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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission File Number 1-5426

THOMAS INDUSTRIES INC.
(Exact name of Registrant as specified in its Charter)

        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 ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934) Yes ý    No o

        As of March 5, 2004, 17,327,686 shares of the registrant's Common Stock were outstanding (net of treasury shares and including directors' and executive officers' shares).

        The aggregate market value of the voting stock held by non-affiliates of the Registrant at June 30, 2003, was approximately $394,100,000. The aggregate market value was computed by using the closing price of the common stock as of that date on the New York Stock Exchange. (For purposes of calculating this amount only, all directors and executive officers of the registrant have been treated as affiliates.)

        Portions of the Proxy Statement for the Annual Meeting of Shareholders on April 22, 2004, are incorporated by reference in Part III of this report.

PART I.

ITEM 1. BUSINESS

a.

General Development of Business.

The company that was eventually to become known as Thomas Industries Inc. ("Thomas" or the "Company") was founded in 1928 as the Electric Sprayit Company. Electric Sprayit manufactured paint spraying machines, blowers, and air compressors in Chicago, Illinois. In 1948, Mr. Lee B. Thomas and a group of investors acquired Moe Brothers Manufacturing of Fort Atkinson, Wisconsin, a manufacturer of residential lighting products. In 1953, Moe Lighting and The Electric Sprayit Company merged to become Thomas Industries Inc.

Although its roots are in lighting products and air compressors, Thomas began to diversify further in the 1960's and 1970's, acquiring different types of consumer products along with tools, hardware, and specialty products. A new strategic focus that began in the 1980's was finalized in 1994 and led the Company to divest its non-core businesses and concentrate on Lighting and Pumps and Compressors.

Significant additions to the Lighting business included the Lumec and Day-Brite Lighting acquisitions in 1987 and 1989. On August 30, 1998, Thomas and The Genlyte Group ("Genlyte") formed a lighting joint venture that combined substantially all of the assets and liabilities of Genlyte and substantially all of the lighting assets and related liabilities of Thomas to create Genlyte Thomas Group LLC (GTG), estimated to be the third largest manufacturer of lighting fixtures and controls in North America. Thomas owns a 32% interest in the joint venture, and Genlyte owns a 68% interest. Since the formation of the joint venture, GTG has made several acquisitions to fill product voids, including Ledalite, Translite, Chloride, Vari-Lite and Shakespeare.

Significant additions to the Pump and Compressor business include ASF, Pneumotive, Brey, WISA, Welch and Oberdorfer, which were made from 1987 through 1999. On August 29, 2002, the Company purchased substantially all the assets and liabilities of Werner Rietschle Holding GmbH ("Rietschle"), a privately held company based in Schopfheim, Germany. Rietschle is a world leader in vacuum and pressure technology, which includes dry-running and oil-lubricated pumps, blowers, compressors, and pressure/vacuum pumps utilizing rotary vane, screw, roots and claw technologies. With the newly-launched Rietschle Thomas brand, Thomas is pursuing further opportunities in markets such as printing, packaging, woodworking and other applications that utilize Rietschle technologies.

b.

Financial Information about Segments.

The information required by this item is set forth in Note 12 to the consolidated financial statements.

c.

Narrative Description of Business.

Pump and Compressor Segment

Since the formation of the lighting joint venture, Thomas is now focused on its Pump and Compressor business. Thomas is a leading supplier of pumps and compressors to the original equipment manufacturer (OEM) market in such applications as medical equipment, gasoline vapor and refrigerant recovery, automotive and transportation applications, printing, packaging, tape drives, and laboratory equipment.

The Company designs, manufactures, markets, sells and services these products through worldwide operations. Pump and Compressor Group headquarters are as follows: North American Group—

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Sheboygan, Wisconsin; European Group—Puchheim, Germany; and Asia Pacific Group—Hong Kong, China.

The Company has four manufacturing operations in the United States which manufacture rotary vane, linear, piston, and diaphragm pumps and compressors, and various liquid pump technologies. These products are directly sold worldwide to OEM's, as well as through fluid power and industrial distributors.

Four German operations manufacture a complementary line of rotary vane, piston, linear, diaphragm, gear, side channel, radial, claw, screw, and rotary lobe pumps and compressors, as well as various liquid pump technologies, air-centers and centralized systems. These products are distributed worldwide. The German operations also include a foundry which produces pump castings for internal use, as well as castings for automotive components.

