with senior lenders and others, but the current global credit
environment has been and continues to be a challenge in accomplishing these
objectives. If the Company is unable to obtain replacement financing before the
maturity of the Credit Agreement on May 1, 2011, the senior lender has the right
to call the loan. If the loan were called, the Company would have difficulties
meeting its obligations in the normal course of business. The Company
continually evaluates the need and availability of long-term capital in order to
meet its cash requirements.
The Company has $10.1 million of Notes outstanding. Interest is payable
semi-annually and may be redeemed, in whole or in part, at par. The Company has
not remitted the $417,800 March 1, 2010 semi-annual interest payment to the
trustee, which continued for more than 30 days. The non-payment constitutes an
event of default under the indenture governing the Notes and the trustee, by
notice to the Company, or the holders of 25% of the principal outstanding, by
notice to the Company and the trustee, may declare the outstanding principal
plus interest due and payable immediately. When such notice is received by the
Company, no payment shall be made by the Company to the holders or trustee until
the earlier of such non-payment event of default is cured or waived or 179 days
since receipt by the trustee of notice of such event, unless the holder of
Senior Indebtedness has accelerated the due date thereof. If the holder of
Senior Indebtedness accelerates the due date at any time, then no payment may be
made until the default is cured or waived.
16
In addition, the Company has $1.1 million of Debentures outstanding. The
Company has not remitted the December 1, 2009 annual sinking fund payment of
$105,700. The non-payment constitutes an event of default under the indenture
governing the Debentures and the trustee, by notice to the Company, or the
holders of 25% of the principal outstanding, by notice to the Company and the
trustee, may declare the outstanding principal plus interest due and payable
immediately. During the continuation of any event which, with notice or lapse
of time or both, would constitute a default under any agreement under which
Senior Indebtedness is issued, if the effect of such default is to cause, or
permit the holder of Senior Indebtedness to become due prior to its stated
maturity, no payment (including any required sinking fund payment) of principal,
premium or interest shall be made on the Debentures unless and until such
default shall have been remedied, if written notice of such default has been
given to the trustee by the Company or the holder of Senior Indebtedness. The
failure to make the sinking fund payment is an event of default under the Credit
Agreement loan since it involves indebtedness over $500,000 and no payment can
be made to such trustee or the holders at this time as such event has not been
waived.
In March 2010, the Company submitted, to the Internal Revenue Service, a request
for waiver of the minimum funding standard for its defined benefit plan. The
waiver request was submitted as a result of the current economic climate and the
current business hardship that the Company is experiencing. The waiver, if
granted, will defer payment of the minimum funding standard for the 2009 plan
year. The Company has not made $242,000 of payment contributions for 2009. The
waiver, if granted, will defer the payment of $285,000 of the minimum funding
standard for the 2009 plan year. If the waiver is not granted, the Pension
Benefit Guaranty Corporation and the Internal Revenue Service have various
enforcement remedies they can implement to protect the participant's benefits,
such as termination of the plan or require the Company to make the unpaid
contributions. At this time, the Company is anticipating to make its required
contributions for the 2010 plan year, however there is no assurance that we will
be able to make all payments. Management believes that based on its actions
taken, current cash resources and cash provided by operations, it will have
difficulty funding operations and its current obligations over the next twelve
months.
Cash and cash equivalents decreased $79,000 for the three months ended March 31,
2010 compared to an increase of $120,000 for the three months ended March 31,
2009. The decrease in 2010 is primarily attributable to the investment in
equipment for rental of $441,000, the investment in property, plant and
equipment of $2,000, scheduled payments of long-term debt of $418,000 and
$85,000 of payments on its revolving credit facility, offset by cash provided by
operating activities of $569,000. In addition, the Company refinanced its Des
Moines mortgage, netting an additional $260,000 for working capital needs. The
increase in 2009 is primarily attributable to cash provided by operating
activities of $1.4 million and proceeds from the sale of available-for-sale
securities of $135,000, offset by the investment in equipment for rental of
$646,000, the investment in property, plant and equipment of $126,000 and
scheduled payments of long-term debt of $665,000.
A fundamental principle of the preparation of financial statements in accordance
with accounting principles generally accepted in the United States of America 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
17
appears imminent. In accordance with this requirement, the Company has prepared
its condensed consolidated financial statements on a going concern basis. While
we have prepared our consolidated financial statements on a going concern basis,
the continuing losses and uncertainty regarding the inability to make the
required sinking fund payment on the Debentures and the interest payment on the
Notes and the potential of the senior lender accelerating the payments on the
Credit Agreement due to an event of default on the Debentures and Notes raises
substantial doubt about our ability to continue as a going concern. Therefore,
we may not be able to realize our assets and settle our liabilities in the
ordinary course of business. Our condensed consolidated financial statements
included in this annual report on Form 10-Q do not reflect any adjustments that
might specifically result from the outcome of this uncertainty.
Under various agreements, the Company is obligated to make future cash payments
in fixed amounts. These include payments under the Company's long-term debt
agreements, employment and consulting agreement payments and rent payments
required under operating lease agreements. The Company has both variable and
fixed interest rate debt. Interest payments are projected based on actual
interest payments incurred until the underlying debts mature.
The following table summarizes the Company's fixed cash obligations as of March
31, 2010 for the remainder of 2010 and the next four years:
------------------------------------------------------------------------------------------
Remainder of
In thousands 2010 2011 2012 2013 2014
------------------------------------------------------------------------------------------
Long-term debt, including interest $17,292 $ 281 $1,978 $ 89 $ 89
Employment and consulting agreement obligations 413 550 226 195 195
Operating lease payments 376 494 271 77 -
-------------------------------------
Total $18,081 $1,325 $2,475 $361 $284
------------------------------------------------------------------------------------------
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
The Company may, from time to time, provide estimates as to future performance.
