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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1995
................................................
Commission file number 1-6687
....................................................
JOHNSTON INDUSTRIES, INC.
..........................................................................
(Exact name of registrant as specified in its charter)
Delaware 11-1749980
..........................................................................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 Thirteenth Street, Columbus, Georgia 31901
..........................................................................
(Address of principal executive offices) (Zip Code)
(706) 641-3140
..........................................................................
(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
------------------- -------------------
Common Stock, $.10 Par Value New York Stock Exchange
Securities Registered pursuant to Section 12 (g) of the Act: None
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
...... ......
Indicated by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be continued, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K (X).
The aggregate market value of the Common Stock of the Registrant held by
non-affiliates of the Registrant on September 15, 1995 was $92,443,566. The
aggregate market value was computer by reference to the closing price of the
stock on the New York Stock Exchange on such date.
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The number of shares outstanding of the Registrant's Common Stock as of
September 15, 1995 was 10,564,979 shares, $.10 Par Value.
DOCUMENTS INCORPORATED BY REFERENCE:
Part of Form 10-K
Document into which incorporated
-------- -----------------------
(1) Specified portions of the Johnston
Industries, Inc. 1995 Annual Report
are incorporated by reference Parts I and II
(2) Specified portions of the Johnston
Industries, Inc. Proxy Statement
dated October 2, 1995 are
incorporated by reference Part III
<PAGE> 3
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.
In January, 1995, the Company increased its ownership of Jupiter
National, Inc. ("Jupiter") to over 50% and at June 30, 1995 owned 54.8%.
Jupiter is traded on the American Stock Exchange. The Company's ownership of
over 50% of Jupiter now requires the operating results of Jupiter and the
Company to be consolidated in compliance with Generally Accepted Accounting
Principles effective January, 1995. In November, 1992, Jupiter, which
previously had operated solely as a "business development company" under the
1940 Act purchased 100% ownership of the custom fabrics division of WestPoint
Pepperell, now named Wellington Sears Company ("Wellington Sears"). In
December, 1994, with shareholder approval, Jupiter filed a Form N-54C notifying
the Securities and Exchange Commission that Jupiter was withdrawing its
election to be treated as a Business Development Company, and as a result, is
no longer subject to regulation under the 1940 Act.
On August 16, 1995, the Company jointly announced with Jupiter an
agreement and plan of merger under which the public shareholders of Jupiter
would receive approximately $32.875 per share in cash from the Company subject
to adjustment based upon the market value of certain investment securities
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held by Jupiter on a date close to the date the merger proxy statement is
mailed to Jupiter shareholders. The merger is subject to approval by Jupiter's
shareholders and is expected to close in December, 1995.
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 $4,174,000, $2,335,000 and $2,303,000
at June 30, 1995, 1994 and 1993 respectively. On September 8, 1995 the Company
completed the purchase of the English company's 50% ownership to become the
sole owner of Tech Textiles.
The Company engages in textile manufacturing through its 100%
owned subsidiaries Southern Phenix Textiles, Inc., and Opp and Micolas Mills,
Inc.; Wellington Sears, a subsidiary of Jupiter, and Tech Textiles, which in
the aggregate occupy 3,519,000 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 some ring spinning equipment. Fabric is manufactured on a
variety of shuttleless, rapier and air jet weaving machines as well as some
shuttle looms. Non-woven fabric is made in the Company's Southern Phenix
Textile's Stitchbond facility. The mills have an annual capacity of
approximately 215 million linear yards of fabric (approximately 110 million
pounds), about 21 million pounds of sales yarn, and approximately 93 million
pounds in non-woven operations (reclamation of textile waste products).
Approximately 87% of production is for the industrial, home furnishings and
automotive manufacturers; the balance is for basic apparel manufacturers and
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the specialty markets such as yarn and recycled textile fibers. The following
table sets forth the percentage of sales to each major industry served by it:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Automotive 6% 10% 10%
Industrial 25% 24% 24%
Home Furnishing 55% 57% 48%
Apparel 4% 7% 14%
Specialty Markets 9% - -
Miscellaneous 1% 2% 4%
---- ---- ----
100% 100% 100%
==== ==== ====
</TABLE>
The Company believes that it is not generally directly affected by
foreign competition although there is an indirect effect. 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 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. With the
addition of Wellington Sears, the Company has a new market area called the
Specialty Markets which is composed of mostly sales yarn and recycled textile
fibers. The direct effect of foreign competition in these areas is very
minimal.
In the past, the Company has attempted to market its products in
Europe. In April, 1995, the position of Vice President of International Sales
was established and staffed to direct the Company's sales efforts on a global
basis. Through June 30, 1995, the international direct sales volume has been
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no more than 3% of sales. The Company's goal is to eventually have
international sales account for approximately 10% of total sales revenue.
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.
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 5%
of the Company's consolidated revenue.
Southern Phenix also has a contract 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.
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Backlog
At June 30, 1995, Southern Phenix's backlog of orders was
approximately $11,890,000 compared to $13,299,000 at June 30, 1994 and
$11,491,000 at June 30, 1993. The decrease in backlog is due to customer
resistance to the increased raw material costs and a general slowing of the
economy. All backlog at year-end is expected to be delivered in the current
fiscal year.
For the fiscal year 1995, Southern Phenix facilities operated at
approximately 81% of full capacity. Southern Phenix has a manufacturing
capacity of 73 million linear yards (36 million pounds).
Employees
As of June 30, 1995, Southern Phenix had approximately 555
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.
Areas 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
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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 3.
Opp and Micolas Mills, Inc.
Opp and Micolas Mills, Inc. ("Opp and Micolas") manufactures more
than 122 different styles (in the "greige" 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.
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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.
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 converters who dye and print
unfinished fabrics. Opp and Micolas employs seven full-time salesmen and
accepts orders from a small number of commissioned agents. Sales by agents
accounted for less than 2% of its fiscal 1995 sales.
Backlog
At June 30, 1995, Opp and Micolas' backlog of orders was
approximately $28,236,000 compared to $31,798,000 at June 30, 1994 and
$26,180,000 at June 30, 1993. The decrease in backlog at June 30, 1995 from
June 30, 1994, was the result of decreases in orders due to resistance to
higher raw material costs and weaknesses in the economy in general. All back
log at year-end is expected to be delivered in the current fiscal year.
For the fiscal year 1995, Opp and Micolas operated at
approximately 92% of full capacity. The Opp and Micolas Mills have an aggregate
annual capacity of 102 million linear yards of fabric (47 million pounds).
Employees
As of June 30, 1995, 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.
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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. 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. Areas 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 indirectly affected by such competition as discussed
on Page 3.
Jupiter National, Inc.
Jupiter is a holding company consisting of two major activities,
its investment activities and Wellington Sears Company. Jupiter commenced
operations in 1960 as a federally-licensed small business investment company
("SBIC"). In 1981, it elected to be treated as a "small business development
company" under the Small Business Investment Act of 1958 ("1958 Act"), which
restricts its investment to qualifying small business concerns as defined in
the 1958 Act. In 1992, Jupiter acquired Wellington Sears, a diversified
manufacturer of cotton and polyester fabrics.
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Investment Activities
The investment activities of Jupiter are conducted through its wholly-owned
subsidiary, Greater Washington Investments, Inc. ("GWI"). GWI invests in
companies which have the potential of above-average capital appreciation as
well as a current return on investment. Because of the speculative nature of
GWI's investments and the lack of any ready market for most of its investment
when purchased, there is minimal liquidity and a significantly greater risk of
loss on each investment than is the case with traditional investment companies.
However, such investments offer a sufficiently higher return when the companies
are successful to compensate for the increased risk. Following is a list of
the major investments held by GWI as of June 30, 1995.
<TABLE>
<CAPTION>
Company Security Value
------- -------- -----
<S> <C> <C>
Viasoft, Inc. OTC 567,915 shares common stock $ 7,116,193
McDATA Corporation 166,666 shares convertible 4,700,000
preferred stock
Gulf Components, Inc. $2,110,000 9% subordinated 3,163,935
notes due 1998
Zoll Medical 210,000 shares common stock 2,625,000
Corporation OTC
Fuisz Technologies, Ltd. $2,000,000 9% subordinated 2,250,000
note due 1998
Mediatech, Inc. $1,400,000 10-12% subordinated 1,700,000
note due 1998
Sensor Medics Corporation 233,654 shares convertible 1,548,243
preferred stock
33,750 shares common stock
Monitoring Technology $1,000,000 12% subordinated 1,000,000
Corporation note due 2004
Maddex Farm, L. P. $980,000 10% participating 1st 980,000
mortgage due 2000
Aegean R&D Corporation $970,000 10% subordinated 970,000
note due 1998
</TABLE>
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GWI's debt consists of subordinated debentures ("Debentures")
which are guaranteed by the Small Business Administration ("SBA") and bear an
effective weighted-average interest rate of 7.8% at June 30, 1995. Principal
payments due on these Debentures are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $ 2,500,000
2001 7,000,000
2003 5,000,000
-----------
$14,500,000
===========
</TABLE>
Debentures carry certain restrictions, and GWI may not (1) make any
distribution to its shareholder other than periodic payments out of accumulated
net realized income or (2) permit its cumulative operating deficit plus any net
unrealized appreciation on investments to exceed 50% of its paid-in capital.
In addition, the Debentures cannot be prepaid except with SBA approval based
upon such exceptional circumstances as license surrender, reorganization and
merger, debt restructure for credit or cash-flow reasons, or liquidation of
idle funds as a result of large capital gains or anticipated portfolio
payments. At June 30, 1995, GWI did not have available funds for distribution
to its shareholder nor funds for the prepayment of its Debentures.
Wellington Sears Company
Wellington Sears is a diversified manufacturer of cotton and
polyester fabrics for the home furnishings and industrial products markets.
Its operations include spinning, weaving, finishing, product testing, waste
textile fiber and fabric reclamation and other nonwoven production. Its
fabrics are used in outdoor furniture, wiper cloths, napery, furniture
upholstery, mattress pads, bed linens, and other industrial applications.
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Wellington Sears' supplier for most of its polyester is Wellman,
Inc. Its cotton comes from several established domestic cotton merchants in
the open market. Wellington Sears does not maintain a supply agreement with
Wellman or other suppliers. Management believes that adequate supplies of
cotton and polyester are available in the open market even if one of its
suppliers of cotton or polyester ceases to exist.
Wellington Sears spins its own yarn using manual and automated
open-end spinning machines for its weaving operations. Fabric is woven on
rapier and projectile weaving machines as well as some shuttle looms.
Wellington Sears services approximately 2,400 customers with no
single customer accounting for more than 8% of total sales.
It uses both in-house sales personnel and independent brokers in
the sale of its products. Approximately 70% of revenues are generated by
in-house sales personnel, with the remaining 30% being generated by brokers.
Fabrics sold through in-house personnel include abrasive, napery, rubber
products, filtration, duck, wipe cloth and reprocessed waste products.
Mattress pads are sold through commissioned sales agents.
The sales and merchandising department includes 45 Company
employees. The sales force is organized along geographical lines, with sales
offices located in Valley, Alabama - Corporate Office; Akron, Ohio; Ann Arbor,
Michigan; Paramus, New Jersey; and Tarboro, North Carolina. Six sales
representatives are located in the field offices and sell all of Wellington
Sears' products with the exception of mattress pads, utilization products, and
upholstery. The remaining 39 sales and merchandising personnel provide support
services such as design, technical support, customer services, and coordination
of production with the mill. Individuals within this group are also
responsible for the sale of utilization products and mattress pad sales.
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Backlog
At June 30, 1995, Wellington Sears' backlog of orders was
approximately $21,721,000 compared to $22,411,000 at June 30 1994 and
$13,739,000 at June 30, 1993. All backlog at year-end is expected to be
delivered in the current fiscal year.
The weaving mills have an annual capacity of approximately 40
million linear yards of fabric (approximately 27 million pounds).
Approximately 55% of production is for industrial and home products, with the
balance for the upholstery market. In addition, the mills have yarn capacity
for sales yarn of approximately 21 million pounds annually. The nonwoven
operations production capacity is approximately 93 million pounds annually.
Employees
At June 30, 1995, Wellington Sears had approximately 1,500
full-time employees, none of whom are covered by collective bargaining
agreements. Wellington Sears believes its relations with its employees are
good.
Competition
Wellington Sears' competition consists primarily of 20-25
companies, a number of which are larger and have significantly greater
resources than Wellington Sears. While Wellington Sears believes that there
are several competitors with larger market shares than it in each product
group, market shares vary greatly from product to product within a group; and
there are individual products for which Wellington Sears is the market leader
as well as others for which it does not have a significant market share. Types
of competition include quality of products and services--chiefly the ability
to respond and meet customer product requirements expeditiously and
reliably--as well as price.
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Wellington Sears believes it is generally not directly affected by
foreign competition (now that it has exited the duck market), although there is
an indirect effect when competitors start looking for sales volume in other
areas to replace their lost volume as discussed on page 3.
The Executive Officers of Johnston Industries, Inc. are as follows:
David L. Chandler has served as Chairman of the Board of Johnston
Industries, Inc. since 1981 and as Chief Executive Officer since January, 1990.
He had also served as President from January, 1990 to October 1992. Mr.
Chandler is 69 years old.
Mr. Chandler has been Chairman of the Board of Redlaw Industries,
Inc. (a former manufacturer of automotive and transportation products) and its
wholly-owned subsidiary, GRM Industries, Inc., which owns approximately 41% of
the Common Shares of Johnston Industries, Inc., for more than five years. He
has been Chairman of the Board of Galtaco, Inc. (a former ferrous casting
products manufacturer) for more than five years. Mr. Chandler is also Chairman
of the Board and Chief Executive Office of Jupiter National, Inc., a 55% owned
affiliate of Johnston Industries, Inc.
Gerald B. Andrews has served as President and Chief Operating
Officer since October, 1992. Prior to that time, he had served in a variety of
senior management positions at WestPoint Pepperell, over a period of 38 years,
most recently as Executive Vice President of Merchandising. Mr. Andrews is 58
years old.
Larry L. Galbraith has served as Executive Vice President of the
Company since November 1, 1992 and as President and Chief Executive Officer of
Southern Phenix Textiles, Inc. since July, 1989. Prior to that time he had
served as Vice President for engineering, purchasing and finishing at Southern
Phenix Textiles, Inc. for more than five years and he is 55 years old.
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Roger J. Gilmartin has served as Executive Vice President of the
Company since November 1, 1992 and as Chairman and Chief Executive Officer of
Opp and Micolas Mills, Inc. since January, 1990. Prior to that time Mr.
Gilmartin was Senior Vice President and Director of Werner International, Inc.,
management consultants to the textile industry for more than five years. Mr.
Gilmartin is 51 years old.
William I. Henry has served as Vice President of Product and
Operations Planning since January 1, 1993, and for more than five years prior
had served as Vice President, Operations of Southern Phenix Textiles, Inc. Mr.
Henry is 55 years old.
John W. Johnson has served as Vice President and Chief Financial
Officer since September 1, 1994 and is 59 years old.
Mr. Johnson had been Treasurer and Secretary of the Company from
January 1, 1992 until September 1, 1994. From July 1, 1991 to December, 1991
he was Assistant Secretary-Treasurer of the Company and for more than five
years prior was Vice President, Finance of Southern Phenix Textiles, Inc.
Charles F. Fazio has served as Vice President of International
Sales since March, 1995. Prior to that time he had served in a variety of
international sales positions with several textile companies, most recently for
more than five years as Vice President International Products Division, Bibb
Company. Mr. Fazio is 50 years old.
F. Ferrell Walton has served as Secretary and Treasurer since
September 1, 1994 and is 51 years old.
Mr. Walton had been Director of Financial Operations for the
Company from April 1, 1993 to September 1, 1994 and for more than five years
prior was Vice President, Finance of Opp and Micolas Mills, Inc.
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The officers of Johnston Industries, Inc. are elected for a one
year term by the Board of Directors at the Annual Meeting of the Board held
following the Annual Meeting of Stockholders.
Item 2. Properties
Johnston Industries, Inc.
The executive offices of the Company are located at 105 13th
Street, Columbus, Georgia 31901 in a 20,000 square foot, two story, brick
office building, which was purchased August 20, 1993.
Southern Phenix Textiles, Inc.
Southern Phenix's two manufacturing facilities totaling 708,000
square feet are located in Phenix City, Alabama. The primary mill houses
Southern Phenix's administrative offices, weaving mill and finishing operations
on 13 acres of a 124 - acre tract accessible both by road and rail. The 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. A second mill with 78,000 square feet on 11 acres
contains the stitchbond operation. Capital expenditures at Southern Phenix in
fiscal 1995 amounted to $4,991,000.
Opp and Micolas Mills, Inc.
The Opp and Micolas Mills located on a major U. S. highway in Opp,
Alabama is composed of the Opp Mill encompassing 13 acres and has approximately
340,000 square feet of plant facility and the Micolas Mill, which is located
very near to the Opp Mill, sits on 19 acres with approximately 441,000 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 have undergone
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extensive modernization programs from the late 1980's on into the 1990's.
During fiscal 1995 the Opp and Micolas Mills spent $8,880,000 in its capital
expenditure program.
Jupiter National, Inc.
Jupiter's headquarters is located in Rockville, Maryland where it
owns and occupies a 3,400 square foot building on approximately three-quarters
of an acre of land.
Wellington Sears Company
Wellington Sears Company's operations are composed of three
manufacturing facilities, a finishing operation, a U.S. Certified testing
laboratory, a fabric design center, a retail outlet and a corporate facility
located just off Interstate I-85 between Valley, Alabama and West Point,
Georgia. Wellington Sears has four additional manufacturing facilities with
two located in Columbus, Georgia and one each in DeWitt, Iowa and Tarboro,
North Carolina. Together the facilities total approximately 2,030,000 square
feet of building space sitting on approximately 238 acres of land. Wellington
Sears has been involved in a highly extensive modernization program since its
purchase by Jupiter in November, 1992 with capital expenditures totaling
$10,636,000 for fiscal 1995.
JI International, Inc. (d.b.a. Tech Textiles, USA)
The Tech Textiles operation is located in Phenix City, Alabama and
shares the manufacturing facility housing Southern Phenix Textiles stitchbond
operation. It occupies 25,200 square feet of the 78,000 square foot facility.
In fiscal 1995, Tech Textiles spent $173,000 on capital expenditures.
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Item 3. Legal Proceedings
Johnston Industries, Inc.
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, the facility has
been closed.
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 remediation of the plant site. The original
complaint alleged that such costs were in excess of $1,500,000. In July 1995,
the plaintiff amended its complaint alleging estimated costs to be $3,900,000.
The Company is not in agreement concerning these estimated costs, but assuming
the estimate is found to be accurate, it is believed that the court will
apportion the liability among each of the parties including the plaintiff for
the cost of remediation of the plant site.
The trial of the case began on July 20, 1995 and was concluded
August 25, 1995. Briefs by all of the parties are to be filed before a
decision is rendered, which is not expected until sometime in 1996. In June
1995, the Company established a $1,000,000 reserve for costs which it may incur
in connection with the final resolution of the dispute. In addition, the
Company has established a reserve in the amount of $200,000 as an estimate of
potential legal and other costs to be incurred in connection with defending
this matter. Although management believes the accrual described above is
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sufficient to cover the estimated costs of such matter, the ultimate outcome of
the litigation cannot be presently determined.
The Company is periodically involved in legal proceedings arising
out of the ordinary conduct of its business. Management does not expect that
any of these legal proceedings or the legal proceedings involving Jupiter,
Polylok and Duhl discussed below, to have a material adverse effect on the
Company's consolidated financial position or results of operations.
Jupiter Litigation
The purchase of the assets of Polylok Corporation ("Polylok")
which comprises Wellington Sears' Tarboro facility ("Tarboro") produced
significant litigation among Jupiter, Wellington Sears, Polylok, and Daniel
Duhl ("Duhl"), Polylok's principal shareholder. The first action, which was
settled in August 1994, involved assertions against Polylok and Duhl of
misrepresentations made in connection with the purchase of Polylok's assets.
Subsequently, in March 1995, Polylok and Duhl commenced an action against
Jupiter and Wellington Sears, which action asserted a breach of contract
relating to installment payments due Duhl pursuant to a $1,600,000 purchase
money note. Jupiter and Wellington Sears filed counterclaims against Polylok
and Duhl for breach of Duhl's consultancy agreement and breach of the prior
August 1994 settlement. The case is scheduled for trial in November 1995, and
Duhl has filed motions for summary judgment for installment payments on the
$1,600,000 note, amounting to approximately $900,000, and on Jupiter and
Wellington Sears' counterclaim. It is not possible at this time to predict the
eventual outcome of this litigation with reasonable accuracy.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year ended June 30, 1995.
18
<PAGE> 21
Part II.
Item 5. Market for the Registrant's Common Equity and Related Stockholders
Matters
The information appearing in the Johnston Industries, Inc. 1995
Annual Report under the caption "Quarterly Price Range of Common Stock" is
reproduced in Exhibit 13(a).
Item 6. Selected Financial Data
The information appearing in the Johnston Industries, Inc. 1995
Annual Report under the caption "Financial Highlights" is reproduced in Exhibit
13(b).
