SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 12 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 1997 Commission File Number 333-34585
JORDAN TELECOMMUNICATION PRODUCTS, INC.
(Exact name of registrant as specified in charter)
Delaware 36-4173125
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ArborLake Centre, Suite 550 60015
1751 Lake Cook Road (Zip Code)
Deerfield, Illinois
(Address of Principal Executive Offices)
Registrant's telephone number, including Area Code:
(847) 945-5591
Former name, former address and former fiscal year, if changed since last
report: Not applicable.
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 twelve (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 ninety (90) days.
Yes No x
The aggregate market value of voting stock held by non-affiliates of the
Registrant is not determinable as such shares were privately placed and there
is currently no public market for such shares.
The number of shares outstanding of Registrant's Common Stock as of
December 23, 1997: 994,638.889
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JORDAN TELECOMMUNICATION PRODUCTS, INC.
INDEX
Part I. Financial Information Page No.
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at
September 30, 1997, and December 31, 1996 3
Condensed Consolidated Statements of Operations
for the third quarter and nine months ended
September 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows
for nine months ended September 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Securities
Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
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PAGE 3
JORDAN TELECOMMUNICATION PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
September 30, December 31,
1997 1996
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 6,898 $ 6,385
Restricted Cash 730 708
Accounts receivable, net 41,308 30,255
Inventories 40,721 25,750
Prepaid expenses and other current assets 4,321 4,830
Total Current Assets 93,978 67,928
Property, plant, and equipment, net 32,676 29,046
Goodwill, net 119,041 71,097
Deferred financing costs, net 9,793 -0-
Other Assets, net 14,293 11,575
Total Assets $269,781 $179,646
LIABILITIES AND NET CAPITAL DEFICIENCY
Current Liabilities:
Accounts Payable $ 19,345 $ 16,799
Accrued interest payable 3,440 -0-
Accrued expenses and other 18,865 9,941
Due to affiliated company 571 6,794
Current portion of long-term debt 1,036 1,855
Total Current Liabilities $ 43,257 $ 35,389
Long-Term debt 299,309 2,572
Notes payable to affiliated company -0- 141,380
Other non-current liabilities 7,938 8,079
Minority Interest 3,175 1,730
Preferred Stock 44,889 1,875
Net Capital Deficiency:
Common Stock 10 88
Additional paid-in capital 2,042 1,990
Notes receivable from shareholders (937) -0-
Cumulative translation (698) 251
Accumulated deficit (129,204) (13,708)
Total Net Capital Deficiency $(128,787) $(11,379)
Total Liabilities and Net Capital
Deficiency $269,781 $179,646
See accompanying notes to condensed consolidated financial statements.
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JORDAN TELECOMMUNICATION PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Third Quarter Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Net Sales $69,140 $38,791 $176,942 $89,708
Cost of Sales, excluding
depreciation 44,432 24,051 111,212 53,768
Selling, general, and
administrative expenses 12,561 6,238 32,614 13,587
Depreciation 1,357 1,251 3,818 3,018
Amortization of goodwill and
other intangibles 1,200 1,001 3,514 2,188
Stock appreciation rights
expense -0- 852 15,417 2,557
Management fees and other 1,062 884 3,246 2,337
Operating Income 8,528 4,514 7,121 12,253
Other (income) and expenses:
Interest expense 7,805 3,304 17,070 7,660
Interest income (209) -0- (296) (28)
Other 100 (2) 81 (2)
Total Other Expenses 7,696 3,302 16,855 7,630
Income (loss) before income
taxes, minority interest and
extraordinary items 832 1,212 (9,734) 4,623
Provision (benefit) for income
taxes 505 996 (2,526) 2,560
Income (loss) before minority
interest and extraordinary
items 327 216 (7,208) 2,063
Minority Interest 228 168 1,024 517
Income (loss) before
extraordinary items 99 48 (8,232) 1,546
Extraordinary items (2) -0- (466) -0-
Net Income (loss) $ 97 $ 48 $ (8,698) $ 1,546
See accompanying notes to condensed consolidated financial statements.
