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FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
[X] For the quarterly period ended September 27, 1997
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Commission file number 1-6687
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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)
N/A
(Former name, former address and former fiscal year if changed since last
report.)
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 [X] No [ ]
The number of shares outstanding of the Registrant's Common Stock as of
September 27, 1997 was 10,726,272 shares.
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JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Operations
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURE PAGE
INDEX TO EXHIBITS
2
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PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 27, DECEMBER 28,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 5,798 $ 1,748
Accounts and Notes Receivable (Less Allowance for
Doubtful Accounts of $1,958 and $1,379) 41,780 37,168
Inventories 54,942 65,520
Net Assets of Discontinued Operations 1,838
Income Taxes Receivable 1,439 1,631
Assets Held for Sale 7,240 7,930
Prepaid Expenses and Other 2,185 3,233
-------- --------
Total Current Assets 113,384 119,068
Property, Plant and Equipment-Net 118,716 130,047
Goodwill 11,637 14,046
Intangible Asset-Pension 2,042 2,042
Other Assets 3,572 4,886
-------- --------
Total Assets $249,351 $270,089
======== ========
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 20,108 $ 26,412
Accrued Expenses 11,890 13,089
Current Maturities of Long-Term Debt 11,992 6,510
Deferred Income Taxes 482 757
-------- --------
Total Current Liabilities 44,472 46,768
Long-Term Debt - Less Current Maturities 137,104 144,314
Other Liabilities 11,097 11,824
Deferred Income Taxes 5,617 7,991
STOCKHOLDER'S EQUITY:
Preferred Stock, Par Value $.01 per Share; Authorized
3,000,000 Shares; Issued 325,000 3 3
Common Stock, Par Value $.10 per share; Authorized,
20,000,000 Shares; Issued 12,467,691 and 12,449,391 1,246 1,246
Additional Paid-In Capital 23,642 23,568
Retained Earnings 34,706 45,111
-------- --------
Total 59,597 69,928
Less Treasury Stock; 1,741,419 and 2,086,517 shares (8,058) (10,258)
Less Minimum Pension Liability Adjustment, Net of Tax Benefit (478) (478)
-------- --------
Total Stockholders' Equity 51,061 59,192
-------- --------
Total Liabilities and Stockholders' Equity $249,351 $270,089
======== ========
</TABLE>
See notes to Condensed Consolidated Financial Statements
3
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JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-------------------------------------------------------------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
------------------------------- ------------------------------
SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28,
1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $78,488 $77,071 $252,990 $242,844
------- ------- -------- --------
Costs and Expenses:
Cost of Sales, excluding Depreciation and Amortization 67,697 62,514 209,856 198,781
Selling, General and Administrative 7,264 6,013 20,852 19,143
Depreciation and Amortization 5,202 5,063 15,878 14,849
Restructuring Charges 83 433 7,201 2,685
Loss on Impairment of Assets -- -- 903 200
------- ------- -------- --------
Total Costs and Expenses 80,246 74,023 254,690 235,658
------- ------- -------- --------
Income (Loss) from Operations (1,758) 3,048 (1,700) 7,186
Other Expenses (Income):
Interest Expense 3,410 2,986 10,131 8,173
Interest Income (213) (51) (669) (190)
Other-Net 771 407 1,109 115
------- ------- -------- --------
Total Other Expenses - Net 3,968 3,342 10,571 8,098
------- ------- -------- --------
Realized and Unrealized Investment Gain (Loss) 379 (1,296) 572 (3,712)
------- ------- -------- --------
Loss from Continuing Operations before Tax Provision,
Minority Interest in Consolidated
Subsidiary, and Extraordinary Item (5,347) (1,590) (11,699) (4,624)
Income Tax Benefit (2,058) (473) (3,325) (1,774)
Minority Interest in Loss of Consolidated Subsidiary -- -- -- 1,572
------- ------- -------- --------
Loss from Continuing Operations (3,289) (1,117) (8,374) (1,278)
DISCONTINUED OPERATIONS:
Income (Loss) from Discontinued Operations of
Jupiter National (less applicable
income tax of $0 and $(113) for the
three months and $5 and $3,514 for the
nine months, respectively) net of minority
interest in income of $0 and $1,455 for
the nine months, respectively -- (170) (11) 6,355
Gain (Loss) on Disposal of Jupiter National,
including provision of $300
for operating losses during phase-out
period (less applicable income taxes of
$0 and $73 for the three months and $60
and ($862) for the nine months, respectively) -- 136 137 (1,633)
------- ------- -------- --------
Income (Loss) from Discontinued Operations -- (34) 126 4,722
Extraordinary Item, (less applicable income
taxes of $323), - Loss on Early Extinguishment of Debt -- -- -- 527
------- ------- -------- --------
Net Income (Loss) (3,289) (1,151) (8,248) 2,917
Dividends on Preferred Stock -- 41 81 84
------- ------- -------- --------
Net Income (Loss) Available to Common Stockholders $(3,289) $(1,192) $ (8,329) $ 2,833
======= ======= ======== ========
</TABLE>
Continued
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JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-------------------------------------------------------------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
-------------------------------- --------------------------------
SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Earnings (Loss) Per Common Share:
Loss from Continuing Operations $ (0.31) $ (0.11) $ (0.80) $ (0.13)
Discontinued Operations -- (0.01) 0.01 0.44
Extraordinary Loss -- -- -- (0.05)
------- ------- ------- -------
Net Earnings (Loss) Per Common Share $ (0.31) $ (0.12) $ (0.79) $ 0.26
======= ======= ======= =======
Dividends Per Share $ -- $ 0.10 $ 0.20 $ 0.30
======= ======= ======= =======
Weighted Average Number of Common and
Common Equivalent Shares Outstanding 10,726 10,363 10,503 10,704
======= ======= ======= =======
</TABLE>
See notes to Condensed Consolidated Financial Statements Concluded
5
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JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-----------------------------------------------------------
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
------------------------------
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
CONTINUING OPERATIONS:
Loss from Continuing Operations $(8,374) $ (1,278)
Adjustments to Reconcile Loss from Continuing Operations
to Net Cash Provided by (Used in) Operating Activities:
Depreciation and Amortization 15,878 14,849
Restructuring Charges 7,201
Loss on Impairment of Assets 903 200
Provision for Bad Debts 512 235
Net Realized and Unrealized (Gains) Losses on Investments (572) 3,712
Loss on Disposal of Fixed Assets 9 91
Minority Interest in (Loss) of Consolidated Subsidiary (1,572)
Changes in Assets and Liabilities, Net of Effect of Acquisition