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information in the Johnston Industries, Inc. 1995 Annual
Report under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" is reproduced in Exhibit 13(c).
Supplementary Data in the Johnston Industries, Inc. 1995 Annual Report under
the caption "Quarterly Information" is reproduced in Exhibit 13(d).
Item 8. Financial Statements and Supplementary Data
The Company's consolidated financial statements of June 30, 1995
and 1994 and for each of the years in the three year period ended June 30,
1995, notes thereto and Independent Auditors' Report are reproduced in Exhibit
13(e).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
19
<PAGE> 22
PART III.
Item 10. Directors and Executive Officers of Johnston Industries, Inc.
(a) The information required by Item 10 is incorporated by reference
from the information in Registrant's proxy statement (filed or to be filed
pursuant to Regulation 14A) for its Annual Meeting of Stockholders to be held
November 2, 1995, except as to biographical information on Executive Officers
which is contained in Item 1 of this Annual Report on Form 10-K.
Item 11. Executive Compensation
The information required by Item 11 is incorporated by reference
from the information in Registrant's proxy statement (filed or to be filed
pursuant to Regulation 14A) for its Annual Meeting of Stockholders to be held
November 2, 1995.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 is incorporated by reference
from the information in Registrant's proxy statement (filed or to be filed
pursuant to Regulation 14A) for its Annual Meeting of Stockholders to be held
November 2, 1995.
Item 13. Certain Relationships and Related Transactions
The information required by Item 13 is incorporated by reference
from the information in Registrant's proxy statement (filed or to be filed
pursuant to Regulation 14A) for its Annual Meeting of Stockholders to be held
November 2, 1995.
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements
The financial statements are filed herewith within Exhibit 13(e)
as provided in Item 8 hereof:
- Independent Auditors' Report.
20
<PAGE> 23
- Consolidated Balance Sheets as of June 30, 1995 and 1994.
- Consolidated Statements of Income for the fiscal years ended
June 30, 1995, 1994, and 1993.
- Consolidated Statements of Stockholders' Equity for the fiscal
years ended June 30, 1995, 1994, and 1993.
- Consolidated Statements of Cash Flows for the fiscal years
ended June 30, 1995, 1994, and 1993.
- Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
The financial statement schedules are filed herewith within
Exhibit 13(e) as provided in Item 8 hereof.
(b) Reports on Form 8-K
There were no reports on Form 8-K during the last quarter
of the fiscal year ended June 30, 1995.
(c) Exhibits
3.1(a) - Certificate of Incorporation of Registrant.
(b) - Certificate of Amendment of Registrant's
Certificate of Incorporation dated
December 20, 1993.
3.2 - By-Laws of Registrant.
10.2(a) - Third Amended and Restated Credit and
Security Agreement dated as of January
31, 1995 among Johnston Industries, Inc.,
Southern Phenix Textiles, Inc., Opp and
Micolas Mills, Inc., The Chase Manhattan
Bank, N. A., NationsBank of North
Carolina, N. A. and Comerica Bank,
Exhibit 10 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended
March 31, 1995 is incorporated by
reference.
*10.3(a) - Registrant's Executive Insurance Plan, as
amended and restated effective May 21,
1984.
*(b) - Letter to Participants dated March 1,
1989 in Registrant's Executive Insurance
Plan setting forth revisions thereto.
21
<PAGE> 24
*10.4 - Registrant's Salaried Employees Pension
Plan, as amended and restated effective
July 1, 1989. Exhibit 10.4 to
Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1991
is incorporated herein by reference.
*10.5 (a) - Amended and Restated Stock Incentive Plan
for Key Employees of the Registrant and its
Subsidiaries.
*10.5 (b) (i) Employee Stock Purchase Plan effective
October 15, 1990 (with 1991 and 1992
amendments). Exhibit 10.5(b)(i) to
Registrant's Annual Report Form 10-K for
the year ended June 30, 1992 is
incorporated by reference.
*(b) (ii) - Amendment dated October 29, 1992 to
Employee Stock Purchase Plan. Exhibit
10.5(b)ii to Registrant's Annual Report
Form 10-K for the year ended June 30,
1993 is incorporated by reference.
*(b) (iii) - Amendment dated December 17, 1993 to
Employee Stock Purchase Plan.
*(b) (iv) - Amendment dated January 24, 1995 to
Employee Stock Purchase Plan.
*10.6(a) - Employment Agreement with Gerald B.
Andrews dated as of October 17, 1992.
Exhibit 10.6(b) to Registrant's Annual
Report on Form 10-K for the fiscal year
ended June 30, 1993 is incorporated
herein by reference.
*(b) (i) - Employment Agreement with David L.
Chandler effective as of January 1, 1990.
Exhibit 10.6(d)(1) to Registrant's Annual
Report on Form 10-K for the fiscal year
ended June 30, 1992 is incorporated
herein by reference.
*(b) (ii) - Trust Agreement dated as of February 12,
1991, with Chemical Bank & Trust Company
and David L. Chandler. Exhibits
10.6(d)(2) to Registrant's Annual Report
on Form 10-K for the fiscal year ended
June 30, 1992 is incorporated herein by
reference.
*(c) - Employment Agreement with Roger J.
Gilmartin dated April 22, 1993. Exhibit
10.6(d) to Registrant's Annual Report on
Form 10-K for the fiscal year ended June
30, 1993 is incorporated herein by
reference.
22
<PAGE> 25
*(d) - Employment Agreement with Larry L.
Galbraith dated June 1, 1989. Exhibit
10.6(g) to Registrant's Annual Report on
Form 10-K for the fiscal year ended June
30, 1990 is incorporated herein by
reference.
*(e) - Employment Agreement with W. I. Henry
dated as of January 1, 1993. Exhibit
10.6(f) to Registrant's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1993 is incorporated herein
by reference.
*(f) - Employment Agreement with John W. Johnson
dated January 27, 1993. Exhibit 10.6(g)
to Registrant's Annual Report on Form
10-K for the fiscal year ended December
31, 1993 is incorporated herein by
reference.
*10.7 - Johnston Industries, Inc. Deferred
Payment Plan Trust Agreement dated as of
October 17, 1992 with First Alabama Bank
& Trust Company. Exhibit 10.7 to
Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31,
1993 is incorporated herein by reference.
11. - Statement of Computation of Per Share
Earnings for the years ended June 30,
1995, 1994 and 1993.
13. (a) - Quarterly Price Range of Common Stock for
the years ended June 30, 1995 and 1994 is
incorporated from Johnston Industries,
Inc., 1995 Annual Report to the
Stockholders.
(b) - Financial Highlights for the fiscal years
1995 and 1994 is incorporated from
Johnston Industries, Inc., 1995 Annual
Report to the Stockholders.
(c) - Management Discussion and Analysis of
Financial Condition and Results of
Operations is incorporated from Johnston
Industries, Inc., 1995 Annual Report to
the Stockholders.
(d) - Supplementary Data captioned "Quarterly
Information" is incorporated from the
Johnston Industries, Inc., 1995 Annual
Report to the Stockholders.
(e) - Financial Statements for the year ended
June 30, 1995 and 1994 and for each of
the years in the three-year period ended
June 30, 1995, notes and schedules
thereto and Independent Auditors' Report
is incorporated from the Johnston
Industries, Inc., 1995 Annual Report to
the Stockholders.
23
<PAGE> 26
21. - List of Subsidiaries of Registrant.
23. - Consent of Deloitte & Touche LLP.
27. - Financial Data Schedule (for SEC use only)
- ------------------------------------------------------------------------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(c) of this report.
24
<PAGE> 27
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: September 28, 1995 By s/ 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>
s/Gerald B. Andrews President and Chief September 15, 1995
------------------- Operating Officer and
Gerald B. Andrews Director
s/David L. Chandler Chairman of the Board September 28, 1995
------------------- and Chief Executive
David L. Chandler Officer (principal
executive officer)
and Director
s/J. Reid Bingham Director September 15, 1995
-------------------
J. Reid Bingham
s/William J. Hart Director September 15, 1995
-------------------
William J. Hart
s/Gaines R. Jeffcoat Director and September 15, 1995
-------------------- Retired Vice President
Gaines R. Jeffcoat
s/C. J. Kjorlien Director September 15, 1995
--------------------
C. J. Kjorlien
</TABLE>
25
<PAGE> 1
EXHIBIT 3.1(a)
CERTIFICATE OF INCORPORATION
OF
JOHNSTON INDUSTRIES, INC.
The undersigned, being of legal age, in order to form a corporation
under and pursuant to the laws of the State of Delaware, does hereby set forth
as follows:
FIRST: The name of the Corporation is Johnston Industries, Inc.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is No. 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock of which the Corporation
shall have authority to issue is 3,000 shares of the par value $.10 per share,
which shall be designated as Common Stock. (See sheet attached - amended,
12/22/93).
FIFTH: The name and address of the incorporator are as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Arthur M. Michaelson 633 Third Avenue
New York, New York 10017
</TABLE>
SIXTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the Corporation
and of its directors and stockholders:
(1) The exact number of directors shall be fixed from time
to time by, or in the manner provided in, the By-Laws
of the Corporation and may be increased or decreased
as therein provided. Directors of the Corporation
need not be elected by ballot unless required by the
By-Laws.
(2) The Board of Directors is expressly authorized to
adopt, alter and repeal the By-Laws of the
Corporation in whole or in part at any regular
or special meeting of the Board of Directors, by
vote of a majority of the entire Board of
Directors. The
<PAGE> 2
By-Laws may also be adopted, altered or repealed in
whole or in part at any annual meeting or special
meeting of stockholders called for that purpose by
the affirmative vote of a majority of the shares of
the Corporation outstanding and entitled to vote
thereon.
SEVENTH: The Corporation shall indemnify (a) its directors and
officers to the fullest extent permitted by the laws of the State of Delaware
now or hereafter in force, including the advance of expenses under the
procedures provided by such laws, and (b) its employees and agents who are not
directors or officers to such extent as shall be authorized by the By-Laws or
the Board of Directors. The foregoing shall not limit the authority of the
Corporation to indemnify the directors, officers and other employees and agents
of this Corporation and shall not be deemed to be exclusive of any rights to
which those indemnified may be entitled as a matter of law or under any
resolution, By-Law provision, or agreement.
EIGHTH: No Director shall be personally liable to the Corporation or
any stockholder for monetary damages for breach of fiduciary duty as a
director, except for any matter in respect of which such director shall be
liable under Section 174 of Title 8 of the Delaware Code or shall be liable by
reason that, in addition to any and all other requirements for such liability,
he (i) shall have breached his duty of loyalty to the Corporation or its
stockholders, (ii) shall not have acted in good faith or, in failing to act,
shall not have acted in good faith, (iii) shall have acted in a manner
involving intentional misconduct or a knowing violation of law or, in failing
to act, shall have acted in a manner involving intentional misconduct or a
knowing violation of law or (iv) shall have derived an improper personal
benefit.
NINTH: No contract or transaction between the Corporation and one or
more of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board of Directors or committee which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose
if: (i) the material facts as to his or their relationship or interest and as
to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or the committee in good
faith authorizes such contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (ii) such material facts are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (iii) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified by the Board of Directors, a
committee or the stockholders. Common or interested directors may be counted
in determining the presence of a quorum at a meeting of the Board of Directors
or of a committee which authorizes the contract or transaction. Any director
of the Corporation may vote upon any contract or other transaction between the
Corporation and any subsidiary or affiliated corporation without regard to
the fact that he is also a director of such subsidiary or affiliated
corporation.
- 2 -
<PAGE> 3
This Article shall not be construed to invalidate any such contract or
transaction which would otherwise be valid under the common and statutory law
applicable thereto.
TENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provision of Section 279 of Title 8 of
the Delaware Code, order a meeting of the creditors or class of creditors,
and/or of the Stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said Court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the Court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
of Incorporation and affirms, under penalties of perjury, that the signature is
his act and deed and that the facts stated herein are true, this 28th day of
October 1987.
s/Arthur M. Michaelson
----------------------
Arthur M. Michaelson,
Incorporator
- 3 -
<PAGE> 4
"FOURTH: The total number of shares of Capital Stock
which the Corporation shall have authority to issue is
Twenty-Three Million (23,000,000) shares divided into two
classes of which Three Million (3,000,000) shares of the par
value of $0.01 per share shall be designated Preferred Stock
and Twenty Million (20,000,000) shares of the par value of
$.10 per share shall be designated Common Stock.
"Subject to any exclusive voting rights which may
vest in holders of Preferred Stock under the provisions of any
series of the Preferred Stock established by the Board of
Directors pursuant to authority herein provided, and except as
otherwise provided by law, the holders of shares of Common
Stock shall be entitled to one vote for each share upon all
matters upon which stockholders have the right to vote.
Subject to any limitations prescribed in this Article FOURTH
and any further limitations prescribed in accordance
therewith, the holders of shares of Common Stock shall be
entitled to receive when and as declared by the Board of
Directors, out of the assets of the Corporation which are by
law available therefor, dividends payable either in cash, in
property or securities of the Corporation.
"The Preferred Stock may be issued from time to time
in one or more series as fixed by resolution or resolutions of
the Board of Directors. The resolution or resolutions of the
Board of Directors may, to the full extent now or hereafter
permitted by law and subject to the provisions of this
Certificate of Incorporation, fix the voting powers,
designations, preferences and relative, participating,
optional or other special rights, and any qualifications,
limitations or restrictions, of the shares of such series."
Note: Effective October 1, 1991 and prior to the above December 22, 1993
amendment, the authorized capital was Thirteen Million (13,000,000) shares
divided into two classes of which Three Million (3,000,000) shares of the par
value of $0.01 per share was designated Preferred Stock and Ten Million
(10,000,000) shares of the par value of $0.10 per share was designated Common
Stock. Prior to October 1, 1991 only Common Stock was authorized.
4
<PAGE> 1
EXHIBIT 3.1(b)
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "JOHNSTON INDUSTRIES, INC." FILED IN THIS OFFICE ON THE TWENTY-
SECOND DAY OF DECEMBER, A.D. 1993, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO KENT COUNTY
RECORDER OF DEEDS ON THE TWENTY-SECOND DAY OF DECEMBER, A. D. 1993 FOR
RECORDING.
* * * * * * * * * *
s/ Willaim T. Quillen
---------------------
William T. Quillen, Secretary of State
<PAGE> 2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
JOHNSTON INDUSTRIES, INC.
The undersigned corporation, in order to amend its Certificate
of Incorporation, hereby certifies as follows:
FIRST: The name of the corporation is Johnston Industries,
Inc.
SECOND: The corporation hereby amends its Certificate of
Incorporation as follows:
Article FOURTH of the Certificate of Incorporation,
relating to the capital stock of the corporation, is hereby amended to read as
follows:
"FOURTH: The total number of shares of Capital Stock
which the Corporation shall have authority to issue is
Twenty-Three Million (23,000,000) shares divided into two
classes of which Three Million (3,000,000) shares of the par
value of $0.01 per share shall be designated Preferred Stock
and Twenty Million (20,000,000) shares of the par value of
$.10 per share shall be designated Common Stock.
"Subject to any exclusive voting rights which may
vest in holders of Preferred Stock under the provisions of any
series of the Preferred Stock established by the Board of
Directors pursuant to authority herein provided, and except as
otherwise provided by law, the holders of shares of Common
Stock shall be entitled to one vote for each share upon all
matters upon which stockholders have upon all matters upon
which stockholders have the right to vote. Subject to any
limitations prescribed in the Article FOURTH and any further
limitations prescribed in accordance therewith, the holders of
shares of Common Stock shall be entitled to receive when and
as declared by the Board of Directors, out of the assets of
the Corporation which are by law available therefor, dividends
payable either in cash, in property or securities of the
Corporation.
<PAGE> 3
"The Preferred Stock may be issued from time to time
in one or more series as fixed by resolution or resolutions of
the Board of Directors. The resolution or resolutions of the
Board of Directors may, to the full extent now or hereafter
permitted by law and subject to the provisions of this
Certificate of Incorporation, fix the voting powers,
designations, preferences and relative, participating,
optional or other special rights, and any qualifications,
limitations or restrictions, of the shares of such series."
THIRD: The amendment effected herein was authorized by the
affirmative vote of the holders of a majority of the outstanding shares
entitled to vote thereon at a meeting of stockholders pursuant to Sections 222
and 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that
the statements made herein are true under the penalties of perjury, this 20th
day of December, 1993.
s/Gerald B. Andrews
-------------------
GERALD B. ANDREWS, President
ATTEST:
s/John W. Johnson
- -----------------
JOHN W. JOHNSON, Secretary
-2-
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
JOHNSTON INDUSTRIES, INC.
Section 1.1. Registered Office. The registered office of the
Corporation shall be at 100 West Tenth Street, City of Wilmington, County of
New Castle, State of Delaware, or at such other office as the Board of
Directors may from time to time designate.
Section 1.2. Principal Office. The principal office of the Corporation
shall be at 30 Rockefeller Plaza, New York, New York 10020, or at such other
office as the Board of Directors may from time to time designate.
Section 1.3. The Other Offices. The Corporation may also establish and
maintain such other offices, within and without the State of Delaware, as the
Board of Directors may from time to time designate or as the business of the
Corporation may require.
STOCKHOLDERS
Section 2.1. Place of Meetings of Stockholders. The meetings of the
stockholders shall be held at such place or places, either within or without
the State of Delaware, as may be fixed from time to time by the Board of
Directors.
Section 2.2. Annual Meeting of Stockholders. The Annual Meeting of the
Stockholders for the election of directors and for the transaction of such
other business as may properly be brought before the meeting shall be held on
the second Friday in November of each year, if not a legal holiday, and if that
day be a legal holiday, then on the next succeeding business day, at 11:00
o'clock a.m., or at such other time and date as shall be fixed from time to
time by the Board of Directors, and stated in the notice of the meeting.
Section 2.3. Special Meeting of Stockholders. Special meeting of the
stockholders for any purpose or purposes, unless otherwise prescribed by law,
may be called by the Board of Directors or by the President or upon the written
request (stating the purpose or purposes of the meeting) of the holders of at
least 33 1/3% of the outstanding shares entitled to vote.
Section 2.4. Fixing the Record Date. The Board of Directors may fix,
in advance, a date as the record date for the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to receive any dividend or distribution or the allotment
of any rights, or for the purpose of any other action.
Section 2.5. Notice of Meetings of Stockholders; Waiver of Notice.
Written notice of all meetings of stockholders shall be given to each
stockholder entitled to vote at the meeting, except that it shall not be
necessary to give notice to any stockholder who waives notice or to whom notice
is not required as provided in Sections 9.2 and 9.4 of these By-Laws. Each
notice
<PAGE> 2
shall be given personally or by mail not less than ten nor more than sixty days
before the date of such meeting and shall state the place, date and hour of the
meeting and, in the case of special meetings, the purpose or purposes for which
the meeting is called.
Section 2.6. Adjourned Meetings. The stockholders present in person or
by proxy at any meeting of stockholders and entitled to vote thereat may
adjourn the meeting despite the absence of a quorum. When a determination of
stockholders entitled to notice of or to vote at any meeting of stockholders
has been made, such determination shall apply to any adjournment thereof unless
the Board elects to fix a new record date for the adjourned meeting. Except as
required by law, when the meeting is adjourned to another time or place, it
shall not be necessary to give any notice of the adjourned meeting if the time
and place to which the meeting is adjourned are announced at the meeting at
which the adjournment is taken. At the adjourned meeting at which a quorum is
present any business may be transacted, which might have been transacted on the
original date of the meeting.
Section 2.7. List of Stockholders at Meeting. A list of stockholders as
of the record date, prepared in accordance with Section 5.4 of these By-Laws,
shall be produced and kept at every meeting of stockholders.
Section 2.8. Quorum. A majority of the shares entitled to vote, present
in person or represented by proxy, at any meeting of stockholders shall
constitute a quorum, except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws. When a quorum is once present to constitute
a meeting, it is not broken by the subsequent withdrawal of any stockholders.
Section 2.9. Vote of Stockholders. Except as otherwise required by
law, by the Certificate of Incorporation or by these By-Laws, all matters
coming before any meeting of stockholders other than the election of directors
shall be decided by the affirmative vote of the majority of the shares present
in person or by proxy and entitled to vote thereat. Directors shall be elected
by a plurality of the votes of the shares present in person or by proxy and
entitled to vote on the election of directors. Unless otherwise provided by
the Certificate of Incorporation, each stockholder of record shall be entitled
to one vote in person or by proxy for each share of the capital stock held by
such stockholder and registered in his name on the books of the Corporation at
the record date fixed for determining stockholders entitled to vote at such
meeting.
Section 2.10. Proxies. Each stockholder entitled to vote at any meeting
of stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. Every proxy shall be in writing subscribed by the stockholder or his
duly authorized attorney-in-fact and shall be filed with the Secretary of the
Corporation. Unless and until voted, every proxy shall be revocable at the
pleasure of the person who executed it or of his legal representatives or
assigns, except in those cases where an irrevocable proxy permitted by statute
is given. No proxy shall be voted or acted upon after expiration of three
years from the date thereof unless the proxy provides for a longer period.
