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 March 31, 1999 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 X No
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 May
13, 1999: 993,916.6667
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JORDAN TELECOMMUNICATION PRODUCTS, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Securities
Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-k 18
Signatures 19
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PAGE NO.
Condensed Consolidated Balance Sheets at March 31, 1999
(unaudited) and December 31, 1998 4
Condensed Consolidated Statements of Operations for the
three months ended March 31, 1999 and 1998 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows for three
months ended March 31, 1999 and 1998 (Unaudited) 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7
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JORDAN TELECOMMUNICATION PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
March 31, December 31,
1999 1998
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 14,799 $ 8,040
Accounts receivable, net 44,986 44,622
Inventories 47,891 38,859
Prepaid expenses and other current assets 3,392 3,428
Total Current Assets 111,068 94,949
Property, plant, and equipment, net 48,944 41,132
Goodwill, net 168,932 169,337
Deferred financing costs, net 8,526 8,782
Deferred income taxes 3,350 4,707
Other assets, net 17,086 12,391
Total Assets $357,906 $331,298
LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current Liabilities:
Accounts payable $ 25,402 $ 19,269
Accrued interest payable 3,641 8,546
Accrued expenses and other current liabilities 15,626 20,214
Due to affiliated company 2,862 1,412
Short-term notes payable 11,678 737
Current portion of other long-term debt 1,925 2,856
Total Current Liabilities 61,134 53,034
Line of credit 93,000 73,000
Other long-term debt 307,331 303,142
Other non-current liabilities 4,513 3,287
Minority interest 4,112 4,000
13.25% Senior Preferred Stock at liquidation
value; 30,478.9724 shares and 29,493.9551 shares issued
and outstanding at March 31, 1999 and December 31, 1998,
respectively 31,084 30,100
Junior Preferred Stock at liquidation value;
2,000 shares issued and outstanding at March
31, 1999 and December 31, 1998 0 0
Shareholders' Equity (Net Capital Deficiency):
Common Stock ($0.01 par value); 1,000,000 shares
authorized; 993,917 shares issued and
outstanding at March 31, 1999 and December 31, 1998,
respectively 10 10
Additional paid-in capital 1,982 1,982
Treasury Stock (22) (22)
Notes receivable from shareholders (855) (855)
Accumulated other comprehensive income (loss) (419) 329
Retained earnings (Accumulated deficit) (143,964) (136,709)
Total Shareholders' Equity (Net
Capital Deficiency) (143,268) (135,265)
Total Liabilities and Shareholders' Equity
(Net Capital Deficiency) $357,906 $331,298
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)
Three Months Ended
March 31,
1999 1998
Net Sales $75,699 $72,101
Cost of sales, excluding depreciation 48,850 46,880
Selling, general, and administrative expenses 14,722 13,781
Depreciation 1,930 1,659
Amortization of goodwill and other 1,943 1,936
Management fees and other 901 1,738
Operating income 7,353 6,107
Other (income) and expense:
Interest expense 9,934 9,943
Interest income (43) (146)
Loss on sale of subsidiary 193 -
Other 474 (18)
Total other expenses 10,558 9,779
Loss before income taxes and minority
interest (3,205) (3,672)
Provision for income taxes 2,601 650
Loss before minority interest (5,806) (4,322)
Minority interest 481 81
Net loss $(6,287) $(4,403)
See accompanying notes to condensed consolidated financial statements.
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JORDAN TELECOMMUNICATION PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Three Months Ended
March 31,
1999 1998
Cash flows from operating activities:
Net loss $(6,287) $(4,403)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization 3,873 3,595
Deferred income taxes 1,357 (94)
Minority interest 112 414
Amortization of deferred financing fees 256 411
Non-cash interest expense on Senior Notes and Senior
Subordinated Notes 2,924 2,643
Changes in operating assets and liabilities
(Net of effects from acquisitions):
Accounts receivable 2,643 4,182
Inventories 2,020 (4,757)
Prepaid expenses and other current assets 41 (170)
Non-current assets (398) (128)
Accounts payable, accrued interest payable,
and accrued expenses and other (6,829) (2,467)
Non-current liabilities 1,243 316
Due to affiliated company 1,450 (347)
Other 70 -0-
Net cash (used in) provided by operating
activities 2,475 (805)
Cash flows from investing activities:
Capital expenditures (2,007) (1,637)
Acquisitions of subsidiaries (7,972) (15,500)
Cash acquired in acquisitions of subsidiaries 616 1,304
Additional purchase price payments, SARA payments
and other (5,584) (6,527)
Net cash used in investing activities (14,947) (22,360)
Cash flows from financing activities:
Net borrowings from line of credit 20,000 21,000
Borrowings under other long-term debt 403 2,900
Repayment of other long-term debt (829) (266)
Net cash provided by financing activities 19,574 23,634
Effect of exchange rate changes on cash (343) 456
Net increase in cash and cash equivalents 6,759 925
Cash and cash equivalents at beginning of period 8,040 8,988
Cash and cash equivalents at end of period $14,799 $ 9,913
See accompanying notes to condensed consolidated financial statements.