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PAGE 5
JORDAN TELECOMMUNICATION PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Nine Months Ended
September 30,
1997 1996
Cash flows from operating activities:
Net income (loss) $ (8,698) $ 1,546
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 7,332 5,206
Provision for (benefit from) deferred income taxes (4,598) 2,862
Minority interest 1,445 197
Non-cash interest on Senior Notes and Senior
Discount Notes 5,546 -0-
Changes in operating assets and liabilities
Net of effects from acquisitions:
(Increase) in current assets (13,314) (2,090)
Increase(Decrease) in current liabilities 3,770 (4,046)
(Increase) in non-current assets (1,481) (1,804)
Increase(Decrease) in non-current liabilities 357 (600)
Increase in payables to affiliated company 4,719 2,022
Net cash provided by (used in)operating activities (4,922) 3,293
Cash flows from investing activities:
Capital expenditures, net (7,030) (4,463)
Purchase of Telecommunications Companies from
affiliated company (284,000) -0-
Acquisitions of subsidiaries (58,373) (71,351)
Cash acquired in purchase of subsidiaries 1,047 1,900
Net cash used in investing activities (348,356) (73,914)
Cash flows from financing activities:
Proceeds from debt issuance 273,545 -0-
Proceeds from issuance of Preferred Stock 45,000 -0-
Proceeds from issuance of Common Stock 1,063 250
Payment of financing costs (14,825) -0-
Net borrowings from revolving credit facilities 18,500 -0-
Borrowings under other long-term debt and capital
lease agreements 3,279 1,980
Repayment of long-term debt & capital leases (1,608) (1,259)
Net borrowings from affiliated company 28,745 73,817
Net cash provided by financing activities 353,699 74,788
Effect of exchange rate changes on cash 92 (326)
Net increase in cash and cash equivalents 513 3,841
Cash and cash equivalents at beginning of period 6,385 2,798
Cash and cash equivalents at end of period $ 6,898 $ 6,639
Cash paid during the period for:
Interest 547 372
Income taxes 1,755 676
Non-cash investing activities:
Capital leases 245 484
See accompanying notes to condensed consolidated financial statements.
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PAGE 6
JORDAN TELECOMMUNICATION PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
A. Organization
The unaudited condensed consolidated financial statements reflect all
adjustments that management believes necessary to present fairly the results
of interim operations. In addition, consistent with the Company's
organization, periods prior to July 24, 1997 are presented on a combined
basis. The unaudited condensed consolidated financial statements should be
read in conjunction with the Notes to the Consolidated Financial Statements
(including the Summary of Significant Accounting Policies) included
consolidated financial statements for the year ended December 31, 1996,
which are included in the Company's prospectus issued in connection with the
offering of its 9 7/8% Series B Senior Notes due 2007, 11 3/4% Series B
Senior Discount Notes due 2007, and 13 1/4% Series B Senior Exchangeable
Preferred Stock due 2009, and filed on November 12, 1997. The Company
conducts its operations exclusively through its subsidiaries. Results of
operations for the interim periods are not necessarily indicative of annual
results of operations.
B. Inventories
Inventories are summarized as follows:
September 30, December 31,
1997 1996
Raw materials and work in process $17,029 $12,297
Finished goods 23,692 13,453
$40,721 $25,750
C. Aquisition of Subsidiaries
Acquisition of LoDan West, Inc.
On May 30, 1997, Jordan Industries, Inc. ("Jordan") purchased the assets
of LoDan West, Inc. ("LoDan") which designs, engineers and manufacturers
high-quality custom electronic cable assemblies, sub-assemblies and electro-
mechanical assemblies to original equipment manufcturers in the data and
telecommunications markets of the electronics industry.
The purchase price of $17,000, including estimated costs incurred
directly related to the transaction, was allocated to working capital of
$5,066, property, plant and equipment of $783, noncompetition agreement of
$250, noncurrent assets of $41, and resulted in an excess purchase price
over net indentifiable assets of $10,860. The acquisition was financed by
Jordan with cash and a $1,500 subordinated seller note. LoDan was one of the
JTP Companies that was subsequently sold by Jordan to the Company on July 25,
1997 (Note F).
Acquisition of Engineered Endeavors, Inc.
On September 2, 1997, the Company purchased the assets of Engineered
Endeavors, Inc. (EEI), a turnkey provider of antenna support systems for the
wireless communications industry. EEI designs complete structures,
manufactures monopole antenna mount platforms, custom bell and clock towers,
and accessories. EEI also distributes ancillary products used in the
construction of cellular and personal communication system (PCS) towers.