2
<PAGE> 3
Section 2.11. Inspectors at Stockholders' Meeting. The Board of
Directors, in advance of any meeting of stockholders, may appoint one or more
inspectors to act at the meeting or any adjournment thereof. If inspectors are
not so appointed, the presiding officer may appoint one or more inspectors.
Each inspector, before entering upon the discharge of his duties, shall take
and sign an oath to execute faithfully the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. No
candidate for the office of director shall be appointed as an inspector.
Section 2.12. Action by Stockholders Without a Meeting. In addition to,
and not in limitation of, the provisions of the General Corporation Law of the
State of Delaware, any action required or permitted to be taken at any annual
or special meeting of stockholders may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereat were
present and voted. Prompt notice of the taking of the corporate action without
a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
DIRECTORS
Section 3.1. Powers of the Board of Directors. The business and affairs
of the Corporation shall be managed by or under the direction of the Board of
Directors (sometimes hereinafter referred to as the "Board").
Section 3.2. Number, Election, Tenure and Qualifications of Directors.
The Board of Directors shall consist of not less than three nor more than
fifteen directors. The exact number of directors shall be fixed from time to
time by resolution of the Board or by the stockholders, provided, however, that
no decrease may shorten the term of any incumbent director. Each director
shall hold office until his successor has been elected and qualified, unless he
shall sooner resign, die or be removed as hereinafter provided.
Section 3.3. Newly Created Directorships and Vacancies. Except as
otherwise provided in the Certificate of Incorporation, newly created
directorships resulting from an increase in the authorized number of directors
and vacancies occurring in the Board through death, resignation, removal,
disqualification or for any other reason may be filled by the vote of a
majority of the directors then in office, although less than a quorum.
Section 3.4. Resignations. Any director may resign at any time upon
written notice to the Board or the Secretary.
Section 3.5. Removal. Except as otherwise provided in the Certificate of
Incorporation, the holders of a majority of the shares then entitled to vote at
an election of directors may, at a special meeting for which notice specifying
the intention to pass such resolution has been given, remove any or all of the
directors with or without cause. Any director may be removed for cause by a
majority vote of the whole Board.
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Section 3.6. Place and Time of Meetings of the Board. A regular meeting
of each newly elected Board shall be held immediately following the Annual
Meeting of Stockholders and at the place of such meeting, or as soon as
practicable thereafter at such place as shall have been previously fixed for
that purpose by resolution of the Board. Other regular meetings of the Board
may be held at such times and places as the Board may from time to time
determine or as may be specified in the notice of the meeting. Special
meetings of the Board shall be held whenever called by order of the Board, by
the President or by any of the directors, and at such place or places as may be
fixed by the Board or specified in the notice of the meeting.
Section 3.7. Notice of Meetings of the Board of Directors. Notice of
regularly scheduled meetings of the Board of Directors need not be given.
Unless notice is waived or not required as provided in Sections 9.3 and 9.4 of
these By-Laws, notice of the time and place of every special meeting of the
Board of Directors shall be given to each director by oral, telegraphic,
telecopy or written notice at least one day before the meeting. Except as
otherwise provided by law or by these By-Laws, any notice of meeting need not
specify the purpose of the meeting. Notice of an adjourned meeting need not be
given other than by announcement at the meeting at which the adjournment is
taken.
Section 3.8. Quorum. A majority of the directors then comprising the
Board shall constitute a quorum for the transaction of business. If at any
meeting of the Board there shall be less than a quorum present, a majority of
the directors present may, without further notice, adjourn the meeting from
time to time until a quorum is obtained.
Section 3.9. Action of the Board of Directors. Except as otherwise
provided in the Certificate of Incorporation or these By-Laws, the act or vote
of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board.
Section 3.10. Action by the Board and Committees Without a Meeting.
Any action required or permitted to be taken at any meeting of the Board of
Directors or any committee thereof may be taken without a meeting, if a written
consent to such action is signed by all members of the Board or of such
committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or such committee.
Section 3.11. Telephone Meetings. Any or all members of the Board or
any committee of the Board may participate in a meeting of the Board or of the
committee by means of a conference telephone or similar communications
equipment allowing all persons participating in the meeting to hear each other.
Participation by such means shall constitute presence in person at the meeting.
Section 3.12. Compensation and Reimbursement of Directors. The Board
may fix the compensation of directors for services in any capacity, and may
allow directors a fixed sum and expenses of attendance, if any, for attendance
at each directors' meeting. Members of committees may be allowed similar
compensation and reimbursement for their services as such. No such payment
shall preclude any director or committee member from serving the Corporation in
any other capacity and receiving compensation therefor.
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Section 3.13. Executive Committee. The Board of Directors may, from
time to time, by resolution passed by a majority of the whole Board, designate
an Executive Committee consisting of three or more directors of the
Corporation. The Executive Committee shall have and exercise all of the powers
of the Board of Directors in the management of the business and affairs of the
Corporation except as otherwise provided in the resolution or by law, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Such Committee shall serve at the pleasure of the Board, which
shall have power at any time to change the members thereof, to fill vacancies
therein and to discharge such committee, with or without cause.
Section 3.14. Other Committees. The Board may, from time to time, by
resolution passed by a majority of the whole Board, designate other committees,
to serve at the Board's pleasure, with such powers and duties as the Board
determines.
Section 3.15. Committee Members. The Board of Directors may designate
one or more directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the committee, and, in
addition, in the absence or disqualification of any member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Section 3.16. Reliance. A member of the Board of Directors, and a
member of any committee thereof, shall be fully protected in relying on good
faith upon the records of the Corporation or upon such information, opinion,
reports, or statements presented to the Corporation by any of its officers and
employees or committees of the Board, or by any other person as to matters the
Board or committee member reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the Corporation.
OFFICERS
Section 4.1. Authorized Officers. The officers of the Corporation shall
be a Chairman of the Board, a Vice-Chairman of the Board, a President, one or
more Senior Vice-Presidents and Vice-Presidents (including an Executive Vice-
President, if the Board so determines), a Treasurer and a Secretary. One
person may hold more than one office, and if the same person holds both the
office of Secretary and the office of Treasurer, he may be known as the
Secretary-Treasurer. The Board may from time to time appoint such subordinate
or assistant officers (including Assistant Secretaries and Assistant
Treasurers), agents or employees, with such terms of office, powers and duties,
as it may deem desirable, and may from time to time authorize any officer or
committee to appoint and remove such subordinate or assistant officers and
prescribe their terms of office, powers and duties.
Section 4.2. Election or Appointment and Term of Office. The officers
of the Corporation, other than subordinate or assistant officers, shall be
elected or appointed annually by the Board at
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its first meeting held after each Annual Meeting of Stockholders. Each officer
shall hold office until his successor has been elected or appointed and
qualified or until the office is declared vacant by the Board of Directors,
unless he shall sooner die, resign or be removed as hereinafter provided.
Section 4.3. Removal. Any officer of the Corporation elected or
appointed by the Board or appointed by an officer or a committee may be
removed, with or without cause, by the Board, or by the officer or committee
upon whom the power to appoint the officer may have been conferred.
Section 4.4. Resignation. Any officer may resign at any time by giving
written notice to the Board of Directors, the President or the Secretary. Any
such resignation shall take effect at the time specified therein, and unless
otherwise specified therein the acceptance of such resignation shall not be
necessary to make it effective.
Section 4.5. Vacancies. A vacancy in any office because of death,
resignation, removal or otherwise may be filled by the Board, or by any officer
or committee upon whom the power to appoint persons to such office may have
been conferred.
Section 4.6. Security. The Board may require any officer, employee or
agent to give security for the faithful performance of his duties. Such
security may be in the form of a bond in such amount and form and with such
surety or sureties as the Board may determine.
Section 4.7. Compensation. The Board shall have power to fix the
compensation of all officers of the Corporation. It may authorize any officer
or committee upon whom the power to appoint subordinate or assistant officers
may have been conferred to fix the compensation of such subordinate or
assistant officers.
Section 4.8. Chairman of the Board. The Chairman of the Board shall,
when present, preside at all meetings of the stockholders and of the Board, and
shall have such other powers and duties as the Board assigns to him from time
to time.
Section 4.9. Vice-Chairman. In the absence of the Chairman of the
Board and the President, the Vice-Chairman shall preside at all meetings of the
stockholders and of the Board, and he shall have such other powers and duties
as the Board assigns to him from time to time.
Section 4.10. President. The President shall be the chief executive
officer of the Corporation and shall have such other powers and duties as the
Board assigns to him from time to time. He shall, in the absence of the
Chairman of the Board, preside at all meetings of the stockholders and of the
Board. He may sign, with the Secretary or any other proper officer of the
Corporation thereunto authorized by the Board, certificates representing shares
of the Corporation, and deeds, mortgages, bonds, contracts, or other
instruments which the Board has authorized to be executed, except in cases
where the signing and execution thereof shall be expressly delegated by the
Board or by these By-Laws to some other officer or agent of the Corporation, or
shall be required by law to be otherwise signed or executed.
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Section 4.11. Vice-Presidents. Except as otherwise provided by these
By-Laws, in the absence of the President or in the event of his death or
inability to act, the Executive Vice-President and in his absence or disability
the Senior Vice-President and in his absence or disability the Vice-President
(or in the event there be more than one Senior Vice-President or
Vice-President, in the respective orders designated at the time of their
election, or in the absence of any designation, first the Senior
Vice-Presidents and then the Vice-Presidents in the respective orders of their
seniority) shall perform the duties of the President, and when so acting, shall
have all the authority of and be subject to all the restrictions upon the
President. Any Vice-President may sign, with the Secretary or any other proper
officer of the Corporation thereunto authorized by the Board, certificates
representing shares of the Corporation and shall perform such other duties as
from time to time may be assigned to him by the President or by the Board.
Section 4.12. Secretary. The Secretary shall record the minutes of the
meetings of the stockholders, of the Board and of the Executive Committee in
books provided for the purpose. He shall see that all notices are duly given
in accordance with the provisions of these By-Laws or as required by law. He
shall be custodian of the corporate records and of the seal of the Corporation.
He shall see that the corporate seal is affixed to all documents, the execution
of which on behalf of the Corporation under its seal is duly authorized, and
when so affixed may attest the same. In general, he shall perform all duties
incident to the office of Secretary, and such other duties as from time to time
may be assigned to him by the President or by the Board. In the absence of the
Secretary from any meeting, the minutes shall be recorded by the person
appointed for that purpose by the presiding officer.
Section 4.13. Treasurer. The Treasurer shall have charge and custody of
the books and records of account of the Corporation. In general, he shall
perform all the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him by the President or by the
Board.
Section 4.14. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretary and Assistant Treasurer or, if there be more than one, the
Assistant Secretaries and Assistant Treasurers in the order determined by the
Board, shall, in the absence or disability of the Secretary or the Treasurer,
perform the duties and exercise the powers of the Secretary and the Treasurer,
respectively, and shall perform such other duties and have such other powers as
from time to time may be assigned to them or any of them by the President or by
the Board.
SHARES AND STOCKHOLDERS
Section 5.1. Certificates. Each stockholders shall be entitled to a
certificate or certificates in a form to be approved by the Board, certifying
the number of shares owned by him, signed by the Chairman or Vice Chairman of
the Board or the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary and sealed with
the seal of the Corporation or a facsimile thereof. Any or all the signatures
on the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or
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registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
Section 5.2. Transfer of Shares. Transfer of record of shares of stock
of the Corporation shall be made only on the books of the Corporation upon the
surrender of the certificate representing the shares to be transferred properly
endorsed and bearing the requisite amount of stock transfer stamps, if any,
duly canceled. The Board of Directors may prescribe such additional rules and
regulations as it may deem appropriate relating to the issue, transfer and
registration of securities of the Corporation.
Section 5.3. Lost, Mutilated or Destroyed Certificates. In case any
certificate of stock is lost, stolen, mutilated or destroyed, the Board may
authorize the issue of a new certificate in place thereof upon such terms and
conditions as it may deem advisable. The Board may require satisfactory surety
before issuing a new certificate to replace a certificate claimed to have been
lost, stolen or destroyed.
Section 5.4. Record of Stockholders. The Secretary of the Corporation,
or the registrar or transfer agent appointed by the Board of Directors shall
prepare, at least ten days prior to every meeting of stockholders, a complete
list containing the names and addresses of all stockholders entitled to vote
thereat, and the number of shares registered in the name of each such
stockholder. Such list shall be open to inspection by any stockholder, for any
purpose germane to the meeting, during ordinary business hours, for a period of
at least ten days prior to such meeting, at a place designated in the notice of
such meeting or at the place where the meeting is to be held. The Corporation
shall be entitled to recognize the persons in whose names shares stand on the
record of stockholders as the owners thereof for all purposes.
INDEMNIFICATION
Section 6.1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit, or proceeding, including an action or suit
by or in the right of the Corporation, whether civil, criminal, administrative
or investigative (hereinafter a "Proceeding"), by reason of the fact that he,
or a person of whom he is the legal representative, is or was a director or an
officer of the Corporation or, while a director or officer is or was serving at
the request of the Corporation as a director, officer, employee, or agent of
another corporation or of a partnership, joint venture, trust, or other
enterprise, including service with respect to employee benefit plans, whether
the basis of the Proceeding is alleged action in an official capacity as a
director or an officer or in any other capacity while serving as a director or
an officer, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation Law, as the same
exists or may hereafter be amended (but no amendment or repeal of any provision
of law shall adversely affect any right to indemnification provided hereunder
arising prior to such amendment or repeal) against all expenses, liability, and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties, and amounts paid or to be paid in settlement) actually and
reasonably incurred or suffered by such person in connection therewith;
provided, however, that in any action to enforce any indemnification right
conferred
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by these By-Laws, the Corporation shall indemnify any such person seeking
indemnification in connection with a Proceeding (or part thereof) initiated by
such person only if the Proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification conferred
in these By-Laws is a contract right.
Section 6.2. Authority to Advance Expenses. Expenses incurred
(including attorneys' fees) by any person indemnified under these By-Laws in
defending a Proceeding shall be paid by the Corporation in advance of the final
disposition of such Proceeding, provided, however, that if required by the
Delaware General Corporation Law, as amended, such expenses shall be advanced
only upon delivery to the Corporation of an undertaking by or on behalf of such
person to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in these By-Laws or
otherwise.
Section 6.3. Provisions Nonexclusive. The indemnification rights
conferred on any person by these By-Laws shall not be exclusive of any other
rights that such person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, agreement, vote of stockholders
or act of the Board of Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
Section 6.4. Authority to Insure. The Corporation may purchase and
maintain insurance to protect itself and any person indemnified under these
By-Laws or under any statute, provision of the Certificate of Incorporation,
agreement, vote of stockholders or act of the Board of Directors or otherwise,
against any liability, expense, or loss asserted against or incurred by such
person, whether or not the Corporation would have the power to indemnify him
against such liability, expense, or loss under applicable law or the provisions
of these By-Laws.
Section 6.5. Survival of Rights. The indemnification rights provided by
these By-Laws shall continue as to a person who has ceased to be a director or
an officer, and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
Section 6.6. Effect of Amendment. Any amendment or repeal of the
indemnification provisions of these By-Laws shall not adversely affect any
right or protection of any director or officer existing at the time of such
amendment or repeal.
Section 6.7. Authority to Enter into Indemnification Agreements. The
Corporation may enter into indemnification agreements with the directors and
officers of the Corporation and with employees and agents of the Corporation in
any form authorized by resolution of the Board of Directors.
FISCAL YEAR
Section 7. The fiscal year of the Corporation shall end on June 30th of
each year.
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SEAL
Section 8. The Board shall provide a suitable seal having inscribed
thereon the name of the Corporation, the year of incorporation and such other
appropriate legend as may from time to time be determined by the Board. If
deemed advisable by the Board, a duplicate seal or seals and facsimile seals
may be provided and used for the necessary purposes of the Corporation.
NOTICES
Section 9.1. Manner of Written Notice. Whenever by law, the Certificate
of Incorporation or these By-Laws written notice is required or permitted to be
given to any stockholder, director, officer or member of a committee, such
notice may be given by depositing same in a United States post office, letter
box or chute, postage prepaid and addressed to such person at his or her
address as the same appears on the records of the Corporation, and the time
when the same shall be so deposited shall be deemed to be the time of the
giving of such notice.
Section 9.2. Waiver of Notice to Stockholders. Notice of a meeting need
not be given to any stockholder who submits a signed waiver of notice in person
or by proxy, whether before or after the meeting. The attendance of any
stockholder at a meeting, in person or by proxy, except for the express purpose
of objecting at the beginning of the meeting to the transaction of any business
on the ground that the meeting is not lawfully called or convened, shall
constitute a waiver of notice by him. A waiver of notice need not specify
either the business to be transacted at, or the purpose of, any regular or
special meeting of the stockholders.
Section 9.3. Waiver of Notice to Directors. Notice of a meeting need
not be given to any director who submits a signed waiver of notice whether
before or after the meeting, or who attends the meeting without protesting,
prior thereto or at its commencement, the lack of notice to him. A waiver of
notice need not specify either the business to be transacted at, or the purpose
of, any regular or special meeting of the Board.
Section 9.4. When Notice or Lapse of Time Unnecessary. Whenever by law,
the Certificate of Incorporation or these By-Laws, the Corporation or the Board
is authorized to take any action after notice to any person or persons, such
action may be taken without notice to each person for whom notice is not, or no
longer, required by law or if at any time before or after such action is
completed the person, or in the case of a stockholder, his attorney-in-fact,
submits a signed waiver of notice.
AMENDMENT AND REPEAL
Section 10.1. Mode of Amendment or Repeal. These By-Laws may be
amended, repealed or new By-Laws adopted, by vote of a majority of the whole
Board, or by the stockholders entitled to vote thereon at any annual meeting or
special meeting of stockholders called for that purpose.
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EXHIBIT 10.3(a)
JOHNSTON INDUSTRIES, INC.
EXECUTIVE INSURANCE PLAN
AMENDED AND RESTATED
EFFECTIVE MAY 21, 1984
FOR
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Johnston Industries, Inc. Executive Insurance Plan
Foreword
Johnston Industries, Inc. established the Executive Insurance Plan
in 1974 for a select group of executives to supplement the benefit level
provided by other insurance and retirement plans sponsored by the company for
its employees. When added to those basic benefits, the program brings the
expected total benefits up to a level commensurate with the needs of these
executives. The purpose of the plan is to provide life insurance benefits or
pre- or post-retirement income for its senior management. The company reserves
the options specified in the plan necessary to allow timely decisions in the
operation of the plan as it judges is in the best interest of the company and
the executives. While it is the intent of the company to maintain the plan,
the company retains the right to terminate the plan subject to its provisions
outlined in the Plan Description.
The purpose of this restatement of the plan is to give each
participant a document explaining how the plan works and how the company
intends to administer the plan and to reassure those participants who have come
to depend upon the plan of the company's continued support.
<PAGE> 3
Plan Summary
Participants in the plan are selected executives of Johnston
Industries, Inc. and its subsidiaries.
The cost of the plan is financed principally by the company through
payment of premiums for a life insurance policy(ies) on the life of the
executive. It provides life insurance benefits for the executive's
beneficiary, should the executive die before retirement, or cash reserves which
will fund contemplated payments to the executive or his beneficiary at
retirement.
The owner of the life insurance is the executive with a collateral
assignment to the company of an amount equal to its contributions.
The amount of death benefit is up to three times the executive's
pay. Upon death, the company will recover its contribution and the net death
benefit will be paid to the executive's beneficiary.
The amount of the supplemental retirement benefit is the total face
amount of all insurance policies issued paid monthly over 120 months. This
would, in most instances, approximate three times the executive's latest annual
salary. No executive will receive increases in insurance plan coverage which
recognizes annual compensation in excess of $100,000. Company directors will
not receive benefits beyond those originally awarded at entry to the plan.
Upon termination of employment the executive will receive 100% of
cash values in the life insurance policy(ies) in excess of the company's
contributions, plus 100% of the remaining cash values after the executive has
participated in the plan for ten years. Such cash values which are payable to
the executive will be paid as outlined in the detailed Plan Description.
If the plan is terminated after the executive has participated in
the plan for ten years, the total cash values as provided in the life insurance
policy will be paid to the executive as outlined in the detailed Plan
Description.
If the executive becomes disabled after five years participation in
the plan, he will receive 100% of the cash values as provided in the life
insurance policy(ies) as outlined in the detailed Plan Description.
<PAGE> 4
PLAN DESCRIPTION
I. Participants
Selected executives of the company and its subsidiaries have been granted
insurance policy(ies) under Split Dollar Agreements with the Company.
II. Contributions
(A) By the Executives - an amount equal to the value of the life
insurance protection received by the executive.
NOTE: Federal Income Tax provisions require that a participant
include in reportable income the "value" of death benefits
provided under a plan such as this, unless the participant
contributes an amount which is equal to that "value". The
participant's contributions were calculated to be that "value",
and thus eliminates the additional tax. "Value" is described in
the Internal Revenue Code.
(B) By the Company - the difference between the premium of a life
policy(ies) on the executive's life and the executive's
contribution.
III. Funding
Life insurance upon the executive's life in an amount approximately three
times annual compensation, subject to a "Split Dollar" agreement and
collateral assignment(s).
