TRANS-LUX CORPORATION Overview
Trans-Lux is a leading supplier of LED technology for display applications. The essential elements of these systems are the real-time, programmable digital products 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 operates in two reportable segments: Digital product sales and Digital product lease and maintenance.
The Digital product sales segment includes worldwide revenues and related expenses from the sales of both indoor and outdoor digital product signage. This segment includes the financial, government/private, gaming, scoreboards and outdoor advertising markets. The Digital product lease and maintenance segment includes worldwide revenues and related expenses from the lease and maintenance of both indoor and outdoor digital product signage. This segment includes the lease and maintenance of digital product signage across all markets.
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
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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 net realizable 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
Rental equipment is comprised of installed digital products on lease 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 still in operation. Current contracts have an average age of 21.1 years from their installation dates through the expiration of their current terms.
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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.
Pension Plan Obligations: The Company is required to make estimates and
assumptions to determine the obligation of our pension benefit plan, which
includes investment returns and discount rates. The Company recorded after-tax
benefit (charges) in unrecognized pension liability of
As of
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. There are no open matters that the Company deems material.
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Table of Contents Results of Operations
The following table presents our Statements of Operations data, expressed as a
percentage of revenue for the years ended
In thousands, except percentages 2021 2020
Revenues:
Digital product sales$ 9,418 83.0 %$ 7,378 78.1 % Digital product lease and maintenance 1,932 17.0 % 2,067 21.9 % Total revenues 11,350 100.0 % 9,445 100.0 % Cost of revenues: Cost of digital product sales 11,896 104.8 % 9,525 100.8 % Cost of digital product lease and maintenance 612 5.4 % 628 6.7 % Total cost of revenues 12,508 110.2 % 10,153 107.5 % Gross loss from operations (1,158) (10.2) % (708) (7.5) % General and administrative expenses (3,075) (27.1) % (3,908) (41.4) % Operating loss (4,233) (37.3) % (4,616) (48.9) % Interest expense, net (578) (5.1) % (425) (4.5) % Loss on foreign currency remeasurement (18) (0.2) % (57) (0.6) % Gain on extinguishment of debt 77 0.7 % 137 1.4 % Pension (expense) benefit (181) (1.6) % 111 1.2 % Loss before income taxes (4,933) (43.5) % (4,850) (51.4) % Income tax (expense) benefit (35) (0.3) % 7 0.1 % Net loss$ (4,968) (43.8) %$ (4,843) (51.3) % 2021 Compared to 2020
Total revenues for the year ended
Digital product sales revenues increased
Digital product lease and maintenance revenues decreased
Total operating loss for the year ended
Digital product sales operating loss decreased
Digital product lease and maintenance operating income decreased
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Corporate general and administrative expenses increased
Net interest expense increased
The gain on extinguishment of debt for the year ended
The effective tax rate for the years ended
Liquidity and Capital Resources
Current Liquidity
The Company has incurred recurring losses and continues to have a working
capital deficiency. The Company incurred a net loss of
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. In order to more effectively manage its cash resources, the Company had, from time to time, increased the payment timetable of some of its payables, which had, from time to time, delayed certain product deliveries from our vendors, which in turn had, from time to time, delayed certain deliveries to our customers. The recent cash infusions have resolved these previous issues.
Management believes there is substantial doubt as to whether we will have adequate liquidity, including access to the debt and equity capital markets, to operate our business over the next 12 months from the date of issuance of this Form 10-K. The Company continually evaluates the need and availability of long-term capital to meet its cash requirements and fund potential new opportunities.
The Company used cash for operating activities of
Cash, cash equivalents and restricted cash increased
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 2020 until the underlying debts mature.
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The following table summarizes the Company's fixed cash obligations as of
In thousands 2022 2023 2024 2025 2026 Long-term debt, including interest$ 4,104 $ -$ 31 $ 31 $ 31 Pension plan payments 138 - 179 129 60 Employment obligations - - - - - Estimated warranty liability 152 103 76 41 24 Operating lease payments 477 438 146 149 152 Total$ 4,871 $ 541 $ 432 $ 350 $ 267
As of
The Company may still seek 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. The Company has no agreements, commitments or understandings with respect to any such financings. To the extent the Company issues additional equity securities, it could be dilutive to existing shareholders.
Pension Plan Contributions
The minimum required pension plan contribution for 2021 was
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.
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