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PAGE 7
JORDAN TELECOMMUNICATIONS PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
The purchase price of $41,500, including estimated costs incurred
directly related to the transaction, was preliminarily allocated to working
capital of $2,068, property, plant, and equipment of $799, noncompetition
agreement of $2,500, noncurrent assets of $14, and resulted in an excess
purchase price over net identifiable assets of $36,199. The acquisition was
financed with $21,500 of cash and $20,000 of borrowings from the Company's
New Credit Agreement.
On October 31, 1997, the Company through its newly formed, 70% owned
subsidiary, Telephone Services Holdings, Inc., acquired the stock of
Telephone Services, Inc. ("TSI") a manufacturer of custom cable assemblies,
terminal strips, terminal blocks and other connecting devices primarily for
use by telephone operating companies and major telecommunications
manufacturers.
The purchase price of $53,000, including estimated costs incurred
directly related to the transaction, was preliminarily allocated to working
capital of $3,560, property, plant and equipment of $1,506, noncompetition
agreements of $2,000, other assets of $129, and resulted in an excess
purchase price over net identifiable assets of $45,805. The acquisition was
financed with borrowings from the Company's New Credit Agreement and $5,000
of subordinated seller notes.
Unaudited proforma information with respect to the Company as if the
1997 and 1996 acquisitions had occurred on January 1, 1997 and 1996 is as
follows:
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
Net Sales $233,976 $138,161
Income (loss) before (2,354) 4,430
extraordinary items (2,820) 4,430
Net Income
D. Formation of Jordan Telecommunication Products, Inc.
Jordan Telecommunication Products, Inc. ("JTP" or the "Company") was
formed on July 21, 1997 by its management, the stockholders of Jordan, and
certain of their affiliates in order to combine a group of companies that are
focused on the manufacture and distribution of products for use in the
rapidly growing telecommunications industry. In connection with its initial
capitalization, JTP issued 2,000 shares of Junior Preferred Stock to Jordan
for $20 million and 959,639 shares of Common Stock to JTP's management and
the stockholders of Jordan for approximately $1.9 million.
Holders of the Junior Preferred Stock are entitled to vote on each
matter which the stockholders are entitled to vote, including the election of
directors, voting together with the Common Stock as a single class. The
holders of Junior Preferred Stock are entitled to 9,500 votes for each share
held and, therefore, hold 95% of the combined voting power of the Common
Stock and Junior Preferred Stock.
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PAGE 8
JORDAN TELECOMMUNICATION PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Commencing on the earlier of August 1, 2002 or the Early Redemption
Date, as defined, holders of the Junior Preferred Stock will be entitled to
receive dividends at 10% per annum of the liquidation value per share. All
dividends are cumulative, whether or not earned or declared, and are payable
quarterly in arrears on March 31, June 30, September 30, and December 31 of
each year following the date dividends commence accruing.
The Junior Preferred Stock has a liquidation value ("Liquidation
Value"), in the aggregate, equal to the sum of (i) $20 million; plus (ii)
(A) for the period from the date of issuance to August 1, 2002, plus or minus
95% of the cumulative net income (loss) of JTP for such period and (B) for
the period subsequent to August 1, 2002, the amount of any preferred
dividends thereon not paid on any dividend payment date, whether or not
declared, which shall be added to the Liquidation Value at such dividend
payment date.
The Junior Preferred Stock is mandatorily redeemable on August 1, 2002,
subject to certain restrictions, as defined in the certificate of
designation, at the then Liquidation Value.
Certain events, including the redemption of the Junior Preferred Stock,
could result in a change in control of JTP. Management cannot determine the
accounting impact of a change in control resulting from the redemption of the
Junior Preferred Stock until the form of the transaction(s) resulting in the
redemption are known.
E. The Offerings
On July 25, 1997, JTP issued and sold $190,000 of 9.875% Senior Notes
due August 1, 2007 ("Senior Notes"), $120,000 principal amount at maturity
($85,034 initial accreted value) of 11.75% Senior Discount Notes due August
1, 2007 ("Senior Discount Notes"), and twenty-five thousand units, each
consisting of (i) $1 aggregate liquidation preference of 13.25% Senior
Exchangeable Preferred Stock due August 1, 2009 ("Senior Preferred Stock"),
and (ii) one share of Common Stock (the transactions described above are
hereafter referred to as the Offerings).
