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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
MARK ONE
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
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Commission file number 1-6687
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JOHNSTON INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 11-1749980
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 Thirteenth Street, Columbus, Georgia 31901
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(Address of principal executive offices) (Zip Code)
(706) 641-3140
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name on each exchange
Title of each class on which registered
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Common Stock, $.10 Par Value New York Stock Exchange
None
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(Title of class)
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 XX No
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State the aggregate market value of the voting stock held by non-affiliates of
the Registrant as of September 23, 1994.
Common Stock, $.10 Par Value -- $43,999,685
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PART I
Item 1. Business
Johnston Industries, Inc. currently is a diversified manufacturer of home
furnishings, industrial and, to a lesser extent, basic apparel and automotive
textile fabrics. Johnston Industries, Inc. is a Delaware corporation which
became the successor to a New York corporation of the same name on December 31,
1987 through a reincorporation merger, and references to "JII" or the "Company"
include its predecessor and its subsidiaries, unless the context indicates
otherwise.
The executive offices of the Company are located at 105 13th Street,
Columbus, Georgia 31901, in a 20,000 square foot, two story, office building,
which was purchased August 20, 1993.
The Company engages in textile manufacturing through its subsidiaries
Southern Phenix Textiles, Inc. and Opp and Micolas Mills, Inc. which together
operate in 1,477,000 square feet of manufacturing, warehouse and administrative
facilities. The Company spins its own yarn using Autocoro open-end automatic
rotor spinning and winding machines, Murata air jet spinners and to a minor
extent some ring spinning equipment. Fabric is manufactured on a variety of
shuttleless, rapier and air jet weaving machines as well as some shuttle looms.
Nonwoven fabric is made in the stitchbond facility. The mills have an annual
capacity of approximately 170 million linear yards of fabric (approximately 82
million pounds). Approximately 93% of production is for industrial and home
furnishings and automotive manufacturers; the balance is for basic apparel
manufacturers. The following table sets forth the percentage of sales to each
major industry served by it:
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<TABLE>
<CAPTION>
1994 1993 1992
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<S> <C> <C> <C>
Automotive 10% 10% 13%
Industrial 24% 24% 26%
Home Furnishings 57% 48% 45%
Apparel 7% 14% 12%
Miscellaneous 2% 4% 4%
--- --- ---
100% 100% 100%
</TABLE>
The Company believes that it is generally not directly affected by foreign
competition although there is an indirect effect. The majority of the
Company's products are manufactured for the industrial and home furnishings
segments of the market with some sales in the basic apparel areas (duck and
pocketing) and in automotive products. The direct effect of foreign
competition in these areas is very minimal. There is however an indirect
effect on the business. As total domestic textile sales volume is reduced as a
result of imports, the companies that are directly affected (generally fashion
and apparel manufacturers) search for sales volume in other areas to replace
their lost volume. This results in increased competition and price pressures
in some of the specialized markets that the Company serves.
The Company is also attempting to market its products in Europe. Through
June 30, 1994, the international direct sales volume has been no more than 3%
of sales.
The Company also owns 49% of Jupiter National, Inc. which is traded on the
American Stock Exchange. In November 1992, Jupiter National, which previously
operated solely as a venture capital company, purchased the custom fabrics
division of WestPoint Pepperell. This division, now named Wellington Sears
Company, is a diversified manufacturer of cotton and polyester fabrics for the
home furnishings and industrial products markets. Its operations include
spinning, weaving, product
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testing, waste textile fiber and fabric reclamation and other nonwoven
production. Its products are used as outdoor furniture fabric, wiper cloths,
napery, furniture upholstery, shoddy pads, tote bags and other industrial
applications, etc.
Southern Phenix Textiles, Inc.
Southern Phenix Textiles, Inc. ("Southern Phenix") manufactures woven
fabrics from 100% polyester fiber for use in the automotive industry, home
furnishings industry, for the coating and laminating trades, and by various
other fabricators. Its operations include spinning, weaving, stitchbonding
and finishings and its products are used in backing for foam car seat
cushions, tufted upholstery and marine coated products, mattress ticking for
popularly priced mattresses, and products for soft furniture. More than 75%
of production is against firm orders, with finishing, packaging and other
specifications determined by customers.
Southern Phenix's single supplier for most of its polyester fiber is
Wellman, Inc., formerly Fiber Industries, Inc. ("Wellman"). Southern Phenix
does not have a long term agreement with Wellman and does not maintain supply
contracts with Wellman or any other polyester suppliers. Other potential
suppliers of polyester include DuPont and Hoechst-Celanese, as well as a number
of other domestic and foreign sources. In the event any one supplier ceases to
be available, management does not expect any difficulty in quickly obtaining
polyester from another supplier.
Southern Phenix's two manufacturing facilities totaling 708,000 square
feet, located in Phenix City, Alabama, have an
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annual manufacturing capacity of approximately 72 million linear yards (36
million pounds) and include a finishing facility. The primary mill, which was
one of the first in the United States to make woven goods from 100% polyester,
was built in 1968, but its equipment and machinery continue to be extensively
modernized. The primary mill is located on 13 acres of a 124-acre tract
accessible by both road and rail. A second mill with 78,000 square feet on 11
acres, contains stitchbond operation. Capital expenditures at Southern Phenix
in fiscal 1994 amounted to $4,124,000. For the fiscal year 1994, Southern
Phenix facilities operated at approximately 80% of rated capacity.
Sales of Southern Phenix products to the automotive industry are made
through Acme Mills Company, as its exclusive automotive marketing
representative. Such sales to Acme Mills Company account for approximately
10% of the Company's consolidated revenues.
Southern Phenix also has contracted with Glabman Teichner Company to
market the majority of its decorative and upholstery fabrics. Other products
are generally sold by the Company's five salesmen.
Backlog
At June 30, 1994, Southern Phenix's backlog of orders was approximately
$13,299,000 compared to $11,491,000 at June 30, 1993 and $10,621,000 at June
30, 9192. All backlog at year-end is expected to be delivered in the current
fiscal year.
Employees
As of June 30, 1994, Southern Phenix had approximately 520
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full-time employees, none of whom is covered by collective bargaining
agreements. Southern Phenix believes its relations with its employees are
good.
Competition
Southern Phenix's competition consists principally of six companies, a
number of which are larger and have significantly greater resources than
Southern Phenix or the Company. While the company believes that there are
several competitors with larger market shares than it in each product group,
market shares vary substantially from product to product within a group and
there are individual products for which Southern Phenix is the market leader
as well as others for which it does not have a significant market share. Means
of competition include quality of product and of service - chiefly the ability
to respond and meet customer product requirements expeditiously and reliably -
as well as price. The Company believes that service is an important positive
competitive factor for Southern Phenix and that only its relatively small size
is a negative factor, though one which is not viewed as significant. The
Company believes that competition from domestic manufacturers has intensified
over the last several years and will continue to increase in the future.
The Company believes that while it is not directly affected by foreign
competition, it is indirectly affected by such competition as discussed on Page
2.
Opp and Micolas Mills, Inc.
Opp and Micolas Mills, Inc. ("Opp and Micolas") manufactures more than 69
different styles (in the "greige"
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state, i.e., unbleached and undyed as taken from the loom) of all cotton
fabrics and cotton/polyester blended fabrics for the coating, home furnishings
and apparel markets. Opp and Micolas also produces fabrics for the footwear
and building supplies industries and for various industrial operations. Its
fabrics are used in a broad range of coated products including wall coverings,
coated fabrics for autos such as convertible tops, cloth roof coverings and
felt window liners, rubber coated products such as automotive V-belts and
other belts for industrial machinery, apparel, industrial protective clothing
and specialty items, such as tote bags, handbags and shoes.
Opp and Micolas buys most of its polyester from Wellman, formerly Fiber
Industries, Inc., and its cotton from ten established domestic cotton
merchants in the open market. Opp and Micolas does not maintain a supply
agreement with Wellman or any other supplier. Management believes that
adequate supplies of cotton are available in the open market and should any
one of its principal suppliers of cotton or polyester cease to be available,
management does not expect any difficulty in quickly locating another
supplier.
Opp and Micolas manufactures fabrics primarily through the use of the
"open-end" spinning method but has some conventional "ring" spinning equipment
still in use. Open-end spinning is a fully automated spinning process which
yields a consistency and quality of yarn unobtainable from ring spinning. In
recent years Opp and Micolas has engaged in an extensive capital expenditure
program aimed at converting both mills to open-end spinning and shuttleless
weaving. Under this program, the Opp
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and Micolas capital expenditures program was $6,581,000 in fiscal 1994. For
the fiscal year 1994, Opp and Micolas operated at approximately 93% of rated
capacity.
The fabrics produced by Opp and Micolas are manufactured to firm orders
and are sold directly to manufacturers which have their own converting
departments or finishing facilities and to fabric convertors who dye and
print unfinished fabrics. Opp and Micolas employs six full-time salesmen and
accepts orders from a small number of commissioned agents. Sales by agents
accounted for less than 2% of its fiscal 1994 sales.