(A) Death Benefit Funding
Life insurance proceeds paid at death distributed between company
and beneficiary whereby the company receives the aggregate of its
contributions, and the remainder is paid to the executive's
beneficiary.
(B) Termination, Disability, or Retirement Funding
This funding allows for possible use by the company of life
insurance cash surrender values, with options to pay these
benefits from cash value loans or from corporate cash flow, with
recovery from ultimate life insurance death benefits reserved to
the company.
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IV. Changes in Life Insurance Coverage
(A) Increases in Life Insurance Coverage
Unless expressly denied by the Administrative Committee, executive
coverage will be increased at the plan anniversary (if so elected
by the executive) when base salary increases since the last
benefit increase equal or exceed $5,000.
(B) Limitation of Life Insurance Coverages
Directors will not receive plan increases beyond those originally
awarded at entry to the plan. No executive will receive increases
in insurance plan coverage which is based on that portion of
compensation in excess of $100,000 per year.
V. The Life Insurance
(A) Owner - The executive.
(B) Collateral Assignee - The company.
(C) Type insurance - Varied. Selected with the purpose of obtaining
the highest pre-retirement net death benefit for the executive's
beneficiary consistent with obtaining adequate cash values to fund
post-retirement benefits.
VI. Benefits
(A) Upon Death Before Retirement
(1) Amount of benefit upon death - 100% of death benefit in
excess of the aggregate of the company contribution.
(2) Immediately upon submission of the claim papers, lump sum
payment to the beneficiary in an amount equal to (a) face
amount of the life insurance policy(ies) plus (b) additional
sums of life insurance from dividends, if any, less (c) the
total of the company's contributions.
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(B) Upon Termination of Employment
(1) Executive will receive 100% of cash values in excess of the
company's contributions; plus 100% of the remaining cash
values after the executive has participated in the plan for
ten years.
(2) The committee may elect to pay immediately the benefit
described in (B) (1) either in cash, or by transfer of the
policy(ies) to the executive; or to defer such payments for a
period of time not to exceed five years. If payment is
deferred, the executive will transfer ownership of the
policy(ies) to the company, which will exercise the paid up
insurance option; and at the end of deferral the value of the
payment shall be the value of the policy(ies) at the time of
termination of employment, plus such enhancements as may
occur from increases in cash values or dividends until such
payment is elected by the committee.
(C) Upon Disability
(1) Executive will receive 100% of cash values in excess of the
company's contributions; plus 100% of the remaining cash
values if the executive has participated in the plan five
years before termination of employment due to disability.
(2) The committee may elect to:
(a) Pay the benefits described within 30 days of termination
of employment due to disability by transfer of the
company's interest in the policy(ies) to the executive;
or
(b) Pay to the executive or his beneficiary in equal monthly
installments over 120 months, an amount equivalent to
the total policy(ies) cash values increased by the
federal tax benefit realized by the company on payments
to the executive. The federal tax benefit is to be
computed using the rate in existence when executive's
payments begin; or
(c) The committee may elect some other period or method of
payment which is actuarially the equivalent in value if
it deems such alternate method to be beneficial to the
executive and consistent with the company's purposes.
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(d) If (2) (b) or (2) (c) of the above is awarded, the
executive will transfer his interest in the policy(ies)
to the company before payments begin.
(e) In no event will benefits payable exceed those payable
under the normal retirement provisions of Section VI
(E).
(D) Upon Termination of the Plan
(1) Executive will receive 100% of cash values in excess of the
company's contributions; plus 100% of the remaining cash
values after the executive has participated in the plan for
ten years.
(2) The committee may elect to:
(a) Pay the benefits described in (D) (1) within 30 days
after such termination by transfer of company's interest
in the policy(ies) to the executive; or
(b) Pay to the executive or his beneficiary, in equal
monthly installments over 120 months, an amount
equivalent to the total policy(ies) cash values
increased by the federal tax benefit realized by the
company on payments to the executive. The federal tax
benefit is computed using the rate in existence when
executive payments begin; or
(c) The committee may elect some other period or method of
payment which is actuarially the equivalent in value if
it deems such alternate method to be beneficial to the
executive and consistent with the company's purposes.
(d) If (2) (b) or (2) (c) of the above is awarded, the
executive will transfer his interest in the policy(ies)
to the company before payments begin.
(e) In no event will benefits payable exceed those payable
under the normal retirement provisions in Section VI
(E).
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(E) Upon Retirement
(1) Executive is awarded the life insurance policy(ies) subject
to payment of total company contributions to the company; or
(2) Executive is awarded supplemental retirement income benefit:
An amount equal to 100% of the initial face amount(s) of the
insurance policy(ies).
(3) In order to pay the benefits described in (E) (1) and (E) (2)
the committee may elect to:
(a) Transfer its interest in policy(ies) to the executive in
exchange for payment by the executive to the company of
a sum equal to the company's contribution to the plan:
or
(b) Pay to the executive or his beneficiary, in equal
monthly installments over 120 months, an amount which is
equal to the initial face amount of the policy(ies) on
the life of the executive; or
(c) Extend some other period or method of payment which is
actuarially the equivalent in value of (3) (b) above if
it deems such alternate method to be more beneficial to
the executive and consistent with company purposes.
(4) Should the company request the executive to remain
active past age 65, and should the executive agree, the total
payments will be:
(a) Initial face amount(s) of the policy(ies) enhanced by
additional death benefits resulting from dividends
during the extension of active employment.
VII. Definitions
(A) Actuarially the Equivalent in Value
The plan provides that in the case of disability (Section VI (C)
(2) (c)) or termination of the plan (Section VI (D) (2) (c)) the
committee may elect "some other period or method of payment
which is actuarially the
- 6 -
<PAGE> 9
equivalent in value." The term "actuarially equivalent in value"
means that recognition shall be given in computing such other
periods or methods to appropriate time values of money and
mortality rates.
(B) Administrative Committee
Or "Committee" means those who control the plan, including
decisions on time of payment or benefits, type of benefits to be
awarded, or other matters necessary to the effective function of
the plan. This committee shall consist of the Chief Executive
Officer of Johnston Industries, Inc., the Senior Vice
President/Finance and Administration, and the Secretary/Treasurer.
(C) Collateral Assignment
An agreement for assignment of the life insurance policy(ies) by
the executive to the company as collateral security for the
repayment of total contributions.
(D) Disability
For the purposes of this plan, disability of a participant shall
be determined by the Administrative Committee; which shall take
as a guideline, but not be restricted thereto, the provisions for
"waiver of premium" in the life insurance policy(ies).
(E) Participation
Participation in the plan shall start on the date of application
for the first insurance policy granted to the executive under the
plan.
(F) Plan
The term Plan refers to the Johnston Industries, Inc. Executive
Insurance Plan as defined in this document or as defined in
subsequent amendments of this document.
(G) Plan Anniversary
The plan anniversary means the annual premium payment date of the
first life insurance policy granted to the executive under the
plan.
- 7 -
<PAGE> 10
(H) Retirement Age
Normal retirement is considered to be age 65, but the committee
acting on the request of the company with concurrence of the
executive, may defer or accelerate the date of retirement.
(I) Salary
The various terms used in the plan to indicate annual earnings
(i.e., salary, compensation, pay, base pay) shall mean the total
W-2 earnings paid to a participant by the company during a
calendar year, but excluding special incentive compensation,
severance pay, or other special forms of compensation.
(J) Split Dollar Agreement
An Agreement between the executive and the company which defines
the operation of the split dollar insurance program including
company loans for premium payments, provision for loan repayment
and ownership of the insurance policy(ies).
VIII. Procedure for Transferring Values
(A) Where lump sum cash or transfer of the policy(ies) is awarded:
(1) The company will obtain a cash value loan for its share (if
any) then transfer the policy(ies), subject to the loan, to
the executive; or
(2) The executive will pay to the company its total premium
contribution. The company then will transfer the policy(ies)
to the executive.
(B) Where monthly installments are awarded, the executive will
transfer his/her share policy(ies) values to the company by
executing an absolute assignment to the company.
IX. Continuance of the Plan
While it was Johnston Industries' original intent, and so remains, to
continue the plan, the company must necessarily retain the right to
terminate the plan.
- 8 -
<PAGE> 1
EXHIBIT 10.3(b)
March 1, 1989
Dear (Participant):
In January 1989, the Company determined that it would "freeze" the contributory
Executive Insurance Plan (Split Dollar Plan). An explanation of that action
and some history of the Plan may be helpful.
The freezing of the Plan means that the insurance coverage available under its
terms will be maintained at current levels. The present coverage for those in
the Plan at January 1, 1989 will continue to be carried on the same basis as in
the past. The benefits of the Plan will no longer be extended to those not
currently covered and coverage will not change for those who are covered.
By way of history, the Split Dollar Plan was originally established in 1974.
At that time the maximum pension benefit available to employees of the Company
was about $14,000. In order to provide a supplement to that basic benefit to
better handle the needs of executives for insurance or pension benefits at
retirement, the Split Dollar Plan was established. In the early 1980's the
Company's regular pension plan was revised to provide, generally, a benefit up
to 60% of average earnings over the last ten years of employment to a maximum
of $60,000 a year.
In view of the substantial improvement in pension benefits, as exemplified by
the increase in the maximum benefit ($14,000 to $60,000 a year), it was
apparent that the need for the Split Dollar Plan no longer was required.
As part of the revision to the Plan, it was also determined that you may elect
to take the payout over a 10-year certain period with monthly payments
beginning at age 65 or to purchase the insurance contract at age 65.
We hope this explanation provides the background and the basis for the recent
change in the Plan. Should you have any questions, please contact me at your
convenience.
Sincerely,
Charles E. Wieser
Senior Vice President
<PAGE> 1
EXHIBIT 10.5(a)
AMENDED AND RESTATED
STOCK INCENTIVE PLAN FOR KEY EMPLOYEES OF
JOHNSTON INDUSTRIES, INC. AND ITS SUBSIDIARIES
1. PURPOSES
The purposes of this Stock Incentive Plan for Key Employees of Johnston
Industries, Inc. and its subsidiaries (the "Plan") are (i) to provide
incentives to those officers and other key employees whose performance will
contribute to the long-term success and growth of Johnston Industries, Inc.
(the "Company") and its subsidiaries, (ii) to strengthen the ability of the
Company and its subsidiaries to attract and retain employees of high
competence, (iii) to increase the identity of interests of such employees with
those of the Company's shareholders, and (iv) to help build loyalty to the
Company and its subsidiaries through recognition and the opportunity for stock
ownership.
2. ELEMENTS OF THE PLAN
The Plan provides the Company's Board of Directors (the "Board") with the
discretion to grant or award participants incentives relating to the Company's
shares of Common Stock, $.10 par value (the "Shares"), utilizing (1) incentive
stock options, (2) nonqualified stock options and (3) restricted stock. In
connection with the grant of options, the Board shall have the authority to
grant stock appreciation rights. Options, restricted stock and stock
appreciation rights (collectively, "Awards") may be granted to participants
singly or in any combination which the Board deems appropriate, provided that
no stock appreciation right may be granted unless in connection with an option.
3. SHARES SUBJECT TO THE PLAN
The maximum aggregate number of Shares as to which options may be granted
or restricted stock awarded under this Plan at any time after the effective
date set forth in Section 22 hereof (the "Effective Date") shall be 515,825
Shares (including 165,825 Shares subject to options granted pursuant to the
Stock Incentive Plan for Key Employees of the Company and its Subsidiaries as
in effect prior to the Effective Date). Such Shares shall be subject to
adjustment as provided in Section 12 hereof and may be either authorized but
unissued Shares, or Shares previously issued and reacquired by the Company. If
and to the extent options granted under the Plan terminate, expire or are
canceled without having been exercised, or if any Shares of restricted stock
are forfeited, the Shares subject to such option or award shall again be
available for purposes of the Plan.
<PAGE> 2
4. PLAN ADMINISTRATION
The Plan shall be administered by the Board. The Board may delegate this
or any other authority granted it hereunder to a committee which shall consist
of at least three members of the Board (the "Incentive Compensation
Committee"). No member of the Incentive Compensation Committee shall be
eligible to participate in the Plan (any references herein to the "Board" shall
be deemed to refer to either the Board or the Incentive Compensation Committee
if authority to administer the Plan has been delegated to such Committee). The
Board shall have the sole authority to determine (a) the officers and employees
to whom Awards shall be granted under the Plan; (b) the type, size and terms of
the Awards to be made to each officer or employee selected; (c) the time when
Awards will be granted and the duration of the exercise period; and (d) any
other matters arising under the Plan. The Board shall have full power and
authority to administer and interpret the Plan and to adopt or amend such
rules, regulations, agreements and instruments for implementing the Plan and
for conduct of its business as it deems necessary or advisable. The Board's
interpretations of the Plan and all determinations made by the Board pursuant
to the powers vested in it hereunder shall be conclusive and binding on all
persons having any interest in the Plan or in any Awards granted hereunder.
A majority of the Board shall constitute a quorum for purposes of meetings
which may be held at such times and places and on such notice as the Board
deems appropriate. All actions and determinations of the Board shall be made
by not less than a majority of its members and may be made at a meeting or by
written consent in lieu of a meeting.
5. ELIGIBILITY FOR PARTICIPATION
Officers and other key employees of the Company or any of its subsidiaries
(as defined in Section 425(f) of the Internal Revenue Code of 1986, as amended
(the "Code")) (the "Subsidiaries"), shall be eligible to participate in the
Plan (the "Participants"). A director of the Company or any Subsidiary who is
not also an officer or employee of the Company or a Subsidiary will not be
eligible to participate in the Plan. Nothing contained in this Plan shall be
construed to limit the right of the Company or any Subsidiary to grant options
otherwise than under this Plan in connection with the acquisition, by purchase,
lease, merger, consolidation, or otherwise, of the business or assets of any
corporation, firm or association, including options granted to officers or
employees thereof who become officers or employees of the Company or a
Subsidiary, or for other proper corporate purposes.
6. GRANTING OF OPTIONS
(a) The Board shall have the right to grant Participants stock options on
the terms and conditions set forth herein. Such options shall be "Incentive
Stock Options" if the Board so designates such options and they comply with
Section 422A of the Code; otherwise they shall be "Nonqualified Stock Options."
The purchase price of each Share subject to an Incentive Stock Option shall be
the fair market value of a share of such stock on the date such Incentive Stock
Option is granted, provided, however, that any Incentive Stock Option granted
to a Participant who owns more than 10% of the total combined voting power of
all classes of stock of the Company or any Subsidiary or any parent corporation
(as defined in Section 425(e) of the Code)
2
<PAGE> 3
of the Company (a "10% Stockholder") shall not be less than 110% of such fair
market value. The purchase price of each Share subject to a Nonqualified Stock
Option shall be such price (which may be less than its fair market value) as is
determined by the Board on or before the date such Nonqualified Stock Option is
granted. The fair market value shall be determined in any reasonable manner
approved by the Board.
(b) Shares subject to Incentive Stock Options that first become
exercisable by a Participant in any calendar year under this Plan or any other
Plan maintained by the Company or any Subsidiary together with Shares subject
to previously granted Incentive Stock Options that first become exercisable by
the Participant in that calendar year shall not exceed $100,000 in fair market
value determined as of their respective dates of grant.
(c) The Board may prescribe such other terms as it deems desirable or
as may be necessary to qualify the grant of Incentive Stock Options under the
provisions of Section 422A of the Code. The Board may also authorize
acceleration of the exercise of an option or installment thereof.
(d) The Board may grant at any time new Incentive Stock Options to a
Participant who has previously received Incentive Stock Options or other
options whether such prior Incentive Stock Options or other options are still
outstanding, have previously been exercised in whole or in part, or are
canceled in connection with the issuance of new Incentive Stock Options.
However, no Incentive Stock Option granted prior to 1987 shall be exercisable
by a Participant while there is outstanding any Incentive Stock Option
previously granted to such Participant to purchase Shares in the Company, until
such option is exercised in full or expires by reason of lapse of time.
7. TERM OF OPTIONS
Unless the option agreement provides otherwise, options granted hereunder
shall be exercisable for a term of ten years from the date of grant
("Expiration Date"); provided, however, that any Incentive Stock Option granted
to a 10% Stockholder may not be exercisable for a term of more than five years
from the date of grant.
8. EXERCISE OF OPTIONS
(a) Unless the option agreement provides otherwise, options granted
hereunder shall be exercisable for cash or any other property (including Shares
or, to the extent permitted by applicable corporate law, promissory notes)
deemed acceptable by the Board; provided that, in the case of payment by a
promissory note the Participant shall pay in cash or other property an amount
equal to at least the par value of Common Shares being purchased, and, if the
option is an Incentive Stock Option, the note shall bear a sufficient rate of
interest so that the exercise price for the purpose of the Code shall be no
less than the fair market value of the Common Shares being purchased. Unless
the Board provides otherwise, Incentive Stock Options will become exercisable
in installments on a cumulative basis at a rate of twenty-five percent (25%)
each year, beginning on the first anniversary of the date of grant and
Nonqualified Stock Options will become exercisable, provided that no
Nonqualified Stock Option may become exercisable
3
<PAGE> 4
earlier than six months from the date of grant. No fractional Shares, or cash
in lieu thereof, shall be issued under this Plan or under any option granted
hereunder. Except as otherwise provided herein, no option may be exercised at
any time, unless the holder is then an officer or employee of the Company or a
Subsidiary and has continuously remained an officer or employee at all times
(other than on an absence for an approved leave of absence or service in the
Armed Forces) since the date of grant of such option.
(b) Options shall be exercised by a Participant giving written notice
of such exercise to the Company, provided that an option may not be exercised
at any one time as to less than 100 Shares (or such number of Shares as to
which the option is then exercisable if less than 100).
(c) An Incentive Stock Option shall be exercisable during a
Participant's lifetime only by the Participant, or, if the Participant has
become disabled, by his legal representative.
9. EXERCISE ON TERMINATION OF EMPLOYMENT
(a) Incentive Stock Options
If a Participant ceases to be an officer or employee (other than by reason
of death or disability), any unexercised portion of his Incentive Stock Option
shall terminate. If, prior to the Expiration Date, a Participant shall cease
to be an officer or employee by reason of death or disability within the
meaning of Section 22(e)(3) of the Code, he (or, in the event of the
Participant's death, his estate) may exercise any Incentive Stock Options he
holds for a period of one year after the date of cessation of his service as an
officer or employee to the extent that it was exercisable at the time of such
cessation. Thereafter, any unexercised portion of the option shall terminate.
In no event shall Incentive Stock Options be exercised after the Expiration
Date.
(b) Nonqualified Stock Options
(i) If a Participant ceases to be an officer or employee prior to the
expiration of a Nonqualified Stock Option by reason of his retirement at or
after age 65 or permanent and total disability (as determined by the Board),
any unexercised portion of his Nonqualified Stock Option shall expire three
months after such retirement or disability, as the case may be, and during such
three months' period, the optionee shall have the same rights to exercise the
unexercised portion of his Nonqualified Stock Option as he would have had if he
were still an officer or employee of the Company.
(ii) If prior to the expiration of any Nonqualified Stock Option, a
Participant shall die while an officer or employee of the Company, any
unexercised portion of such option shall expire one year after his death and
during such one-year period his legal representatives, heirs or legatees shall
have the same rights to exercise the unexercised portion of the option as the
Participant would have had if he were still an officer or employee of the
Company.
(iii) Except as provided in clauses (i) and (ii) of this Section
9(b), if a Participant ceases to be an officer or employee for any reason prior
to the expiration of any Nonqualified Stock
4
<PAGE> 5
Option, the unexercised portion of such option shall automatically terminate,
unless the Board in its sole discretion shall determine otherwise.
10. STOCK APPRECIATION RIGHTS
(a) Concurrently with the grant of any option under this Plan, the
Board may award a Participant a "Stock Appreciation Right" which shall provide
the Participant the right to receive cash in lieu of the purchase of Shares
under such option. Such rights shall only be granted in conjunction with
options and may not be granted alone.
(b) Unless the Board, in its sole discretion, provides otherwise,
Stock Appreciation Rights shall be exercisable upon the same conditions as the
related option is exercisable under Sections 7, 8 and 9 hereof.
(c) The amount to which a Participant shall be entitled upon the
exercise of any Stock Appreciation Right shall be determined by multiplying (i)
the number of Shares with respect to which the Stock Appreciation Right is
exercised by (ii) the amount, if any, by which the fair market value of a Share
on the exercise date exceeds the exercise price of the related option.
(d) The exercise of any Stock Appreciation Right shall reduce the
number of Shares subject to the related option.
11. RESTRICTED STOCK AWARDS
(a) The Board shall have the authority to award Participants Shares
which shall be restricted as provided herein to avoid immediate taxation under
the Code.
(b) Such restricted stock may not be sold, transferred or otherwise
disposed of and shall not be pledged or otherwise hypothecated by a
Participant, except as provided below. The Board may place such additional
restrictions as it may deem appropriate on the restricted stock. As a
condition to the receipt of any Shares awarded under this Plan, a Participant
shall execute and deliver to the Company an instrument in writing, in form
approved by the Board, wherein he agrees to the above restrictions and the
legending of the certificates representing his Shares with respect thereto.