The Senior Notes bear interest at a rate of 9.875% per annum, payable
semi-annually in cash in arrears on February 1 and August 1 of each year,
commencing on February 1, 1998. The Senior Discount Notes will accrete at a
rate of 11.75%, compounded semi-annually, to par by August 1, 2000.
Commencing August 1, 2000, the Senior Discount Notes bear interest at a rate
of 11.75% per annum, payable semi-annually in cash in arrears on February 1
and August 1 of each year, commencing on February 1, 2001.
The indentures governing the Senior Notes and the Senior Discount Notes
contain certain covenants which limit JTP's ability to (i) incur additional
indebtedness; (ii) make restricted payments; (iii) enter into certain
transactions with affiliates; (iv) create certain liens; (v) sell certain
assets; and (vi) merge, consolidate or sell substantially all of JTP's assets.
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PAGE 9
JORDAN TELECOMMUNICATION PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Dividends on the Senior Preferred Stock are payable on February 1,
May 1, August 1, and November 1 of each year at a rate of 13.25% per annum of
the liquidation preference. The Senior Preferred Stock is mandatorily
redeemable on August 1, 2009 at a redemption price equal to 100% of the
liquidation preference on the date of redemption, plus accrued and unpaid
dividends.
F. Sale of JTP Companies
Concurrent with the Offerings, Jordan sold the JTP Companies to JTP
Industries, Inc., a wholly-owned subsidiary of JTP, for aggregate
consideration of $294 million, which includes the repayment of the notes
payable to Jordan by the JTP Companies. The acquisition was financed by JTP
with a portion of the net proceeds of the Offerings.
Since JTP and the JTP Companies are under the common control of Jordan,
the acquisition has been accounted for similar to a pooling-of-interests.
As such, the assets and liabilities of the JTP Companies have been carried
over to JTP at historical book value, with the excess of the purchase price
over book value recorded as a charge to stockholders equity.
G. New Credit Agreement
On July 25, 1997, JTP Industries, Inc. entered into a credit agreement
(New Credit Agreement) with certain parties thereto, and BankBoston, N.A., as
agent, under which JTP Industries, Inc. is able to borrow up to approximately
$110,000 in the form of a revolving credit facility over a term of five
years. Interest on borrowings is at BankBoston's base rate, as defined, or
the rate at which BankBoston's eurodollar lending office is offered dollar
deposits. The New Credit Agreement is secured by a first priority security
interest in substantially all of JTP Industries' assets, including a pledge
of all the stock of JTP Industries' subsidiaries.
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PAGE 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Results of Operations
Summary financial information by business segment included in the
financial statements of the Company is as follows:
Third Quarter Nine Months Ended
1997 1996 1997 1996
Net Sales:
Infrastructure Products and
Equipment $36,344 $21,396 $95,614 $53,160
Electronic Connectors and
Components 11,188 10,053 33,317 29,206
Custom Cable Assemblies and
Specialty Wire and Cable 21,608 7,342 48,011 7,342
$69,140 $38,791 $176,942 $89,708
Operating Income (Loss):(1)
Infrastructure Products and
Equipment $5,328 $3,033 ($1,903) $ 8,075
Electronic Connectors and
Components 1,919 382 3,709 381
Custom Cable Assemblies and
Specialty Wire & Cable 1,861 1,099 5,895 3,797
$9,108 $4,514 $7,701 $12,253
(1) Before corporate overhead of $.6 million and $.0 million for the quarter
ended September 30, 1997 and 1996, respectively and $.6 million and $.0
million for the nine months ended September 30, 1997 and 1996, respectively.
Three months ended September 30, 1997 compared to the three months ended
September 30, 1996.