The Opp Mill encompasses 13 acres and has approximately 340,000 square
feet of plant facility. The Micolas Mills, which is located near the Opp
Mill, has 19 acres and approximately 429,000 square feet of plant facility. A
nearby Company-owned tract of 140 acres is available for future expansion.
The mills, which share some basic facilities and services but are equipped to
operate independently, are single level facilities which were built in 1922
and, like Southern Phenix plant, underwent extensive modernization programs in
the early 1990's. The Opp and Micolas Mills have a aggregate annual capacity
of 98 million linear yards of fabric (46 million pounds).
Backlog
At June 30, 1994, Opp and Micolas' backlog of orders was approximately
$31,798,000 compared to $26,180,000 at June 30, 1993 and $28,734,000 at June
30, 1992. The increase in backlog at June 30, 1994, was the result of large
increases in orders from the home furnishings market. All backlog at year-end
is expected to be delivered in the current fiscal year.
7
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Employees
As of June 30, 1994, Opp and Micolas had approximately 950 full-time
employees, none of whom are covered by collective bargaining agreements. Opp
and Micolas believes its relations with its employees are good.
Competition
Opp and Micolas competition consists principally of 10 companies, a
number of which are larger and have significantly greater resources than Opp
and Micolas or the Company. While the Company believes that there are several
competitors with larger market shares than it in each product group, market
shares vary substantially from product to product within a group and there are
individual products for which Opp and Micolas is the market leader as well as
others for which it does not have a significant market share. Means of
competition include quality of product and service - chiefly the ability to
respond and meet customer product requirements expeditiously and reliably -
as well as price. The Company believes that service is an important positive
competitive factor for Opp and Micolas and that only its relatively small size
is a negative factor, though one which is not viewed as significant.
The Company believes that while it is not directly affected by foreign
competition, it is directly affected by such competition as discussed on Page
2.
8
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for fiscal 1994 were $159,904,000 compared to $154,074,000
for the prior year, an increase of 4%. This increase was primarily the result
of a 24% improvement in sales of upholstery and furniture products by Opp and
Micolas and Southern Phenix offset by a 46% reduction in apparel market sales
at Opp and Micolas. The decrease in the Company's low margin apparel market
sales reflects management's decision to significantly reduce its involvement in
this market and is expected to continue in the future. Presently, apparel
market sales represent only 13% of the Opp and Micolas total business and the
increase in upholstery and furniture market products produced significantly
higher gross margins. In addition, the Company has placed greater emphasis on
the development of new high margin products and designs in the decorative
fabrics sector of the home furnishings market.
The 11% increase in net sales to $154,074,000 in fiscal 1993 compared
to fiscal 1992 was primarily in unit sales volume. The upholstery and
furniture market was a major contributor providing about 8% and apparel
contributed about 3% of the increase.
At the present time, our sales backlog is high, the economy is relatively
stable, and we are not aware of any material trends that will have a
significant effect on future operations or sales volume. These conditions are
comparable to fiscal 1993, with the exception of increases in raw material
prices, primarily cotton and polyester. Although increasing, export sales
represent approximately 3% of our core business.
Although net sales for fiscal 1994 increased 4% from fiscal 1993, the Company's
operating income increased approximately 33%.
Cost of Sales as a percentage of sales, which had significantly improved in
1992 compared to prior years, maintained the improved level in 1993 and made
another significant improvement in 1994. Gross profit was 21.5% in 1992 and
1993 and improved to 24.2% in 1994. Improved sales volume, especially in
upholstery and furniture fabrics at Southern Phenix, have significantly
increased productivity through higher utilization of plant and equipment. This
improvement also reflects decreased cost resulting from utilization of newer
machinery and equipment purchased over the past several years.
Management does not believe that inflation has had a material impact on results
of operations for the periods presented. Substantial and unreasonable
increases in costs, however, could have a significant economic effect on the
industry and the Company. Management believes, to the extent inflation affects
its costs in the future, the Company can generally offset inflation by
increasing prices, if competitive conditions permit.
Selling, general and administrative expenses increased 11% in fiscal 1994 and
19% in fiscal 1993. In fiscal 1994 and fiscal 1993, approximately one-half of
the increase was in selling expenses (personnel, samples and commissions) at
Southern Phenix directly related to the new line of decorative fabrics
introduced in the upholstery and furniture markets. There were also small
increases in support expenses in administrative functions to support the sales
effort. It should be noted that while the absolute dollars of these 1994 and
1993 expenses are higher, as a percentage of sales the annual increase was only
1/2 of 1% each year. It should also be noted that increased expenses due to
development of new, value added markets, were offset and substantially exceeded
by increased profitability.
Depreciation and amortization expenses were up 5% in fiscal 1994 to $10,202,000
and 5% in fiscal 1993 to $9,761,000 over the prior years. These increases
reflect the recent improvement in the level of capital expenditures. Over the
past three years, the Company has invested $32,487,000 to continue our effort
to upgrade machinery and equipment to state-of-the-art levels, and move into
new more profitable markets.
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Net interest expense was up 18% in fiscal 1994 to $2,845,000 and 8% in fiscal
1993 to $2,403,000 from the prior years. While the increase in 1993 was due to
a higher average borrowing balance, the change in 1994 was primarily due to a
reduction in interest income. Interest income decreased $379,000 in 1994
because of the payment of a note receivable in July, 1993. The average
interest rate increased slightly from 6-1/4 to 6-1/2 and the total bank debt
increased $1,800,000.
The other net elements of Other Expenses were nominal in fiscal 1992 but
increased significantly in fiscal 1993 and fiscal 1994. The increase in 1994
and 1993 relates to the liability for the Company's former steel fabrication
operations which is discussed in Note 2 in the financial statements. This
liability represents costs related to health insurance and death benefits and
is stated at the actuarially determined discounted present value.
In fiscal 1994, there was a loss of $980,000 from the operations of Tech
Textiles, USA, compared to a loss of $889,000 in fiscal 1993 and a loss of
$198,000 in fiscal 1992, the year Tech Textiles was established as a 50%-owned
joint venture with another company and the year Tech Textiles commenced
operations. These amounts reflect the startup nature of this new business and
is consistent with the Company's expectations and original business plan. The
operations of Tech Textiles are expected to generate substantially smaller
losses through fiscal year 1995 compared to prior fiscal years. For fiscal
year 1996, management expects Tech Textiles to be profitable.
The Company holds a 49% interest in Jupiter National, Inc. ("Jupiter"). In
fiscal 1992, Jupiter experienced a large increase in net asset value primarily
due to the increased market values of two noncontrolled portfolio companies
that had initial public offerings. In fiscal 1993, the net asset value of
Jupiter continued to increase because of the market value of the investment
portfolio and the operating profits of Wellington Sears Company, a major 100%
manufacturing acquisition by Jupiter in that fiscal year. In fiscal 1994, the
market value of one of the portfolio companies in which Jupiter has a financial
interest decreased significantly in value, which decrease exceeded other
increases in portfolio investments of Jupiter and the operating profit
generated by Wellington Sears Company. Consequently, for the last three years,
the Company recognized income from Jupiter of $2,339,000 for fiscal 1992,
$6,163,000 for fiscal 1993, and a loss of $106,000 for fiscal 1994. Because of
these factors, Jupiter has reported volatility in its earnings for the last
three years and will continue to potentially show such volatility dependent on
the value of its portfolio investments due to market conditions and the profit
generated from the operations of Wellington Sears Company.
The provision for income taxes in fiscal 1992 was low due to a loss carryforward
from fiscal 1991. The provision in fiscal 1993 and 1994 is at a 38% rate.
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes." Effective July 1, 1993, the Company adopted SFAS 109 retroactively,
and restated all prior years presented.
The effect of the retroactive restatement on shareholders' equity at July 1,
1992 was a reduction of $418,000. Net income and earnings per share as
previously reported for fiscal 1993 were $8,878,000 and $.81, respectively, and
for fiscal 1992 were $6,771,000 and $.62, respectively. The restatement impact
of applying SFAS 109 on net income was a $352,000 reduction to $8,526,000 and a
reduction of $.03 per share to $.78 in fiscal 1993. In fiscal 1992, the
restatement impact on net income was a reduction of $82,000 to $6,689,000 while
earnings per share remained at $.62.
LIQUIDITY AND CAPITAL RESOURCES
The net cash provided by operating activities of $13,567,000 in fiscal 1994 was
$571,000 less favorable than the $14,138,000 generated in fiscal 1993. This
decrease in cash from operations was a direct result of
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increased accounts receivable and increased inventories over the prior year.
The accounts receivable were up due to higher sales volume while inventories
increased because of growth in upholstery markets, which requires more shelf
stock.
Capital expenditures in fiscal 1994 of $12,701,000 was $2,320,000 higher than
the $10,381,000 expenditure in the prior year and reflects management's goal of
8% of net sales. These expenditures were primarily for the replacement of
existing equipment with the latest technology, the implementation of new
manufacturing processes, and development of new products.
Although current replacement cost for inventories at June 30, 1994 and 1993 was
less than last-in, first-out carrying value, the Company's management believes
that the carrying value will be recovered through future sales which will yield
normal profit margins.