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JORDAN TELECOMMUNICATION PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
A. ORGANIZATION
The unaudited condensed consolidated financial statements, which reflect
all adjustments that management believes necessary to present fairly the
results of interim operations and are of a normal recurring nature, should be
read in conjunction with the Company's consolidated financial statements for
the year ended December 31, 1998, included in the Company's annual report on
Form 10-K. 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:
March 31, December 31,
1999 1998
Raw Materials $21,317 $20,405
Work in process 2,595 2,386
Finished goods 23,979 16,068
$47,891 $38,859
C. ACQUISITIONS & DIVESTITURES OF SUBSIDIARIES
On February 18, 1999, the Company, through Northern Technologies
Holdings, Inc., purchased the net assets of High Mountain Communications, Inc.
("HMC"). HMC provides celluar and PCS site maintenance services. The
purchase price of $700, which includes estimated transaction costs, has been
preliminarily allocated to working capital of $8, property, plant and
equipment of $127, and non-current assets of $25, resulting in an excess
purchase price over identifiable assets of $540.
On March 31, 1999, the Company, through a newly created subsidiary
Integral Holdings, Inc. ("Integral Holdings"), a subsidiary of Dura-Line
Corporation, purchased the assets of Integral Corporation ("Integral").
Integral is a manufacturer of high-density polyethylene conduit for the
installation and protection of cables used in the electrical,
telecommunications, and cable TV industries. Integral has locations in
Dallas, Texas; England; and Malaysia. The purchase price of $18,716, which
includes estimated related transaction costs, has been preliminarliy allocated
to working capital of $5,412, property, plant and equipment of $8,174,
non-current assets of $5,073 ($4,100 in non-compete agreements)and non-current
liabilities of $943. The acquisition was financed with four-month promissory
notes for $10,653 and borrowings from the revolving credit agreement.
On July 9, 1998, the Company sold its stock of Diversified Wire and Cable
for $15.0 million which resulted in a loss of approximately $6.7 million. The
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proceeds from the sale were used to pay $1,500 in subordinated seller notes to
the original owners of Diversified, and $13,500 to pay down the Company's
revolving credit facility.
On July 14, 1998, the Company, through its 70% owned subsidiary, TSI,
purchased the net assets of Opto-Tech Industries, Inc. ("Opto-Tech").
Opto-Tech assembles and sells radio frequency interference products,
attenuators and message waiting indicators to Regional Bell Operating
Companies, independent phone operators and distributors of telecommunications
products. The purchase price of $6,632 including costs incurred directly
related to the transaction, has been allocated to working capital of $261,
property plant and equipment of $42, non-current assets of $100, resulting in
an excess purchase price over net identifiable assets of $6,229. The
acquisition was financed with $5,382 of borrowings from the Company's
revolving credit agreement and $1,250 of subordinated seller notes.
On January 20, 1998, the Company through a newly created subsidiary K&S
Sheet Metal Holdings (K&S Holdings), a subsidiary of 80% owned Bond
Technologies, purchased the stock of K&S Sheet Metal (K&S). K&S is a
manufacturer of precision metal enclosures for electronic original equipment
manufacturers. The purchase price of $15,930, including costs incurred
directly related to the transaction, has been allocated to working capital of
$2,666, property, plant and equipment of $1,002, non-compete agreements of
$1,545 and other assets of $91 resulting in an excess purchase price over net
identifiable assets of $10,626. The acquisition was financed with $14,430 of
borrowings from the Company's revolving credit agreement and $1,500 of
subordinated seller notes. The sellers of K&S are also entitled to additional
payments for their stock, contingent upon future operating results, as
described in the Purchase Agreement.
