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Genlyte Group is a well-managed company that has consistently
grown their sales and earnings through the introduction of new products and acquiring
companies. Then using their management
philosophies to turn these acquired companies into good, solid and highly profitable
companies.
Consumer Goods
Business Equipment
(GLYT-NASDAQ)
Genlyte Group Inc.
10350 Ormsby Park Place Suite 601
Louisville, Ky 40223
Phone: 502-420-9500
Larry K. Powers
President and CEO
Interview conducted by:
Walter Banks, Publisher
CEOCFOinterviews.com
September 22, 2005
Company Profile:
The Genlyte Group Incorporated (Nasdaq: GLYT) is a leading manufacturer of lighting
fixtures, controls, and related products for the commercial, industrial and residential
markets. Genlyte sells lighting and lighting accessory products under the major brand
names of Capri, Chloride Systems, Crescent, Day-Brite, Gardco, Hadco, Ledalite,
Lightolier, Lightolier Controls, Lumec, Shakespeare Composite Structures, Stonco, Thomas,
Vari-Lite, Wide-Lite, and Canlyte.
CEOCFO: Mr. Powers, what
is your vision and what attracted you to the company?Mr. Powers:
“ I have been with the company since 1983. The company was formed from a group of
companies that was acquired by a man by the name of Glenn Bailey who was chairman,
president and CEO of Bairnco Corporation. He had acquired Lightolier, which was one of the
premiere lighting companies in North America in 1981, and then he acquired a group of
companies that I was managing, which was owned by the Esquire group, a publishing company,
in 1983. So that is how I became affiliated with the company. A few years after that I
became the president of the outdoor division of that company and managed the outdoor
companies until I became the President of Genlyte in 1993. During those early years, we
had some challenging times, such as a severe recession in the construction market in the
late 80’s and early 90’s. Since 1993, our company has grown very nicely. We
formed a joint venture with Thomas Industries Inc. in 1998, in which they put their
lighting companies with our lighting companies and we called it Genlyte Thomas Group LLC.
Just a year ago, we acquired all the assets of the Genlyte Thomas Group and it is now
owned entirely by Genlyte. We are the third largest manufacturer of commercial,
residential, and industrial lighting in the U.S. We are the largest company that is solely
dedicated to the manufacturing, and sale of lighting fixtures and lighting controls in
this country.”
CEOCFO: I noticed you
have escalating profits and earnings, what do you attribute that to?
Mr. Powers: “We operate our company significantly
differently than most of our competition. We are an accumulation of 14 different
companies. All of the presidents and general managers of these various divisions have
complete profit and loss responsibilities. They are responsible to stay close to their
customers and end markets and develop products specifically for each market that they
serve. We believe that our organization gives us the flexibility to move more quickly in
developing new products and stay closer to the markets we serve. Lighting is a broad
field; we manufacture lighting fixtures, everything from a decorative chandelier that you
would hang over your dining room table, to a fixture that would light the oil wells off
the Gulf of Mexico, indoor/outdoor, landscape, industrial, residential, and all types of
commercial lighting. We do not believe that the market can best be served by one large
company trying to do all things for all people, so we maintain these separate operating
units.”
CEOCFO: You have a large
amount of employees, I would imagine overseeing this is a huge responsibility; do you need
a lot of assistants for yourself?
Mr. Powers: “I do not have a lot of assistants. For
approximately a billion, two hundred million dollar company, we have a corporate staff of
about 28 people. I rely heavily on the general managers of these various divisions to be
competent individuals and to be responsible to grow their sales and earnings of those
particular divisions. They all report directly to me. We meet regularly; we have a meeting
at least once a month either in person or via video conferencing; we have about five video
conferences a year. The other meetings, they come here to Louisville or we go to some of
the divisions and meet directly with them. We have a very close working relationship with
our divisions and we maintain good communications and a good understanding of what our
expectations are from all the divisions.”
CEOCFO: What is your
sales and distribution strategy?
Mr. Powers: “We sell almost exclusively through
electrical distribution throughout the country. We do very limited business through the
DIY (Do-It-Yourself) channel. We sell high-quality, high-end products and we focus on
high-quality value-added electrical distributors and lighting showrooms that we can sell
our products through.”
CEOCFO: Do you develop
your own products?
Mr. Powers: “Yes! We are very aggressive and we think we
develop probably as many new products each year as practically all of our competition put
together. We are a company focused on product leadership through all of our various
divisions. One might be focused on landscape lighting for high-end residential, somebody
else might be focused on lighting for warehouses or residential homes. What makes us
different, and we think one of the reasons we have performed well financially, is that we
are a very product performance driven type of company. We have a philosophy that if we do
not develop a product first, we want to develop it better; if there is a new trend that
comes out, we are quick to work with the lamp and ballast companies to find out what new
lamps and ballasts are coming down the pipeline, and we jump in and develop new fixtures
for those new lighting sources.”
CEOCFO: Which areas
generate the most revenue for you?