On January 14, 1994, the Company completed the restructuring of its loan
facilities with its banks and at June 30, 1994 had a revolving credit loan of
$35,000,000, a term note of $5,000,000, and a line of credit of $10,000,000
with outstanding borrowings of $2,500,000. The $5,000,000 term loan is due in
fiscal 1995 while the balance will be due on January 14, 1997. The Company
plans to restructure its debt prior to January 14, 1997. Certain of the
Company's borrowing agreements require the Company, among other things, to
maintain certain financial ratios and specified levels of working capital and
intangible net worth, as defined. The Company was in technical noncompliance
with respect to its covenant related to the Maximum Leverage Ratio, as defined,
as of June 30, 1994; however, on August 15, 1994, the Amended Credit Agreement
was modified through June 30, 1995 to revise such Maximum Leverage Ratio in
order to cure such technical noncompliance and in order to make certain
covenants less restrictive.
A decision was made by the Company in fiscal 1993 to move the executive office
to Columbus, Georgia. In that regard, in fiscal 1994 a building was purchased
and renovated, and the Company obtained a Purchase Money Mortgage Loan of
$1,325,000. As of June 30, 1994, the remaining balance on this loan was
$1,303,000. Working Capital at June 30, 1994 is $25,495,000. With the net
expected cash provided by operating activities in fiscal 1995 which will
include over $11,000,000 in expected depreciation expense in addition to
operating earnings, the Company will have adequate cash and capital resources
for its requirements.
RECENT DEVELOPMENTS
In 1981, a subsidiary of the Company closed a steel fabricating facility in
Pennsylvania which it had operated before its closing. The facility was
purchased from the Company and again operated as a steel fabricating facility
by the new owner for approximately two years and thereafter was purchased by
the present owner who also operated it as a steel fabricating facility for
about three years. Since that time, it has been closed.
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In February 1994, the present owners of the property filed a complaint against
the Company and the previous owner alleging responsibility of those parties for
the cost of remediation of the plant site. The complaint alleges that such
costs to date are in excess of $1,500,000.
The case is presently scheduled to be heard on June 5, 1995, and the Company
has established a reserve in the amount of $180,000, which is the present
estimate of potential costs to be incurred. Once the initial trial of this
matter has been concluded, the Company will be in a position to further
evaluate this claim with much more certainty and increase or decrease its
reserve pursuant thereto. However, the Company is of the present opinion that
this issue will not have a material effect on the Company's future financial
condition and results of operations.
NEW ACCOUNTING STANDARD
Statement of Financial Accounting Standard No. 112 ("SFAS 112"), "Employers'
accounting for Postemployment Benefits," establishes accounting standards for
employers that provide benefits to former or inactive employees after
employment but before retirement and is effective for fiscal years beginning
after December 15, 1993. The Company expects that there will be no material
effect upon implementing SFAS 112 on its financial position or results of
operations.
Supplemental data appearing on page 13 of the 1994 Annual Report under the
caption "Quarterly Information" is incorporated herein by reference.
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ITEM 11. EXECUTIVE COMPENSATION
The information beginning on page 4 of the Johnston Industries, Inc. Proxy
Statement dated October 3, 1994 (to be filed within 30 days hereafter) ("Proxy
Statement") under the caption "Executive Compensation and Related Matters" and
on page 10 of the Proxy Statement under the caption "Other Matters" are
incorporated herein reference. David L. Chandler and Rainer H. Bosselman,
officers and directors of Johnston Industries, Inc., are also officers and
directors of affiliated companies. An estimated 60% and 35%, respectively, of
their time is allocated to their duties at Johnston Industries, Inc.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information on page 1 of the Proxy Statement under the caption "Principal
Stockholders" and on pages 2 and 3 under the caption "Nominees for Election as
Director" is incorporated herein by reference. David L. Chandler beneficially
owns 42.7% of Redlaw Industries Inc.'s securities.
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JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT F-1 and
F-2
CONSOLIDATED FINANCIAL STATEMENTS OF JOHNSTON INDUSTRIES, INC.
AND SUBSIDIARIES AS OF JUNE 30, 1994 AND 1993 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED JUNE 30, 1994:
Consolidated Balance Sheets F-3
Consolidated Statements of Income F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 to
F-19
FINANCIAL STATEMENT SCHEDULES:
Johnston Industries, Inc. and Subsidiaries
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Schedule I - Marketable Securities - Other Security Investments S-2
Schedule II - Amounts Receivable from Related Parties and Underwriters, Promoters,
and Employees Other Than Related Parties S-3
Schedule V - Property, Plant, and Equipment S-4
Schedule VI - Accumulated Depreciation and Amortization of Property, Plant,
and Equipment S-5
Schedule VIII - Valuation and Qualifying Accounts S-6
Schedule IX - Short-Term Borrowings S-7
Schedule X - Supplementary Income Statement Information S-8
</TABLE>
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CONSOLIDATED FINANCIAL STATEMENTS OF JUPITER NATIONAL, INC.
AS OF JUNE 30, 1994 AND 1993 AND FOR EACH OF THE THREE YEARS
ENDED JUNE 30, 1994:
<TABLE>
<S> <C>
Report of Independent Accountants J-1
Consolidated Statements of Financial Position J-2
Consolidated Statements of Operations and Changes in Net Assets J-3
Consolidated Statements of Cash Flows J-4
Notes to Consolidated Financial Statements J-5 to
J-12
Consolidated Schedule of Investments as of June 30, 1994 and
June 30, 1993 J-13 to
J-20
</TABLE>
All other schedules are omitted because they are either not required or the
information is included in the notes to consolidated financial statements.
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Johnston Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Johnston
Industries, Inc. and subsidiaries (the "Company") as of June 30, 1994 and 1993,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended June 30, 1994. Our
audits also included the financial statement schedules listed in the Table of
Contents. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedules
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Johnston Industries, Inc. and
subsidiaries at June 30, 1994 and 1993, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1994
in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly, in
all material respects, the information set forth therein.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for income taxes in 1994 to conform with Statement of
Financial Accounting Standards No. 109 and, retroactively, restated the 1993
and 1992 financial statements for the change.
F-1
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As explained in Note 5, the consolidated financial statements include the
Company's investment in and equity in earnings of its unconsolidated affiliate,
Jupiter National, Inc. ("Jupiter"). As of and for the years ended June 30,
1994 and 1993, a portion of the Company's investment in Jupiter ($17,434,000
and $9,263,000, respectively) and equity in earnings from Jupiter ($2,010,560
and $755,180, respectively) relates to security values estimated by Jupiter's
Board of Directors in the absence of readily ascertainable market values. We
have reviewed the procedures used in arriving at the estimates of value of such
securities and have inspected underlying documentation and, in the
circumstances, we believe the procedures are reasonable and the documentation
appropriate. However, because of the inherent uncertainty of valuation, those
estimated values may differ significantly from the values that would have been
used had a ready market for Jupiter's investment securities existed, and the
difference could be material to the Company's consolidated financial
statements.