The Company also maintains sales and service facilities in Germany, U.S.A., England, Italy, Switzerland, Sweden, France, Denmark, the Netherlands, Hungary, Slovakia, Czech Republic, China, Japan, Taiwan, Mexico, Korea, New Zealand, Australia and Brazil. In many of these sales and service facilities, systems sales and final assembly work is done. The Corporate Office is in Louisville, Kentucky.

The Company offers a wide selection of standard air compressors and vacuum pumps and will modify or design its products to meet exacting OEM applications. For the OEM market, the Company's pump and compressor products are now marketed under the Rietschle Thomas name worldwide. Other products are marketed under the brand names Welch (high vacuum pumps for laboratory and chemical markets), Air-Pac (pneumatic construction equipment), Vakuumatic (leakage detection systems), Medi-Pump (respiratory products), and Oberdorfer (bronze and high alloy liquid pumps).

The medical equipment market, which includes oxygen concentrators, nebulizers, aspirators, and other devices, is important to the Company. Excluding Rietschle, Company sales to medical equipment OEM's were approximately $77 million in 2003, $67 million in 2002, and $69 million in 2001. Oxygen concentrator OEM's represent a significant portion of the Company's sales in the medical equipment market. The Company believes it has the leading market share in the oxygen concentrator OEM market worldwide.

No single customer of the Company accounted for 10 percent or more of the Company's net sales in 2003.

The backlog of unshipped orders was $66 million at December 31, 2003, and $62 million at December 31, 2002. The Company believes substantially all of such orders are firm, although some orders are subject to cancellation. Substantially all of these orders are expected to be filled in 2004.

The Company believes that it has adequate sources of materials and supplies for its business.

There is no significant seasonal impact on the business of the Company.

The Company has a $120 million committed revolving line of credit with its banks through August 28, 2005, of which $85 million was being used at December 31, 2003. The Company also had uncommitted short-term borrowing arrangements being used by some of its foreign offices which totaled $3.1 million at December 31, 2003. The Company expects to fund working capital requirements from a combination of available cash balances, internally generated funds, and the borrowing arrangements mentioned above.

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The Company has various patents and trademarks but does not consider its business to be materially dependent upon any individual patent or trademark. The majority of patents and trademarks resulted from the Rietschle acquisition.

The Company competes across all of its product lines with many large and varied manufacturers, both domestic and foreign. Some competitors are publicly-held companies and others are private companies. The Company competes on the basis of quality, performance, service, and price. Thomas believes that it is able to maintain its competitive position because of the quality and breadth of its products and services and its global presence.

During 2003, the Company spent $19,736,000 on research activities relating to the development of new products and the improvement of existing products. Substantially all of this amount was Company- sponsored activity. During 2002 and 2001, the Company spent $11,789,000 and $10,369,000, respectively, on these activities.

The Company, like other manufacturers, is subject to environmental rules and regulations regarding the use, disposal, and cleanup of substances regulated under environmental protection laws. It is the Company's policy to comply with these rules and regulations, and the Company believes that its practices and procedures are designed to meet this compliance. The Company is involved in remedial efforts at certain of its present and former locations, and when costs can be reasonably estimated, the Company records appropriate liabilities for such matters. The Company does not believe that the ultimate resolution of environmental matters will have a material adverse effect on its financial position, results of operations, or liquidity.

At December 31, 2003, the Company employed approximately 2,242 people.

Lighting Segment

On August 30, 1998, Thomas and Genlyte formed a lighting joint venture that combined substantially all of the assets and liabilities of Genlyte and substantially all of the lighting assets and related liabilities of Thomas to create GTG, estimated to be the third largest manufacturer of lighting fixtures, controls, and related products in North America. Thomas owns a 32% interest in the joint venture and Genlyte owns a 68% interest.

GTG designs, manufactures, markets, and sells lighting fixtures, controls, and related products for a wide variety of applications in the commercial, residential and industrial markets. GTG operates in these three industry segments through the following divisions: Lightolier, Day-Brite, Crescent, Capri/Omega, Chloride Systems, Controls, Hadco, Gardco, Wide-Lite, Stonco, Shakespeare Composite Structures and Thomas Residential in the United States and Canlyte, Thomas Lighting Canada, Lumec, and Ledalite in Canada.