Accounts and Notes Receivables (5,164) (1,861)
Inventories 9,639 3,370
Deferred Income Taxes (2,649) (1,812)
Prepaid Expenses and Other Assets 1,874 (1,341)
Accounts Payable (4,603) 2,267
Accrued Expenses 1,557 2,051
Income Taxes Receivable 223 1,461
Other Liabilities (727) 949
Other-Net (200)
------- --------
Total Adjustments 23,881 22,599
------- --------
Net Cash Provided by Continuing Operations 15,507 21,321
DISCONTINUED OPERATIONS:
Income (Loss) from Discontinued Operations (11) 6,355
Gain (Loss) on Disposal of Discontinued Operations 137 (1,633)
Cash Provided by (Used in) Discontinued Operations 1,901 (2,129)
Items not Affecting Cash - Net -- (11,809)
------- --------
Net Cash Provided by (Used in) Discontinued Operations 2,027 (9,216)
------- --------
Net Cash Provided by Operating Activities 17,534 12,105
INVESTING ACTIVITIES:
CONTINUING OPERATIONS:
Additions to Property, Plant and Equipment (8,065) (14,893)
Decrease in Non-Operating Accounts Payable (1,698) (6,873)
Purchase of Minority Interest in Jupiter (37,693)
Purchase of T.J. Beall, Net of Cash Acquired 333
------- --------
Net Cash Used in Continuing Operations (9,763) (59,126)
</TABLE>
Continued
6
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JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-----------------------------------------------------------
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
------------------------------
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
<S> <C> <C>
INVESTING ACTIVITIES CONTINUED:
DISCONTINUED OPERATIONS:
Net Loss from Continuing Operations -- (240)
Proceeds from Sale of Investments -- 35,000
------- ------
Net Cash Provided by Discontinued Operations -- 34,760
------- ------
Net Cash Used in Investing Activities (9,763) (24,366)
FINANCING ACTIVITIES:
CONTINUING OPERATIONS:
Principal Payments of Debt (7,100) (109,812)
Proceeds from Issuance of Long-Term Debt 5,500 159,532
Borrowings under Line-of-Credit Agreements 4,750
Repayments under Line-of-Credit Agreements (18,000)
Purchase of Treasury Stock (2,241)
Proceeds from Issuance of Common Stock 36 164
Dividends Paid (2,157) (3,189)
Extraordinary Item, Loss on Early Extinguishment of Debt (850)
------- ------
Net Cash Provided by (Used in) Continuing Operations (3,721) 30,354
DISCONTINUED OPERATIONS:
Principal Payments of Debt (16,171)
Proceeds from Issuance of Long-Term Debt 117
------- ------
Net Cash Used in Discontinued Operations -- (16,054)
------- ------
Net Cash Provided by (Used in) Financing Activities (3,721) 14,300
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 4,050 2,039
CASH AND CASH EQUIVALENTS
Net Cash Provided by Operating Activities 1,748 1,471
------- ------
End of Period $ 5,798 3,510
======= ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Nine Months for:
Interest $ 8,182 10,171
======= ======
Income Taxes $ (771) 4,120
======= ======
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING INFORMATION
The Company acquired T.J. Beall Company in an exchange for preferred stock in
1996.
See notes to Condensed Consolidated Financial Statements Concluded
7
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JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements for the
three months and nine months ended September 27, 1997 and September 28,
1996 are unaudited. The September 28, 1996 statements included the
accounts of Johnston Industries, Inc. ("Johnston"), its direct wholly
owned subsidiary, Johnston Industries Alabama, Inc. and its indirect
wholly owned subsidiaries, Johnston Industries Composite
Reinforcements, Inc. ("JICR" formerly Tech Textiles, USA), T.J. Beall
Company ("TJB") and Greater Washington Investments, Inc. ("GWI").
Prior to April 3, 1996, the consolidated financial statements included
the accounts of Johnston, its wholly owned subsidiaries, Southern
Phenix Textiles, Inc. ("Southern Phenix"), Opp and Micolas Mills, Inc.
("Opp and Micolas"), and JICR, its majority owned subsidiary, Jupiter
National, Inc. ("Jupiter") and Jupiter's wholly owned subsidiaries,
Wellington Sears Company ("Wellington"), Pay Telephone America, Ltd.,
and GWI.
On April 3, 1996, after the acquisition by Johnston of the minority
interest in Jupiter (see note 2), Jupiter was merged into Opp and
Micolas. At the close of business on June 29, 1996, (i) the name of Opp
and Micolas was changed to Johnston Industries Alabama, Inc. ("JI
Alabama") (ii) Southern Phenix and Wellington were merged into JI
Alabama and (iii) JICR, T. J. Beall Company ("TJB") and GWI became
subsidiaries of JI Alabama.
The September 27, 1997 statements include the accounts of Johnston, its
direct wholly owned subsidiary, JI Alabama and its indirect wholly
owned subsidiaries, JICR, TJB, and GWI (collectively, the "Company").
In the opinion of management, the unaudited condensed consolidated
financial statements reflect all adjustments and disclosures which are
necessary for a fair presentation. All such adjustments, other than
those relating to restructuring and loss on impairment, are of a normal
recurring nature. Operating results for the nine months ended September
27, 1997 are not necessarily indicative of the results that may be
expected for the entire year. The condensed consolidated financial
statements included herein should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 28, 1996. Reference is
made to the accounting policies of the Company described in the notes
to consolidated financial statements included in the Company's Annual
Report on Form 10-K for year ended December 28, 1996.
2. DISCONTINUANCE OF THE VENTURE CAPITAL SEGMENT
Concurrent with the Jupiter Acquisition, the Company's management made
the decision to discontinue the venture capital investment segment of
Jupiter's operation. Through June 28, 1997, the segment was accounted
for as discontinued operations, and in accordance with Generally
Accepted Accounting Principles, the net assets of the discontinued
segment were recorded as an asset on the consolidated balance sheet and
were expected to be disposed of by June 1997. During that period, the
results of operations for Jupiter's venture capital investment
activities have been recorded as discontinued operations.
At June 28, 1997, the remaining undisposed portfolio investments have
been reclassified from net assets of discontinued operations to assets
held for sale on the consolidated balance sheet, and the results of
continuing operations for these remaining portfolio investments have
been reported as income from
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continuing operations on the consolidated statements of income. Prior
periods presented have been restated accordingly.
Income before taxes from discontinued operations, inclusive of minority
interest, includes net realized and unrealized gains from investments
of approximately $0 and $(283,000) for the three months and ($6,000)
and $11,324,000 for the nine months ended September 27, 1997 and
September 28, 1996 respectively. The gains from investments during the
nine months ended September 28, 1996 are mainly due to gains realized
on the sale of the Company's investments in EMC Corporation, Viasoft,
Fuisz and Zoll Medical.