August 15, 1994
F-2
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JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1994 AND 1993
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ASSETS 1994 1993
<S> <C> <C>
CURRENT ASSETS:
Cash $ 3,914,000 $ 4,102,000
Accounts and notes receivable, net of allowance of $368,000
and $314,000 18,152,000 15,643,000
Notes receivable and accrued interest from stockholders 5,524,000
Inventories 25,438,000 23,194,000
Prepaid expenses and other 1,330,000 1,259,000
------------ ------------
Total current assets 48,834,000 49,722,000
INVESTMENTS - At equity 21,529,000 18,038,000
PROPERTY, PLANT, AND EQUIPMENT - Net 65,354,000 62,982,000
INTANGIBLE ASSET - Pension 2,874,000 3,869,000
OTHER ASSETS 2,096,000 1,460,000
------------ ------------
$140,687,000 $136,071,000
============ ============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings $ 2,500,000 $ 10,000,000
Current maturities of long-term debt 5,087,000 9,500,000
Accounts payable 6,410,000 8,085,000
Accrued expenses 7,372,000 6,578,000
Income taxes payable 806,000 638,000
Deferred income taxes 1,164,000 1,214,000
------------ ------------
Total current liabilities 23,339,000 36,015,000
------------ ------------
LONG-TERM DEBT 36,216,000 22,500,000
------------ ------------
OTHER LIABILITIES 16,876,000 11,840,000
------------ ------------
LONG-TERM DEFERRED INCOME TAXES 4,142,000 5,271,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share; authorized,
3,000,000 shares; none issued
Common stock, par value $.10 per share; authorized,
20,000,000 shares; issued 12,411,891 and 12,338,245 1,241,000 1,235,000
Additional paid-in capital 17,107,000 16,733,000
Retained earnings 51,371,000 48,536,000
------------ ------------
Total 69,719,000 66,504,000
Less treasury stock: 1,682,112 and 1,650,412 shares at cost (6,407,000) (6,059,000)
Less minimum pension liability, net of tax benefit (3,198,000) -
------------ ------------
Stockholders' equity 60,114,000 60,445,000
------------ ------------
$140,687,000 $136,071,000
============ ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 20
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JUNE 30, 1994, 1993, AND 1992
- ----------------------------------------------------------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
NET SALES $159,904,000 $154,074,000 $138,272,000
------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales, excluding depreciation and
amortization 121,261,000 120,933,000 108,606,000
Selling, general, and administrative 13,306,000 11,980,000 10,037,000
Depreciation and amortization 10,202,000 9,761,000 9,304,000
------------ ------------ ------------
Total costs and expenses 144,769,000 142,674,000 127,947,000
------------ ------------ ------------
INCOME BEFORE OTHER EXPENSE AND
PROVISION FOR INCOME TAXES 15,135,000 11,400,000 10,325,000
------------ ------------ ------------
OTHER EXPENSE:
Interest expense - net 2,845,000 2,403,000 2,223,000
Other - net 590,000 491,000 12,000
------------ ------------ ------------
Total other expenses 3,435,000 2,894,000 2,235,000
------------ ------------ ------------
EQUITY IN EARNINGS (LOSSES)
OF EQUITY INVESTMENTS (1,086,000) 5,274,000 2,141,000
------------ ------------ ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 10,614,000 13,780,000 10,231,000
PROVISION FOR INCOME TAXES 4,085,000 5,254,000 3,542,000
------------ ------------ ------------
NET INCOME $ 6,529,000 $ 8,526,000 $ 6,689,000
============ ============ ============
EARNINGS PER SHARE $ 0.60 $ 0.78 $ 0.62
============ ============ ============
DIVIDENDS PER SHARE $ 0.35 $ 0.32 $ 0.24
============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 10,850,141 10,931,781 10,874,356
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 21
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1994, 1993, AND 1992
- -----------------------------------------------------------------------------------------------------------------------
COMMON STOCK ADDITIONAL
----------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
<S> <C> <C> <C> <C>
BALANCE, JUNE 30, 1991 - As previously reported 8,008,765 $ 800,000 $15,858,000 $39,770,000
Adjustment for three-for-two stock split (see Note 10) 4,004,382 401,000 (401,000)
---------- --------- ----------- -----------
Effect of SFAS 109 adoption (see Note 14) (418,000)
BALANCE, JUNE 30, 1991 - As restated 12,013,147 1,201,000 15,457,000 39,352,000
Exercise of stock options 165,545 18,000 484,000
Net income 6,689,000
Fractional shares redeemed as a result
of the three-for-two stock split (270) (3,000)
Dividends paid ($.24 per share) (2,619,000)
---------- --------- ----------- -----------
BALANCE, JUNE 30, 1992 12,178,422 1,219,000 15,938,000 43,422,000
Exercise of stock options 159,823 16,000 795,000
Purchase of treasury stock
Net income 8,526,000
Dividends paid ($.32 per share) (3,412,000)
---------- --------- ----------- -----------
BALANCE, JUNE 30, 1993 12,338,245 1,235,000 16,733,000 48,536,000
Exercise of stock options 73,742 6,000 376,000
Purchase of fractional shares (96) (2,000)
Purchase of treasury stock
Net income 6,529,000
Dividends paid ($.35 per share) (3,694,000)
Minimum pension liability, net of tax
benefit of $1,957,000
---------- --------- ----------- -----------
BALANCE, JUNE 30, 1994 12,411,891 $1,214,000 $17,107,000 $51,371,000
========== ========== =========== ===========
TREASURY STOCK
----------------------- MINIMUM
SHARES AMOUNT PENSION LIABILITY TOTAL
<S> <C> <C> <C> <C>
BALANCE, JUNE 30, 1991 - As previously reported 885,375 $(3,366,000) $53,062,000
Adjustment for three-for-two stock split (see Note 10) 442,687
Effect of SFAS 109 adoption (see Note 14) (418,000)
--------- ----------- ----------- -----------
BALANCE, JUNE 30, 1991 - As restated 1,328,062 (3,366,000) 52,644,000
Exercise of stock options 502,000
Net income 6,689,000
Fractional shares redeemed as a result
of the three-for-two stock split (3,000)
Dividends paid ($.24 per share) (2,619,000)
--------- ----------- ----------- -----------
BALANCE, JUNE 30, 1992 1,328,062 (3,366,000) 57,213,000
Exercise of stock options 811,000
Purchase of treasury stock 322,350 (2,693,000) (2,693,000)
Net income 8,526,000
Dividends paid ($.32 per share) (3,412,000)
--------- ----------- ----------- -----------
BALANCE, JUNE 30, 1993 1,650,412 (6,059,000) 60,445,000
Exercise of stock options 382,000
Purchase of fractional shares (2,000)
Purchase of treasury stock 31,700 (348,000) (348,000)
Net income 6,529,000
Dividends paid ($.35 per share) (3,694,000)
Minimum pension liability, net of tax
benefit of $1,957,000 $(3,198,000) (3,198,000)
--------- ----------- ----------- -----------
BALANCE, JUNE 30, 1994 1,682,112 $(6,407,000) $(3,198,000) $60,114,000
========= =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 22
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1994, 1993, AND 1992
- ------------------------------------------------------------------------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 6,529,000 $ 8,526,000 $ 6,689,000
------------ ------------ ------------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 10,202,000 9,761,000 9,304,000
Provision for bad debts 151,000 383,000 493,000
Undistributed (income) losses of
unconsolidated affiliates 1,086,000 (5,274,000) (2,141,000)
Changes in assets and liabilities:
Accounts and notes receivable (2,563,000) (375,000) (1,023,000)
Inventories (2,244,000) (309,000) (3,018,000)
Deferred income taxes (50,000) (21,000) (279,000)
Prepaid expenses and other assets (566,000) 264,000 (2,260,000)
Accounts payable (1,675,000) (1,366,000) 2,304,000
Accrued expenses 794,000 (27,000) 406,000
Income taxes payable 168,000 113,000 819,000
Other liabilities 1,704,000 2,291,000 1,625,000
Other, net 31,000 172,000 133,000
------------ ------------ ------------
Total adjustments 7,038,000 5,612,000 6,363,000
------------ ------------ ------------
Net cash provided by operating activities 13,567,000 14,138,000 13,052,000
------------ ------------ ------------
INVESTING ACTIVITIES:
Additions to property, plant, and equipment (12,701,000) (10,381,000) (9,405,000)
Increase in investments (4,578,000) (2,034,000) (1,447,000)
Repayments from (loans to) stockholders 5,383,000 341,000 (5,725,000)
------------ ------------ ------------
Net cash used in investing activities (11,896,000) (12,074,000) (16,577,000)
------------ ------------ ------------
FINANCING ACTIVITIES:
Principal payments of debt (4,022,000) (2,000,000) (2,500,000)
Proceeds from issuance of long-term debt 13,325,000 9,000,000
Net borrowings under line-of-credit agreements (7,500,000) 4,000,000
Purchase of treasury stock (348,000) (2,693,000)
Proceeds from employee stock ownership plan 1,454,000 (1,454,000)
Proceeds from issuance of common stock 380,000 811,000 502,000
Dividends paid (3,694,000) (3,412,000) (2,619,000)
------------ ------------ ------------
Net cash provided by (used in) financing activities (1,859,000) (1,840,000) 2,929,000
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (188,000) 224,000 (596,000)
CASH, BEGINNING OF YEAR 4,102,000 3,878,000 4,474,000
------------ ------------ ------------
CASH, END OF YEAR $ 3,914,000 $ 4,102,000 $ 3,878,000
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $2,962,000 $2,861,000 $3,061,000
Income taxes $2,908,000 $2,472,000 $1,567,000
</TABLE>
F-6
<PAGE> 23
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1994 AND 1993
AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED JUNE 30, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Principles of Consolidation - The consolidated financial statements
include the accounts of Johnston Industries, Inc. and its wholly owned
subsidiaries (the "Company"), which are involved in the manufacture and
sale of industrial textiles. All significant intercompany accounts and
transactions have been eliminated.
Inventories - The Company's inventories of finished goods, work in
process, and raw materials are stated at the lower of cost (using the
last-in, first-out cost flow assumption) or market. Supplies are stated
at cost determined on the first-in, first-out basis.
Property, Plant, and Equipment - Property, plant, and equipment is
stated at cost. Depreciation and amortization are provided principally
by the use of the straight-line method over the estimated useful service
lives of 40 years for buildings and improvements and 3-20 years for
machinery and equipment.
Revenue Recognition - Revenue is generally recognized as products are
shipped to customers. When customers, under the terms of specific
orders, request that the Company manufacture and invoice goods on a bill
and hold basis, the Company recognizes revenue based on the completion
date required in the order and actual completion of the manufacturing
process. At that time, title and risks of ownership are transferred to
the customer. Accounts receivable included bill and hold receivables of
$3,136,000 and $2,538,000 at June 30, 1994 and 1993, respectively.
Concentration of Credit Risk - The Company's accounts receivable are
generally unsecured and are liquidated based on cash flows generated by
its customers' operations.
Income Taxes - In February 1992, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 109 ("SFAS
109"), "Accounting for Income Taxes." Effective July 1, 1993, the
Company adopted SFAS 109 retroactively, and restated all prior years
presented. Under SFAS 109, the Company determines income taxes for
financial reporting purposes using the asset and liability method.
Under this method, deferred tax assets and liabilities are established
for temporary differences between the financial reporting basis and the
tax basis of the Company's assets and liabilities at enacted tax rates
expected to be in effect when such amounts are realized or settled.