GTG's products primarily utilize incandescent, fluorescent, light emitting diodes (LED) and high-intensity discharge (HID) light sources and are marketed primarily to distributors who resell the products for use in new commercial, residential and industrial construction as well as in remodeling existing structures. GTG's sales, like those of the lighting fixture industry in general, depends significantly on the level of activity in new construction and remodeling.

GTG designs, manufactures, markets, and sells the following types of products:

Indoor fixtures—Incandescent, fluorescent, LED and HID lighting fixtures and lighting controls for commercial, residential, industrial, institutional, medical, entertainment, and sport markets, and task lighting for all markets.

Outdoor fixtures—HID and incandescent lighting fixtures and accessories for commercial, residential, industrial, institutional, and sports markets.

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GTG's products are marketed by independent sales representatives and GTG direct sales personnel who sell to distributors, electrical wholesalers, mass merchandisers, and national accounts. In addition, GTG's products are promoted through architects, engineers, contractors, and building owners. GTG's products are principally sold throughout the United States, Canada, and Mexico.

Thomas' investment in GTG is accounted for using the equity method of accounting. Under the terms of the LLC Agreement, any time on or after January 31, 2002, Thomas has the right (a "put right"), but not the obligation, to require the Joint Venture (GTG) to purchase all, but not less than all, of Thomas' ownership interest in GTG at the applicable purchase price. The purchase price shall be equal to the "Fair Market Value" of GTG multiplied by Thomas' ownership percentage in GTG. The "Fair Market Value" means the value of the total interest in GTG computed as a going concern, including the control premium.

After receipt of the "Put Notice," Genlyte has the right, in its sole discretion and without the need of approval from Thomas, to cause GTG to be sold by giving notice to the GTG Management Board, and the Management Board must then proceed to sell GTG subject to a fairness opinion from a recognized investment banking firm.

Also under the terms of the LLC Agreement, on or after the final settlement of Genlyte's case related to the Keene Creditors Trust lawsuit against Genlyte and others, either Thomas or Genlyte has the right, but not the obligation to buy the other parties' interest in GTG (the "Offer Right"). If Thomas and Genlyte cannot agree on the terms, then GTG or the business of GTG shall be sold to the highest bidder. Either party may participate in bidding for the purchase of GTG or the business of GTG. On March 17, 2003, the Southern District of New York Federal District Court dismissed the Genlyte case noted above. On April 14, 2003, the Creditors Trust filed a Notice of Appeal to the United States Court of Appeals for the Second Circuit from the final judgment entered on March 17, 2003. The Notice claims to bring up for review all orders, opinions, and decisions previously entered in the action; however, the trust has since indicated that it would pursue its appeal only as to certain issues including the dismissal of the fraudulent conveyance claims, but would not pursue its appeal as to certain other issues, including the dismissal of the RICO claims. Argument on appeal is scheduled for March 24, 2004. Therefore as of March 2, 2004, no final settlement or disposition has occurred and neither party has the ability to exercise the offer right.

In the event of a Change of Control (i) of Thomas, GTG has the right, but not the obligation, to purchase Thomas' interest for a purchase price equal to Fair Market Value of GTG multiplied by Thomas' ownership interest or (ii) of Genlyte, Thomas has the right, but not the obligation, to sell its interest to the Joint Venture for a purchase price equal to Fair Market Value of GTG multiplied by Thomas' ownership interest. The definition of "Change of Control" includes the acquisition by any person of 25% or more of Thomas' outstanding common stock.

In the event of a Deadlock (as defined below), Thomas may exercise its Put Right in accordance with the LLC Agreement or Genlyte may, in its sole discretion, cause the entire Joint Venture or business of GTG to be sold. A "Deadlock" shall be deemed to exist if (i) the Management Board of GTG fails to agree on a matter for which Special Approval is required in accordance with the LLC Agreement and (ii) such disagreement continues for 90 days. The definition of "Special Approval" includes the approval of at least a majority of the management board representatives, including, in all instances, approval by at least one representative appointed by Thomas.

d.

Financial Information about Geographic Areas.

See Note 12 to the consolidated financial statements.

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e.

Website Access to Company Reports and Corporate Governance Material

We make available free of charge through our website, www.thomasind.com, (1) our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission and (2) the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee charters, our Corporate Governance Guidelines and our Corporate Compliance and Code of Ethics Policy. Our internet website and the information contained therein or incorporated therein are not intended to be incorporated into this Annual Report on Form 10-K.

f.