These forward-looking statements will be estimates and may or may not be
realized by the Company. The Company undertakes no duty to update such
forward-looking statements. Many factors could cause actual results to differ
from these forward-looking statements, including loss of market share through
competition, introduction of competing products by others, pressure on prices
from competition or purchasers of the Company's products, interest rate and
foreign exchange fluctuations, terrorist acts and war.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is subject to interest rate risk on its long-term debt. The Company
manages its exposure to changes in interest rates by the use of variable and
fixed interest rate debt. In addition the Company is exposed to foreign
currency exchange rate risk mainly as a result of its investment in its Canadian
subsidiary. The Company may, from time to time, enter into derivative contracts
to manage its interest risk. The Company does not enter into derivatives for
trading or speculative
18
purposes. At March 31, 2010, the Company did not hold any derivative financial
instruments.
A one-percentage point change in interest rates would result in an annual
interest expense fluctuation of approximately $70,000. A 10% change in the
Canadian dollar relative to the U.S. dollar would result in a currency exchange
expense fluctuation of approximately $337,000, based on dealer quotes,
considering current exchange rates.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. As required by Rule 13a-15
under the Securities Exchange Act of 1934, as of the end of the period covered
by this report, we have carried out an evaluation, under the supervision and
with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer (our principal executive officer and principal
financial officer), of the effectiveness of the design and operation of our
disclosure controls and procedures. 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 March 31, 2010.
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
quarter ended March 31, 2010, that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.
Part II - Other Information
---------------------------
Item 1. Legal Proceedings
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 that it
believes individually and in the aggregate will not have a material adverse
effect on the consolidated financial position or operations of the Company.
19
Item 1A. Risk Factors
The Company is subject to a number of risks including general business and
financial risk factors. Any or all of such factors could have a material
adverse effect on the business, financial condition or results of operations of
the Company. You should carefully consider the risk factors identified in our
Annual Report on Form 10-K for the year ended December 31, 2009.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On February 16, 2010 the Company granted its new President and Chief Executive
Officer, Jean-Marc Allain, 50,000 shares of restricted Common Stock from
treasury shares pursuant to an exemption under Section 4(2) of the Securities
Act of 1933, as amended. The shares vest 50% after one year and the remaining
50% after two years. Reference is made to Exhibit 10.2 to Form 8-K dated
February 18, 2010 for the terms of the Restricted Stock Agreement governing the
issuance of such shares. No proceeds were received by the Company in connection
with such grant.
Item 3. Defaults upon Senior Securities
As disclosed in Note 6 - Long-Term Debt to the condensed consolidated financial
statements, the Company has $10.1 million of 8 1/4% Limited convertible senior
subordinated notes due 2012 (the "Notes") which are no longer convertible into
common shares; interest is payable semi-annually and may be redeemed, in whole
or in part, at par. The Company did not remit the March 1, 2010 semi-annual
interest payment of $417,800 to the trustee, which continued for more than 30
days. The non-payment constitutes an event of default under the indenture
governing the Notes and the trustee, by notice to the Company, or the holders of
25% of the principal outstanding, by notice to the Company and the trustee, may
declare the outstanding principal plus interest due and payable immediately.
When such notice is received by the Company, no payment shall be made by the
Company to the holders or trustee until the earlier of such non-payment event of
default is cured or waived or 179 days since receipt by the trustee of notice of
such event, unless the holder of Senior Indebtedness has accelerated the due
date thereof. If the holder of Senior Indebtedness accelerates the due date at
any time, then no payment may be made until the default is cured or waived. At
March 31, 2010, the total amount outstanding is classified as current portion of
long-term debt.
Also disclosed in Note 6 - Long-Term Debt, the Company has $1.1 million of 9
1/2% Subordinated debentures due 2012 (the "Debentures") which are due in annual
sinking fund payments of $105,700 beginning in 2009, which payment has not been
remitted by the Company, with the remainder due in 2012; interest is payable
semi-annually and may be redeemed, in whole or in part, at par. The non-payment
constitutes an event of default under the indenture governing the Debentures and
the trustee, by notice to the Company, or the holders of 25% of the principal
outstanding, by notice to the Company and the trustee, may declare the
outstanding principal plus interest due and payable immediately. During the
continuation of any event which, with notice or lapse of time or both, would
constitute a default under any agreement under which Senior Indebtedness is
issued, if the
20
effect of such default is to cause, or permit the holder of Senior Indebtedness
to become due prior to its stated maturity, no payment (including any required
sinking fund payment) of principal, premium or interest shall be made on the
Debentures unless and until such default shall have been remedied, if written
notice of such default has been given to the trustee by the Company or the
holder of Senior Indebtedness. The failure to make the sinking fund payment is
an event of default under the Credit Agreement since it involves indebtedness
over $500,000 and no payment can be made to such trustee or the holders at this
time as such event has not been waived. At March 31, 2010, the total amount
outstanding is classified as current portion of long-term debt.
Item 4. (Removed and Reserved)
Item 5. Other Information
None.
Item 6. Exhibits
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.
31.2 Certification of Angela D. Toppi, Executive Vice President and Chief
Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of 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.
32.2 Certification of Angela D. Toppi, Executive Vice President and Chief
Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRANS-LUX CORPORATION
---------------------
(Registrant)
by /s/ Angela D. Toppi
-----------------------------
Angela D. Toppi
Executive Vice President and
Chief Financial Officer
by /s/ Todd Dupee
-----------------------------
Todd Dupee
Vice President and Controller
Date: May 20, 2010
22