Unaudited proforma information with respect to the Company as if the 1999
and 1998 acquisitions and divestitures had occurred on January 1, 1999 and
1998 is as follows:
(Unaudited)
Three Months Ended March 31,
1999 1998
Net Sales $89,359 $76,042
Income (loss) before income taxes
and minority interest (2,231) (3,671)
Net income (loss) (5,363) (4,121)
D. COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income". Statement 130 established new rules for the
reporting and display of comprehensive income and its components; however, the
adoption of this Statement had no impact on the Company's net income or
shareholders' equity. Statement 130 requires foreign currency translation
adjustments, which prior to adoption were reported separately in shareholders'
equity, to be included in other comprehensive income.
During the first quarter of 1999 and 1998, total comprehensive income
(loss) was ($7,035) and ($4,215), respectively.
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E. BUSINESS SEGMENT INFORMATION
See Part 1 "Financial Information" - Item 2 "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for the Company's
business segment disclosures. There have been no changes from the Company's
December 31, 1998 consolidated financial statements in the basis of
segmentation or in the basis of measurement of segment profit or loss.
F.INCOME TAXES
Income (loss) before income taxes and minority interest consists of the
following:
March 31, March 31,
1999 1998
From U.S. operations $(3,889) $(2,796)
From foreign operations 684 (876)
Income (loss) before income taxes and
minority interest $(3,205) $(3,672)
Deferred income taxes consists of the following:
March 31, December 31,
1999 1998
Deferred tax liabilities:
Tax over book depreciation and amortization $ 5,324 $ 2,966
Equity investment in Dura-Line (Israel) Ltd. 121 121
Other 106 107
5,551 3,194
Deferred tax assets:
Accrued stock appreciation rights 1,915 1,915
U.S. net operating loss carryforwards 21,124 18,521
Foreign net operating loss carryforwards 3,230 3,230
Inventory reserves 400 400
Uniform capitalization of inventory 395 423
Book over tax depreciation and amortization 5,090 5,427
Accrued vacation 251 251
Accrued warranties 137 137
Accrued employee benefits 103 103
Investment in partnership 282 282
Allowance for doubtful accounts 237 237
Foreign currency translation adjustment 7 594
Deferred intercompany gain 87 87
Other 325 322
33,583 31,929
Valuation allowance for deferred tax assets (24,682) (24,028)
Net deferred tax assets $ 3,350 $ 4,707
The provision for income taxes differs from the amount of income tax
provision computed by applying the United States federal income tax rate to
income before income taxes and minority interest. A reconciliation of the
differences is as follows:
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March 31, March 31,
1999 1998
Computed statutory tax provision (benefit) $(1,090) $(1,248)
Increase (decrease) resulting from:
Nondeductible depreciation and amortization 160 415
Higher effective income taxes of other countries 49 153
State and local taxes (148) 50
Foreign subsidiary losses without a current-year
tax benefit (63) 611
U.S. losses without a current-year tax benefit 2,244 780
Additional valuation allowance for prior year
deferred tax asset 1,342 --
Other, net 107 (111)
Provision for income taxes $ 2,601 $ 650
G. CAPITAL STOCK
In April 1999, the Company sold 10,000 shares of its common stock to an
executive of the Company for $2 per share.
On February 1, 1999, the Company issued 985.0173 shares of Senior
Preferred Stock as payment of dividends through that date. On May 1, 1999,
the Company issued 984.7213 shares of Senior Preferred Stock as payment of
dividends through that date.
The Junior Preferred Stock has a liquidation value, in the aggregate,
equal to the sum of (i) $20,000; plus (ii)(A) for the period from the date of
issuance (July 25, 1997) to August 1, 2002, plus or minus 95% of the
cumulative net income (loss) of the Company 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.
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. As of December 31, 1998, the
liquidation value was reduced to zero.