Executive Officers of the Registrant

(A)

Timothy C. Brown was elected Chairman of the Board on April 20, 1995, in addition to his other duties of President and Chief Executive Officer. Prior to this, Mr. Brown held various management positions in the Company including Chief Operating Officer, Executive Vice President, and Vice President and Group Manager of the Specialty Products Group.

(B)

Phillip J. Stuecker was elected Vice President of Finance, Chief Financial Officer, and Secretary on October 23, 1989. Prior to this, Mr. Stuecker held various management positions in the Company including Vice President and Treasurer.

(C)

Peter H. Bissinger was elected an officer effective December 14, 1992, in addition to his position of General Manager of the European Pump and Compressor Group, which he has held since 1987.

(D)

Dieter W. Rietschle was appointed a General Manager of TIWR Holding GmbH and Co. KG, a wholly owned subsidiary of the Company, effective August 30, 2002. This was the date Mr. Rietschle joined the Company as a result of the acquisition of substantially all of the assets of Werner Rietschle Holding GmbH. Prior to this date, Mr. Rietschle was General Manager of Werner Rietschle Holding GmbH. Mr. Rietschle was a former director of the Company.

(E)

James J. Kregel was elected an officer effective April 17, 2003, in addition to his position of General Manager, Rietschle Thomas North American Pump and Compressor Group, which he has held since March 1, 2003. Prior to this, Mr. Kregel held the position of Assistant General Manager for the North American Group from January 1, 2003, and the position of Director of Marketing and Sales for the North American Group from January 1, 1991 to December 31, 2002.

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ITEM 2. PROPERTIES

        The Corporate offices of the Company are located in Louisville, Kentucky. Due to the large number of individual locations and the diverse nature of the operating facilities, specific description of the properties owned and leased by the Company is not necessary to an understanding of the Company's business. All of the buildings are of steel, masonry, and concrete construction, are in generally good condition, provide adequate and suitable space for the operations at each location, and are of sufficient capacity for present and foreseeable future needs.

        The following listing summarizes the Company's properties.

ITEM 3. LEGAL PROCEEDINGS

        On August 13, 2002, a petition was filed in the District Court of Jefferson County, Texas adding Thomas Industries Inc. as a third party defendant in a lawsuit captioned Hydro Action, Inc. v. Jesse James, individually, and d/b/a/ James Backhoe Service of Dietrich, Illinois, Inc. and Septic Solutions, Inc. (the "Third Party Plaintiffs") (the "Original Lawsuit"). The Original Lawsuit alleged that the Company violated the Texas Deceptive Trade Practices Act and breached warranties of merchantability and fitness for a particular purpose with respect to pumps sold by the Company and used in septic tanks manufactured or sold by the plaintiffs. The Original Lawsuit has been stayed as a result of the bankruptcy filing by Hydro Action, Inc. On October 8, 2003, a lawsuit was filed against the Company, Gig Drewery, Yasunaga Corporation, Rietschle Thomas and Aqua-Partners, Ltd. in the District Court of Jefferson County, Texas making the same allegations set forth in the Original Lawsuit as well as alleging breach of contract, negligence and product liability and requesting class-action certification. No class has been certified. The Third Party Plaintiffs are plaintiffs in this action. This complaint has been amended to include approximately 28 plaintiffs. The complaint currently seeks $3 million per plaintiff and punitive and exemplary damages. The total sales related to these products were approximately $900,000. Although this litigation is in the preliminary stages, the Company believes it has meritorious defenses to the claims and intends to vigorously defend this matter. Litigation is subject to many uncertainties and the Company cannot guarantee the outcome of these proceedings. However, based upon information currently available, the Company does not believe that the outcome of these proceedings will have a material adverse effect on the consolidated financial position, results of operations, or cash flows of the Company.

        In the normal course of business, the Company is a party to legal proceedings and claims. When costs can be reasonably estimated, appropriate liabilities for such matters are recorded. While management currently believes the amount of ultimate liability, if any, with respect to these actions will not materially affect the financial position, results of operations, or liquidity of the Company, the ultimate outcome of any litigation is uncertain. Were an unfavorable outcome to occur, the impact could be material to the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None.

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PART II.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a)

Market Prices and Dividends of Common Stock

        The Company's common stock is traded on the New York Stock Exchange (ticker symbol TII). On February 9, 2004 there were 1,793 security holders of record. High and low closing stock prices and dividends per share for the last two years were:

(b)

The Company made no stock repurchases in 2003.