Earnings Per Share - Earnings per share are calculated based on the
weighted average number of common and common equivalent shares
outstanding during each respective fiscal year. Fully diluted earnings
per share are not presented because the difference from primary earnings
per share is insignificant for all periods presented.
F-7
<PAGE> 24
Postretirement and Postemployment Benefits - On July 1, 1993, the
Company adopted the provisions of Statement of Financial Accounting
Standards No. 106 ("SFAS 106"), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The impact of adoption of
SFAS 106 was not material to the Company's financial position or results
of operations. Statement of Financial Accounting Standards No. 112
("SFAS 112"), "Employers' Accounting for Postemployment Benefits,"
establishes accounting standards for employers that provide benefits to
former or inactive employees after employment but before retirement and
is effective for fiscal years beginning after December 15, 1993. The
Company expects that there will be no material effect upon implementing
SFAS 112 on its financial position or results of operations.
2. STEEL FABRICATION OPERATIONS
The accompanying balance sheets as of June 30, 1994 and 1993 include
accruals of $7,903,000 and $7,828,000, respectively, for the remaining
costs expected to be incurred in phasing out the Company's steel
fabrication operations. These costs are principally related to health
insurance and death benefits for former employees and are stated at the
actuarially determined discounted present value. These operations were
closed in 1981.
In February 1994, the operators of a steel fabricating facility filed a
complaint against a previous operator of the facility and a former
subsidiary of Johnston Industries, Inc. which had operated the facility
earlier before its close in 1981. The complaint seeks to have the
earlier operators bear the response costs incurred in remediation of
contamination at the plant site. Such costs are alleged to be in excess
of $1,500,000 to date. The Company is presently in the process of
obtaining sufficient information to fully evaluate the claim. The
Company has established a reserve in the amount of $180,000 as an
estimate of potential legal costs to be incurred in connection with
defending this matter. Based upon the advice of legal counsel, no
reserve for remediation of the site has been established. While the
ultimate resolution of any lawsuit involves uncertainty, management
believes settlement of this issue will not have a material effect on the
Company's financial condition or results of operations.
During 1992, the Company was notified by the Federal Environmental
Protection Agency ("EPA") and Michigan Department of Natural Resources
("MDNR") that the EPA and MDNR believe the Company is a potentially
responsible party for the remediation of contamination at a former
landfill facility previously utilized by the Company's steel fabrication
operations. Negotiations are currently under way among the
owner/operator group, the generator group, and MDNR as to the allocation
of response costs expended to date. The current estimate of the
Company's share of costs to date is approximately $20,000 which has been
recorded in the financial statements. Any additional liability of the
Company for future costs is not expected to be material.
Management believes that the accruals described above are sufficient to
cover the estimated costs to comply with the terms of settlements and
other matters.
3. RECEIVABLES FROM RELATED PARTIES
During 1992 and 1993, the Company made secured revolving loans to Redlaw
Industries, Inc. ("Redlaw"), a stockholder. As of June 30, 1993,
$5,524,000 was outstanding. In July 1993, principal and interest was
paid in full. An additional loan of $1,300,000 was made to Redlaw in
October 1993 and interest and principal was paid in full in December
1993. All loans bore interest at the Company's interest rate on its
revolving credit loan (see Note 8) plus 1/2 of 1%.
F-8
<PAGE> 25
4. INVENTORIES
Inventories consist of the following at June 30, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Finished goods $ 11,585,000 $ 8,588,000
Work-in-process 6,897,000 6,240,000
Raw materials and supplies 6,956,000 8,366,000
------------- ------------
25,438,000 23,194,000
Difference between LIFO carrying value and
current replacement cost (838,000) (656,000)
------------ -----------
Current replacement cost $ 24,600,000 $ 22,538,000
============= ============
</TABLE>
Although current replacement cost for inventories at June 30, 1994 and
1993 was less than last-in, first-out carrying value, the Company's
management believes that the carrying value will be recovered through
future sales which will yield normal profit margins.
5. INVESTMENTS
Jupiter National, Inc.
As of June 30, 1994 and 1993, the Company owned approximately 49% and
40%, respectively, of the outstanding common stock of Jupiter National,
Inc. ("Jupiter"), a closed-end venture capital investment company.
Jupiter uses specialized accounting policies required for investment
companies to determine the net asset value of its portfolio of
investments. Under these policies, securities with readily available
market quotations are valued at the current market price; all other
investments are valued at fair value as determined in good faith by
Jupiter's Board of Directors using a formal portfolio valuation
procedure. At the end of each quarter, management prepares a written
summary of each significant portfolio company and meets with the Board
of Directors to discuss each investment in detail and determine the
final valuations.
Summarized financial information of Jupiter as of June 30, 1994 and
1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Financial Position:
Net current assets $ 3,474,000 $ 9,686,000
Investments 53,558,000 49,409,000
Total assets 61,748,000 61,610,000
Long-term debt 15,050,000 14,500,000
Net assets 39,353,000 39,907,000
</TABLE>
F-9
<PAGE> 26
The Company accounts for its investment in Jupiter using the equity
method. For the years ended June 30, 1994, 1993, and 1992, the
Company's equity in the changes in net assets of Jupiter was $(106,000),
$6,163,000, and $2,339,000, respectively. For the years ended June 30,
1994 and 1993, $2,010,560 and $755,180, respectively, of the Company's
equity in Jupiter's change in net assets was derived from net unrealized
appreciation of investments whose values have been estimated by
Jupiter's Board of Directors. In 1992, the portion of the Company's
income from Board-valued investments was immaterial.
The Company's equity in net assets of Jupiter at June 30, 1994 and 1993
is $19,194,000 and $15,735,000, respectively, which includes $17,434,000
and $9,263,000, respectively, of security values determined by Jupiter's
Board of Directors. The quoted market value of the Company's investment
in Jupiter was approximately $20,148,000 and $11,423,000 on June 30,
1994 and 1993, respectively.
In 1992, the Company changed its method of accounting to a current
reporting basis rather than the one quarter delay basis previously used.
The cumulative effect of the change on prior years is included in net
income for the year ended June 30, 1992 and is not material. The effect
of the change on the year ended June 30, 1992 was to increase net income
by $227,000 ($.02 per share).
Tech Textiles, USA
During 1992, the Company entered into a 50%/50% partnership with an
English company to establish Tech Textiles, USA ("Tech Textiles") for
the joint manufacture and sale of certain specialized textile products.
The Company's investment in this entity was $2,335,000 and $2,303,000 at
June 30, 1994 and 1993, respectively. Losses of $980,000, $889,000, and
$198,000, respectively, for the years ended June 30, 1994, 1993, and
1992 were recorded.
Summarized financial information of Tech Textiles as of June 30, 1994
and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Financial Position:
Net current assets $ 593,000 $ 295,000
Total assets 2,662,000 2,490,000
Net assets 2,335,000 2,302,000
</TABLE>
6. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following at June 30,
1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Land $ 555,000 $ 359,000
Buildings and improvements 19,422,000 16,425,000
Machinery and equipment 106,871,000 97,517,000
------------ ------------
126,848,000 114,301,000
Less accumulated depreciation and amortization (61,494,000) (51,319,000)
----------- -------------
Property, plant, and equipment - net $ 65,354,000 $ 62,982,000
============ ============
</TABLE>
F-10
<PAGE> 27
7. ACCRUED EXPENSES
Accrued expenses consist of the following at June 30, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Salaries, wages, and employee benefits $2,821,000 $2,299,000
Pension costs 1,697,000 1,537,000
Taxes, other than income taxes 1,276,000 1,201,000
Interest expense 41,000 26,000
Current estimated phase out costs of steel fabrication
operations 1,000,000 1,000,000
Other 537,000 515,000
---------- ----------
$7,372,000 $6,578,000
========== ==========
8. LONG-TERM FINANCING AND SHORT-TERM BORROWINGS
Long-term debt consists of the following at June 30, 1994 and 1993:
1994 1993
Revolving credit loans $35,000,000 $25,000,000
Term notes payable 5,000,000 7,000,000
Purchase money mortgage loan 1,303,000
----------- -----------
41,303,000 32,000,000
Less current maturities (5,087,000) (9,500,000)
----------- -----------
$36,216,000 $22,500,000
=========== ===========
</TABLE>
Revolving Credit Loans - During 1994, the Company's Credit and Security
Agreement (the "Original Credit Agreement") was amended by the Second
Amended and Restated Credit and Security Agreement dated as of January
14, 1994 (the "Amended Credit Agreement"). The Original Credit
Agreement was amended and restated in its entirety by the Amended Credit
Agreement. The Amended Credit Agreement increased the maximum
borrowings to $35,000,000. Principal under the Amended Credit Agreement
is payable in full on or before January 14, 1997. Interest payments are
due on the last day of each calendar quarter. Borrowings under the
Amended Credit Agreement bear interest at a variable rate which is the
higher of the federal funds rate plus 3/4 of 1% or the prime rate plus
1/4 of 1%. A commitment fee of 1/2 of 1% on the unused portion of the
revolving credit facility is payable annually. Borrowings under the
Original Credit Agreement bore interest at a variable rate which was the
higher of the federal funds rate plus 1/2 of 1% or the prime rate plus
1/4 of 1%.