Notwithstanding such restrictions, however, a Participant shall be entitled to
receive all dividends declared on and to vote any Shares held by him and to all
other rights of a shareholder with respect thereto.
(c) If a Participant terminates his service as an officer or employee
for any reason, his rights with respect to any Shares which remain restricted
hereunder shall be as provided in a written agreement between the Participant
and the Company relating to the award and forfeiture of Shares hereunder.
(d) Subject to subsection (c) hereof or to the extent provided in any
written agreement between the Participant and the Company relating to the award
of Shares hereunder, the restrictions set forth in this Section on Shares
awarded under this Plan shall lapse ratably over a
5
<PAGE> 6
period of five years from the date of award. The Board may, in its discretion,
waive such restrictions at any time.
12. ADJUSTMENTS FOR CERTAIN EVENTS
(a) If there is any change in the number of Shares through the
declaration of stock dividends, or through recapitalization resulting in stock
splits, or combinations or exchanges of such Shares, the number of Shares
available for options or awards and the number of such Shares covered by
outstanding options or awards, and the price per Share of such options or the
applicable market value of awards, shall be proportionately adjusted by the
Board to reflect any increase or decrease in the number of issued Shares;
provided, however, that any fractional Shares resulting from such adjustment
shall be eliminated.
(b) In the event of any sale of all or substantially all of the
assets of the Company, merger or consolidation, corporate separation or
division (including split-up or split-off), or reorganization or dissolution or
liquidation of the Company (each such event, an "Event"), the Board shall make
such provision for the holders of Awards as it deems equitable. The actions
which the Board shall have authority to take shall include (i) adjustment of
outstanding options so that after the Event each holder of an option becomes
entitled to receive upon exercise of the option at the option price the kind
and amount of shares of stock or other securities, property, cash or
combination thereof to which a holder of the number of Shares for which the
option might have been exercised immediately prior to such Event is entitled
thereafter, (ii) if the Event involves the acquisition by another corporation
of all or substantially all of the Company's assets, or a merger or
consolidation of the Company in which another corporation is the surviving or
resulting corporation and if such other corporation is prepared to assume the
options then outstanding or to substitute its options therefor, provision for
such assumption or substitution; or (iii) provision that each Award granted
under the Plan shall terminate as of the date fixed by the Board, with not less
than twenty(20) days written notice of the date fixed to be given to each
Participant and each Participant to have the right during the twenty (20) days
preceding such termination to exercise the Awards as to all or any part of the
Shares covered thereby, including installments as to which such Awards would
not otherwise be exercisable.
(c) The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined by the Board in its sole discretion.
Any such adjustment may provide for the elimination of fractional Shares, and,
provided that any such adjustment with respect to an Incentive Stock Option in
connection with a transaction to which Section 425(a) of the Code applies shall
be done in accordance with the provisions of such Section 425(a) unless the
Board specifically determines otherwise, and any acceleration of time for
exercise of an Incentive Stock Option shall be done in a manner that will not
cause the Plan to fail to satisfy the requirements of Section 422A(b)(7) of the
Code.
13. FORFEITURE OF BENEFITS
Notwithstanding any other provision of this Plan, no payment of any unpaid
award shall be made and any and all unexercised options and all rights under
the Plan of a Participant who received such award or option grant (or his
designated beneficiary or legal representatives) to the
6
<PAGE> 7
payment or exercise thereof shall be forfeited if, prior to the time of such
payment or exercise, the Participant shall (i) be employed by a competitor of,
or shall be engaged in any activity in competition with, the Company without
the Company's consent, (ii) divulge without the consent of the Company any
secret or confidential information belonging to the Company, or (iii) engage in
any other activities which would constitute grounds for his discharge by the
Company for cause.
14. TRANSFERABILITY OF OPTIONS AND AWARDS
A Participant's rights and interests under the Plan may not be assigned or
transferred except, in the case of a Participant's death, by will or the laws
of descent and distribution.
15. AMENDMENT AND TERMINATION
The Board may at any time and from time to time terminate, modify or amend
the Plan in any respect; provided, however, that unless also approved or
ratified by a vote of the majority of the holders of the outstanding Shares of
the Company entitled to vote thereon, any such modification or amendment shall
not (subject, however, to the provisions of Section 12): (i) increase the
maximum number of Shares for which options and awards may be granted under the
Plan; (ii) reduce the option price at which options may be granted; (iii)
extend the period during which options may be granted or exercised beyond the
times originally prescribed; (iv) change the persons eligible to participate in
the Plan; or (v) increase the number of options or awards that may be granted
to a Participant. No such termination, modification or amendment may affect
the rights of an optionee under an outstanding option or the grantee of an
award. Nevertheless, with the consent of the Participant affected, the
Committee may amend outstanding options or awards in a manner not inconsistent
with the terms of the Plan.
16. FUNDING OF THE PLANS
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Award under this Plan and payment of Awards
shall be subordinate to the claims of the Company's general creditors. In no
event shall interest be paid or accrued on any Award, including unpaid
installments of Awards.
17. RIGHTS OF PARTICIPANTS
No Participant or other person shall have any claim or right to be granted
an Award under this Plan. Neither this Plan nor any action taken hereunder
shall be construed as giving any Participant any rights to be retained as an
officer or employee of the Company.
18. WITHHOLDING OF TAXES
The Company shall have the right to deduct from all Awards paid in cash
any federal, state or local taxes required by law to be withheld with respect
to such cash Awards and, in the case of Awards paid in Shares, the Participant
or other person receiving such Shares shall be
7
<PAGE> 8
required to pay to the Company the amount of any such taxes which the Company
is required to withhold with respect to such Awards paid in Shares.
19. AGREEMENTS WITH PARTICIPANTS
Each Award granted under this Plan shall be evidenced by a written
instrument containing such terms and conditions as the Board shall approve.
20. REQUIREMENTS FOR ISSUANCE OF SHARES
No Shares shall be issued or transferred upon payment of any Award payable
hereunder unless and until all legal requirements applicable to the issuance or
transfer of such Shares have been complied with to the satisfaction of the
Board. The Board shall have the right to condition any award or issuance of
Shares made to any Participant hereunder on such Participant's undertaking in
writing to comply with any restrictions on his subsequent disposition of such
Shares as the Board shall deem necessary or advisable as a result of any
applicable law, regulation or official interpretation thereof, and certificates
representing such Shares may be legended to reflect any such restrictions.
21. HEADINGS
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
22. EFFECTIVE DATE AND DESIGNATION OF THE BOARD
Subject to the approval of the Company's Stockholders, this Plan shall be
effective as of October 27, 1988 and shall continue in effect thereafter until
terminated or suspended by the Board.
8
<PAGE> 1
EXHIBIT 10.5(b)(iii)
JOHNSTON INDUSTRIES, INC.
EMPLOYEE STOCK PURCHASE PLAN
AMENDMENT NUMBER 4
In accordance with the action of the Board of Directors at its
meeting on December 17, 1993, paragraph 3 of the Plan was amended to increase
the maximum number of shares that may be purchased by participants pursuant to
the Plan to 632,400 shares. The Board also increased by $3,100,000 the limit
on guarantees, bringing the maximum guarantees to a total of $6,875,000 in
aggregate outstanding principal amount.
<PAGE> 1
EXHIBIT 10.5(b)(iv)
JOHNSTON INDUSTRIES, INC.
EMPLOYEE STOCK PURCHASE PLAN
AMENDMENT NUMBER 5
In accordance with the action of the Board of Directors at its
meeting on January 24, 1995, paragraph 3 of the Plan was amended to increase
the maximum number of shares that may be purchased by participants pursuant to
the Plan to 1,181,600 shares. The Board also increased by $2,125,000 the limit
on guarantees, bringing the maximum guarantees to a total of $9,000,000 in
aggregate outstanding principal amount.
<PAGE> 1
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
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:
<TABLE>
<CAPTION>
PRIMARY
FOR THE YEAR ENDED
------------------
JUNE 30,
--------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Weighted average common shares outstanding 10,599,242 10,714,651 10,794,821
Shares issued from assumed exercise of
incentive stock options(1) - 1,174 26,473
Shares issued from assumed exercise of
nonqualified stock options(1) 98,097 134,316 110,487
----------- ----------- -----------
Weighted average number of shares
outstanding, as adjusted 10,697,339 10,850,141 10,931,781
=========== =========== ===========
Net income $ 7,875,000 $ 6,495,000 $ 8,414,000
=========== ========== ==========
Earnings per share $ .74 $ .60 $ .77
=========== =========== ===========
</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: Fully diluted earnings per share are not presented because the
difference from primary earnings per share is insignificant for all
periods presented.
<PAGE> 1
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 13(a) - QUARTERLY PRICE RANGE OF COMMON STOCK
- -----------------------------------------------------
- -----------------------------------------------------
The sales prices, adjusted for the three-for-two stock split of January 4,
1994, of the Company s Common Stock, currently traded on the New York Stock
Exchange (symbol: "JII"), for each of the quarters in the period July 1, 1993
through June 30, 1995 are set forth below:
<TABLE>
<CAPTION>
========================================================================================================================
PRICE RANGE PRICE RANGE
- ------------------------------------------------------------------------------------------------------------------------
QUARTER ENDED: HIGH LOW QUARTER ENDED: HIGH LOW
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
June 30, 1995................. 10 3/8 7 7/8 June 30, 1994................. 11 8 7/8
March 31, 1995................ 12 10 March 31, 1994................ 13 3/4 9 3/4
December 31, 1994............. 11 8 1/4 December 31, 1993............. 13 11 1/8
September 30, 1994............ 9 7/8 8 1/4 September 30, 1993............ 11 5/8 9 3/8
========================================================================================================================
</TABLE>
Regular quarterly dividends have been paid since September 28, 1990. The
current quarterly dividend is $.10 a share. This rate has been in effect since
February, 1995. From April, 1994 to January, 1995 the rate was $.095 a share.
From October, 1992 to March, 1994 the rate was $.083 a share. From February,
1992 to September, 1992 the rate was $.066 a share. Prior to February, 1992
the rate was $.055 a share. these dividend rates have been adjusted for the
three-for-two stock split of January 4, 1994. The number of shareholders at
June 30, 1995 was approximately 2000.
<PAGE> 1
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 13(b) - FINANCIAL HIGHLIGHTS (In Thousands, Except Per Share Data)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fiscal Year Ended June 30 1995(1) 1994(2) % Change
- ------------------------- ------- ------- --------
<S> <C> <C> <C>
Net Sales................................................... $263,327 $159,904 +64.7
Income From Operations...................................... 17,891 15,135 +18.2
Pre-tax Income.............................................. 16,658 10,559 +57.8
Net Income.................................................. 7,875 6,495 +21.2
Earnings Per Share.......................................... .74 .60 +23.3
Income From Operations to Sales %........................... 6.79% 9.47% -28.3
Net Income to Sales %....................................... 2.99% 4.06% -26.4
Total Assets................................................ 255,101 140,194 +82.0
Long-Term Debt.............................................. 98,834 36,216 +172.9
Stockholders' Equity........................................ 63,427 59,808 + 6.1
Equity Per Share............................................ 5.93 5.51 + 7.6
Dividends Per Share......................................... .390 .345 +13.0
Depreciation And Amortization............................... 13,939 10,202 +36.6
Capital Expenditures........................................ 21,983 12,701 +73.1
Return on Beginning Assets.................................. 5.62% 4.79% +17.3
Return On Beginning Equity.................................. 13.17% 10.79% +22.1
___________________________________
</TABLE>
(1) The operations of Jupiter National, Inc., a majority owned subsidiary, for
the six months ended June 30, 1995, are included in the year ended June 30,
1995.
(2) Income for the year ended June 30, 1994, has been restated to reflect the
equity of Jupiter National, Inc. on an operating company basis.
<PAGE> 1
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 13(c) - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- -----------------------------------------------------------------
GENERAL
Johnston Industries, Inc. ("Johnston") and its wholly owned operating
subsidiaries, Opp and Micolas Mills, Inc. ("Opp and Micolas") and Southern
Phenix Textiles, Inc. ("Southern Phenix"), together with its majority owned
subsidiary, Jupiter National, Inc. ("Jupiter") including Wellington Sears
Company ("Wellington") (collectively, the "Company"), are principally
diversified manufacturers that produce woven and nonwoven textiles primarily
for the residential and industrial marketplace and, to a lesser extent, for the
basic apparel and automotive sectors. In addition to being a holding company
for Wellington Sears, Jupiter is a holding company for Greater Washington
Investments, Inc. ("GWI"), a small business development company under the Small
Business Investment Act of 1958, as amended. GWI's investment strategy is to
seek above-average capital appreciation by investing in developing companies
which GWI's management believes offer significant long-term growth prospects,
in a broad range of industries. Total assets attributable to the textile
operations and to the venture capital operations are approximately $217.9
million and $37.2 million, respectively.
In January 1995, Johnston increased its ownership interest in Jupiter from
49.6% to 54.2%. Accordingly, Jupiter operations were consolidated with
Johnston operations effective January 1995. As a result, 1995 data, except net
income and net income per share, is not directly comparable to prior period
data. In May 1995, the Company purchased an additional 15,000 shares of
Jupiter common stock bringing its total ownership to 54.8% of Jupiter's issued
and outstanding common stock. Additionally, on August 16, 1995, Johnston
jointly announced with Jupiter an agreement and plan of merger under which the
public shareholders of Jupiter would receive $32.875 per share in cash from
Johnston. The per share cash price is subject to certain adjustments based
upon the market value of certain securities held by Jupiter on a date close to
the date the merger proxy statement is mailed to Jupiter shareholders. The
amount to be paid by Johnston is expected to be approximately $37,500,000. The
merger is subject to approval by Jupiter shareholders and is expected to close
in December 1995.
On December 1, 1994, with shareholder approval, Jupiter filed a Form N-54C
notifying the Securities and Exchange Commission that Jupiter was withdrawing
its election to be treated as a Business Development Company under the
Investment Company Act of 1940 as amended (the "1940 Act") and is no longer
subject to regulation under the 1940 Act. As a result, majority owned
operating companies are required to be recorded at historical cost. This
change was effected through a retroactive change in accounting method that has
resulted in a restatement of Johnston's and Jupiter's prior financial
statements through December 31, 1994. This retroactive change did not have a
material impact on Johnston's financial position or results of operations.
1
<PAGE> 2
RESULTS OF OPERATIONS
Fiscal 1995 Compared with Fiscal 1994
Net sales for fiscal 1995 were $263,327,000 compared to $159,904,000 for the
prior year, an increase of $103,423,000 or 65%. The majority of this increase
was primarily due to sales of $84,299,000 from Wellington for the period
January 1, 1995 to June 30, 1995 reflecting the consolidation of Jupiter with
Johnston effective January 1, 1995. The remaining increase was primarily the
result of higher unit sales and changes in product mix. Sales in the
upholstery and furniture markets were up approximately $14,235,000 in fiscal
1995, an increase of 20% over fiscal 1994. Additionally, improved sales in the
home products markets have increased fiscal 1995 sales. Management has
continued to place greater emphasis on these high margin products and designs
in the decorative fabrics sector of the home furnishings market. These
increases have been partially offset by a 3% reduction in the apparel market
sales at Opp and Micolas. The reduction in the apparel marketplace is the
result of management's decreased emphasis in this low margin business.
Additionally, net sales to the automotive sector, which is cyclical in nature,
decreased in fiscal 1995 to $15,015,000 from $16,950,000 in fiscal 1994, an 11%
decrease, due to lower demand especially in the quarter ended June 30, 1995.
Sales backlog of Johnston and Jupiter on a combined basis was $61,847,000 as of
June 30, 1995, and management believes this level of sales backlog will enable
the Company to sustain growth in fiscal 1996.
Cost of sales increased in fiscal 1995 to $209,598,000 compared to fiscal 1994
of $121,261,000 primarily as a result of $71,812,000 related to Wellington from
January 1, 1995 to June 30, 1995. Sharply escalating raw material costs--
especially cotton and polyester--took a considerable toll on margins. These
steep raw material increases generally could not be passed on to customers and
amounted to approximately 12 cents per share for the quarter ended June 30,
1995 and 25 cents per share for fiscal 1995. Significant LIFO adjustments of
$2,724,000, or 12 cents a share, for the quarter ended June 30, 1995 and
$4,349,000, or 20 cents a share, for fiscal 1995 substantially reduced
earnings.
Margins were positively impacted by the increased sales volume which continued
to allow the Company to maintain an increased level of productivity through
higher utilization of plant and equipment. The increased volume, coupled with
certain price increases, has enabled the Company to partially offset increases
in raw material costs.
Selling, general, and administrative expenses increased from $13,306,000 for
fiscal 1994 to $21,899,000 for fiscal 1995, a 65% increase. This increase was
mainly due to the Jupiter selling, general, and administrative expenses of
$8,309,000 for the period January 1, 1995 to June 30, 1995. Selling, general,
and administrative expenses as a percentage of sales was 8% in fiscal 1995 and
fiscal 1994.
2
<PAGE> 3
Depreciation and amortization was up $3,737,000 in fiscal 1995 to $13,939,000
compared to fiscal 1994 of $10,202,000. This 37% increase includes
depreciation and amortization expense of $2,589,000 for Jupiter for the
period January 1, 1995 to June 30, 1995. In addition, the increase represents
the continued investments in capital expenditures. In the last three years,
the Company has invested $45,065,000 in continuing efforts to upgrade machinery
and equipment to state-of-the-art levels, and to move into new more profitable
markets.
Net interest expense was up $3,070,000 in fiscal 1995 to $5,915,000 from fiscal
1994 of $2,845,000. This increase was mainly due to two factors. First, the
consolidation of Jupiter with Johnston entailed recording substantial Jupiter
debt levels, thus resulting in $2,214,000 of additional net interest expense
for the period January 1, 1995 to June 30, 1995. Second, effective January
1995, Johnston restructured its revolving debt agreements and increased its
borrowings under the revolving credit loan from $35,000,000 to $45,000,000.
Other expenses - net includes a negative effect on both the quarter ended June
30, 1995 and fiscal 1995 net income caused by a charge of $1,000,000 to
establish a reserve for estimated environmental cleanup costs related to a
property sold by Johnston in 1982. This steel fabrication operation, sold by
Johnston 13 years ago, has no relationship to today's operations. The charge
represents approximately 5 cents in earnings per share for both the quarter and
for the 1995 fiscal year, respectively. Johnston has been unable to amicably
resolve litigation concerning responsibility for clean-up costs associated with
this site. Such litigation is in process, and the ultimate outcome of the
litigation cannot presently be determined. (See Note 4 of the consolidated
financial statements for further discussion.)
The consolidation of Jupiter also resulted in the separate reporting of income
or loss activity of the investment portfolio. (See Note 2 to the consolidated
financial statements for further explanation.) Hence, beginning January 1,
1995, the Company's equity in earnings/loss of equity investments included only
the Company's then 50% interest in Tech Textiles, USA ("Tech Textiles"),
whereas prior to January 1, 1995, the equity in earnings/loss also included
Johnston's proportionate interest in its equity investment in Jupiter. The
equity loss in Tech Textiles was $308,000 for fiscal 1995 compared to $980,000
in the prior year period. The Company estimated Tech Textiles to have a
three-year start-up phase and at June 30, 1995 it is performing to the
Company's expectations. During September 1995, Johnston purchased the
remaining 50% interest in Tech Textiles for a total cost of $655,000. Thus,
Tech Textiles is a consolidated wholly owned subsidiary of Johnston effective
September 1995.
The realized and unrealized investment portfolio gain of Jupiter for the period
January 1, 1995 to June 30, 1995 was $5,191,000. (See Note 2 to the
consolidated financial statements for further explanation.) This gain reflects
increases in the market value of Jupiter's investment in Viasoft, Inc. of
$2,602,000 and McData Corporation of $2,300,000 for the period. For the six
months ended December 31, 1994, and for the year ended June 30, 1994,
Johnston's equity in the changes in net assets of Jupiter was $1,308,000 and
($161,000), respectively. For the six months ended December 31, 1994, the
market price of Jupiter's investment in Zoll Medical increased $588,000. In
fiscal 1994, Jupiter's investment in Zoll Medical had a substantial decrease in
value, which exceeded total increases in Jupiter's remaining investments.
3
<PAGE> 4
Jupiter carries its portfolio investments at market or fair value. Minority
interest is recorded for the minority shareholders' proportionate share of the
equity and earnings of Jupiter.
The provision for income taxes was an effective rate of 43% in fiscal 1995
versus an effective rate of 38% in fiscal 1994. The increased rate is mainly
due to taxes related to equity in income of its' majority owned subsidiary,
Jupiter.
Fiscal 1994 Compared With Fiscal 1993
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 low margin apparel market sales reflects
management's decision to significantly reduce its involvement in this market.
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, Johnston placed greater
emphasis on the development of new high margin products and designs in the
decorative fabrics sector of the home furnishings market.
Although net sales for fiscal 1994 increased 4% from fiscal 1993, Johnston's
operating income increased approximately 33%.
Cost of sales as a percentage of sales made a significant improvement in 1994.
Gross profit was 22% in 1993 and improved to 24% in 1994. Improved sales
volumes, 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 costs resulting from
utilization of newer machinery and equipment purchased over the past several
years.