H. FOREIGN EXCHANGE INSTRUMENTS AND RISK MANAGEMENT
The Company enters into foreign currency forward exchange contracts to
hedge transactions and firm commitments that are denominated in foreign
currencies (principally the Czech Koruna) and not to engage in currency
speculation. The Company primarily utilizes forward exchange contracts with a
duration of one year or less. Gains or losses on hedges of transaction
exposures are included in income in the period in which exchange rates
change. Gains and losses on contracts which hedge specific foreign currency
denominated commitments, primarily royalty payments from the Company's Czech
operations, are deferred and recognized in the basis of the transactions
underlying the commitments.
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Forward exchange contracts generally require the Company to exchange U.S.
dollars for foreign currencies at maturity, at rates that are agreed to at
inception of the contracts. If the counterparties to the exchange contracts
(primarily highly-rated financial institutions) do not fulfill their
obligations to deliver the contracted currencies, the Company could be at risk
for any currency related fluctuation.
The Company has $0 and $6,884 notional amount of foreign currency forward
exchange contracts outstanding at March 31, 1999 and 1998, respectively.
I. STOCK APPRECIATION RIGHTS (SAR) AND ADDITIONAL PURCHASE PRICE AGREEMENTS
In April 1997, Dura-Line entered into an agreement to purchase the former
owners' interest in a SAR for $15,417, consisting of $9,438 in cash and
deferred payments payable in annual installments with remaining payments due
as follows:
March 31, 1999 $1,101
March 31, 2000 1,189
March 31, 2001 1,284
March 31, 2002 1,386
$4,960
As such, at March 31, 1999 the Company has recorded $2,290 in accrued
expenses and other current liabilities and $2,670 in other non-current
liabilities. The $1,101 installment due on March 31, 1999 was paid in April
1999. Dura-Line also purchased the former owners' 7% cumulative preferred
stock on March 9, 1998 at a price of $1,875.
In connection with the acquisition of AIM and Cambridge in 1989, the
sellers of these companies were granted stock appreciation rights. In 1997,
the Company entered into an agreement to purchase and redeem the Estate's and
Decedent's interest in the SAR for $3,111 in cash and a deferred payment of
$3,391 (including interest at 9% per annum), which was paid on May 2, 1998.
The Company is party to a stock appreciation rights agreement with the
sellers of Engineered Endeavors. The agreement calls for payments to be made
to the participants upon exercise of the stock appreciation rights, such
exercise being a one-time election during the calendar years 2003 through and
including 2008. The amount payable to the participants is based upon a
specific formula, the basis of which is the average EBIT (as defined) for the
two calendar years preceding the exercise date. A different formula applies
if Engineered Endeavors is sold before December 31, 2008. When exercised, the
stock appreciation rights are payable one-fourth on or before September 30th
of the year of exercise, and the remaining three-fourths payable in three
equal annual installments.
The Company had a Contingent Purchase Price Payment Plan relating to its
acquisition of Viewsonics in 1996. The plan was based on Viewsonics achieving
certain earnings before interest and taxes during the years ended July 31,
1997 and 1998, respectively. On January 2, 1998, the Company paid $1,388 for
the plan year ended July 31, 1997. $1,081 was accrued at December 31, 1998 and
March 31, 1999, for the final plan year ended July 31, 1998.
<PAGE>
The Company had agreements with the previous owners of TSI to make
additional purchase price payments and bonus payments, if certain earnings
levels were met during the year ended October 31, 1998. At December 31, 1998,
approximately $5,600 was accrued related to these agreements, which was paid
in March 1999.
The Company has an agreement with the previous owners of K&S to make
additional purchase price payments if certain earnings levels are met for the
plan years ended December 31, 1998 through December 31, 2004. There is no
accrual recorded at December 31, 1998 or March 31, 1999 related to this
agreement.
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PART I. FINANCIAL INFORMATION
ITEM 2. 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:
Three Months Ended
March 31,
1999 1998
Net Sales
Infrastructure Products $36,953 $28,131
Radio Frequency Connectors 9,646 10,988
Custom Cable Assemblies 29,100 32,982
$75,699 $72,101
Operating Income
Infrastructure Products $ 2,266 $ 1,730
Radio Frequency Connectors 1,835 2,166
Custom Cable Assemblies 5,312 3,917
Unallocated amounts:
Management fees (757) (733)
Corporate expenses (1,303) (973)
Total Operating Income 7,353 6,107
Interest expense (9,934) (9,943)
Interest Income 43 146
Loss on sale of subsidiary (193) --
Other (474) 18
Loss before income taxes and
minority interest $(3,205) $(3,672)
Consolidated Results of Operations
Net sales. Net sales increased $3.6 million or 5.0% to $75.7 million in
1999 from $72.1 million in 1998. This increase was due to increased domestic
demand for cable conduit, fiber optic central office cables and connectors and
data networking products. These gains were partially offset by reduced sales
of data server products, which were negatively affected by the slowdown in the
semiconductor industry worldwide. Sales of power conditioning equipment were
also negatively affected by a change in the buying habits of a major wireless
customer who shifted to "just-in-time" purchasing and postponed purchases from
the first quarter to the summer months to match the timing of construction,
and the divestiture of Diversified Wire & Cable in July 1998 reduced by sales
by $8.0 million.