Net Sales. Net sales increased $30.3 million or 78% from $38.8 million
in 1996 to $69.1 million in 1997. The increase was primarily due to the
acquisition of Northern, LoDan and EEI, which were acquired after the third
quarter of 1996, Bond, which was acquired near the end of September 1996,
and Viewsonics and Vitelec, which were acquired at the beginning of August
1996. These acquisitions accounted for $21.7 million or 71% of the increase
in net sales. The balance of the sales increase was attributed primarily to
higher international sales of cable conduit due to the Company's new Mexico
and China manufacturing facilities, which began operations after the third
quarter 1996.
Net sales from the Infrastructure Products and Equipment segment
increased $14.9 million or 70% from $21.4 million in 1996 to $36.3 in 1997.
This increase was due to the acquisition of Viewsonics, Northern and EEI,
which accounted for $8.9 million or 60% of the increase. Sales in this
segment were also higher due to additional international sales of cable
conduit from the Company's new cable conduit manufacturing facilities in
Mexico and China.
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PAGE 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net sales from the Custom Cable Assembly and Specialty Wire and Cable
segment increased $14.3 million from $7.3 million in 1996 to $21.6 million in
1997. Approximately 87% of this increase was due to the acquisition of Bond
and LoDan.
Net sales from the Electronic Connectors and Components segment
increased $1.1 million or 11% from $10.1 million in 1996 to $11.2 million in
1997. Increased sales of RF connectors and related products accounted for
74% of this increase. The acquisition of Vitelec, which was acquired in
August 1996, accounted for the balance of this increase.
Cost of Sales (Excluding Depreciation): Cost of sales increased $20.4
million or 85% from $24.1 million in 1996 to $44.4 million in 1997 reflecting
the higher sales levels from the acquired companies. Cost of sales as a
percent of net sales increased from 62.0% in 1996 to 64.3% in 1997. This
increase was due primarily to a higher percentage of sales from segments with
higher cost of sales and the underabsorption of manufacturing overhead costs
relating to the Company's new manufacturing facilities in China and Mexico.
Selling, General and Administrative Expenses (Excluding Depreciation):
Selling, general and administrative expenses increased $6.4 million or 101%
from $6.2 million in 1996 to $12.6 million in 1997. Approximately 61% of the
increase relates to the new acquisitions, further international market
development costs, increased overhead to support the higher sales levels and
the overhead expense of Jordan Industries and JTP. As a result, selling
general and administrative expenses as a percentage of net sales increased
from 16.1% to 18.2%.
Operating Income: Operating income increased $4.0 million or 89% from
$4.5 million in 1996 and $8.5 million in 1997. Approximately 91% of this
increase was due to the new acquisitions. In addition, the Company incurred
SAR expenses of $.9 million relating to AIM in 1996, which it did not incur
in 1997.
Operating income from the Infrastructure Products and Equipment segment
was up $2.3 million from $3.0 million in 1996 to $5.3 million in 1997. This
increase was due primarily to the acquisition of Northern, Viewsonics and
EEI. Operating income from this segment also reflects higher market
development costs incurred to expand the Company's international business.
Operating income from the Custom Cable Assembly and Specialty Wire and
Cable segment increased $0.8 million from $1.1 million in 1996 to $1.9
million in 1997. This increase was due primarily to the acquisition of Bond
and LoDan.
Operating income from the Electronic Connector and Components segment
increased $1.5 million from $0.4 million in 1996 to $1.9 million in 1997.
This increase was due primarily to the $.9 million non-recurring SAR expense
relating to AIM.
Net Income: Net income was flat with 1996 due to higher operating
income, which was offset by higher interest cost relating to the financing of
new acquisitions and the Company's recapitalization.
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PAGE 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nine Months Ended September 30, 1997 compared to the Nine Months Ended
September 30, 1997.
Net Sales: Net sales increased $87.2 million or 97% from $89.7 million
in 1996 to $176.9 million in 1997. The increase was primarily due to the
acquisition of Viewsonics, Vitelec, Bond, Northern, LoDan and EEI, all of
which were acquired after the second quarter of 1996, Diversified which was
acquired in late June 1996 and Johnson, which was acquired near the end of
January 1996. Combined, these acquisitions accounted for approximately 78%
of the increase. The balance of the sales increase was attributed to higher
sales of cable conduit, particularly international sales, due to the
addition of the Company's new Mexico and China manufacturing facilities.