ITEM 6. SELECTED FINANCIAL DATA

FIVE YEAR SUMMARY OF OPERATIONS AND STATISTICS

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Note:  See accompanying Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations

(A)

Includes Rietschle results since the acquisition date on August 29, 2002.

(B)

Includes $2,272,000 of pre-tax gains related to the settlement of a patent infringement lawsuit.

(C)

Includes $1,400,000, or $.08 per share, of after-tax gains related to the settlement of GTG's patent infringement lawsuit.

(D)

Includes $1,632,000 of pre-tax gains related to insurance proceeds and sale of securities; also includes a $1,000,000 pre-tax charge related to environmental costs.

(E)

Includes $1,315,000, or $.09 per share, of after-tax gains related to insurance proceeds and sale of securities; also includes a $623,000, or $.04 per share, after-tax charge related to environmental costs.

(F)

In accordance with SFAS No. 142, goodwill is no longer amortized, effective January 1, 2002 (see Note 2 in the consolidated financial statements).

(G)

Represents the Company's earnings from its 32% interest in the GTG joint venture.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

        The Company operates in two segments. The Pump and Compressor Segment designs, manufactures, markets, sells and services pump and compressor products through worldwide operations. In August 2002, we significantly increased the size of our pump and compressor business by acquiring substantially all the assets and liabilities of Werner Rietschle Holding GmbH ("Rietschle"), a privately held company based in Schopfheim, Germany. Rietschle's operating results are included in the Company's operating results since the August 29, 2002 acquisition date. As we continue to integrate the Rietschle and Thomas entities, it becomes more difficult to determine the impact of the Rietschle acquisition, on a stand-alone basis. The Company has made its best estimate of the Rietschle impact to various income statement line items, such as net sales, gross profit, operating income and net income. Beginning in 2004, it will not be meaningful to make these estimates. The Pump and Compressor Segment supplies products to the original equipment manufacturer (OEM) market in such applications as medical equipment, gasoline vapor and refrigerant recovery, automotive and transportation, printing, packaging and many others. An important market to the Company is the medical equipment market, which includes oxygen concentrators, nebulizers, aspirators, and other devices. As previously announced, we expect our sales to the oxygen concentrator OEM market to be reduced in 2004 by $4 million to $6 million as a result of the loss of one of our customer's oxygen concentrator product lines to a competitor beginning in the second quarter of 2004. Even with the loss of these sales, the Company has a leading market share in the oxygen concentrator OEM market worldwide. In order to reduce our cost structure and remain price competitive, we are in the process of constructing a manufacturing facility in China, which should be in production by the first half of 2005. We continue to rationalize our existing production facilities around the world to achieve the most cost effective and high quality production capabilities. During 2003, we closed our manufacturing facility in Fleurier, Switzerland, and relocated this production to other existing facilities. We only incurred moving related costs for this shutdown, since this was a former Rietschle facility and all other shutdown costs were recorded as goodwill as part of the opening balance sheet adjustments. In 2003, we also built and opened a new facility in Memmingen, Germany and relocated from the older leased facility late in 2003, incurring approximately $400,000 in relocation costs. This new building will allow the Company to produce in a more efficient manner and consolidate production. In February 2004, the Company announced the closing of its Wuppertal, Germany manufacturing facility which will generate approximately $3.2 million of one-time costs over the first three quarters of 2004. Production from the Wuppertal facility will be transferred to the new Memmingen facility. We believe these steps were necessary to position the Company for future growth opportunities and the current competitive environment.

        The Company also operates in the Lighting Segment through its 32% interest in the Genlyte Thomas Group LLC (GTG) joint venture. The Company's investment in GTG is accounted for using the equity method of accounting. GTG designs, manufacturers, markets, and sells lighting fixtures for a wide variety of applications in the commercial, industrial and residential markets for both indoor and outdoor fixtures. Terms of the LLC Agreement are discussed in various sections of Part 1, ITEM 1 in this Form 10-K.