Operating income. Operating income increased $1.3 million or 20.4%, to
$7.4 million in 1999 from $6.1 million in 1998. The above mentioned sales
increases of cable conduit, fiber optic cable and connectors and data
networking products accounted for $5.2 million of the increase. These gains
were partially offset by the decreases in sales mentioned above, $0.5 million
increase in corporate overhead and management fees, both due to the expansion
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of our business, and the divestiture of Diversified Wire & Cable which reduced
operating income by $0.3 million.
Infrastructure Products and Equipment
Net Sales. Net sales increased $8.9 million, or 31.4% to $37.0 million
in 1999 from $28.1 million in 1998. The increase was due to increased demand
for domestic cable conduit from new entrants into the telecommunications
industry, which was partially offset by the change in the buying habits of a
major wireless customer who shifted to "just-in-time" purchasing. This change
resulted in orders being postponed from the first quarter to the summer months
to match the timing of construction.
Operating Income. Operating income increased $0.6 million or 31.0%, to
$2.3 million in 1999 from $1.7 million. The increase was the result of the
above sales activity.
Custom Cable Assemblies
Net Sales. Net sales decreased $3.9 million or 11.8%, to $29.1 million
in 1999 from $33.0 million in 1998. The July 1998 sale of Diversified Wire &
Cable accounted for $8.0 million of the decrease. A further contributor to
the decrease was the reduced sales of data server products which were
negatively impacted by the slowdown in the semiconductor industry worldwide.
This was partially offset by an increase in demand for central office data
cables and data networking products.
Operating Income. Operating income increased $1.4 million, or 35.6%, to
$5.3 million in 1999 from $3.9 million in 1998. The sale of Diversified Wire
& Cable accounted for $0.3 million of the increase, with the remaining amount
being the net result of the sales activity mentioned in the preceding
paragraph.
Radio Frequency Connectors
Net Sales. Net sales decreased $1.4 million, or 12.2%, to $9.6 million
in 1999 from $11.0 million in 1998. The decrease in sales was primarily due
to an industry slowdown and increased price competition in the domestic
electronic connector industry.
Operating Income. Operating income decreased $0.4 million. or 15.3%, to
$1.8 million in 1999 from $2.2 million in 1998 due primarily to the above
mentioned industry slowdown and increased price competition. Operating income
was further impacted by $0.1 million in non-recurring charges associated with
the reorganization and consolidation of certain connector operations which
began in 1998.
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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 are the Company's working capital requirements, which
increase whenever the Company 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 revolving line of credit
agreement.
Operating activities. Net cash provided by operating activities for the
three months ended March 31, 1999 was $2.5 million, compared to $0.8 million
used in activities during the same period in 1998. The increase in cash was
primarily the result of improved inventory control partially offset by a
reduction in accounts payable and accruals.
Investing activities. Capital expenditures were $0.4 million more for
the three months ended March 31, 1999 than for the comparable period in 1998.
The majority of the expenditures related to capital investments at Dura-Line's
new production facility in the U.S.
On March 31, 1999, the Company acquired the assets of Integral
Corporation, Inc. for $18.7 million, including estimated costs of the
transaction. The purchase was financed with $7.1 million of borrowings from
the Company's revolving credit agreement and $10.7 million from promissory
notes.
In March 1999, the Company made a $5.6 million additional purchase price
and bonus payment to the former owners of TSI.