For the nine months ended September 28, 1996, the loss after income
taxes for the disposal of the discontinued operations included a
$4,380,000 write down for the carrying value after considering
liquidation plans on disposal of the remaining portfolio investments
and related debt as well as a $300,000 provision for future operating
costs.
In June 1997, the Company engaged a business consultant to review the
remaining undisposed portfolio investments and to aggressively pursue
collection of amounts due, including both notes and accrued interest,
from various portfolio investment companies. Considering the progress
which has been made to date, current estimates of amounts which are
expected to be realized from the portfolio investments exceed previous
evaluations; however, the recognition of recoverable value is limited
by the purchased cost of each portfolio item at March 28, 1996, the
date of the Jupiter Acquisition. At September 27, 1997, $521,000 in
reserves which had been recorded against the value of the portfolio
investments were reversed. It is management's intention for its agent
to continue with aggressive management of the remaining investment
instruments in order to maximize the amounts which may be realized from
the remaining liquidation of the portfolio investments.
3. SUBSEQUENT SALE OF T.J. BEALL
Effective September 29, 1997 an agreement was reached culminating in
the sale of substantially all of the assets and current liabilities of
TJB back to the Beall family. The subsequent sale of TJB, to be
recorded in the fourth quarter, resulted in a charge of $546,000 which
is reflected in other expenses for the third quarter of 1997.
4. RESTRUCTURING CHARGES AND LOSSES ON IMPAIRMENT
In connection with the Jupiter Acquisition, the Company decided to
close the manufacturing facility in Tarboro, North Carolina, which had
been operated by Jupiter's Wellington subsidiary (the "Tarboro
Facility") in an effort to realign and consolidate certain operations,
concentrate capital resources on more profitable operations and better
position itself to achieve its strategic corporate objectives. All
activities related to the closing of the Tarboro Facility were
substantially completed in January 1997. The Tarboro Facility, which is
currently vacant, is held for sale and is recorded at its estimated net
realizable value. During the nine months ended September 28, 1996, the
Company recorded restructuring charges totaling $4,551,000 which
included $1,619,000 to write-downs of accounts receivable and
inventory, $625,000 for severance costs, $433,000 for relocating
production equipment, $964,000 for actual operating losses and $910,000
for other costs related to the operation. Of these costs, $1,866,000,
representing the minority interest (the portion of Wellington not owned
by Johnston prior to the Jupiter Acquisition), has been recorded in the
purchase accounting for the Jupiter Acquisition with the remaining
$2,685,000 recorded as an expense on the consolidated statement of
operations.
The plan for the closing of the Tarboro Facility called for termination
of 168 employees with various job descriptions at the facility. As of
September 27, 1997, 167 employees had been terminated. Through
September 27, 1997, approximately $4,071,000 has been charged to the
reserves established for the closing. These costs included $539,000
related to severance costs.
In consideration of the Company's inability to find buyers for its real
properties which are held for sale, the Tarboro Facility and the former
Jupiter office in Rockville, MD (the "Rockville Office"), the Company
has also recorded an additional loss on impairment of assets to
reduce the carrying value of these properties
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to estimated net realizable value. A loss of $650,000 was recorded for
the Tarboro Facility and a loss of $253,000 was recorded for the
Rockville Office during June, 1997.
In August 1997, the Company finalized its plans to cease manufacturing
operations at its Langdale Facility and close its Outlet Store in West
Point, Georgia in an effort to further consolidate certain
manufacturing activities and concentrate on efficient and profitable
operations. The Langdale Facility, the original building of which was
constructed in 1866, is the Company's oldest facility and contained
both weaving operations and yarn manufacturing operations. The yarn
manufacturing operations have been eliminated and selected equipment
and associated product offerings of the weaving operations have been
relocated to other of the Company's facilities. The remaining weaving
operations at the Langdale Facility have been closed. The Langdale
Facility will be retained as warehouse, distribution and potential
future manufacturing space for JI Alabama's Fiber Products Division.
A contract for sale of the Outlet Store building has been executed
with closing scheduled on or before December 1, 1997. During the
Second Quarter of 1997, the Company recorded restructuring charges
totaling $4,381,000 related to closure of the Langdale Facility and the
Outlet Store including write-downs on machinery and equipment of
$2,674,000, write-downs of $939,000 on inventories, a write-down of
$573,000 on the Langdale building, and a write-down of $195,000 on the
store building.
In recognition of the disappointing operating results realized at TJB
since its acquisition in March of 1996 and risks inherent in future
operations, the Company recorded restructuring charges of $1,983,000
during the second quarter of 1997 for the write-off of goodwill related
to the acquisition of TJB. The Company also recorded a $754,000 write-
down in the second quarter of 1997 related to the Company's investment
in manufacturing computer software for which the original
implementation attempt has been abandoned.
5. INVENTORIES
Inventories consisted of the following at September 27, 1997 and
December 28, 1996:
<TABLE>
<CAPTION>
SEPTEMBER 27, 1997 DECEMBER 28, 1996
------------------ -----------------
<S> <C> <C>
Finished Goods $29,147,000 $30,051,000
Work-In Process 9,654,000 9,012,000
Raw Materials and Supplies 16,141,000 26,457,000
----------- -----------
Total $54,942,000 $65,520,000
=========== ===========
</TABLE>
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6. LONG-TERM FINANCING AND SHORT-TERM BORROWINGS
Long-term debt and short-term borrowings consisted of the following at
September 27, 1997 and December 28, 1996:
<TABLE>
<CAPTION>
SEPTEMBER 27, 1997 DECEMBER 28, 1996
------------------ -----------------
<S> <C> <C>
Term Loans $ 72,375,000 $ 74,500,000
Lines of Credit Borrowings 0 0
Revolving Credit Loans 74,550,000 73,899,000
Purchase Money Mortgage Debt 1,043,000 1,108,000
Industrial Development Note
(net of unamortized discount) 578,000 639,000
Other Loans 550,000 678,000
------------ ------------
Total 149,096,000 150,824,000
Less Current Maturities (11,992,000) (6,510,000)
------------ ------------
$137,104,000 $144,314,000
============ ============
</TABLE>
Bank Credit Agreement
On March 28, 1996, the Company signed a new credit agreement with a
syndicate of lenders (the "Bank Credit Agreement") to provide aggregate
loans of up to $160,000,000 to repay existing indebtedness, to provide
funds used to acquire the remaining outstanding shares of the common
stock of Jupiter and to finance working capital needs. The Bank Credit
Agreement provides for revolving credit loans (the "Revolver") of up to
$80,000,000, a term loan for $40,000,000 ("Term Loan A") and a term
loan for an additional $40,000,000 ("Term Loan B"). Borrowings under
the Revolver and the Term Loan A mature March, 2001, and Term Loan B
matures March, 2003. The term loans are repayable in quarterly
installments starting in 1997.