Critical Accounting Policies and Estimates

        Thomas' discussion and analysis of its financial condition and results of operations are based upon Thomas' consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. When preparing these consolidated financial statements, the Company is required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

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The Company evaluates its estimates, including, but not limited to, those related to product warranties, bad debts, inventories, equity investments, income taxes, pensions and other post-retirement benefits, contingencies, and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

        In response to the Securities and Exchange Commission's (SEC) Release No. 33-8040, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies", the Company identified the following critical accounting policies which affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. Included with the accounting policies are potential adverse results which could occur if different assumptions or conditions were to prevail.

        The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of Thomas' customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

        Thomas provides for the estimated cost of product warranties. While the Company engages in extensive product quality programs and processes, should actual product failure rates differ from estimates, revisions to the estimated warranty liability would be required. Thomas writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. For its business combination in 2002, the Company utilized an independent appraiser in determining the fair value of assets and liabilities acquired. If actual market conditions or other factors are different than those used by the independent appraiser, then additional asset write-downs may be required.

        Thomas holds a 32 percent interest in the Genlyte Thomas Group LLC (GTG) joint venture, which comprises Thomas' lighting segment and is accounted for using the equity method. If future adverse changes in market conditions or poor operating results of GTG occurred, it could result in losses or an inability to recover the carrying value of the Company's investment, thereby possibly requiring an impairment charge in the future. GTG's critical accounting policies are determined separately by The Genlyte Group Incorporated, which owns 68 percent of GTG and consolidates the GTG results.

Results of Operations

        On August 29, 2002, the Company purchased substantially all the assets and liabilities of Werner Rietschle Holding GmbH ("Rietschle"), a privately held company based in Schopfheim, Germany. See Note 3 in the notes to consolidated financial statements. Results of Rietschle are included in our operations beginning August 29, 2002.

        The Company's 2003 record net income of $37.3 million, was 14.1% higher than the $32.7 million for 2002. Included in 2003 was a previously announced non-recurring gain of $1.4 million, or $.08 per share, related to the settlement of GTG's patent infringement lawsuit. The Rietschle operating results were included for twelve months in 2003 versus four months in 2002, which contributed to the higher net income in 2003. The Rietschle operating results were negatively impacted in 2003 due to the strong euro's effect on the Rietschle sales offices' intercompany purchases from the German factory, which resulted in lower margins on sales generated from the Rietschle sales offices located outside of Germany. Also favorably impacting net income in 2003 was the reduction of the effective income tax rate from 36.1% in 2002 to 32.9% in 2003. This reduction was primarily due to the effect of foreign tax

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rates and the realization of income tax loss carryforward benefits in certain foreign jurisdictions. The Company's 2002 net income of $32.7 million was 16.1% higher than the 2001 net income of $28.2 million. The 2002 net income was positively impacted by the change in accounting for goodwill required by Statement of Financial Accounting Standards (SFAS) No. 142, which was effective January 1, 2002, and eliminated the recording of goodwill amortization. Compared to 2001, this change in accounting increased 2002 net income by $3.3 million.

Pump and Compressor Segment

        Net sales for the Pump and Compressor Segment in 2003 increased 56.6% to $376.8 million compared to $240.6 million for 2002. Acquisitions increased net sales by approximately $170.5 million in 2003 and $49.9 million in 2002. Also favorably impacting the 2003 net sales were the effects of exchange rates, which were primarily due to the strong euro. Net sales in the North American operations increased to $153.2 million in 2003 from $131.3 million in 2002. Acquisitions contributed approximately $15.6 million to this increase. The North American operations also reported higher sales in 2003 in the automotive and medical markets. European sales increased to $189.3 million in 2003 from $90.7 million in 2002. This increase was primarily related to acquisitions, which contributed approximately $89.4 million to the increase in European sales. The 2003 European sales also benefited due to higher sales in the medical and food and beverage markets, which were partially offset by lower sales in the automotive and business equipment markets. European sales in 2003 also increased due to foreign exchange rate fluctuations. Net sales in the Asia Pacific operations were $34.3 million in 2003 and $18.5 million in 2002. Acquisitions contributed approximately $15.6 million to the 2003 increase in Asia Pacific sales. Foreign exchange rate fluctuations had a favorable impact on Asia Pacific sales in 2003, while lower sales were reported in the environmental and medical markets. Net sales for the Pump and Compressor Segment in 2002 increased 30.4% to $240.6 million compared to $184.4 million for 2001. Included in 2002 were approximately $49.9 million related to Rietschle net sales after August 29, 2002. Also favorably impacting the 2002 net sales were the effects of exchange rates. When excluding Rietschle and the effects of exchange rates, the North American, European and Asia Pacific operations reported increases in net sales for 2002 compared to 2001. North America and Europe were slightly ahead of 2001 due to the strength in the automotive market, which was partially offset by softness in the environmental and medical markets in 2002. Asia Pacific operations reported increases due primarily to strength in the environmental market.