Financing activities. During the first quarter of 1999, the Company
increased borrowings under its revolving credit agreement by $20.0 million to
fund acquisition, additional purchase price, SAR and other acquisition related
payments and for general corporate purposes. The Company is party to a Credit
Agreement under which the Company is able to borrow up to approximately $110.0
million to fund acquisitions and provide working capital and for other general
corporate purposes. As of April 30, 1999, the Company has approximately $14.0
million of available funds under this Agreement.
The Company expects its principal sources of liquidity to be from its
operating activities and funding from the revolving line of credit agreement.
The Company further expects that these sources will enable it to meet its cash
requirements for working capital, capital expenditures, interest, taxes, debt
repayment, and future acquisitions for at least the next twelve months.
Year 2000
Introduction. The Year 2000 issue is the result of computer programs
being written using two digits rather than four to define the applicable
year. Any of the Company's computer programs or hardware that have
date-sensitive software or embedded chips may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
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State of Readiness. Based on recent assessments, the Company determined
that it will be required to modify or replace certain portions of its software
and hardware so that those systems will properly utilize dates beyond December
31, 1999. The Company presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue
can be mitigated. However, if such modifications and replacements are not
made, or are not completed timely, the Year 2000 issue could have a material
impact on the operations of the Company.
The Company's plan to resolve the Year 2000 issue involves the following
four phases: assessment, remediation, testing and implementation. The Company
has assessed all systems that could be significantly affected by the Year
2000. Results of this assessment indicated that some of the Company's
significant information technology systems could be affected. The assessment
also indicated that software and hardware (embedded chips) used in production
and manufacturing systems (hereafter also referred to as operating equipment)
may also be at risk. In addition, based on a review of its product lines, the
Company has determined that most of the products it has sold and will continue
to sell do not require remediation to be Year 2000 issue compliant.
Accordingly, the Company does not believe that the Year 2000 issue presents a
material exposure as it relates to the Company's products. In addition, the
Company is in the process of gathering information about the Year 2000
compliance status of its significant suppliers and continues to monitor their
compliance.
For its information technology exposures, to date the Company has
completed a majority of the remediation phase and expects to complete software
modifications and replacement, if necessary, no later than July 31, 1999.
Once software is modified or replaced for a system, the Company will begin
testing and implementation. The testing and implementation phases for all
significant systems are expected to be completed by September 30, 1999. The
four phases of the Company's Year 2000 program in relation to operating
equipment is on-going and expected to be completed by September 30, 1999.
Risks. Management of the Company believes it has an effective program in
place to resolve the Year 2000 issue in a timely manner. As noted above, the
Company has not yet completed all phases of the Year 2000 program. In the
event that the Company does not complete any additional phases, the Company
could be materially adversely affected. In addition, disruptions in the
economy generally resulting from the Year 2000 issue could also materially
adversely affect the Company. The amount of potential liability and lost
revenue cannot be reasonably estimated at this time.
Contingency Plans. The Company's contingency plans, in the event it does
not complete all phases of the Year 2000 program, are incomplete at this time.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Company does not engage in hedging or other market structure
derivative trading activities. Additionally, the Company's debt obligations
are primarily fixed-rate in nature and, as such, are not sensitive to changes
in interest rates. At March 31, 1999, the Company has $93 million in variable
rate debt outstanding. A one percentage point increase in interest rates
would increase the amount of annual interest paid by approximately $0.9
million. The Company does not believe that its market risk financial
instruments on March 31, 1999 would have a material effect on future
operations or cash flows.
<PAGE>
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
1) 27. EDGAR Financial Data Schedule
<PAGE>
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/ John LaVitola
John LaVitola
Chief Financial Officer
May 13, 1999
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<CASH> 14,799
<SECURITIES> 0
<RECEIVABLES> 46,481
<ALLOWANCES> (1,495)
<INVENTORY> 47,891
<CURRENT-ASSETS> 111,068
<PP&E> 79,864
<DEPRECIATION> (30,920)
<TOTAL-ASSETS> 357,906
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<BONDS> 291,725
0
31,084
<COMMON> 10
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<TOTAL-LIABILITY-AND-EQUITY> 357,906
<SALES> 75,699
<TOTAL-REVENUES> 75,699
<CGS> 48,850
<TOTAL-COSTS> 19,496
<OTHER-EXPENSES> 10,558
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<INCOME-PRETAX> (3,205)
<INCOME-TAX> (5,806)
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<EXTRAORDINARY> 0
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<NET-INCOME> (6,287)
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