As of September 27, 1997, the Company had outstanding borrowings under
the Bank Credit Agreement of $146,925,000 and availability under the
Revolver of $5,325,000.
Covenants and Restrictions
Under the terms of the Bank Credit Agreement, substantially all assets
are pledged as collateral for the borrowings under the Bank Credit
Agreement. The Bank Credit Agreement requires the Company to maintain
certain financial ratios and specified levels of tangible net worth.
The Bank Credit Agreement places a limit on the Company's level of
capital expenditures and its ability to effect certain types of mergers
or acquisitions. The Bank Credit Agreement permits the Company to pay
dividends on its Common Stock provided it is in compliance with various
covenants and provisions contained therein, which among other things
limit dividends and restrict investments to the lesser of (x) 20% of
total assets of the Company, on a fully consolidated basis, as of the
date of determination thereof, or (y) $5,000,000 for the period
commencing on January 1, 1996 and ending on December 31, 1996 or (z)
$5,000,000 plus 50% of cumulative consolidated net income for the
period commencing January 1, 1997, minus 100% of cumulative
consolidated net loss for the consolidated entities for such period, as
calculated on a cumulative basis as of the end of each fiscal quarter
of the consolidated entities with reference to the financial statements
for such quarter.
The initial Bank Credit Agreement was amended on June 28, 1996 and
February 28, 1997 to modify certain covenants. Prior to the execution
of these amendments, the Company was in technical noncompliance with
certain of the financial covenants contained therein. At June 28, 1997
and September 27, 1997, the Company was not in compliance with certain
of its covenants under the Bank Credit Agreement. Such events of
noncompliance at June 28, 1997 and September 27, 1997 have been waived
by
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the syndicate of lenders who are parties to the Bank Credit Agreement.
The Company is exploring alternatives to reduce the likelihood of
future non-compliance with the covenants of the Bank Credit Agreement,
including amending the covenants or restructuring the long-term debt.
Management believes that it will be successful in these efforts,
although an agreement has not yet been reached.
The Bank Credit Agreement requires the Company to prepay the principal
installments on Term Loan A and Term Loan B, in inverse order of the
scheduled maturities, from the net cash proceeds from the sale or
liquidation of the Tarboro Facility, Rockville Office and venture
capital portfolio investments. Subsequent to September 27, 1997,
payments totaling $2,357,328 were made against term loans representing
net cash proceeds from liquidation of venture capital portfolio
investments. Accordingly, this amount was included in current
maturities of long-term debt at September 27, 1997.
7. FINANCIAL INSTRUMENTS
Interest Rate Swaps
In order to minimize the Company's exposure to the uncertainty of
floating interest rates, the Bank Credit Agreement requires the Company
to maintain interest rate protection agreements covering a minimum of
50% of the principal amount outstanding under the term loans, as long
as these loans exceed an aggregate of $40 million. Under the Credit
Agreement, the Company may elect to pay interest based on either the
prime rate plus various margins or the LIBOR rate plus various margins.
Effective June 7, 1996, the Company entered into interest rate swap
agreements with several lenders whereby it exchanged its floating rate
obligations under the Bank Credit Agreement on $38 million notional
principal amount for a fixed rate payment obligation of 6.705% for a
term of three years, with an option to renew for an additional two
years. Prior to the interest rate swap agreements, the Company was
paying interest based on a floating rate of 5.535%, based on a three
month LIBOR rate.
8. EARNINGS PER SHARE
Earnings per share for the nine months ended September 28, 1996 were
calculated based on the weighted average number of shares of common and
common equivalent shares outstanding during the periods. For the three
months ended September 27, 1997 and September 28, 1996 and the nine
months ended September 27, 1997, common shares from assumed exercise of
stock options are not presented as they are antidilutive in periods for
which a loss is presented. Preferred dividends were deducted from net
income to compute earnings applicable to common stock. Additionally,
earnings (loss) per share were computed for continuing operations,
discontinued operations, and extraordinary item.
New Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS No. 128"). This Statement establishes new standards for
computing and presenting earnings per share ("EPS") information. SFAS
No. 128 simplifies the computation of earnings per share currently
required by APB Opinion No. 15 and its related interpretations. The new
statement replaces the presentation of "primary" (and when required
"fully diluted") earnings per share with "basic" and "diluted" earnings
per share. This new statement is effective for financial statements
issued for periods ending after December 15, 1997 including interim
periods; earlier application is not permitted. The Company's
computation of basic and diluted EPS under SFAS No. 128 for the nine
months ended September 27, 1997 and September 28, 1996 will not be
materially different than EPS previously reported.
12
<PAGE> 13
9. INCOME TAXES
The benefit for income taxes from continuing operations as computed
under Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes", is comprised of the following for the nine months
ended September 27, 1997 and September 28, 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Federal:
Current $(1,501,000) $ (528,000)
Deferred (1,532,000) (1,400,000)
----------- -----------
(3,033,000) (1,928,000)
State:
Current (38,000) 77,000
Deferred (254,000) 77,000
----------- -----------
(292,000) 154,000
Provision (benefit) for income taxes $(3,325,000) $(1,774,000)
=========== ===========
</TABLE>
The reconciliation of the Company's effective income tax rate to the
Federal statutory rate from continuing operations of 34% for the nine
months ended September 27, 1997 and September 28, 1996 follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Federal income taxes at statutory rate $(3,978,000) $(1,572,000)
State income taxes, net of Federal tax benefit (193,000) 102,000
Equity in Income of Majority-Owned Subsidiary -- (508,000)
Amortization of Goodwill 851,000 155,000
Other - Net (5,000) 49,000
----------- -----------
$(3,325,000) $(1,774,000)
----------- -----------
Effective rate 28.4% 60.3%
=========== ===========
</TABLE>
The effective tax rates in 1997 and 1996 were distorted by the
amortization of non-deductible goodwill.
10. CONTRIBUTION OF TREASURY STOCK TO PENSION PLAN
On June 24, 1997, the Company contributed 345,098 shares of Treasury
Stock to the Company's Pension Plan. This transaction, totaling
$2,200,000, satisfied a portion of the Company's required funding
for pension plans.