Selling, general, and administrative expenses increased 11% in fiscal 1994
compared to fiscal 1993. In fiscal 1994, 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. While the absolute dollars of fiscal 1994 selling, general, and
administrative expenses were higher than fiscal 1993, such expenses as a
percentage of sales increased only 1/2 of 1%. In addition, increased expenses
due to the development of new, value added products, were offset and
substantially exceeded by increased profitability.
Depreciation and amortization were up 5% in fiscal 1994 to $10,202,000 compared
to $9,761,000 in fiscal 1993, reflecting the recent increased level of capital
expenditures. Over the past three years, Johnston has invested $32,487,000 to
continue its effort to upgrade machinery and equipment to state-of-the-art
levels, and move into new more profitable markets.
4
<PAGE> 5
Net interest expense was up 18% in fiscal 1994 to $2,845,000 from the fiscal
1993 of $2,403,000. This change was primarily due to a $379,000 reduction
in interest income 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.
Other expenses - net increased in fiscal 1994 compared to fiscal 1993. The
increase in 1994 relates to the liability for Johnston's former steel
fabrication operations which are discussed in Note 4 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, compared to a loss of $889,000 in fiscal 1993. These amounts reflect
the start-up nature of this new business and are consistent with Johnston's
expectations and original business plan.
As of June 30, 1994 and 1993, Johnston held a 49% and 40% interest in Jupiter,
respectively, and accounted for such investment using the equity method. 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, a major 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
exceeded other increases in portfolio investments of Jupiter and the operating
profit generated by Wellington. Consequently, for the last two years, Johnston
recognized a loss of $106,000 for fiscal 1994 and income from Jupiter of
$6,163,000 for fiscal 1993. Because of these factors, Jupiter has reported
volatility in its earnings for the last two 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.
The provision for income taxes in fiscal 1994 remained consistent with 1993 at
an effective 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. The restatement impact of applying SFAS 109 on net income was a
$352,000 reduction and a reduction of $.03 on earnings per share in fiscal
1993.
EFFECTS OF INFLATION
Management does not believe that inflation has had a material impact on the
results of operations for the periods presented, except as discussed above
related to sharply escalating raw material costs in fiscal 1995. These
increases in raw material costs have continued into fiscal 1996 and could have
a significant impact on the Company and the industry. However, management
believes that to the extent general inflation affects its costs in the future,
the Company can generally offset inflation by increasing prices if competitive
conditions permit.
5
<PAGE> 6
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary needs for capital resources are to finance the purchase
of the outstanding public shares of Jupiter as discussed above, and to finance
accounts receivable, inventories and capital expenditures. Although
definitive financing agreements have not been entered into, management believes
the Company will be able to secure the financing necessary to complete the
Company's proposed acquisition of the outstanding public shares of Jupiter,
either in the form of additional borrowings from one or more of its existing
lenders or from alternate sources.
Johnston
Credit Agreement - In January 1995, Johnston amended its credit agreement,
increasing its available revolving credit loans and outstanding borrowings from
$35,000,000 to $45,000,000 and providing for $10,000,000 in annually renewable
lines of credit with outstanding borrowings of $6,800,000 as of June 30, 1995.
Term Notes - Johnston's outstanding borrowings under the term notes, which were
$5,000,000 as of June 30, 1994, were paid in full in March 1995.
Purchase Money Mortgage Loan - A decision was made by Johnston in fiscal 1993
to move the executive office to Columbus, Georgia. In that regard, in fiscal
1994, a building was purchased and renovated, and Johnston obtained a Purchase
Money Mortgage Loan of $1,325,000. As of June 30, 1995, $1,217,000 was
outstanding on this loan.
In connection with the consolidation of Jupiter effective January 1995,
Johnston was required to record the debt of Jupiter and Wellington. The
following summarizes the significant elements of such debt. (See Note 10 to
the consolidated financial statements for further information.)
Jupiter
Subordinated Debentures - The subordinated debentures with an outstanding
balance of $14,500,000 at June 30, 1995 are payable to the Small Business
Administration.
Wellington
Revolving Credit Loans - In January 1995, Wellington amended its revolving
credit, term loan and equipment loan agreement with a bank. The agreement
provides that Wellington may obtain revolving credit loans up to an aggregate
amount of the lesser of $24,000,000 or certain percentages of accounts
receivable and inventories. The loan is due November 20, 1998, with an
automatic renewal for one year. As of June 30, 1995, $17,361,000 was
outstanding under this loan.
6
<PAGE> 7
Term Loan - The amended agreement provides for a term loan of $21,000,000
payable in monthly installments of $218,735 through November 1998, at which
time the remaining unpaid balance is due. At June 30, 1995, there were
borrowings of $19,687,000 under the term loan.
Equipment Loans - Through November 18, 1998, Wellington may borrow up to
$5,000,000 to finance the purchase of equipment. The principal amount is
payable in monthly installments of 1/96th of the loan balance from August 1995
through November 1998, when the remaining balance is due. At June 30, 1995,
there were borrowings of $2,768,000 under the equipment loans.
The various loan agreements require Johnston, Jupiter, and Wellington, among
other things, to maintain certain financial ratios and specified levels of
working capital, tangible net worth, and profitability, as defined. The
agreements also restrict ability to incur debt, buy or sell assets, pay
dividends, transfer funds from certain subsidiaries to the parent company to
satisfy debt obligations and issue or repurchase capital stock.
Substantially all machinery and equipment, inventory and account receivables
are pledged as collateral under the borrowing agreements.
The net cash provided by operating activities of $17,069,000 in fiscal 1995 was
$3,984,000 higher than the fiscal 1994 amount of $13,085,000. This significant
increase is largely due to management of the Wellington inventory levels from
January 1995 (the date of consolidation) to June 1995, which was not a factor
in the prior year.
Capital expenditures in fiscal 1995 were $21,983,000 compared to $12,701,000 in
fiscal 1994, an increase of $9,282,000. This increase is due to $7,393,000 of
capital expenditures at Wellington in fiscal 1995, which were not included in
the consolidated amounts of the prior year. In addition, Johnston increased
its capital expenditures by $1,889,000. These expenditures were primarily for
the replacement of existing equipment with the latest technology and the
implementation of new manufacturing processes.
Management believes that funds generated from operations, funds available under
the existing debt agreements and finalization of financing to buy the public
shares of Jupiter will be sufficient to meet the needs of the Company's current
operations for at least the next 12 months.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 116 ("SFAS 116"), "Accounting
for Contributions Received and Contributions Made," established standards
for accounting and reporting for contributions received and made and is
effective for fiscal years beginning after December 15, 1994. The Company
expects that there will be no material effect upon implementing SFAS 116 on its
financial position or results of operations.
7
<PAGE> 8
Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," established standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles to
be disposed of and is effective for fiscal years beginning after December 15,
1995. The Company expects that there will be no material effect upon
implementing SFAS 121 on its financial position or results of operations.
OTHER MATTERS
Jupiter and Wellington are involved in a legal dispute with Polylok Corporation
and its former majority shareholder. The former majority shareholder has filed
motions for summary judgment on his claims for installment payments amounting
to approximately $900,000. Jupiter and Wellington have vigorously defended
this dispute. Since the case is in its preliminary stages, the eventual
outcome cannot be predicted with reasonable accuracy. (See Note 16 of the
consolidated financial statements for further information.)
The Company is periodically involved in legal proceedings arising out of the
ordinary conduct of business. Management does not expect that they will have a
material adverse effect on the Company's consolidated financial position or
results of operations.
8
<PAGE> 1
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 13(d) - QUARTERLY INFORMATION (UNAUDITED)
(In Thousands, Except Per Share Data)
- ---------------------------------------------------
The following summarizes the unaudited quarterly results of operations for the
Years Ended June 30, 1995 and 1994.
<TABLE>
<CAPTION>
============================================================================================================================
THREE MONTHS ENDED
- ----------------------------------------------------------------------------------------------------------------------------
1995 SEPT. 30 DEC. 31 MARCH 31 JUNE 30
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales................................................. $40,773 $44,197 $91,002 $87,355
Gross Margin.............................................. 9,815 10,037 18,194 15,683
Net Income(2)............................................. 1,682 2,514 2,633 1,046
Earnings Per Share(2)..................................... .16 .24 .25 .10
Weighted Average Shares Outstanding(1).................... 10,766 10,687 10,682 10,654
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
- ----------------------------------------------------------------------------------------------------------------------------
1994 SEPT. 30 DEC. 31 MARCH 31 JUNE 30
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales............................................... $35,695 $38,295 $42,595 $43,319
Gross Margin............................................ 7,709 8,858 10,602 11,474
Net Income(2)........................................... 2,146 1,046 2,429 874
Earnings Per Share(1)(2)................................ .20 .10 .22 .08
Weighted Average Shares Outstanding(1).................. 10,844 10,860 10,863 10,832
============================================================================================================================
</TABLE>
(1) Restated to reflect the three-for-two stock split effective January 4,
1994.
(2) Restated to reflect the equity in earnings of Jupiter National, Inc. on an
operating company basis effective December 1994.
<PAGE> 1
EXHIBIT 13(e)
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------------------------------------------
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT F-1 and F-2
CONSOLIDATED FINANCIAL STATEMENTS OF JOHNSTON INDUSTRIES, INC.
AND SUBSIDIARIES AS OF JUNE 30, 1995 AND 1994 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED JUNE 30, 1995:
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 and F-7
Notes to Consolidated Financial Statements F-8 to F-25
FINANCIAL STATEMENT SCHEDULES
Johnston Industries, Inc. and Subsidiaries
Schedule I - Condensed Financial Information of Registrant S-1 to S-4
Schedule II - Valuation and Qualifying Accounts S-5
</TABLE>
<PAGE> 2
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, 1995 and 1994,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended June 30, 1995. 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, 1995 and 1994, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1995
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 4 to the consolidated financial statements, the Company is
involved in litigation relating to a steel fabricating facility which had been
operated prior to its close in 1981 by a former subsidiary of the Company. In
June 1995, the Company accrued an estimate of certain amounts which it may
incur in connection with the final resolution of the dispute; however, the
ultimate outcome of the litigation cannot presently be determined.
F -1
<PAGE> 3
As discussed in Note 2 to the consolidated financial statements, through
December 31, 1994 the consolidated financial statements include the Company's
investment in and equity in earnings of its affiliate, Jupiter National, Inc.
("Jupiter"). In January 1995, the Company increased its ownership interest in
Jupiter from 49.6% at December 31, 1994 to 54.2%. As a result, Jupiter became
a consolidated, majority owned subsidiary of the Company in January 1995.
As of and for the year ended June 30, 1995, $19,892,000 of the Company's
investments and $2,455,000 of the Company's earnings related to security values
estimated by Jupiter's Board of Directors in the absence of readily
ascertainable market values. As of June 30, 1994 and for the years ended June
30, 1994 and 1993, a portion of the Company's investment in Jupiter
($9,074,000) and the Company's interest in the earnings (losses) of Jupiter
[$1,091,000 and $(582,000), respectively] related 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.
As discussed in Note 20 to the consolidated financial statements, on August 16,
1995, the Company announced an agreement to purchase for cash all publicly held
shares of Jupiter.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
August 18, 1995
F -2
<PAGE> 4
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994(a)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 9,456,000 $ 3,914,000
Marketable securities, at fair value 9,741,000
Accounts and notes receivable, net of allowance of
$1,113,000 and $368,000 43,333,000 18,152,000
Inventories 46,389,000 25,438,000
Prepaid expenses and other 1,892,000 1,330,000
-------------- --------------
Total current assets 110,811,000 48,834,000
INVESTMENTS - At market or fair value as determined
by directors 19,892,000
INVESTMENTS - At equity 4,174,000 21,036,000
PROPERTY, PLANT, AND EQUIPMENT - Net 114,309,000 65,354,000
INTANGIBLE ASSET - Pension 2,675,000 2,874,000
OTHER ASSETS 3,240,000 2,096,000
$ 255,101,000 $ 140,194,000
============== =============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994(a)
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings $ 6,800,000 $ 2,500,000
Current maturities of long-term debt 5,894,000 5,087,000
Accounts payable 19,692,000 6,410,000
Accrued expenses 13,084,000 7,372,000
Income taxes payable 1,219,000 806,000
Deferred income taxes 2,947,000 1,164,000
-------------- -------------
Total current liabilities 49,636,000 23,339,000
LONG-TERM DEBT 98,834,000 36,216,000
-------------- -------------
OTHER LIABILITIES 14,023,000 16,876,000
-------------- -------------
LONG-TERM DEFERRED INCOME TAXES 9,012,000 3,955,000
-------------- -------------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 20,169,000
--------------
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 12,426,891 and 12,411,891 1,243,000 1,241,000
Additional paid-in capital 17,258,000 17,107,000
Retained earnings 54,808,000 51,065,000
-------------- -------------
Total 73,309,000 69,413,000
Less treasury stock: 1,861,912 and 1,682,112 shares at cost (8,108,000) (6,407,000)
Less minimum pension liability adjustment, net of tax benefit (1,774,000) (3,198,000)
-------------- -------------
Stockholders' equity 63,427,000 59,808,000
-------------- -------------
$ 255,101,000 $ 140,194,000
============== =============
</TABLE>
(a) The June 30, 1994 balances have been restated to reflect Jupiter National,
Inc. on an operating company basis as discussed in Note 2.
See notes to consolidated financial statements.
F-3
<PAGE> 5
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994(a) 1993(a)
<S> <C> <C> <C>
NET SALES $263,327,000 $159,904,000 $154,074,000
------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales, excluding depreciation and
amortization 209,598,000 121,261,000 120,933,000
Selling, general, and administrative 21,899,000 13,306,000 11,980,000
Depreciation and amortization 13,939,000 10,202,000 9,761,000
------------ ------------ ------------
Total costs and expenses 245,436,000 144,769,000 142,674,000
------------ ------------ ------------
INCOME FROM OPERATIONS 17,891,000 15,135,000 11,400,000
OTHER EXPENSE:
Interest expense - net 5,915,000 2,845,000 2,403,000
Other - net 1,509,000 590,000 491,000
------------ ------------ ------------
Total other expenses 7,424,000 3,435,000 2,894,000
------------ ------------ ------------
EQUITY IN EARNINGS (LOSSES)
OF EQUITY INVESTMENTS 1,000,000 (1,141,000) 5,093,000
REALIZED AND UNREALIZED
INVESTMENT PORTFOLIO GAIN 5,191,000
------------ ------------ ------------
INCOME BEFORE PROVISION FOR
INCOME TAXES AND MINORITY INTEREST 16,658,000 10,559,000 13,599,000
PROVISION FOR INCOME TAXES 7,083,000 4,064,000 5,185,000
------------ ------------ ------------
INCOME BEFORE MINORITY INTEREST 9,575,000 6,495,000 8,414,000
MINORITY INTEREST IN INCOME OF
CONSOLIDATED SUBSIDIARY 1,700,000
------------ ------------ ------------
NET INCOME $ 7,875,000 $ 6,495,000 $ 8,414,000
============ ============ ============
EARNINGS PER SHARE $ .74 $ .60 $ .77
============ ============ ============
DIVIDENDS PER SHARE $ .39 $ .35 $ .32
============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 10,697,339 10,850,141 10,931,781
============ ============ ============
</TABLE>
(a) Income for the years ended June 30, 1994 and 1993 has been restated to
reflect the equity in earnings of Jupiter National, Inc. on an operating
company basis as discussed in Note 2.
See notes to consolidated financial statements.
F-4
<PAGE> 6
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
<S> <C> <C> <C> <C>
BALANCE, JUNE 30, 1992 - As previously reported 12,178,422 $1,219,000 $15,938,000 $43,422,000
Adjustment for Jupiter National, Inc. restatement
(see Note 2) (160,000)
---------- ---------- ----------- -----------
BALANCE, JUNE 30, 1992 - As restated 12,178,422 1,219,000 15,938,000 43,262,000
Exercise of stock options 159,823 16,000 795,000
Purchase of treasury stock
Net income 8,414,000
Dividends paid ($.32 per share) (3,412,000)
---------- ---------- ----------- -----------
BALANCE, JUNE 30, 1993 12,338,245 1,235,000 16,733,000 48,264,000
Exercise of stock options 73,742 6,000 376,000
Purchase of fractional shares (96) (2,000)
Purchase of treasury stock
Net income 6,495,000
Dividends paid ($.35 per share) (3,694,000)
Minimum pension liability adjustment,
net of tax benefit of $1,957,000
---------- ---------- ----------- -----------
BALANCE, JUNE 30, 1994 12,411,891 1,241,000 17,107,000 51,065,000
Exercise of stock options 15,000 2,000 151,000
Purchase of treasury stock
Net income 7,875,000
Dividends paid ($.39 per share) (4,132,000)
Minimum pension liability adjustment,
net of taxes of $871,000
---------- ---------- ----------- -----------
BALANCE, JUNE 30, 1995 12,426,891 $1,243,000 $17,258,000 $54,808,000
========== ========== =========== ===========
<CAPTION>
TREASURY STOCK MINIMUM
------------------------- PENSION LIABILITY
SHARES AMOUNT ADJUSTMENT TOTAL
<S> <C> <C> <C> <C>
BALANCE, JUNE 30, 1992 - As previously reported 1,328,062 $(3,366,000) $57,213,000
Adjustment for Jupiter National, Inc. restatement
(see Note 2) (160,000)
--------- ------------ -----------
BALANCE, JUNE 30, 1992 - As restated 1,328,062 (3,366,000) 57,053,000
Exercise of stock options 811,000
Purchase of treasury stock 322,350 (2,693,000) (2,693,000)
Net income 8,414,000
Dividends paid ($.32 per share) (3,412,000)
--------- ------------ -----------
BALANCE, JUNE 30, 1993 1,650,412 (6,059,000) 60,173,000
Exercise of stock options 382,000
Purchase of fractional shares (2,000)
Purchase of treasury stock 31,700 (348,000) (348,000)
Net income 6,495,000
Dividends paid ($.35 per share) (3,694,000)
Minimum pension liability adjustment,
net of tax benefit of $1,957,000 $(3,198,000) (3,198,000)
--------- ------------ -----------
BALANCE, JUNE 30, 1994 1,682,112 (6,407,000) (3,198,000) 59,808,000
Exercise of stock options 153,000
Purchase of treasury stock 179,800 (1,701,000) (1,701,000)
Net income 7,875,000
Dividends paid ($.39 per share) (4,132,000)
Minimum pension liability adjustment,
net of taxes of $871,000 1,424,000 1,424,000
--------- ------------ ----------- -----------
BALANCE, JUNE 30, 1995 1,861,912 $ (8,108,000) $(1,774,000) $63,427,000
========= ============ =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 7
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994(a) 1993(a)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 7,875,000 $ 6,495,000 $ 8,414,000
------------ ------------ ------------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 13,939,000 10,202,000 9,761,000
Provision for bad debts 89,000 151,000 383,000
Net realized and unrealized gain on portfolio (5,191,000)
investment
Undistributed (income) losses in investments (1,000,000) 1,141,000 (5,093,000)
Minority interest in income of consolidated 1,700,000
subsidiary
Changes in assets and liabilities:
Accounts and notes receivable (9,140,000) (2,563,000) (375,000)
Inventories 7,432,000 (2,244,000) (309,000)
Deferred income taxes 1,783,000 (50,000) (21,000)
Prepaid expenses and other assets 287,000 (566,000) 264,000
Accounts payable (1,014,000) (2,157,000) (4,133,000)
Accrued expenses 47,000 794,000 (27,000)
Income taxes payable (551,000) 168,000 113,000
Other liabilities 847,000 1,683,000 2,222,000
Other, net (34,000) 31,000 172,000
------------ ------------ ------------
Total adjustments 9,194,000 6,590,000 2,957,000
------------ ------------ ------------
Net cash provided by operating activities 17,069,000 13,085,000 11,371,000
------------ ------------ ------------
INVESTING ACTIVITIES:
Additions to property, plant, and equipment (21,983,000) (12,701,000) (10,381,000)
Unpaid capital expenditures 5,784,000 482,000 2,767,000
Increase in investments (3,254,000) (4,578,000) (2,034,000)
Repayments of loans by stockholders 5,383,000 341,000
Purchase of Jupiter, net of cash acquired 3,758,000
------------ ------------ ------------
Net cash used in investing activities (15,695,000) (11,414,000) (9,307,000)
------------ ------------ ------------
FINANCING ACTIVITIES:
Principal payments of debt (5,086,000) (4,022,000) (2,000,000)
Proceeds from issuance of long-term debt 12,634,000 13,325,000
Net borrowings (repayments) under line-of-credit 2,300,000 (7,500,000) 4,000,000
agreements
Purchase of treasury stock (1,701,000) (348,000) (2,693,000)
Proceeds from employee stock ownership plan 1,454,000
Proceeds from issuance of common stock 153,000 380,000 811,000
Dividends paid (4,132,000) (3,694,000) (3,412,000)
------------ ------------ ------------
Net cash provided by (used in) financing 4,168,000 (1,859,000) (1,840,000)
activities ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 5,542,000 (188,000) 224,000
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 3,914,000 4,102,000 3,878,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 9,456,000 $ 3,914,000 $ 4,102,000
============ ============ ============
</TABLE>
F-6
<PAGE> 8
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
(CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $6,720,000 $2,962,000 $2,861,000
Income taxes $3,932,000 $2,908,000 $2,472,000
</TABLE>
(a) Years ended June 30, 1994 and 1993 have been restated to reflect the equity
in earnings of Jupiter National, Inc. on an operating company basis as
discussed in Note 2.