The interest rate on these borrowings was 7.50% at June 30, 1994 and
6.25% at June 30, 1993. All machinery, equipment, inventory, and
receivables of the Company are pledged as collateral to the Amended
Credit Agreement.
Term Notes Payable - The term notes are payable to banks and bear
interest at the fixed rate of 8.75% per annum. Principal of $500,000
and interest are payable quarterly through March 1995, at which time the
remaining principal of $4,000,000 is due.
F-11
<PAGE> 28
Purchase Money Mortgage Loan - In connection with the purchase of a new
office building during 1994, the Company obtained a Purchase Money
Mortgage Loan of $1,325,000. At June 30, 1994, borrowings outstanding
under this loan were $1,303,000. Borrowings under this loan accrue
interest at the lesser of (1) 30-day adjustable, 60-day adjustable, or
90-day adjustable LIBOR rate plus 2.70% or (2) the prime rate. The
interest rate on this loan was 7.25% at June 30, 1994. Beginning on
March 31, 1994, the Company was obligated to make 58 consecutive
quarterly payments of principal of $21,667 plus interest, with all
remaining principal and interest due on December 31, 2008. The new
office building in Columbus, Georgia is pledged as collateral for this
loan.
Short-term Borrowings - At June 30, 1994 and 1993, the Company had
available lines of credit from banks totaling $10,000,000 and
$13,500,000, respectively, of which $2,500,000 and $10,000,000,
respectively, had been borrowed. Borrowings under these agreements bear
interest at the prevailing prime lending rate which was 7.25% and 6.0%
at June 30, 1994 and 1993, respectively. Total compensating balances
under these arrangements were approximately $1,000,000 at June 30, 1994
and 1993.
Covenants and Restrictions - The Amended Credit Agreement and term note
agreement require the Company, among other things, to maintain certain
financial ratios and specified levels of working capital and tangible
net worth, as defined. The Company was in technical noncompliance with
respect to its covenant related to the Maximum Leverage Ratio, as
defined, as of June 30, 1994; however, on August 15, 1994, the Amended
Credit Agreement was modified through June 30, 1995 to revise such
Maximum Leverage Ratio in order to cure such technical noncompliance and
in order to make certain covenants less restrictive.
The agreements also place a limit on total borrowings to the lower of
$52,000,000, total stockholders' equity, or an amount computed using a
borrowing base formula. Additionally, the Company's restricted
investments, defined to include guarantees and advances to affiliates,
are limited to the lesser of 20% of total assets or $13,500,000 plus 50%
of net income for fiscal 1994, 1993, and 1992. These agreements also
restrict the Company's ability to incur debt, buy or sell assets, pay
dividends, and issue or repurchase capital stock. As of June 30, 1994,
the Company is restricted from paying cash dividends in excess of
$11,606,000.
Debt Maturities - Aggregate scheduled repayments of long-term debt are
summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30, AMOUNT
<S> <C>
1995 $ 5,087,000
1996 87,000
1997 35,087,000
1998 87,000
1999 and thereafter 955,000
-----------
$41,303,000
===========
</TABLE>
F-12
<PAGE> 29
9. OTHER LIABILITIES
Other liabilities consist of the following at June 30, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Estimated phase out costs of steel fabrication operations $ 6,903,000 $ 6,828,000
Additional pension liability (see Note 16) 8,029,000 3,869,000
Other 1,944,000 1,143,000
----------- -----------
$16,876,000 $11,840,000
=========== ===========
</TABLE>
10. COMMON STOCK
On November 1, 1993, the Board of Directors approved a three-for-two stock
split, whereby shareholders of record on January 4, 1994 were entitled to
one additional share of common stock for every two shares held, payable on
January 24, 1994. Stock options, treasury stock, outstanding common stock
and per share data have been retroactively adjusted to reflect the split.
11. STOCK OPTION PLANS
Employees' Stock Incentive Plan - The Company has a Stock Incentive Plan
for Key Employees under which the Company may grant incentive stock options,
nonqualified stock options, stock appreciation rights, and restricted
stock. Stock appreciation rights may only be granted in conjunction with
nonqualified stock options. The maximum number of common shares which
could be issued upon exercise of options or through awards granted under
this plan is 2,358,450. Incentive stock options granted under the plan
are exercisable, on a cumulative basis, at a rate of 25% each year,
beginning one year after the date of grant. Nonqualified stock options
are exercisable beginning six months after the date of grant.
F-13
<PAGE> 30
A summary of employee stock option activity for the three years ended
June 30, 1994 is as follows:
<TABLE>
<CAPTION>
NON- INCENTIVE
QUALIFIED STOCK EXERCISE
OPTIONS OPTIONS TOTAL PRICE
<S> <C> <C> <C> <C>
Options outstanding at
June 30, 1991 319,612 111,375 430,987 $ 2.37 - $ 4.85
Options granted 180,000 180,000 5.55
Options exercised (128,250) (37,296) (165,546) 2.37 - 3.22
Options canceled (16,875) (16,875) 4.85
-------- ------- --------
Options outstanding at
June 30, 1992 371,362 57,204 428,566 2.37 - 5.55
Options granted 213,750 213,750 6.85 - 10.17
Options exercised (107,438) (52,386) (159,824) 2.37 - 3.22
-------- ------- --------
Options outstanding at
June 30, 1993 477,674 4,818 482,492 2.37 - 10.17
Options exercised (68,924) (4,818) (73,742) 2.37 - 3.22
-------- ------- --------
Options outstanding at
June 30, 1994 408,750 - 408,750 2.37 - 10.17
======== ======= ========
Options available
for grant at
June 30, 1994 855,000
=======
</TABLE>
At June 30, 1994, approximately 304,000 of the outstanding options are
exercisable.
Compensation expense is recognized when nonqualified stock options are
granted at prices which are less than market value on the date of grant.
Compensation expense was also recognized on stock appreciation rights
based on the change in market price from the grant price. Compensation
expense relating to the Company's Employee Stock Incentive Plan for
employees was $3,000 and $(65,000) during the years ended June 30, 1993
and 1992, respectively. No compensation expense was recognized in 1994.
Other Stock Option Agreement - During 1991, the Company entered into a
nonqualified stock option agreement with a director under which the
director was granted options to purchase a maximum of 22,500 shares of
the Company's common stock. The options are exercisable at $3.22 per
share.
Stock Appreciation Rights - During 1992, certain of the Company's
executives rescinded their rights to exercise stock appreciation rights
previously issued in connection with nonqualified stock options. As a
result, compensation expense is no longer required to be recognized and
previously accrued compensation of approximately $65,000 reduced
selling, general, and administrative expenses for the year ended June
30, 1992.
12. EMPLOYEE STOCK PURCHASE PLAN
On October 15, 1990, the Company adopted an Employee Stock Purchase Plan
under which selected eligible key employees and directors of the Company
were granted the opportunity to purchase shares of the Company's common
stock. Through June 30, 1994, 731,213 shares of the Company's stock
have been purchased at market prices by employees and directors under
the plan.
F-14
<PAGE> 31
At June 30, 1994, the Company has guaranteed plan participants' bank
borrowings totaling approximately $5,004,000.
13. TREASURY STOCK
On February 1, 1993, the Company purchased 294,000 shares of its stock
at $8.50 per share from GRM Industries, Inc., a subsidiary of Redlaw.
14. INCOME TAXES
The Company adopted SFAS 109 effective July 1, 1993 and has applied the
provisions of such statement retroactively to July 1, 1988.
Accordingly, the consolidated financial statements have been restated to
comply with the provisions of SFAS 109.
The effect of the retroactive restatement on stockholders' equity at
July 1, 1992 was a reduction of $418,000. The following table
summarizes the restatement impact of applying SFAS 109 on net income and
earnings per share for the years ended June 30, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Net income as previously reported $8,878,000 $6,771,000
Effect of SFAS 109 restatement (352,000) (82,000)
---------- ----------
As restated $8,526,000 $6,689,000
========== ==========
Per share amounts as previously reported $ .81 $ .62
Effect of SFAS 109 restatement (.03) -
---------- ----------
As restated $ .78 $ .62
========== ==========
</TABLE>
The provision for income taxes as computed under SFAS 109 is comprised
of the following for the three years ended June 30, 1994:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Federal:
Current $2,604,000 $2,185,000 $2,188,000
Deferred 828,000 2,249,000 850,000
---------- ---------- ----------
3,432,000 4,434,000 3,038,000
---------- ---------- ----------
State:
Current 689,000 392,000 324,000
Deferred (36,000) 428,000 180,000
---------- ---------- ----------
653,000 820,000 504,000
---------- ---------- ----------
Provision for income taxes $4,085,000 $5,254,000 $3,542,000
========== ========== ==========
</TABLE>
F-15
<PAGE> 32
The significant components of deferred income tax assets and liabilities
at June 30, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Deferred tax assets:
Estimated phase-out costs of steel fabrication operations $ 3,000,000 $ 2,972,000
Alternative minimum tax 678,000 1,373,000
Additional pension liabilities 1,957,000
Other - net 1,570,000 1,481,000
------------ ------------
7,205,000 5,826,000
------------ ------------
Deferred tax liabilities:
Inventories (2,235,000) (2,418,000)
Investments - at equity (in unconsolidated affiliates) (1,929,000) (1,970,000)
Property, plant, and equipment (8,347,000) (7,923,000)
------------ -------------
(12,511,000) (12,311,000)
------------ ------------
Net deferred tax liability $ (5,306,000) $ (6,485,000)
============ ============
Net current deferred tax liability $ (1,164,000) $ (1,214,000)
Net long-term deferred tax liability (4,142,000) (5,271,000)
------------ ------------
$ (5,306,000) $ (6,485,000)
============ ============
</TABLE>
Net deferred tax liabilities are classified in the financial statements
as current or long-term depending upon the classification of the
temporary difference to which they relate.