11. RELATED PARTY TRANSACTIONS
Redlaw Industries, Inc. ("Redlaw"), a stockholder, is the commissioned
sales agent for the Company for sales of the Company's products into
Canada under the terms of a non-exclusive sales agency agreement. For
the nine months ended September 27, 1997, there were no sales to
Redlaw. As of September 27, 1997 accounts receivable from Redlaw was $0
and commissions payable to Redlaw were $26,638. Johnston also maintains
inventory at a public warehouse in Ontario, Canada which is supervised
by Redlaw. At September 27, 1997, there was approximately $330,025 of
inventory located at the warehouse in Canada.
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The accompanying condensed consolidated financial statements for the three
months and nine months ended September 27, 1997 and September 28, 1996 are
unaudited. The September 28, 1996 statements included the accounts of Johnston
Industries, Inc. ("Johnston"), its direct wholly owned subsidiary, Johnston
Industries Alabama, Inc. and its indirect wholly owned subsidiaries, Johnston
Industries Composite Reinforcements, Inc. ("JICR" formerly Tech Tech Textiles,
USA), T.J. Beall Company ("TJB") and Greater Washington Investments, Inc.
("GWI").
Prior to April 3, 1996, the consolidated financial statements included the
accounts of Johnston, its wholly owned subsidiaries, Southern Phenix Textiles,
Inc. ("Southern Phenix"), Opp and Micolas Mills, Inc. ("Opp and Micolas"), and
JICR, its majority owned subsidiary, Jupiter National, Inc. ("Jupiter") and
Jupiter's wholly owned subsidiaries, Wellington Sears Company ("Wellington"),
Pay Telephone America, Ltd., and GWI.
On April 3, 1996, after the acquisition by Johnston of the minority interest in
Jupiter (see note 2), Jupiter was merged into Opp and Micolas. At the close of
business on June 29, 1996, (i) the name of Opp and Micolas was changed to
Johnston Industries Alabama, Inc. ("JI Alabama") (ii) Southern Phenix and
Wellington were merged into JI Alabama and (iii) JICR, TJB and GWI became
subsidiaries of JI Alabama.
The September 27, 1997 statements include the accounts of Johnston, its direct
wholly owned subsidiary, JI Alabama and its indirect wholly owned subsidiaries,
JICR, TJB, and GWI (collectively, the "Company").During the fourth quarter of
1996, operations of Wellington were divided along lines of woven products and
fiber products, thus forming four divisions of JI Alabama which included Opp &
Micolas Division, Southern Phenix Division, Wellington Sears Division (woven),
and Fiber Products Division (fiber). During the third quarter of 1997 and in
conjunction with closure of the Wellington Sears Division's Langdale Facility,
operations of the Wellington Sears Division were divided whereby its woven
facility in Columbus, Georgia was combined with the Opp and Micolas Division to
form the Greige Fabrics Division and its finishing facility in Valley, Alabama
was combined with the Southern Phenix Division to form the Finished Fabrics
Division. The realignment of the four operating divisions into three will
eliminate duplicative selling, general and administrative costs and is intended
to provide divisional management with greater focus on their core markets and
operational objectives and allow enhanced differentiation of each division
within their respective marketplace.
Concurrent with the Jupiter Acquisition, the Company's management made the
decision to discontinue the venture capital investment segment of Jupiter's
operation. This segment was accounted for as discontinued operations through
June 28, 1997 in accordance with APB 30. Accordingly, the net assets of the
discontinued segment were recorded as a current asset on the consolidated
balance sheet and were expected to be disposed of by June 30, 1997. At June 29,
1997, the remaining undisposed portfolio investments were reclassified from net
assets of discontinued operations to assets held for sale on the consolidated
balance sheet, and the results of operations for these remaining portfolio
investments have been reported as part of income from continuing operations on
the consolidated statements of income. Prior periods presented have been
restated accordingly.
RESULTS OF OPERATIONS
Results for the nine months ended September 27, 1997 include substantial
restructuring and impairment charges resulting from the Company's decision to
cease manufacturing operations at its Langdale facility (the "Langdale
Facility") in Valley, Alabama, close its retail store (the "Outlet Store") in
West Point, Georgia, write-off goodwill related to the acquisition of TJB (the
"TJB Acquisition"), and abandon certain manufacturing computer software.
Additionally, the Company divested itself of TJB effective September 28, 1997.
The nine months ended September 28, 1996 included $2,685,000 in restructuring
charges related to the Company's decision to close the manufacturing facility in
Tarboro, North Carolina which had been operated by Wellington (the "Tarboro
Facility") prior to the Jupiter
14
<PAGE> 15
Acquisition. The Company's policy, which is consistent with generally accepted
accounting principles ("GAAP") and Securities and Exchange Commission ("SEC")
regulations, provides for recognition of certain costs related to restructuring
activities upon adoption of a qualified exit plan. Under the policy, the Company
estimates a) impairment losses for affected assets (typically to write the asset
down to estimated net realizable value), and b) costs for relocating production
equipment. Severance costs related to the exit plan are recorded as
restructuring costs when commitment is made to involuntarily terminate employees
and such employees have been notified of the termination. Other costs incidental
to the restructuring activities, such as professional services, employee
retraining, losses due to operating inefficiencies during the restructuring
activities, etc. are recorded as incurred and are not classified as
restructuring costs. The cessation of production activities at the Langdale
Facility and the associated relocation of production equipment required moving
or repositioning 200 looms among four manufacturing facilities. Such activities
and associated operating disruption, while necessary, have contributed
significantly to depressed margins for the three months and the nine months
ended September 27, 1997. In addition, professional services for the three
months ended September 27, 1997 exceeded the amounts recorded during the
comparable period in 1996 by approximately $944,000. These professional services
are temporary in nature and largely relate to development and execution of the
restructuring plan during 1997.
Net sales for the three months ended September 27, 1997 were $78,488,000
compared to $77,071,000 the third quarter of 1996 reflecting a 1.8% increase of
$1,417,000. Sales of automotive fabrics, which accounted for 2.5% of the
Company's sales in the third quarter of 1997, declined $692,000 (24.9%) while
sales of industrial fabrics decreased approximately $523,000 (2.6%) compared to
the prior period. Sales of home furnishing fabrics remained level despite a
downturn in demand for the Company's flocking substrate fabrics. The market for
these flocking substrates began to strengthen by the end of the third quarter
and although there is no assurance they will regain the position they held prior
to the downturn, they have demonstrated marked improvement. Sales to specialty
markets remained relatively unchanged compared to the third quarter in 1996.