See notes to consolidated financial statements.
F-7
<PAGE> 9
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1995 AND 1994 AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED JUNE 30, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Principles of Consolidation - The consolidated financial statements include
the accounts of Johnston Industries, Inc. ("Johnston"), its wholly owned
subsidiaries, Southern Phenix Textiles, Inc. and Opp and Micolas Mills,
Inc., its majority owned subsidiary, Jupiter National, Inc. ("Jupiter") and
Jupiter's wholly owned subsidiaries, Wellington Sears Company
("Wellington"), Pay Telephone America, Ltd., and Greater Washington
Investments, Inc. ("GWI") (collectively, the "Company"). All significant
intercompany accounts and transactions have been eliminated.
Johnston and its wholly owned subsidiaries and Wellington are diversified
manufacturers of textile fabrics used in the residential, industrial, and
to a lesser extent, apparel, and automotive marketplaces. Jupiter holds
venture capital portfolio investments in new and developing companies that
offer long-term growth prospects. GWI is a small business investment
company licensed under the Small Business Investment Act of 1958. Under
applicable Small Business Administration regulations, GWI is restricted to
investing only in qualified small business concerns contemplated by the
1958 Act, as amended, and such regulations. Total assets attributable to
the textile operations and to the venture capital operations as of June 30,
1995 are approximately $217.9 million and $37.2 million, respectively.
Fiscal Year-End - Johnston has a fiscal year-end of June 30. However, the
operating subsidiaries have a fiscal year-end based on a 52/53 week
reporting period that ends on the Saturday closest to June 30. For the
fiscal years ended on June 30, 1995 and 1994, such operating subsidiaries'
fiscal years ended on July 1, 1995 and July 2, 1994, respectively.
Cash Equivalents - The Company classifies all highly liquid investments
with a maturity of three months or less as cash equivalents. Cash
equivalents held by GWI are required to be invested in securities of the
U.S. Government.
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 computed principally by the use
of the straight-line method over the estimated useful service lives of
20-40 years for buildings, 20 years for 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
F-8
<PAGE> 10
transferred to the customer. Accounts receivable included bill and hold
receivables of $9,150,000 and $3,736,000 at June 30, 1995 and 1994,
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.
Valuation of Investments - Portfolio investments held by Jupiter in
publicly traded entities are stated at market or fair value as determined
by quoted market prices and are reflected as marketable securities in the
accompanying balance sheet. Such investments expected to be sold within
the next 12 months are classified as current assets. Other portfolio
investments held by Jupiter are recorded at market or fair value as
determined in good faith by Jupiter's Board of Directors. Unrealized
appreciation (depreciation) is included as a component of net income.
There are restrictions on the disposition of most of the securities, and
values do not necessarily represent the amounts that may be realized from
their immediate sale or other disposition.
Investments in companies and joint ventures in which the Company has a 20%
to 50% interest are accounted for under the equity method. The investments
are recorded at cost and adjusted for the Company's share of earnings or
losses and cash distributions.
Recognition of Interest Income - Jupiter accrues interest on the principal
balance of notes outstanding considered to be collectible.
Gains or Losses on Securities Sold - Sales of securities by Jupiter are
recorded on the trade date (date the order to sell is executed). The cost
of securities sold is reported on the average cost basis for financial
statement purposes. Realized losses are recognized for securities whose
value is considered permanently impaired.
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.
Postretirement 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.
Reclassifications - Certain prior year amounts have been reclassified to
conform to the current year presentation.
F-9
<PAGE> 11
Contributions Made - Statement of Financial Accounting Standards No. 116
("SFAS 116"), "Accounting for Contributions Received and Contributions
Made," establishes standards for accounting and reporting for contributions
received and made and is effective for fiscal years beginning after
December 15, 1994. The Company expects that there will be no material
effect upon implementing SFAS 116 on its financial position or results of
operations.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of -
Statement of Financial Accounting Standards No. 121 ("SFAS 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," establishes standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related
to those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS 121 is effective for
fiscal years beginning after December 15, 1995. The Company expects that
there will be no material effect upon implementing SFAS 121 on its
financial position or results of operations.
2. JUPITER NATIONAL, INC.
In January 1995, the Company purchased an additional 89,300 shares of
Jupiter for approximately $2,300,000 which increased the Company's
ownership interest in the outstanding shares of Jupiter from 49.6% at
December 31, 1994 to 54.2%. As a result, Jupiter became a consolidated,
majority owned subsidiary of the Company in January 1995. Minority
interest is recorded for the minority shareholders' proportionate share of
the equity and earnings of Jupiter.
The following represents the results of operations on a pro forma basis
assuming Johnston had owned 54.2% of Jupiter as of July 1, 1993. This pro
forma information is provided for informational purposes only. Such pro
forma information is based on historical information and is not necessarily
indicative of the actual results that would have been achieved had Johnston
purchased the additional shares of Jupiter on July 1, 1993, nor is it
necessarily indicative of future results of operations (see Note 20).
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------
1995 1994
<S> <C> <C>
Net sales $ 333,873,000 $ 290,572,000
Net income 8,117,000 6,371,000
Earnings per share .76 .59
</TABLE>
The Company accounted for its investment in Jupiter using the equity method
through December 31, 1994. For the six months ended December 31, 1994 and
for the years ended June 30, 1994 and 1993, Johnston recorded equity in the
changes in net assets of Jupiter of $1,308,000, $(161,000), and $5,982,000,
respectively.
As of and for the year ended June 30, 1995, $19,892,000 of the Company's
investments and $2,455,000 of the Company's earnings, respectively, relate
to security values estimated by Jupiter's Board of Directors. The Company'
equity in the net assets of Jupiter at June 30, 1994 was $18,701,000, which
included $9,074,000 of security values determined by Jupiter's Board of
Directors. For the years ended June 30, 1994 and 1993, $1,091,000 and
$(582,000), respectively, of the Company's equity in Jupiter's changes in
net assets was derived from net unrealized appreciation (depreciation) of
investments whose values have been estimated by Jupiter's Board of
Directors. The quoted market value of the Company's investment in Jupiter
was approximately $28,387,000 and $20,148,000 on June 30, 1995 and 1994,
respectively.
F-10
<PAGE> 12
Summarized financial information of Jupiter as of June 30, 1994 and for the
years ended June 30, 1994 and 1993 is as follows:
FINANCIAL POSITION
<TABLE>
<CAPTION>
1994
<S> <C>
Net current assets $ 27,186,000
Investments 22,218,000
Total assets 111,610,000
Long-term debt (including current portion) 54,766,000
Net assets 38,099,000
</TABLE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Net sales $ 130,688,000 $ 77,499,000
Operating income 5,210,000 3,508,000
Net income 233,000 15,917,000
</TABLE>
Through November 30, 1994, Jupiter was considered a closed-end venture
capital investment company that used 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 were valued at the current market price, and
all other investments were valued at fair value as determined in good faith
by Jupiter's Board of Directors using a formal portfolio valuation
procedure. Effective December 1, 1994, Jupiter received approval from the
Securities and Exchange Commission to withdraw its election as a business
development company under the Investment Act of 1940. As a result,
majority owned operating companies are required to be recorded at
historical cost. This change to the historical cost basis for such
operating companies was effected through a retroactive change in accounting
method that resulted in a restatement of Johnston's and Jupiter's prior
financial statements through December 31, 1994. This retroactive change
did not have a material impact on Johnston's financial position or results
of operations.
The remaining nonoperating assets require periodic valuation of each
investment in Jupiter's consolidated portfolio to determine net asset value
as described above. As a result, effective January 1995, the Company's
proportionate share of the unrealized appreciation (depreciation) of
Jupiter's portfolio companies will be included as a separate line item in
the Company's income statement.
F-11
<PAGE> 13
The following summarizes the aggregate cost and market or fair value of the
portfolio investments as of June 30, 1995:
<TABLE>
<CAPTION>
MARKET OR
COST FAIR VALUE
<S> <C> <C>
Marketable securities $ 1,575,000 $ 9,741,000
============= =============
Portfolio investments - long-term $ 15,426,000 $ 19,892,000
============= =============
</TABLE>
These investments are principally comprised of subordinated notes,
preferred stock, and common stock of new and developing companies.
3. GREATER WASHINGTON INVESTMENTS, INC.
As discussed in Note 1, GWI is a small business investment company licensed
under the Small Business Investment Act of 1958. Summary financial
information for GWI consists of the following:
STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
JUNE 30,
1995
<S> <C>
Current assets $ 5,933,000
Portfolio investments, at fair value 23,951,000
Other assets 44,000
-------------
Total assets $ 29,928,000
=============
Current liabilities $ 325,000
Subordinated debentures 14,500,000
Deferred income taxes 2,677,000
-------------
Total liabilities 17,502,000
Shareholder's equity 12,426,000
-------------
Total liabilities and shareholder's equity $ 29,928,000
=============
</TABLE>
F-12
<PAGE> 14
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED JUNE 30,
1995
<S> <C>
Operating income $ 1,485,000
Operating expenses (3,000)
Interest expense (1,155,000)
-------------
Net operating income 327,000
Realized gain on sale of investments 392,000
Provision for income taxes (2,371,000)
-------------
Net realized loss (1,652,000)
Increase in unrealized appreciation of investments 6,253,000
-------------
Results of operations $ 4,601,000
=============
</TABLE>
4. STEEL FABRICATION OPERATIONS
The accompanying balance sheets as of June 30, 1995 and 1994 include
accruals of $8,363,000 and $7,903,000, respectively, for the remaining
costs expected to be incurred in phasing out the Company's steel
fabrication operations (see Notes 9 and 11). 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 discontinued 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 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 approximately $3,900,000; however, the Company
disputes such costs. The lawsuit is presently in the litigation process.
In June 1995, the Company established a reserve of $1,000,000 for costs
which it may incur in connection with the final resolution of the dispute.
In addition, the Company has established a reserve in the amount of
$200,000 as an estimate of potential legal and other costs to be incurred
in connection with defending this matter. Although management believes
that the accruals described above are sufficient to cover the estimated
costs of such matters, the ultimate outcome of the litigation cannot
presently be determined.
5. RELATED PARTY TRANSACTIONS
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 plus 1/2 of 1%.
F-13
<PAGE> 15
In May 1994, Redlaw became the commissioned sales agent in Canada for sales
of textile products manufactured by the Company. The Company paid Redlaw
approximately $152,000 related to Redlaw's commissioned sales business for
the fiscal year ended June 30, 1995.
6. INVENTORIES
Inventories consist of the following at June 30, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Finished goods $ 18,191,000 $ 11,585,000
Work-in-process 15,288,000 6,897,000
Raw materials and supplies 12,910,000 6,956,000
------------- -------------
$ 46,389,000 25,438,000
=============
Difference between LIFO carrying value and
current replacement cost (838,000)
-------------
Current replacement cost $ 24,600,000
=============
</TABLE>
Although current replacement cost for inventories at June 30, 1994 was less
than last-in, first-out carrying value, the carrying value was recovered
through future sales which yielded normal profit margins. The excess of
replacement cost over the value of inventories based upon the LIFO method
was $4,107,000 at June 30, 1995.
7. EQUITY INVESTMENT
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 $4,174,000 and $2,335,000 at June
30, 1995 and 1994, respectively. Losses of $308,000, $980,000, and
$889,000, respectively, for the years ended June 30, 1995, 1994, and 1993
were recorded. Subsequent to year-end, the Company purchased the remaining
50% interest for a total cost of $655,000. Thus, Tech Textiles became a
consolidated, wholly owned subsidiary of the Company beginning in fiscal
1996.
Summarized financial information of Tech Textiles as of June 30, 1995 and
1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
FINANCIAL POSITION
<S> <C> <C>
Net current assets $ 2,365,000 $ 593,000
Total assets 4,559,000 2,662,000
Net assets 4,174,000 2,335,000
</TABLE>
F-14
<PAGE> 16
8. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following at June 30, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land $ 1,373,000 $ 555,000
Buildings and improvements 33,671,000 19,422,000
Machinery and equipment 159,741,000 106,871,000
-------------- ---------------
194,785,000 126,848,000
Less accumulated depreciation and amortization (80,476,000) (61,494,000)
-------------- ---------------
Property, plant, and equipment - net $ 114,309,000 $ 65,354,000
============== ===============
</TABLE>
9. ACCRUED EXPENSES
Accrued expenses consist of the following at June 30, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Salaries, wages, and employee benefits $ 5,100,000 $ 2,821,000
Pension costs 2,148,000 1,697,000
Taxes, other than income taxes 1,459,000 1,276,000
Interest expense 507,000 41,000
Current estimated phase-out costs of steel
fabrication operations 2,000,000 1,000,000
Other 1,870,000 537,000
------------- ------------
$ 13,084,000 $ 7,372,000
============= ============
</TABLE>
10. LONG-TERM FINANCING AND SHORT-TERM BORROWINGS
Long-term debt and short-term borrowings consist of the following at June
30, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
JOHNSTON
Short-term borrowings $ 6,800,000 $ 2,500,000
============= =============
Revolving credit loans $ 45,000,000 $ 35,000,000
Term notes payable 5,000,000
Purchase money mortgage loan 1,217,000 1,303,000
------------- -------------
46,217,000 41,303,000
JUPITER
Subordinated debentures 14,500,000
Securities loans 1,191,000
Other debt 933,000
-------------
16,624,000
</TABLE>
F-15
<PAGE> 17
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
WELLINGTON SEARS
Revolving credit loans $ 17,361,000
Term loan 19,687,000
Equipment loans 2,768,000
Amounts due former affiliates of Polylok 1,434,000
Installment and other loans 637,000
--------------
41,887,000
-------------- -------------
Total 104,728,000 41,303,000
Less current maturities (5,894,000) (5,087,000)
-------------- -------------
$ 98,834,000 $ 36,216,000
============== =============
</TABLE>
The estimated fair value of long-term debt (including current maturities)
is $107,086,000 at June 30, 1995. Interest rates that are currently
available to the Company for issuance of debt with similar terms, credit
characteristics, and remaining maturities were used to estimate fair value
of long-term debt.
JOHNSTON
Amended Credit Agreement - In January 1995, Johnston amended and restated
its revolving credit agreement to increase the borrowings under its
revolving credit loans to $45,000,000 and to provide for $10,000,000 in
annually renewable lines of credit. Principal under the agreement is
payable in full no later than January 14, 1997. Interest is payable
quarterly at a variable rate which is the higher of the federal funds rate
plus 1/2 of 1% or the prime rate (7.5% at June 30, 1995 and 1994). A
commitment fee of 1/2 of 1% on the unused portion of the revolving credit
facility is payable annually. Borrowings under the lines of credit bear
interest at the higher of the federal funds rate plus 1/2 of 1% or the
prime rate. At June 30, 1995, there were borrowings of $6,800,000 under
the lines of credit, and the interest rate under these borrowings was 9%.
All machinery, equipment, inventory, and receivables of Johnston and its
wholly owned subsidiaries are pledged as collateral under the Amended
Credit Agreement.
Terms Notes Payable - The term notes were payable to banks and bore
interest at the fixed rate of 8.75% per annum. In March 1995, such term
notes were paid in full.
Purchase Money Mortgage Loan - In connection with the purchase of a new
office building during 1994, Johnston obtained a Purchase Money Mortgage
Loan of $1,325,000. At June 30, 1995, borrowings outstanding under this
loan were $1,217,000. 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 8.75% at June 30, 1995. Beginning on March 31, 1994, Johnston 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 under this loan agreement.
Covenants and Restrictions - The Amended Credit Agreement requires
Johnston, among other things, to maintain certain financial ratios and
specified levels of working capital and tangible net worth, as defined.
The agreement also places a limit on Johnston's total borrowings to the
lower of $52,000,000,
F-16
<PAGE> 18
Johnston's total stockholders' equity, or an amount computed using a
borrowing base formula. Additionally, Johnston's restricted investments,
defined to include guarantees and advances to affiliates, are limited to
the lesser of 20% of Johnston's total assets or $13,500,000 plus 50% of net
income for fiscal 1995, 1994, and 1993. This agreement also restricts
Johnston's ability to incur debt, buy or sell assets, pay dividends, and
issue or repurchase capital stock. Johnston's wholly owned subsidiaries
paid dividends of $15,952,000 to Johnston during the year ended June 30,
1995.
JUPITER
Subordinated Debentures - The subordinated debentures, which relate to GWI,
are payable to the Small Business Administration ("SBA") and bear interest
at an effective weighted rate of 7.8% at June 30, 1995. Principal payments
are due as follows:
<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30, AMOUNT
<S> <C>
1998 $ 2,500,000
2001 7,000,000
2003 5,000,000
-------------
$ 14,500,000
=============
</TABLE>
The subordinated debentures contain restrictions on prepayments,
distributions to shareholders, and certain operating results. At June 30,
1995, GWI did not have available funds for distribution (equity of
$12,426,000) to its shareholder nor funds for the prepayment of its
debentures.
Securities Loans - At June 30, 1995, Jupiter had borrowed $1,191,000 under
a brokerage margin account with average interest rates of 10%.
WELLINGTON
Revolving Credit Loans - In January 1995, Wellington amended its revolving
credit, term loan, and equipment loan agreement with a bank. The agreement
provides that Wellington may obtain revolving credit loans up to an
aggregate amount of the lesser of $24,000,000 or certain percentages of
accounts receivable and inventories through November 20, 1998, with an
automatic renewal for one year. Substantially all machinery, inventory,
and receivables of Wellington are pledged as collateral under such
borrowing agreement.
Wellington is also required to pay a commitment fee equal to 1/2 of 1% per
annum on the unused portion of the revolving credit facility. The unused
available line of credit at June 30, 1995 was approximately $4,770,000.
Interest is payable at the current prime rate plus 1% (10% at June 30,
1995). At June 30, 1995 and 1994, Wellington had outstanding letters of
credit of $400,000 and $350,000, respectively.
Term Loan - The amended agreement provides for a term loan of $21,000,00
payable in monthly installments of $218,735 through November 1998, at which
time the remaining unpaid balance is due. The term loan bears interest at
the current prime rate plus 1% (10% at June 30, 1995).
F-17
<PAGE> 19
Equipment Loans - Through November 18, 1998, Wellington may borrow up to
$5,000,000 to finance the purchase of equipment. The principal amount is
payable in monthly installments of 1/96th of the loan balance from August
1995 through November 1998, when the remaining balance is due. The
equipment loans bear interest at the current prime rate plus 1% (10% at
June 30, 1995).
Covenants and Restrictions - The amended revolving credit, term loan, and
equipment loan agreement requires Wellington, among other things, to
maintain certain financial ratios and specified levels of working capital
and profitability, as defined. The agreement also restricts Wellington's
ability to incur debt, buy or sell assets, pay dividends, transfer assets
to its parent company for payment or settlement of debt, and issue or
repurchase capital stock. At June 30, 1995, Wellington did not have
available funds for distribution (equity of $29,722,000) to its
shareholder.
At certain times during the years ended June 30, 1995 and 1994, Wellington
was not in compliance with either its cash flow coverage ratio covenant or
debt coverage ratio covenant. These events of noncompliance were waived by
the lending institution in waivers dated September 27, 1994, November 21,
1994, and April 21, 1995.
Amounts Due Former Affiliates of Polylok - Amounts due former affiliates of
Polylok are primarily comprised of $1,434,000 due under a note payable
agreement and deferred compensation agreement with the former owner of
Polylok Corporation. Amounts are payable in equal quarterly installments
of $269,108 plus interest, which accrues at the prime interest rate (9% at
June 30, 1995).
During the year ended June 30, 1995, Wellington stopped making payments
under these agreements due to the former owner's failure to sign a debt
subordination agreement required by Wellington's lender (see Note 16). The
former owner has sued Wellington for performance under the agreements. The
principal and interest payments past due total $1,434,000 and $277,000,
respectively, at June 30, 1995.
Installment and Other Loans - Installment and other loans are comprised of
$527,000 due in September 1996 for the purchase of certain machinery and
equipment, and $110,000 borrowed to finance the construction of a new roof
in one of the Company's facilities. The principal under the roof loan is
payable in monthly installments of $7,340 through July 1996, at which time
all remaining amounts are due. Both loans are noninterest-bearing, and the
Company did not record any imputed interest.
DEBT MATURITIES - Aggregate scheduled repayments of long-term debt are
summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30, AMOUNT
<S> <C>
1996 $ 5,894,000
1997 48,653,000
1998 5,584,000
1999 31,574,000
2000 and thereafter 13,023,000
---------------
$ 104,728,000
===============
</TABLE>
F-18
<PAGE> 20
11. OTHER LIABILITIES
Other liabilities consist of the following at June 30, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Long-term portion of estimated phase-out costs
of steel fabrication operations $ 6,363,000 $ 6,903,000
Additional pension liability (see Note 17) 5,534,000 8,029,000
Other 2,653,000 1,944,000
------------- -------------
$ 14,550,000 $ 16,876,000
============= =============
</TABLE>
12. 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.