        Gross profit for the Pump and Compressor Segment was $129.9 million or 34.5% of sales in 2003, compared to $85.7 million, or 35.6% in 2002. Acquisitions increased gross profits by approximately $57.0 million in 2003 and $17.1 million in 2002, although the 2003 gross profit was negatively impacted due to the strong euro's effect on intercompany purchases from German factories. Competitive pressures, as well as relocation cost related to facility rationalization plans also negatively impacted 2003 gross profits. In 2002, gross profit for the Pump and Compressor Segment was $85.7 million, or 35.6% of sales, compared to $65.8 million, or 35.7% in 2001. Included in 2002 was a $.6 million write-down of a long-lived asset, which was offset by $.5 million favorable impact due to the accounting change for goodwill amortization.

        The Pump and Compressor Segment's 2003 selling, general and administrative (SG&A) expenses were $93.2 million, or 24.7% of sales, compared to $54.0 million, or 22.5% of sales in 2002. These exclude corporate expenses which are discussed in a separate section below. The higher percent of sales in 2003 for SG&A expenses is primarily due to having a full year of Rietschle sales and service offices throughout the world, which require a higher level of SG&A costs to operate, as well as increased personnel costs. The 2002 SG&A expenses were $54.0 million, or 22.5% of sales, compared to $37.3 million, or 20.2% in 2001. The increase in 2002 was primarily related to the Rietschle acquisition.

        Operating income in 2003 for the Pump and Compressor Segment increased 16.0% to $36.7 million compared to $31.7 million for 2002. Included in 2003 and 2002 was approximately

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$8.1 million and $2.3 million, respectively, related to acquisitions, although the 2003 operating income was negatively impacted due to the strong euro's effect on intercompany purchases from German factories. All three geographic regions had decreases in 2003 operating income compared to 2002. This was primarily related to competitive pressures, relocation and rearrangement costs, and higher personnel related costs. Operating income in 2002 increased 11.2% to $31.7 million compared to $28.5 million for 2001. The 2002 results were positively impacted by $.5 million, due to the accounting change for goodwill amortization. Included in 2002 was approximately $2.3 million related to Rietschle operating income after August 29, 2002. Also favorably impacting the 2002 operating income were the effects of exchange rates. When excluding Rietschle and the effects of exchange rates, the North American and Asia Pacific operations had increases in operating income for 2002 compared to 2001, while the European operations came in below 2001. The North American operations posted a 5.7% improvement in operating income in 2002 due to cost reductions and lower material prices and a $.3 million favorable impact from not recording goodwill amortization in 2002. Operating income for the European operations was lower in 2002 due to unfavorable sales mix, a $.6 million write-down of a long-lived asset, and $.8 million write-off of certain accounts receivable and inventory related to one customer. These were partially offset by a $.2 million favorable impact from not recording amortization in 2002. Asia Pacific operations had higher operating income in 2002 primarily due to higher volume and favorable sales mix.

Lighting Segment

        The Genlyte Group Incorporated (Genlyte) and Thomas formed Genlyte Thomas Group LLC (GTG) on August 30, 1998. The Lighting Segment's operating income includes our 32% interest in the GTG joint venture, as well as expenses related to Thomas Industries stock options issued to GTG employees and our amortization of Thomas' excess investment in GTG for periods prior to January 1, 2002. The Lighting Segment's operating income was $32.1 million in 2003 compared to $28.8 million in 2002. Included in 2003 was a pre-tax gain of $2.3 million related to the settlement of GTG's patent infringement lawsuit.    This increase in operating income was primarily due to sales volume increases attributed to recent acquisitions. The Lighting Segment's operating income was $28.8 million in 2002 compared to $24.8 million in 2001. This $4.0 million increase in 2002 was primarily related to the positive impact of not recording $3.8 million of goodwill amortization due to the accounting change. This $3.8 million impact includes $2.1 million related to the 2001 amortization of Thomas' excess investment and $1.7 million, which represents Thomas' 32% interest in GTG's $5.2 million of goodwill amortization in 2001. Excluding the impact from the accounting change, GTG was able to achieve slightly higher earnings even when sales were down 1.5%. This was accomplished due to sales mix and cost reduction efforts.