Net sales from the Infrastructure Products and Equipment segment
increased $42.5 million or 80%. Approximately 55% of this increase was due
to the acquisition of Viewsonics, Northern and EEI. The balance is accounted
for by higher sales of cable conduit, particularly international sales, due
to the Company's new manufacturing facilities in China and Mexico.
Net sales from the Custom Cable Assembly and Specialty Wire and Cable
segment was up $40.7 million from $7.3 million in 1996 to $48.0 million in
1997 due to the acquisition of Bond and LoDan, which were not owned during
the same period last year and Diversified which was purchased late in June
1996.
Net sales from the Electronic Connectors and Components segment
increased $4.1 million from $29.2 million in 1996 to $33.3 million in 1997.
The majority of this increase was due to the acquisition of Johnson and
Vitelec.
Cost of Sales (Excluding Depreciation): Cost of sales increased $57.4
million from $53.8 million in 1996 to $111.2 million in 1997 reflecting the
higher sales levels from the acquired companies and the addition of new cable
conduit manufacturing facilities in China and Mexico. Cost of sales as a
percent of net sales increased from 59.9% in 1996 to 62.9% in 1997. This
increase reflects the higher cost of sales of the acquired businesses which
averaged 62.2% and the under absorption of manufacturing overhead costs
relating to the Company's new cable conduit manufacturing facilities in
Mexico and China.
Selling, General and Administrative Expenses (Excluding Depreciation):
Selling, general and administrative expenses increased $19.0 million or 140%
from $13.6 million in 1996 to $32.6 million in 1997. This increase was
primarily due to the new acquisitions, which accounted for 72% of the
increase. The balance relates to increased overhead to support the higher
sales levels, the new facilities in Mexico and China, further international
market development and the overhead expenses of Jordan Industries and of the
JTP Corporate Group. As a result, selling, general and administrative
expenses as a percent of sales increased from 15.1% in 1996 to 18.4% in 1997.
Operating Income (Loss): Operating income decreased $5.1 million from
$12.3 million in 1996 to $7.1 million in 1997. This decrease was due
primarily to a $15.4 SAR expense incurred in April 1997 relating to the
Company's acquisition of Dura-Line in 1988. Excluding the effects of SAR
expenses in 1996 and 1997, operating income would have increased $7.7 million
from $14.8 million in 1996 to $22.5 million in 1997. This increase in
operating income (excluding the SAR expense) was due to the acquisitions,
which added $9.2 million in operating income and which was partially offset
by lower operating income from the Electronic Connector and Components
segment, the addition of shared general,
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PAGE 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
administrative and overhead expenses of Jordan Industries and of the JTP
Corporate Group. Excluding SAR expenses, operating margins would have
declined from 16.5% in 1996 to 12.7% in 1997, due to the lower operating
margins of the acquired businesses, which averaged 13.3%, the underabsorbed
overhead of the new China and Mexico facilities and international market
development costs not incurred in 1996.
Operating income (loss) from the Infrastructure Products and Equipment
segment was down $10.0 million from $8.1 million in 1996 to a loss of $1.9
million in 1997. This was due primarily to the $15.4 million SAR expense
relating to the Company's acquisition of Dura-Line. Excluding the SAR
expense, operating income from this segment increased $5.1 million from $8.1
million in 1996 to $13.5 million in 1997. Approximately all this increase
was due to the new acquisitions. Operating income from the Company's cable
conduit business was flat with 1996 due to the underabsorbed overhead of its
new China and Mexico facilities and international market development costs
not incurred in 1996.
Operating income from the Custom Cable Assembly and Specialty Wire and
Cable segment increased $3.3 million from $.4 million in 1996 to $3.7 million
in 1997. This increase was due to the acquisitions.
Operating income from the Electronic Connectors and Component segment
increased $2.1 million from $3.8 million in 1996 to $5.9 million in 1997.
This increase was due to a $2.6 million decrease in SAR expense, relating to
AIM's acquisition in 1988. Excluding the SAR expense, operating income
decreased $.5 million from $6.4 million in 1996 to $5.9 million in 1997.
Additional operating income of $.5 million from the new acquisitions was
offset by a $1.0 million decrease in operating income from AIM. This
decrease was due primarily to a decrease in domestic sales of AIM's connector
products and expenses related to increased sales and marketing efforts.