On February 1, 1993, Johnston purchased 294,000 shares of its stock at
$8.50 per share from GRM Industries, Inc., a subsidiary of Redlaw.
13. STOCK OPTION PLANS
Employees' Stock Incentive Plan - Johnston has a Stock Incentive Plan for
Key Employees under which Johnston 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.
A summary of employee stock option activity for the three years ended June
30, 1995 is as follows:
<TABLE>
<CAPTION>
NON- INCENTIVE
QUALIFIED STOCK EXERCISE
OPTIONS OPTIONS TOTAL PRICE
<S> <C> <C> <C> <C>
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 3.22 - 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 exercised (15,000) (15,000) 3.22
-------- ------- --------
Options outstanding at June 30, 1995 393,750 - 393,750 5.55 - 10.17
======== ======= ========
Options available for grant at June 855,000
30, 1995 ========
</TABLE>
F-19
<PAGE> 21
At June 30, 1995, approximately 341,250 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 is also recognized on stock appreciation rights based
on the change in market price from the grant price. Compensation expense
relating to the Johnston's Employee Stock Incentive Plan for employees was
$3,000 during the year ended June 30, 1993. No compensation expense was
recognized in 1995 and 1994.
Other Stock Option Agreement - During 1991, Johnston 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
Johnston's common stock. The options are exercisable at $3.22 per share.
Jupiter Stock Option Plans - Jupiter has an employee stock option plan and
a director stock option plan under which options have been granted to
purchase 428,220 shares of Jupiter common stock at prices ranging from
$3.62 to $28.75. At June 30, 1995, approximately 302,000 of the options
are exercisable.
In connection with Johnston's planned acquisition of the remaining publicly
held shares of Jupiter (see Note 20), these options are expected to be
redeemed by Johnston.
14. EMPLOYEE STOCK PURCHASE PLAN
On October 15, 1990, Johnston adopted an Employee Stock Purchase Plan under
which selected eligible key employees and directors of Johnston were
granted the opportunity to purchase shares of Johnston's common stock.
Through June 30, 1995, 900,209 shares of Johnston's stock have been
purchased at market prices by employees and directors under the plan.
At June 30, 1995, the Company has guaranteed plan participants' bank
borrowings totaling approximately $7,088,000.
15. 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, 1991 was a reduction of $418,000. The impact of applying SFAS 109 on
net income and earnings per share for the year ended June 30, 1993 was a
reduction of $352,000 and $.03, respectively.
F-20
<PAGE> 22
The provision for income taxes is comprised of the following for each of
the three years in the period ended June 30, 1995:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Federal:
Current $ 2,834,000 $ 2,604,000 $ 2,185,000
Deferred 3,276,000 810,000 2,191,000
------------ ------------ ------------
6,110,000 3,414,000 4,376,000
------------ ------------ ------------
State:
Current 552,000 689,000 392,000
Deferred 421,000 (39,000) 417,000
------------ ------------ ------------
973,000 650,000 809,000
------------ ------------ ------------
Provision for income taxes $ 7,083,000 $ 4,064,000 $ 5,185,000
============ ============ ============
</TABLE>
The significant components of deferred income tax assets and liabilities at
June 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Estimated phase-out costs of steel fabrication operations $ 3,174,000 $ 3,000,000
Alternative minimum tax 1,949,000 678,000
Additional pension liabilities 1,086,000 1,957,000
Other - net 2,413,000 1,570,000
-------------- --------------
8,622,000 7,205,000
-------------- --------------
Deferred tax liabilities:
Unrealized appreciation - investments (5,012,000)
Inventories (2,365,000) (2,235,000)
Investments - at equity (in consolidated affiliates) (2,916,000) (1,742,000)
Property, plant, and equipment (10,288,000) (8,347,000)
-------------- --------------
(20,581,000) (12,324,000)
-------------- --------------
Net deferred tax liability $ (11,959,000) $ (5,119,000)
============== ==============
Net current deferred tax liability $ (2,947,000) $ (1,164,000)
Net long-term deferred tax liability (9,012,000) (3,955,000)
-------------- --------------
$ (11,959,000) $ (5,119,000)
============== ==============
</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.
F-21
<PAGE> 23
The reconciliation of the Company's effective income tax rate to the
federal statutory rate of 34% for the three years ended June 30, 1995,
1994, and 1993 follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Federal income taxes at statutory rate $ 5,664,000 $ 3,590,000 $ 4,624,000
State income taxes, net of federal tax benefit 746,000 429,000 533,000
Equity in income of majority owned subsidiary 607,000
Impact of purchase accounting adjustments (61,000)
Other, net 66,000 45,000 89,000
------------ ------------ ------------
$ 7,083,000 $ 4,064,000 $ 5,185,000
============ ============ ============
Effective rate 42.5% 38.5% 38.1%
===== ===== =====
</TABLE>
At June 30, 1995, the Company has alternative minimum tax credit
carryforwards of approximately $1,949,000 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 is
more likely than not and as such has not established any valuation
allowance against this asset.
16. COMMITMENTS AND CONTINGENCIES
On March 3, 1995, Polylok Corporation and its majority shareholder
commenced an action against Jupiter and Wellington in the United States
District Court for the Eastern district of North Carolina. The action
arises from the sale of the former Polylok plant located at Tarboro, North
Carolina to Wellington's predecessor (JPI Development Corporation). The
majority shareholder asserted claims against Jupiter and Wellington for
breach of contract and anticipatory breach of contract relating to
installment payments due to such majority shareholder under a $1.6 million
note.
Jupiter and Wellington have filed counterclaims against Polylok and the
majority shareholder for breach of the majority shareholder consultancy
agreement and breach of the settlement of prior litigation between the
parties relating to the plant sale. They have alleged that the majority
shareholder has breached the consultancy agreement by refusing to
subordinate his note to lender financing for Wellington which now operates
the former Polylok plant.
The case is scheduled for trial on or after November 6, 1995. The majority
shareholder has filed motions for summary judgment on his claims for
installment payments amounting to approximately $900,000. Jupiter and
Wellington have vigorously defended against the majority shareholder's
motions. Since this case is in its preliminary stages, the eventual
outcome cannot be predicted with reasonable accuracy.
The Company is periodically involved in legal proceedings arising out of
the ordinary conduct of its business. Management does not expect that they
will have a material adverse effect on the Company's consolidated financial
position or results of operations.
Lease Commitments - Rent expense under operating leases covering production
equipment and office facilities was $791,000 in 1995, $785,000 in 1994, and
$1,100,000 in 1993.
F-22
<PAGE> 24
At June 30, 1995, the Company is committed to pay the following minimum
rental payments on noncancelable operating leases:
<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30, AMOUNT
<S> <C>
1996 $ 587,000
1997 471,000
1998 257,000
1999 37,000
2000 and thereafter 22,000
------------
$ 1,374,000
============
</TABLE>
Other Commitments - The Company has employment contracts with certain of
its employees extending through 1999 aggregating $4,939,000.
The Company has purchase commitments as of June 30, 1995 with several
vendors to buy inventory with terms in excess of one year aggregating
approximately $13,707,000.
The Company also has capital commitments as of June 30, 1995 with several
vendors for the purchase of machinery and equipment with terms extending
over one year aggregating approximately $8,031,000.
17. EMPLOYEE BENEFIT PLANS
Defined Benefit Pension Plans - Johnston 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. Johnston'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, 1995 and 1994, an additional liability of $5,534,000 and
$8,029,000, respectively, is reflected in the consolidated balance sheets.
At June 30, 1995 and 1994, the liability exceeded the unrecognized prior
service cost resulting in a minimum pension liability, net of taxes, of
$1,774,000 and $3,198,000, respectively, recorded as a reduction of the
Company's equity.
F-23
<PAGE> 25
Net periodic pension cost for 1995, 1994, and 1993 was $2,342,000,
$2,205,000, and $1,815,000, respectively, and included the following
components:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Service cost $ 953,000 $ 1,010,000 $ 824,000
Interest cost 1,999,000 1,829,000 1,729,000
Actual (return) loss on assets (2,460,000) 395,000 (1,202,000)
Net amortization and deferral 1,850,000 (1,029,000) 464,000
------------ ------------ ------------
Net periodic pension cost $ 2,342,000 $ 2,205,000 $ 1,815,000
============ ============ ============
</TABLE>
The following sets forth the funded status of the plans at June 30, 1995
and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 25,280,000 $ 24,784,000
Nonvested benefit obligation 729,000 464,000
------------- -------------
Accumulated benefit obligation $ 26,009,000 $ 25,248,000
============= =============
Projected benefit obligation $ 27,798,000 $ 27,048,000
Plan assets at fair value 19,013,000 15,769,000
------------- -------------
Projected benefit obligation in excess of plan assets $ 8,785,000 $ 11,279,000
============= =============
Unrecognized prior service cost $ 590,000 $ 491,000
Unrecognized net loss 4,649,000 6,956,000
Unrecognized net liability at date of initial adoption 2,084,000 2,382,000
Pension liability recognized 1,462,000 1,450,000
------------- -------------
Total $ 8,785,000 $ 11,279,000
============= =============
</TABLE>
For the salaried and hourly plans, the weighted average discount rate used
in determining the projected benefit obligation was 8% in 1995 and 7.5% in
1994, and the rate of increase in future compensation levels was graded by
age from 7.5% to an ultimate rate of 4% for 1995 and was a flat rate of 6%
for 1994. The expected long-term rate of return on plan assets was 8% for
1995 and 1994 for both plans.
Defined Contribution Plans - Through December 31, 1994, Jupiter maintained
a defined contribution employee pension plan for substantially all
employees to which it made annual contributions of 10% of compensation,
subject to a $30,000 individual annual limitation. A portion of the plan's
assets was invested in Jupiter's common stock. At June 30, 1995, 7,554
Jupiter shares were owned by the plan. During August 1995, Jupiter
received a favorable determination letter from the Internal Revenue Service
to terminate the plan, effective December 31, 1994. Accordingly, the plan
assets were distributed to the participants during August 1995.
Wellington has a defined contribution savings plan that covers
substantially all full-time Wellington employees who qualify as to age and
length of service. Wellington may make discretionary contributions to the
plan. Wellington made contributions of $286,000 for the year ended June
30, 1995.
F-24
<PAGE> 26
18. MAJOR CUSTOMERS
Net sales to a major customer of the Company comprised 6%, 11%, and 10% of
net sales for the years ended June 30, 1995, 1994, and 1993, respectively.
Another major customer, who acts as a distributor for the Company,
comprised 5%, 9%, and 9%, of net sales for the years ended June 30, 1995,
1994, and 1993, 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 sheets and are recorded at the fair market
value of the underlying assets, include corporate stocks including equity
securities of affiliated companies, corporate bonds including debt
securities of affiliated companies, 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, 1995 and 1994, the trust
assets and corresponding liabilities each totaled $1,061,000 and
$1,005,000, respectively.
20. SUBSEQUENT EVENT
On August 16, 1995, Johnston jointly announced with Jupiter an agreement
and plan of merger under which the public shareholders of Jupiter would
receive $32.875 per share in cash from Johnston. The per share cash price
is subject to adjustment based upon the market value of certain securities
held by Jupiter on a date close to the date the merger proxy statement is
mailed to Jupiter shareholders. If this adjustment had been made as of the
close of business on August 15, 1995, the amount to be paid by Johnston
would have been $31.593 per share or approximately $37,500,000. The merger
is subject to approval by Jupiter's shareholders and is expected to close
in December 1995.
F-25
<PAGE> 27
FINANCIAL STATEMENT SCHEDULES
(See Independent Auditors' Report on Page F-1 and F-2)
<PAGE> 28
JOHNSTON INDUSTRIES, INC. (PARENT COMPANY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,979,000 $ 3,681,000
Prepaid expenses and other 469,000 522,000
Deferred income taxes 788,000
------------ -------------
Total current assets 4,236,000 4,203,000
INVESTMENT IN WHOLLY OWNED CONSOLIDATED
SUBSIDIARIES - At equity 95,705,000 92,116,000
INVESTMENTS IN MAJORITY OWNED SUBSIDIARY AND
IN UNCONSOLIDATED AFFILIATES - At equity 29,067,000 21,036,000
PROPERTY, PLANT, AND EQUIPMENT - Net 2,739,000 2,331,000
INTANGIBLE ASSET - PENSION 2,675,000 2,874,000
OTHER ASSETS 1,721,000 7,127,000
LONG-TERM DEFERRED INCOME TAXES 4,859,000 5,933,000
------------ -------------
$141,002,000 $ 135,620,000
============ =============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings $ 6,800,000 $ 2,500,000
Current maturities of long-term debt 87,000 5,087,000
Accounts payable 856,000 280,000
Accrued expenses 3,012,000 2,037,000
Income taxes payable 656,000
Deferred income taxes 1,731,000
Intercompany payables 7,541,000 11,030,000
------------ -------------
Total current liabilities 18,296,000 23,321,000
LONG-TERM DEBT 46,130,000 36,216,000
------------ -------------
OTHER LIABILITIES 13,149,000 16,275,000
------------ -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.10 per share; authorized,
20,000,000 shares; issued 12,426,891 and 12,411,891 1,243,000 1,241,000
Additional paid-in capital 17,258,000 17,107,000
Retained earnings 54,808,000 51,065,000
------------ -------------
Total 73,309,000 69,413,000
Less treasury stock: 1,861,912 and 1,682,112 shares at (8,108,000) (6,407,000)
cost
Less minimum pension liability adjustment, net of tax (1,774,000) (3,198,000)
benefit ------------ -------------
Stockholders' equity 63,427,000 59,808,000
------------ -------------
$141,002,000 $ 135,620,000
============ =============
</TABLE>
S - 1
<PAGE> 29
JOHNSTON INDUSTRIES, INC. (PARENT COMPANY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF INCOME
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
NET SALES $ - $ - $ -
COSTS AND EXPENSES:
Cost of sales, excluding depreciation and amortization (5,000) 483,000 96,000
Selling, general, and administrative (53,000) (310,000) 93,000
Depreciation and amortization 255,000 (240,000) (252,000)
---------------- --------------- ---------------
Total costs and expenses 197,000 (67,000) (63,000)
---------------- --------------- ---------------
INCOME (LOSS) FROM OPERATIONS (197,000) 67,000 63,000
OTHER EXPENSE:
Interest expense - net 3,776,000 2,984,000 2,504,000
Other - net 1,717,000 619,000 1,095,000
---------------- --------------- ---------------
Total other expenses 5,493,000 3,603,000 3,599,000
---------------- --------------- ---------------
EQUITY IN EARNINGS (LOSSES)
OF EQUITY INVESTMENTS 2,784,000 (1,141,000) 5,093,000
---------------- --------------- ---------------
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR
INCOME TAXES AND INCOME FROM SUBSIDIARIES (2,906,000) (4,677,000) 1,557,000
PROVISION (BENEFIT) FOR INCOME TAXES (926,000) (1,606,000) 512,000
---------------- --------------- ---------------
NET INCOME (LOSS) BEFORE INCOME
OF SUBSIDIARIES (1,980,000) (3,071,000) 1,045,000
INCOME FROM OPERATIONS OF SUBSIDIARIES 9,855,000 9,566,000 7,369,000
---------------- --------------- ---------------
NET INCOME $ 7,875,000 $ 6,495,000 $ 8,414,000
================ =============== ===============
</TABLE>
S - 2
<PAGE> 30
JOHNSTON INDUSTRIES, INC. (PARENT COMPANY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 7,875,000 $ 6,495,000 $ 8,414,000
----------- ----------- -----------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 255,000 (240,000) (252,000)
Undistributed income from operations of (9,855,000) (9,566,000) (7,369,000)
subsidiaries
Undistributed income of affiliates (2,784,000) 1,141,000 (5,093,000)
Changes in assets and liabilities:
Deferred income taxes (359,000) (161,000) 507,000
Prepaid expenses and other assets (299,000) (198,000) 324,000
Accounts payable 715,000 222,000 (36,000)
Accrued expenses 975,000 (18,000) (94,000)
Income taxes payable (687,000) (9,000) 152,000
Intercompany accounts (9,441,000) (10,752,000) (8,019,000)
Other liabilities (568,000) 487,000 1,060,000
Other, net 4,000 124,000 124,000
----------- ----------- -----------
Total adjustments (22,044,000) (18,970,000) (18,696,000)
----------- ----------- -----------
Net cash used in operating activities (14,169,000) (12,475,000) (10,282,000)
----------- ----------- -----------
INVESTING ACTIVITIES:
Additions to property, plant, and equipment (720,000) (1,997,000) (200,000)
Increase in investments (5,247,000) (4,578,000) (2,034,000)
Repayments of loans by stockholders 5,383,000 341,000
----------- ----------- -----------
Net cash used in investing activities (5,967,000) (1,192,000) (1,893,000)
----------- ----------- -----------
FINANCING ACTIVITIES:
Principal payments of debt (5,086,000) (4,022,000) (2,000,000)
Proceeds from issuance of long-term debt 10,000,000 13,325,000
Net borrowings (repayments) under line-of-credit 4,300,000 (7,500,000) 4,000,000
agreements
Purchase of treasury stock (1,701,000) (348,000) (2,693,000)
Proceeds from employee stock ownership plan 1,454,000
Proceeds from issuance of common stock 101,000 380,000 811,000
Payments from consolidated subsidiaries 15,952,000 15,818,000 16,749,000
Dividends paid (4,132,000) (3,694,000) (3,412,000)
----------- ----------- -----------
Net cash provided by financing activities 19,434,000 13,959,000 14,909,000
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (702,000) 292,000 2,734,000
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,681,000 3,389,000 655,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,979,000 $ 3,681,000 $ 3,389,000
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest paid $ 3,673,000 $ 2,962,000 $ 2,861,000
=========== =========== ===========
Income taxes paid $ 3,168,000 $ 2,401,000 $ 2,052,000
=========== =========== ===========
</TABLE>
S - 3
<PAGE> 31
JOHNSTON INDUSTRIES, INC. (PARENT COMPANY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL STATEMENTS
Johnston Industries, Inc. and subsidiaries (the "Company") publish consolidated
financial statements that are its primary financial statements. Therefore,
these parent company condensed financial statements are not intended to be the
primary financial statements of the Company, and should be read in conjunction
with the consolidated financial statements and notes thereto of the Company.
S - 4
<PAGE> 32
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING CHARGED TO OTHER BALANCE AT
DESCRIPTION OF YEAR OPERATIONS ACCOUNTS DEDUCTIONS END OF YEAR
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
1995 $ 368,000 $ 305,000 $ 838,000(2) $ (398,000)(1) $ 1,113,000
========= ========= ========= ========== ============
1994 $ 314,000 $ 151,000 $ (97,000)(1) $ 368,000
========= ========= ========= ========== ============
1993 $ 667,000 $ 383,000 $ (736,000)(1) $ 314,000
========= ========= ========= ========== ============
</TABLE>
(1) Amounts written off, net of recoveries.
(2) Additional amount added during the year is from the consolidation of
Jupiter in January 1995 representing the balance at the date of
consolidation.
S - 5
<PAGE> 1
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 21 - LIST OF SUBSIDIARIES OF JOHNSTON INDUSTRIES, INC.
- --------------------------------------------------------------
1. Johnston Industries, Inc.
State of Incorporation: Delaware
2. Southern Phenix Textiles, Inc.
State of Incorporation: Alabama
3. Opp and Micolas Mills, Inc.
State of Incorporation: Alabama
4. JI International, Inc.
State of Incorporation: Delaware
5. Jupiter National, Inc.
State of Incorporation: Delaware
.6. Wellington Sears Company
State of Incorporation: Delaware
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
Johnston Industries, Inc.:
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 18, 1995 appearing in the Annual Report on Form 10-K of the Company for
the year ended June 30, 1995.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
September 27, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JOHNSTON
INDUSTRIES, INC. AND SUBSIDIARIES FINANCIAL STATEMENTS AS OF JUNE 30, 1995 AND
FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 9,456,000
<SECURITIES> 9,741,000
<RECEIVABLES> 43,333,000
<ALLOWANCES> 1,113,000
<INVENTORY> 46,389,000
<CURRENT-ASSETS> 110,811,000
<PP&E> 194,785,000
<DEPRECIATION> 80,476,000
<TOTAL-ASSETS> 255,101,000
<CURRENT-LIABILITIES> 49,109,000
<BONDS> 98,834,000
<COMMON> 1,243,000
0
0
<OTHER-SE> 62,184,000
<TOTAL-LIABILITY-AND-EQUITY> 255,101,000
<SALES> 263,327,000
<TOTAL-REVENUES> 263,327,000
<CGS> 209,598,000
<TOTAL-COSTS> 245,436,000
<OTHER-EXPENSES> 1,590,000
<LOSS-PROVISION> 89,000
<INTEREST-EXPENSE> 5,915,000
<INCOME-PRETAX> 16,658,000
<INCOME-TAX> 7,083,000
<INCOME-CONTINUING> 7,875,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,875,000
<EPS-PRIMARY> .74
<EPS-DILUTED> 0
</TABLE>