Mr. Powers: “Our largest division is Lightolier as I
mentioned earlier. They are our flagship company and one of their major markets is retail
construction. We are very dependent on the major commercial construction market, which
consists of retail stores, schools, hospitals, high-end restaurants and hotels. Office
buildings also and that is the one area in recent years that has been relatively soft.
Retail construction remains relatively robust. Office construction is still somewhat slow;
although we see signs that it is starting to improve.”
CEOCFO: Will future
growth come through new products, new markets or a combination?
Mr. Powers: “It will come from a combination. We have an
objective every year to grow 5% through new products and internal growth. We have another
goal to look for acquisitions, new markets, and new opportunities outside our traditional
channels to grow another 5%. We are not always successful in doing it every year, but last
year’s sales were up more than 5% in our traditional channels and this year they are
up more than five again.”
CEOCFO: Are you
considering any other markets?
Mr. Powers: “One of the hot things that is going on now
is the development of LEDs (Light-Emitting Diodes). It is now being used in taillights in
automobiles, and most stoplights in America. The idea behind LEDs is that they are much
more energy efficient and they basically last forever. They are rated for about 50,000
hours of light. A typical light bulb will burn 1,000 to 2,500 hours of light. LEDs are
going to last a long time and use a lot less electricity. Many people believe it is going
to go a long ways to changing how we now light things. It is an emerging technology. It
has become reasonably efficient in the oranges, reds and greens. White LED light has been
more difficult for them to get the efficiencies where they need to be. The lumens per watt
are still not where they need to be to be a good source of general illumination. It is
currently being used a lot in sign lighting and under-cabinet lighting. We use it almost
exclusively in our emergency lighting. Once they get the lumens per watt output up in
white light, and we figure out how to use it and configure the LEDs, we think it is going
to be a booming technology for general illumination. We see LEDs coming in the next three
to five years where it will have a major impact on our business.”
CEOCFO: Do you think you
will have a lead on this?
Mr. Powers: “We are constantly working with the
companies that are developing LEDs. We have had many meetings with those who are
developing LEDs and we will try to stay in the forefront of this new technology. There is
a company in Canada called TIR Systems Ltd. (TSX: TIR) that we are working closely with to
develop new LED products. LEDs will be the light source and we will develop the fixture
that will house this light source for this new technology.”
CEOCFO: Do you consider
safety an issue when you go to produce a product?
Mr. Powers: “We do not produce any products that do not
meet UL standards or CSA (Canadian Standards Association) standards in Canada, or NOM
which are the standards in Mexico. We do not have any safety issues at all with our
products because we are very concerned about safety and we develop our products to the
highest standards.”
CEOCFO: Are you
primarily in North American markets?
Mr. Powers: “Yes, we are primarily a North American
company. We are the number-one lighting company in Canada. I was just in Mexico for the
first two days of this week. We used to have a strong position in Mexico with a joint
venture partner but things didn’t work out. We basically abandoned Mexico, but we are
now revitalizing our Mexican operation. Our primary markets are the U.S., Mexico and
Canada. We have a company called Vari-Lite, which is a manufacturer of entertainment
lighting fixtures; these large moving lights that change colors. That is a worldwide
company; we do business in China, Japan, Europe and all around the world. We just acquired
Vari-Lite a couple of years ago and we are hoping that will lead to us selling more of our
other products on a worldwide basis. The Europeans are very good at lighting, but their
standards are different. I spent a few weeks in China last fall to determine if I think it
is an opportunity for us in that country; I do not see it yet because they do not have any
lighting standards and the products they are producing are relatively low quality. There
are many lighting companies in China, but eventually, if they start setting some lighting
standards, the China market may develop into a good potential market for us. We are always
looking for new markets to expand into if we think we have quality products that people
may want to acquire.”
CEOCFO: Do you feel that
your company is set financially going forward to continue building your business?
Mr. Powers: “We are in a strong financial position. We
acquired Thomas last year and paid approximately $400 million for the company. Right now,
a year later our net debt (debt minus cash on hand) is about $175 million. If you take a
company that has a billion-two in sales and strong earnings, we have almost unlimited
borrowing capacity. Financing our company has not been any problem what so ever in the
last ten years.”
CEOCFO: Do you have
float for investors?
Mr. Powers: “Yes. About 28 million shares of our stock
are out there and reasonable volume is traded over the NASDAQ.”
CEOCFO: Is most of your
PR work done in-house or in an outside firm?
Mr. Powers: “It is done in-house.”
CEOCFO: In closing, what
would you like to say to potential investors and what would you like them to remember?
Mr. Powers: “You have to review the history of the
company. Over the last twelve years, we have had good consistent growth in sales. We have
had a couple of years where our sales were off slightly related to the construction
market, but every year we have grown our earnings per share to new heights. We have a
solid, well-managed company that has consistently grown our sales and earnings through the
introduction of new products and acquiring companies. We have a tremendous record of
success in acquiring companies and then using our management philosophies to turn the
companies into good, solid profitable companies. We believe our company is a very good
company. You can look at our website to see the history of the company. We believe we have
the ability to continue to grow our sales and earnings. It is a good, solid company in
which to invest.”
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