Sales to such specialty markets largely include the Company's Fiber Products
Division (fiber and fabric waste reclamation) and TJB which was acquired at the
end of the first quarter of 1996 and sold just after the end of the third
quarter of 1997. The Company's composite reinforcement business, which is
included in sales to specialty markets, remained unchanged increasing by $13,000
(.6%) from the third quarter of 1996. Markets for apparel fabrics, characterized
generally by low margins, continued to offer some short term opportunities at
higher margins. Sales of apparel fabrics increased by $2,566,000 (266.7%) over
the third quarter of 1996, following on the resurgence of short term
opportunities which first gained notice during the quarter ended June 28, 1997.
Net sales for the nine months ended September 27, 1997 were $252,990,000,
increasing by $10,146,000 (4.2%) over net sales of $242,844,000 for the nine
months ended September 28, 1996. Sales of industrial fabrics were flat while
sales of home furnishing fabrics grew by approximately $4.4 million (3.7%) from
the first nine months of 1996. Sales to specialty markets, including the impact
of the March 1996 acquisition of TJB, increased by almost $6.6 million over the
nine months ended September 28, 1996. Such increase includes an offsetting
decline in sales of composite reinforcement fabrics of $701,000 (10.31%) marking
weaker demand for these specialty fabrics in the current year. Sales of fabric
in miscellaneous markets declined by approximately $2.8 million. Sales of
automotive fabrics, which now represent less than 3% of the Company's sales
declined by $1.5 million (18.3%). Sales of apparel fabrics grew by $3.8 million
due to the continuation of profitable opportunities which began in the second
quarter of 1997.
At September 27, 1997, the sales backlog of the Company was approximately
$67,487,000 compared to sales backlog of approximately $88,581,000 at December
28, 1996 and $75,163,000 at September 27, 1996. The sales backlog at December
28, 1996 includes peak orders for a) outdoor furniture fabrics which are
seasonal, b) wipe cloth fabrics which are cyclical, and c) TJB whose fiber
buying season concludes during the fall and selling season begins in January.
The sales backlog at September 27, 1997 reflects a) lower levels of outdoor
furniture orders as manufacturers have completed their seasonal manufacturing,
b) fulfillment of a wipe cloth contract and c) the absence of TJB which was
excluded from the September 27, 1997 sales backlog due to disposition of this
operation shortly after quarter end. With consideration of the normal seasonal
and cyclical decline in backorders from December to June for certain products,
as described above, management believes that demand for the Company's products
at September 27, 1997 continues to be stable though not strong.
For the three months ended September 27, 1997 compared to the three months ended
September 27, 1996, cost of sales increased by approximately $5.2 million to
$67,697,000. Cost of sales as a percentage of sales increased in the third
quarter of 1997 when compared to the prior period largely reflected disruption
and operational inefficiencies resulting
15
<PAGE> 16
from closure of the Langdale facility and associated restructuring activities as
well as poor yields and weak markets in the TJB operations. Gross margin dropped
from 18.9% for the third quarter of 1996 to 13.7% for the third quarter of 1997.
Cost of sales for the nine months ended September 27, 1997 were $209,856,000
representing an $11.1 million increase over the same period in 1996. Gross
margin declined from 18.1% for the first nine months of 1996 to 17% for the
first nine months of 1997. This change reflects the significant impact of
restructuring activities which occurred in the third quarter of 1997 as
described above.
Selling, general, and administrative expenses of $7,264,000 for the third
quarter of 1997 increased by $1,251,000 from $6,013,000 recorded for the third
quarter of 1996. Comparing the first nine months of 1997 with the same period in
the prior year, selling, general and administrative expenses grew by $1,709,000
to $20,852,000. These increases result from provision for termination benefits
not associated with the exit plan recorded in the second quarter of 1997 as well
as a higher incidence of professional services which have been reflected in both
the second and third quarters of 1997.
In connection with the Jupiter Acquisition, the Company decided to close the
Tarboro Facility in an effort to realign and consolidate certain operations,
concentrate capital resources on more profitable operations and better position
itself to achieve its strategic corporate objectives. All activities related to
the closing of the Tarboro Facility were substantially completed in January
1997. The Tarboro Facility, which is currently vacant, is held for sale and is
recorded at its estimated net realizable value. During the first quarter of
1996, the Company recorded restructuring charges totaling $4,118,000 to cover
anticipated losses from the closing of the Tarboro Facility including $1,619,000
related to write-downs of accounts receivable and inventory, $834,000 for
severance costs and $1,665,000 for other costs related to the operation. Of
these costs, $1,866,000, representing the minority interest (the portion of
Wellington not previously owned by Johnston), has been recorded in the purchase
accounting for the Jupiter Acquisition with the remaining $2,252,000 recorded as
an expense on the consolidated statement of operations.
In August 1997, the Company finalized its plans to cease manufacturing
operations at its Langdale Facility and close its Outlet Store in West Point,
Georgia in an effort to further consolidate certain manufacturing activities and
concentrate on efficient and profitable operations. The Langdale Facility, the
original building of which was constructed in 1866, is the Company's oldest
facility and contained both weaving operations and yarn manufacturing
operations. The yarn manufacturing operations have been eliminated and selected
equipment and associated product offerings of the weaving operations have been
relocated to other of the Company's facilities. The remaining weaving operations
at the Langdale Facility have been closed. The Langdale Facility will be
retained as warehouse, distribution and potential future manufacturing space for
JI Alabama's Fiber Products Division. A contract for sale of the Outlet Store
building has been executed with closing scheduled on or before December 1, 1997.
During the Second Quarter of 1997, the Company recorded restructuring charges
totaling $4,381,000 related to closure of the Langdale Facility and the Outlet
Store including write-downs on machinery and equipment of $2,674,000,
write-downs of $939,000 on inventories, a write-down of $573,000 on the Langdale
building, and a write-down of $195,000 on the store building.
In recognition of the disappointing operating results realized at TJB since its
acquisition in March of 1996 and risks inherent in future operations, the
Company recorded restructuring charges of $1,983,000 during the second quarter
of 1997 for the write-off of goodwill related to the acquisition of TJB. (See
discussion below of the sale of TJB). The Company also recorded a $754,000
write-down in the second quarter of 1997 related to the Company's investment in
manufacturing computer software for which the original implementation attempt
has been abandoned.
Depreciation and amortization expense for the three months ended September 27,
1997 increased $139,000 to $5,202,000 compared to $5,063,000 for the three
months ended September 28, 1996. Depreciation and amortization expense of
$15,878,000 for the nine months ended September 27, 1997 was $1,029,000 higher
than the $14,849,000 recorded for the nine months ended September 28, 1996. This
increase resulted from additional depreciation based on the Company's capital
investment to upgrade older machinery and equipment and also included additional
depreciation related to the Company's step-up in basis of property, plant, and
equipment in connection with the Jupiter acquisition. Such capital investment is
an ongoing process necessary to maintain the Company's production capabilities
and competitive position within the textile industry.