The reconciliation of the Company's effective income tax rate to the
federal statutory rate of 34% for the three years ended June 30, 1994,
1993, and 1992 follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Federal income taxes at statutory rate $3,609,000 $4,685,000 $3,479,000
State income taxes, net of federal tax benefit 431,000 541,000 333,000
Impact of purchase accounting adjustments (61,000) (217,000)
Other, net 45,000 89,000 (53,000)
---------- ---------- ----------
$4,085,000 $5,254,000 $3,542,000
========== ========== ==========
Effective rate 38.5% 38.1% 34.6%
===== ===== =====
</TABLE>
At June 30, 1994, the Company has alternative minimum tax credit
carryforwards of approximately $678,000 which have been recorded as an
asset and are included in the long-term deferred taxes payable account.
The Company presently believes that realization of these carryforwards
are more likely than not and as such has not established any valuation
allowance against this asset.
F-16
<PAGE> 33
15. COMMITMENTS
Lease Commitments - Rent expense on operating leases covering production
equipment and office facilities was $785,000 in 1994, $1,100,000 in
1993, and $1,492,000 in 1992.
At June 30, 1994, the Company is committed to pay the following minimum
rental payments on noncancelable operating leases:
<TABLE>
<CAPTION>
YEAR ENDING,
JUNE 30, AMOUNT
<S> <C>
1995 $433,000
1996 174,000
1997 157,000
1998 130,000
--------
$894,000
</TABLE>
Minimum rental payments have not been reduced by sublease rentals
receivable of $69,000 due through September 1994 from a 1991 sublease of
certain office facilities.
Other Commitments - The Company has employment contracts with certain of
its employees extending through 1996 aggregating $1,968,000.
16. EMPLOYEE BENEFIT PLANS
The Company has two noncontributory defined benefit pension plans
covering substantially all hourly and salaried employees. The plan
covering salaried employees provides benefit payments based on years of
service and the employees' final average ten years' earnings. The plan
covering hourly employees generally provides benefits of stated amounts
for each year of service. The Company's current policy is to fund
retirement plans in an amount that falls between the minimum
contribution required by ERISA and the maximum tax deductible
contribution. Plan assets consist primarily of bonds, convertible
securities, growth equity securities, cash and cash equivalents, and
unallocated insurance contracts.
The provisions of Financial Accounting Standards Board Statement No. 87
("SFAS 87"), "Employers' Accounting for Pensions" require recognition in
the balance sheet of an additional minimum liability and related
intangible asset for pension plans with accumulated benefits in excess
of plan assets. At June 30, 1994 and 1993, an additional liability of
$8,029,000 and $3,869,000, respectively, is reflected in the
consolidated balance sheets. At June 30, 1994, the liability exceeds
the unrecognized prior service cost resulting in a minimum pension
liability, net of tax benefit, of $3,198,000 recorded as a reduction of
the Company's equity.
F-17
<PAGE> 34
Net periodic pension cost for 1994, 1993, and 1992 was $2,205,000,
$1,815,000, and $1,735,000, respectively, and included the following
components:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Service cost $ 1,010,000 $ 824,000 $ 726,000
Interest cost 1,829,000 1,729,000 1,645,000
Actual return on assets 395,000 (1,202,000) (840,000)
Net amortization and deferral (1,029,000) 464,000 204,000
----------- ----------- ----------
Net periodic pension cost $ 2,205,000 $ 1,815,000 $1,735,000
=========== =========== ==========
The following sets forth the funded status of the plans at June 30, 1994
and 1993:
1994 1993
Actuarial present value of benefit obligations:
Vested benefit obligation $24,784,000 $20,433,000
Nonvested benefit obligation 464,000 189,000
----------- -----------
Accumulated benefit obligation $25,248,000 $20,622,000
=========== ===========
Projected benefit obligation $27,048,000 $22,835,000
Plan assets at fair value 15,769,000 15,423,000
----------- -----------
Projected benefit obligation in excess of plan assets $11,279,000 $ 7,412,000
=========== ===========
Unrecognized prior service cost $ 491,000 $ 919,000
Unrecognized net loss 6,956,000 2,483,000
Unrecognized net liability at date of initial adoption 2,382,000 2,680,000
Pension liability recognized 1,450,000 1,330,000
----------- -----------
Total $11,279,000 $ 7,412,000
=========== ==========
</TABLE>
For the salaried and hourly plans, the weighted average discount rate
used in determining the projected benefit obligation was 7.5% in 1994
and 8.5% in 1993, and the rate of increase in future compensation levels
was graded by age from 7.5% to an ultimate rate of 4% for 1994 and was a
flat rate of 6% for 1993. The expected long-term rate of return on plan
assets was 8% for 1994 and 9% for 1993 for both plans.
F-18
<PAGE> 35
17. SUPPLEMENTARY INCOME DATA
Total other expenses (income) consist of the following for the three
years ended June 30, 1994:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Interest income $ (103,000) $ (482,000) $ (484,000)
Interest expense 2,948,000 2,885,000 2,707,000
Miscellaneous, net 590,000 491,000 12,000
---------- ---------- ----------
$3,435,000 $2,894,000 $2,235,000
========== ========== ==========
</TABLE>
18. MAJOR CUSTOMERS
Net sales to a major customer of the Company comprised 11%, 10%, and 9%
of net sales for the years ended June 30, 1994, 1993, and 1992,
respectively. Another major customer, who acts as a distributor for the
Company, comprised 9%, 9%, and 11%, of net sales for the years ended
June 30, 1994, 1993, and 1992, respectively.
19. TRUST AGREEMENTS
During 1991 and 1993, the Company entered into trust agreements with
officers to transfer assets to trusts in lieu of paying annual bonuses
and consulting fees. These trust assets which are included in "Other
Assets" on the consolidated balance sheet and are recorded at the fair
market value of the underlying assets include corporate stocks,
corporate bonds, and short-term investments. The compensation to the
officers is determined in accordance with the trust agreements. Upon
termination of the officers' employment with the Company, the trust
assets will be distributed to the officers. If the Company becomes
insolvent at any time before the assets of the trust are distributed to
the officers, the trust assets may be used to satisfy the claims of the
Company's creditors. As of June 30, 1994 and 1993, the trust assets
totaled $1,005,000 and $312,000, respectively.
F-19
<PAGE> 36
FINANCIAL STATEMENT SCHEDULES
(See Independent Auditors' Report on Page F-1 and F-2)
<PAGE> 37
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
SCHEDULE I - MARKETABLE SECURITIES - OTHER SECURITY INVESTMENTS
- -------------------------------------------------------------------------------------------------
AMOUNT AT WHICH EACH
PORTFOLIO OF EQUITY
NUMBER OF SHARES SECURITY ISSUES AND
OR UNITS PRINCIPAL MARKET VALUE OF EACH OTHER SECURITY
NAME OF EACH ISSUER AND AMOUNT OF BONDS COST OF EACH ISSUE AT ISSUE CARRIED IN THE
TITLE OF EACH ISSUE AND NOTES EACH ISSUE JUNE 30, 1994 BALANCE SHEET
<S> <C> <C> <C> <C>
Long-Term
Jupiter National, Inc. 463,177 $14,026,000 $20,148,000 $19,194,000
</TABLE>
<PAGE> 38
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
- ------------------------------------------------------------------------------------------------------
BALANCE AT END
DEDUCTIONS OF YEAR
BALANCE AT ----------------------- --------------------
BEGINNING OF AMOUNTS AMOUNTS NOT
NAME OF DEBTOR YEAR ADDITIONS COLLECTED WRITTEN OFF CURRENT CURRENT
<S> <C> <C> <C> <C> <C> <C>
1994
Redlaw Industries, Inc. (2) $5,524,000 $ 26,000 $5,550,000
Polylok Corporation (3) 73,791 9,904 38,189 $45,506
1993
David L. Chandler (1) 412,000 11,000 423,000
Redlaw Industries, Inc. (2) 5,582,000 2,204,000 2,262,000 $5,524,000
Polylok Corporation (3) 901,931 125,310 350,257 $603,193 73,791
Rainer H. Bosselman (4) 286,000 286,000
1992
David L. Chandler (1) 682,000 270,000 412,000
Redlaw Industries, Inc. (2) 5,732,000 150,000 5,582,000
Polylok Corporation (3) 282,422 1,137,731 518,222 901,931
</TABLE>
(1) Represents a promissory note due from David L. Chandler, the Company's
Chairman of the Board, President, and Chief Executive Officer. This
note was payable on demand and bore interest at a rate of 8.75% per
annum. At June 30, 1992, the total amount due included accrued but
unpaid interest of $12,000. This interest was repaid on August 3, 1992,
and the remaining balance was repaid on March 31, 1993.