Corporate

        As noted in footnote 12, in the consolidated financial statements, consolidated operating income includes corporate expenses. Corporate expenses were $8.7 million for 2003, compared to $6.0 million for 2002 and $6.1 million for 2001. The increase in 2003 corporate expenses relates to higher banking fees for the financing of the Rietschle acquisition, higher professional fees related to a reorganization of our legal structure, higher expenses related to Sarbanes-Oxley compliance, higher personnel costs due to headcount additions, higher franchise taxes and higher expenses related to expensing stock options (as discussed in the notes to our consolidated financial statements).

        Interest expense for 2003 was $4.2 million compared to $3.4 million for 2002. The 2003 and 2002 amounts include approximately $2.9 million and $1.0 million respectively, related to the Rietschle acquisition. The reduction in 2003, when excluding the Rietschle acquisition, was primarily related to the $7.7 million payment of long-term debt on January 31, 2003, which carried a 9.36% annual interest rate. Interest rates were also lower in 2003 compared to 2002. Interest expense for 2002 was

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$3.4 million compared to $3.6 million for 2001. The 2002 amount includes approximately $1.0 million related to the Rietschle acquisition. The reduction in 2002, when excluding Rietschle, was primarily related to the $7.7 million payment of long-term debt on January 31, 2002, which carried a 9.36% annual interest rate, as well as higher short-term and other long-term borrowing levels in 2001.

        Interest income and other for 2003 was an expense of $221 thousand compared to income of $22 thousand in 2002. The primary reason for the increase in expense relates to higher transaction losses recorded during 2003. Interest income and other for 2002 was $22 thousand compared to $1.5 million in 2001. The reduction in 2002 was primarily related to a $22.3 million note receivable with GTG, from which the Company received interest income in 2001. GTG paid off this $22.3 million note in November 2001 and the Company used some of these proceeds to partially pay down long-term debt.

        Income tax provisions were $18.3 million, $18.5 million, and $16.9 million in 2003, 2002, and 2001, respectively. The effective income tax rate was 32.9% in 2003, compared to 36.1% in 2002 and 37.5% in 2001. The decline in the effective tax rate in 2003 was primarily due to the effect of foreign tax rates and the realization of income tax loss carryforward benefits in certain foreign jurisdictions. The decline in the effective tax rate in 2002 was primarily due to the accounting change related to goodwill amortization and to a higher proportion of foreign earnings in GTG's 2002 results, for which taxes are provided for in GTG's equity earnings.

Liquidity and Sources of Capital

        Cash flows provided by operations in 2003 were $32.4 million compared to $27.6 million in 2002 and $21.9 million in 2001. The increases in 2002 and 2003 were primarily related to increases in net income.

        Cash used in investing activities was $23.2 million in 2003 compared to $92.4 million in 2002. While $5.0 million was spent in 2003 for a new manufacturing facility in Germany, the overall reduction from 2002 levels was due to the Rietschle acquisition in August 2002 for $83.5 million. Cash provided from investing activities was $13.8 million in 2001. The change between 2002 and 2001 was primarily due to the 2002 Rietschle acquisition, as well as the 2001 collection of a note receivable from GTG.

        Financing activities used cash of $6.4 million in 2003, compared with providing cash of $52.6 million in 2002. The change between 2002 and 2003 primarily relates to the debt associated with the Rietschle acquisition. In 2002, the Company borrowed $80.0 million to partially finance the Rietschle acquisition, and also made payments of $22.8 million related to short-term and long-term debt. In 2003, the Company had a net payment on short-term and long-term debt of $2.1 million. Financing activities used cash of $19.4 million in 2001. The change between 2001 and 2002 was primarily related to the debt proceeds in 2002 used for the Rietschle acquisition.

        Dividends paid in 2003 were $6.2 million compared with $5.3 million in 2002 and $5.0 million in 2001. The 2003 dividends increased primarily due to the issuance of 1.8 million shares in August 2002 in connection with the acquisition of Rietschle. Also, effective with the April 1, 2003 dividend, the Company increased its quarterly dividend per share from $.085 to $.095.

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        The following summarizes the Company's contractual obligations at December 31, 2003, and the effect such obligations are expected to have on its liquidity and cash flow in future periods.