Interest expense for the three months and nine months ended September 27, 1997
was $3,410,000 and $10,131,000 reflecting increases of $424,000 and $1,958,000
compared to the three months and nine months ended September 28,
16
<PAGE> 17
1996 respectively. The increase in the third quarter of 1997 compared to the
third quarter of 1996 reflects higher average rates while the increase in the
first nine months of 1997 compared to the first nine months of 1996 reflects
higher average borrowings resulting from the Company's increased borrowing
related to the Jupiter Acquisition of March 1996, and to a lesser degree, higher
average rates.
Following management's evaluation of TJB, considering future profitability,
operating similarities with other of the Company's operations, and the role TJB
would play in achieving the Company's core operating strategy, an agreement was
reached culminating in the sale of substantially all of the assets and current
liabilities of TJB back to the Beall family effective September 29, 1997. The
sale of TJB resulted in a charge of $546,000 which is reflected in other
expenses for the third quarter of 1997.
The minority interest in loss of consolidated subsidiary reflects the minority
shareholders' proportionate share in the losses of Wellington through March 28,
1996, the date the Jupiter Acquisition was completed.
Concurrent with the Jupiter Acquisition, the Company's management made the
decision to discontinue the venture capital investment segment of Jupiter's
operation. Through June 28, 1997, the segment was accounted for as discontinued
operations, and in accordance with Generally Accepted Accounting Principles, the
net assets of the discontinued segment were recorded as an asset on the
consolidated balance sheet and were expected to be disposed of by June 1997.
During that period, the results of operations for Jupiter's venture capital
investment activities have been recorded as discontinued operations. At June 29,
1997, the remaining undisposed portfolio investments have been reclassified from
net assets of discontinued operations to assets held for sale on the
consolidated balance sheet, and the results of operations for these remaining
portfolio investments have been reported as part of income from continuing
operations on the consolidated statements of income. Prior periods presented
have been restated accordingly. For the nine months ended September 27, 1997,
loss from the discontinued operations was $11,000 net of applicable tax
provision of $5,000 and for the nine months ended September 28, 1996, income
from the discontinued operations was $6,355,000 net of applicable taxes of
$3,514,000 and minority interest in income of $1,455,000. The gains from
investments during the nine months ended September 28, 1996 are mainly due to
gains realized on the sale of the Company's investments in EMC Corporation,
Viasoft, Fuisz and Zoll Medical. In connection with the classification of the
venture capital investment portfolio business as discontinued operations, for
the nine months ended September 28, 1996, the Company recorded a loss on
disposal of Jupiter of $1,633,000 net of the applicable income tax benefit of
$862,000. This loss is mainly reflective of the first quarter 1996 write-down of
the remaining portfolio of venture capital investments from the values
previously established by Jupiter's Board of Directors. Such write-down was
recorded to reduce the investments to their estimated fair value which was
expected to be realized upon the sale of such investments within one year versus
the value of these investments held on a long-term basis.
In June 1997, the Company engaged a business consultant to review the remaining
undisposed portfolio investments and to aggressively pursue collection of
amounts due, including both notes and accrued interest, from various portfolio
investment companies. Considering the progress which has been made to date,
current estimates of amounts which are expected to be realized from the
portfolio investments exceed previous evaluations, however, the recognition of
appreciated value is limited by the purchased cost of each portfolio item at
March 28, 1996, the date of the Jupiter Acquisition. At September 27, 1997,
$521,000 in reserves which had been recorded against the value of the portfolio
investments were reversed. It is management's intention for its agent to
continue with aggressive management of the remaining investment instruments in
order to maximize the amounts which may be realized from the remaining
liquidation of the portfolio investments.
MATERIAL CHANGES IN FINANCIAL CONDITION
As a result of the Jupiter Acquisition, the Company revalued certain Jupiter
assets, mainly inventories and property, plant, and equipment. Due to Johnston's
previous partial ownership interest in Jupiter, the acquisition of the remaining
outstanding interest was accounted for as a "step acquisition" resulting in a
partial step-up in Jupiter assets. The Company recorded such partial step-up in
basis on such assets and has recorded goodwill of $12,477,000 which is to be
amortized over 20 years.
17
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
Working capital at September 27, 1997 was $68,912,000 representing a ratio of
current assets to current liabilities of 2.55 to 1. The Company's primary needs
for capital resources have been funded by borrowings under its Bank Credit
Agreement, which was entered into on March 28, 1996 and thereafter amended on
June 28, 1996 and February 28, 1997 (the "Bank Credit Agreement"). Borrowings
under the Bank Credit Agreement have been used to finance the Jupiter
Acquisition (as discussed above), to refinance certain indebtedness, and to pay
fees and expenses related to the foregoing, and available borrowings will be
used, as needed, to finance working capital and capital expenditure. The Bank
Credit Agreement provides for revolving credit loans (the "Revolver") of up to
$80,000,000, a term loan for $40,000,000 ("Term Loan A") and a term loan for an
additional $40,000,000 ("Term Loan B"). Borrowings under the Revolver and Term
Loan A mature on March 28, 2001 and Term Loan B matures on March 28, 2003. The
term loans are repayable in quarterly installments starting in 1997.
As of September 27, 1997, the Company had outstanding borrowings under the Bank
Credit Agreement of $146,925,000 and availability under the revolver of
$5,325,000.
Under the terms of the Bank Credit Agreement, substantially all assets are
pledged as collateral for the borrowings under the Bank Credit Agreement. The
Bank Credit Agreement requires the Company to maintain certain financial ratios
and specified levels of tangible net worth. The Bank Credit Agreement places a
limit on the Company's level of capital expenditures and its ability to effect
certain types of mergers or acquisitions. The Bank Credit Agreement permits the
Company to pay dividends on its Common Stock provided it is in compliance with
various covenants and provisions contained therein, which among other things
limit dividends and restrict investments to the lesser of (x) 20% of total
assets of the Company, on a fully consolidated basis, as of the date of
determination thereof, or (y) $5,000,000 for the period commencing on January 1,
1996 and ending on December 31, 1996 or (z) $5,000,000 plus 50% of cumulative
consolidated net income for the period commencing January 1, 1997, minus 100% of
cumulative consolidated net loss for the consolidated entities for such period,
as calculated on a cumulative basis as of the end of each fiscal quarter of the
consolidated entities with reference to the financial statements for such
quarter.