(2) Represents a revolving demand note from Redlaw Industries, Inc., a
stockholder. This note is payable on demand and bore interest at the
Company's rate on its revolving credit loans plus 1/2 of 1% (6.75% at
June 30, 1993 and 7.25% at June 30, 1992). At June 30, 1993, the total
amount due included accrued but unpaid interest of $141,000. This note
was collateralized by a lien on and security interest in a debenture
dated October 31, 1990 in the principal amount of $1,508,696 (CDN) from
Western Foundry Company Limited and a second lien and security interest
in 900,000 shares of the Company's common stock owned by Redlaw. The
note was paid in full in July 1993.
(3) Represents trade accounts receivable from Polylok Corporation, a Tarboro,
North Carolina based manufacturer which is currently owned by Jupiter
National, Inc. (an affiliate).
(4) Represents a loan to Rainer H. Bosselman, the Company's Vice Chairman of
the Board. This note bore interest at the rate of 6.0% and was repaid
prior to June 30, 1993.
S-3
<PAGE> 39
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
SCHEDULE V - PROPERTY, PLANT, AND EQUIPMENT
- --------------------------------------------------------------------------------------------
BALANCE AT
BEGINNING ADDITIONS BALANCE AT
CLASSIFICATION OF YEAR AT COST RETIREMENTS END OF YEAR
<S> <C> <C> <C> <C>
1994
Land $ 359,000 $ 196,000 $ 555,000
Buildings and improvements 16,425,000 2,997,000 19,422,000
Machinery and equipment 97,517,000 9,508,000 $(154,000) 106,871,000
------------ ----------- --------- ------------
$114,301,000 $12,701,000 $(154,000) $126,848,000
============ =========== ========= ============
1993
Land $ 359,000 $ 359,000
Buildings and improvements 15,613,000 $ 812,000 16,425,000
88,113,000 9,569,000 $(165,000) 97,517,000
------------ ----------- --------- ------------
$104,085,000 $10,381,000 $(165,000) $114,301,000
============ =========== ========= ============
1992
Land $ 357,000 $ 2,000 $ 359,000
Buildings and improvements 15,149,000 464,000 15,613,000
Machinery and equipment 79,330,000 8,939,000 $(156,000) 88,113,000
------------ ----------- --------- ------------
$ 94,836,000 $ 9,405,000 $(156,000) $104,085,000
============ =========== ========= ============
</TABLE>
1993 and 1992 have been restated for the adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes".
S-4
<PAGE> 40
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
SCHEDULE VI - ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY, PLANT, AND EQUIPMENT
- ----------------------------------------------------------------------------------------------------
BALANCE AT ADDITIONS
BEGINNING CHARGED TO OTHER BALANCE AT
DESCRIPTION OF YEAR OPERATIONS RETIREMENTS ADDITIONS END OF YEAR
<S> <C> <C> <C> <C> <C>
1994
Buildings and improvements $ 2,298,000 $ 380,000 $ 2,678,000
Machinery and equipment 49,021,000 9,822,000 $(150,000) $123,000 58,816,000
----------- ----------- --------- -------- -----------
$51,319,000 $10,202,000 $(150,000) $123,000 $61,494,000
=========== =========== ========= ======== ===========
1993
Buildings and improvements $ 1,973,000 $ 325,000 $ 2,298,000
Machinery and equipment 39,578,000 9,436,000 $(117,000) $124,000 49,021,000
----------- ----------- --------- -------- -----------
$41,551,000 $ 9,761,000 $(117,000) $124,000 $51,319,000
=========== =========== ========= ======== ===========
1992
Buildings and improvements $ 1,664,000 $ 309,000 $ 1,973,000
Machinery and equipment 30,607,000 8,995,000 $(149,000) $125,000 39,578,000
----------- ----------- --------- -------- -----------
$32,271,000 $ 9,304,000 $(149,000) $125,000 $41,551,000
=========== =========== ========= ======== ===========
</TABLE>
1993 and 1992 have been restated for the adoption of Statement of Financial
Accounting Standards, No. 109, "Accounting for Income Taxes".
S-5
<PAGE> 41
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
- --------------------------------------------------------------------------------------------------
BALANCE AT ADDITIONS
BEGINNING CHARGED TO BALANCE AT
DESCRIPTION OF YEAR OPERATIONS DEDUCTIONS END OF YEAR
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
1994 $314,000 $151,000 $ (97,000) (1) $368,000
======== ======== ========= ========
1993 $667,000 $383,000 $(736,000) (1) $314,000
======== ======== ========= ========
1992 $271,000 $493,000 $ (97,000) (1) $667,000
======== ======== ========= ========
</TABLE>
(1) Amounts written off, net of recoveries.
S-6
<PAGE> 42
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
SCHEDULE IX - SHORT-TERM BORROWINGS
- -----------------------------------------------------------------------------------------------
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT AMOUNT AVERAGE
AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
CATEGORY OF AGGREGATE BALANCE AT END INTEREST DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS OF PERIOD RATE PERIOD PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Short-term borrowings
from banks under lines
of credit agreements
with interest rate at
the prevailing
prime lending
1994 $ 2,500,000 7.25% $ 6,000,000 $2,759,000 6.20% (1)
=========== ==== =========== ========== ====
1993 $10,000,000 6.00% $12,500,000 $9,207,000 6.04% (1)
=========== ==== =========== ========== ====
1992 $ 6,000,000 6.50% $ 9,500,000 $5,976,000 7.74% (1)
=========== ==== =========== ========== ====
</TABLE>
(1) Represents the weighted average interest rate for the twelve months in
1994, 1993, and 1992 during which the Company had short-term borrowings.
S-7
<PAGE> 43
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
- ---------------------------------------------------------------------------------------------
CHARGED TO COSTS AND EXPENSES
-----------------------------------------------
ITEM 1994 1993 1992
<S> <C> <C> <C>
Maintenance and Repairs $14,550,000 $12,112,000 $12,070,000
=========== =========== ===========
Taxes Other than Payroll and Income Taxes $ 1,416,000 $ 1,243,000 $ 1,376,000
=========== =========== ===========
</TABLE>
S-8
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
JOHNSTON INDUSTRIES, INC.
Date: May 15, 1995 By David L. Chandler
-------------------------
David L. Chandler
Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Gerald B. Andrews President and Chief 5-15-95
- ----------------------------- Operating Officer and
Gerald B. Andrews Director
David L. Chandler Chairman of the Board 5-15-95
- ------------------------------ and Chief Executive
David L. Chandler Officer (principal
executive officer
and Director)
J. Reid Bingham Director 5-15-95
- ------------------------------
J. Reid Bingham
Rainer H. Bosselmann Director 5-15-95
- ------------------------------
Rainer H. Bosselmann
William J. Hart Director 5-15-95
- ------------------------------
William J. Hart
Gaines R. Jeffcoat Director and 5-15-95
- ------------------------------ Retired Vice President
Gaines R. Jeffcoat
C. J. Kjorlien Director 5-15-95
- ------------------------------
C. J. Kjorlien
</TABLE>
<PAGE> 45
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
11 Statement of Computation of Per Share Earnings
23 Consent of Deloitte & Touche LLP
<PAGE> 1
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
EXHIBIT 11-STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
- -----------------------------------------------------------------------------------------------------------------------
The weighted average number of common and common share equivalents on a primary and full-diluted basis are as follows:
PRIMARY
FOR THE YEAR ENDED
JUNE 30,
------------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
Weighted average common share outstanding 10,714,651 10,794,821 10,726,328
Shares issued from assumed exercise of
incentive stock options (1) 1,174 26,473 42,874
Shares issued from assumed exercise of
non-qualified stock options (1) 134,316 110,487 105,154
---------- ---------- ----------
Weighted average number of shares
outstanding, as adjusted 10,850,141 10,931,781 10,874,356
========== ========== ==========
FULLY DILUTED
Weighted average common shares outstanding 10,714,651 10,794,821 10,726,328
Shares issued from assumed exercise of
incentive stock options (1) 1,174 27,655 49,528
Shares issued from assumed exercise of
non-qualified stock options (1) 134,316 129,639 128,101
---------- ---------- ----------
Weighted average number of shares 10,850,141 10,952,115 10,903,957
========== ========== ==========
</TABLE>
(1) Shares issued from assumed exercise of options included the number of
incremental shares which result from applying the "treasury stock method"
for options.
Note: All per share data has been retroactively adjusted for the
three-for-two stock split.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-86414, No. 33-38359, No. 33-44669, No. 33-50100, and No. 33-73268 of
Johnston Industries, Inc. (the "Company") on Form S-8 of our report dated
August 15, 1994 appearing in the Annual Report on Form 10-K/A of the Company
for the year ended June 30, 1994.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
May 15, 1995