Net Income: Net income decreased $10.2 million due to increased SAR
expenses, higher interest costs relating to the financing of new acquisitions
and the Company's recapitalization.
Liquidity and Capital Resources
In general, the Company requires liquidity for working capital, capital
expenditures, interest, taxes, debt repayment and its acquisition strategy.
Of primary importance is the Company's working capital requirements that
increase whenever it experiences strong incremental demand or geographical
expansion. The Company expects to satisfy its liquidity requirements through
a combination of funds generated from operating activities and the funds
available under its new credit agreements.
Operating activities. Net cash used by operating activities in the nine
months ended September 30, 1997 was $4.9 million, compared to $3.3 million
provided from operating activities during the same period in 1996. The
increase in cash requirements was primarily the result of $15.4 million in
SAR expenses relating to the Company's acquisition of Dura-Line. In
addition, the Company required higher working capital to support its sales
growth.
Investing activities. Capital expenditures were $2.5 million more for
the nine months ended September 30, 1997 than for the comparable period in
1996. The
<PAGE>
PAGE 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
majority of the expenditures have been made in the Infrastructure Products
and Equipment segment where the Company continues to pursue an aggressive
international expansion into the Czech Republic, China, Mexico, India,
Malaysia and Spain. The Company expects its capital investment in these
countries to be substantially complete in 1997 and its total capital
expenditures to be slightly higher than 1996.
Acquisitions prior to July 25, 1997 were financed through proceeds
borrowed from Jordan Industries. The Company plans to fund future
acquisitions through its New Credit Agreement. In addition, under the terms
of its Notes, the Company is able to make restrictive investments of up to
$40.0 million.
Financing activities. On July 25, 1997, through a series of
transactions, the Company was established as a stand-alone company. It
issued the Old Securities and obtained the Equity Investment, as defined,
raising approximately $306.0 million (after fees and expenses) which was used
substantially to acquire the Telecommunication Subsidiaries.
The Company's annual cash interest expense on the Senior Notes, which
are due 2007, will be approximately $18.8 million. Interest on the Senior
Notes is payable semi-annually on February 1 and August 1 of each year,
commencing February 1, 1998. Interest on the Discount Notes, which are due
2007, is non- cash pay through August 1, 2000; cash interest is payable semi-
annual beginning February 1, 2001. Dividends on the Company's Senior
Preferred Stock accrue quarterly each February 1, May 1, August 1, and
November 1. Dividends are non-cash pay at the Company's option until
August 1, 2002.
Also on July 25, 1997, JTP Industries, a subsidiary of the Company,
entered into the New Credit Agreement under which JTP Industries is able to
borrow up to approximately $110.0 million to fund acquisitions and provide
working capital and for other general corporate purposes. The New Credit
Agreement provides for a revolving line of credit of $110.0 million over a
term of five years and the agreement is secured by a first priority security
interest in substantially all of JTP Industries' assets, including a pledge
of all of the stock of the Company's subsidiaries. Payments of principal and
interest on amounts borrowed under the New Credit Agreement are guaranteed by
the Company's subsidiaries. As of November 30, 1997, the Company has
approximately $45 million of available funds under this Agreement.
Future funding requirements will also include the Company's agreement to
repurchase the preferred stock of Dura-Line, held by its previous owner, in
April 1998 for $1.9 million and an additional purchase price payment of
approximately $1.4 million relating to the acquisition of Viewsonics in 1996
due January 1998.
The Company expects its principal sources of liquidity to be from its
operating activities and funding from the New Credit Agreement, in addition
to the excess cash generated by the Old Offerings. The Company further
expects that these sources will enable it to meet its long-term cash
requirements for working capital, capital expenditures, interest, taxes, debt
repayment and for executing its acquisition strategy for at least the next 12
months.
<PAGE>
PAGE 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Securities Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) 27. EDGAR Financial Data Schedule
<PAGE>
PAGE 16
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.
JORDAN TELECOMMUNICATION PRODUCTS, INC.
By: /s/ Michael R. Elia
Michael R. Elia
Chief Financial Officer
December 23, 1997
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<PERIOD-END> SEP-30-1997
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44,889
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<COMMON> 10
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<TOTAL-LIABILITY-AND-EQUITY> 269,781
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