The initial Bank Credit Agreement was amended on June 28, 1996 and February 28,
1997 to modify certain covenants. Prior to the execution of these amendments,
the Company was in technical noncompliance with certain of the financial
covenants contained therein. At June 28, 1997 and September 27, 1997, the
Company was not in compliance with certain of its covenants under the Bank
Credit Agreement. Such events of noncompliance at June 28, 1997 and September
27, 1997 have been waived by the syndicate of lenders who are parties to the
Bank Credit Agreement. The Company is exploring alternatives to reduce the
likelihood of future non-compliance with the covenants of the Bank Credit
Agreement, including amending the covenants or restructuring the long-term debt.
Management believes that it will be successful in these efforts, although an
agreement has not yet been reached.
The Bank Credit Agreement requires the Company to prepay the principal
installments on Term Loan A and Term Loan B, in inverse order of the scheduled
maturities, from the net cash proceeds from the sale or liquidation of the
Tarboro Facility, Rockville Office and venture capital portfolio investments.
Subsequent to September 27, 1997, payments totaling $2,357,328 were made
against term loans representing net cash proceeds from liquidation of venture
capital portfolio investments. Accordingly, this amount was included in
current maturities of long-term debt at September 27, 1997.
Available cash has been adequate to sustain the Company's operations, cash
used for debt service and debt reduction under the Bank Credit Agreement
and cash used to maintain a reduced capital expenditure plan have strained the
Company's available liquid assets. Management expects improvements in cash
generation from improved operating results, strict cost containment, reduction
in inventories, and judicious review of its short term capital expenditure
plans. While discretionary cash expenditures will require constraint and
careful planning, management believes that funds generated from operations and
funds available under the Bank Credit Agreement will be sufficient to satisfy
the Company's liquidity requirements for at least the next year.
18
<PAGE> 19
ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 128, Earnings Per Share, will
require the presentation of basic and diluted net income per share. Basic net
income per share excludes common stock equivalents such as options, while
diluted net income per share considers the possible effect of all common shares
which potentially can be issued. The statement will be effective for financial
statements for periods ending after December 15, 1997, including interim
periods. Early adoption of this Statement is not permitted. The Company's
computation of basic and diluted EPS under SFAS No. 128 for the nine months
ended September 27, 1997 and September 28, 1996 will not be materially different
than EPS previously reported.
Statement of Financial Accounting Standards No. 129 will establish standards for
disclosing information about an entity's capital structure and is effective for
periods ending after December 15, 1997.
Statement of Financial Accounting Standards No. 130 establishes standards for
reporting and display of comprehensive income and its components (revenues,
gains, expenses, losses) in a full set of general purpose financial statements
and is effective for fiscal years beginning after December 15, 1997.
Statement of Financial Accounting Standards No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. The statement is effective for financial
statements for periods beginning after December 31, 1997.
Management of the Company has not yet assessed the impact of the above
Statements of Financial Accounting Standards on the Company's financial
statements.
OTHER MATTERS
The Company is periodically involved in legal proceedings arising in the
ordinary conduct of business. Management does not expect that such proceedings
will have a material adverse effect on the Company's consolidated financial
position or results of operations. During 1997, management became aware of
certain industrial espionage activities that targeted the Company and several
other textile manufacturers, allegedly carried out by agents of a large
competitor. Management is reviewing the impact that this alleged activity may
have had on the Company's operations and is exploring possible remedies.
RISKS AND UNCERTAINTIES
Except for historical information contained herein, the matters set forth in
this report are forward looking statements which are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those in, or which could be expected based on, such forward looking statements.
The Company's expectations regarding future sales and profits assume, among
other things, reasonable continued growth in the general economy which affects
demand for the Company's products, and reasonable stability in raw materials
pricing, changes in which affect customer purchasing decisions as well as the
Company's prices and margins. The costs and benefits of the Company's
discontinuance of Jupiter venture capital investments and the disposition of the
Tarboro Facility may vary from the Company's expectations due to various factors
such as: higher or lower than anticipated proceeds from the sale of assets; the
extent of management's ability to control duplication of costs, inefficiencies
and overhead during the period of phasing out operations; and the difficulties
inherent in forecasting the operating results of an operating mode different
from that which exists at the time the forecast is made. For a further
discussion of risks and uncertainties associated with the Company's business,
readers are referred to the cautionary statement set forth in Item 1 of the
Company's annual report on Form 10-K for the year ended December 28, 1996, which
cautionary statement is incorporated by reference herein.
19
<PAGE> 20
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No reportable legal proceedings arose in the quarter ended June 28, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
+10.25 Employment Agreement with James J. Murray dated September 15,
1997
11 Statements of Computation of Per Share Earnings
27 Financial Data Schedule (Filed Electronically)
(b) Reports on Form 8-K
(i) No reports on Form 8-K were filed during the quarter ended June 28,
1997.
- --------------------------------------------------------------------------------
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to Form 10-Q pursuant to Item 6(a).
20
<PAGE> 21
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
undersigned has duly caused this report to be filed on its behalf by the
undersigned hereto duly authorized.
JOHNSTON INDUSTRIES, INC.
Dated: November 12, 1997 By: /s/ James J. Murray
------------------------------
James J. Murray
Executive Vice President
Chief Financial Officer
Dated: November 12, 1997 By: /s/ James J. Murray
------------------------------
James J. Murray
(Principal Accounting Officer)
21
<PAGE> 1
EXHIBIT 10.25
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), made this 15th day of
September, 1997 by and between JOHNSTON INDUSTRIES, INC., a Delaware corporation
(hereinafter referred to as "Company"), and JAMES J. MURRAY (hereinafter
referred to as "Executive").
W I T N E S S E T H T H A T:
WHEREAS, Company and Executive have agreed that Executive shall be
employed by Company for the period commencing on September 22, 1997, for the
term and under the provisions and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises herein set
forth, it is agreed as follows:
1. EMPLOYMENT; DUTIES. Company hereby employs Executive as an executive
officer of Company, and Executive hereby accepts such employment. Executive
shall be the chief financial officer and chief accounting officer of the Company
and shall have the title of Executive Vice President and CFO. Executive shall
have such duties as are customarily performed by a chief financial and chief
accounting officer of a publicly-traded textile manufacturing company. In
addition, Executive shall have such other executive duties as may be assigned to
him by Company to be rendered on behalf of Company or any of its subsidiary
corporations, or any of Company's affiliates, subject to supervision, change of
duties, direction and control by the Chief Executive Officer or Chief Operating
Officer of Company or by the Board of Directors of Company. Executive agrees to
perform his duties in connection therewith to the best of his ability and to
devote his full working time thereto. Executive, at the request of Company,
agrees to serve as a Director or other officer of Company or of any affiliated
or subsidiary corporation of Company, without any additional compensation for
such service.
2. TERM. Executive's employment hereunder, unless earlier terminated in
accordance with the provisions hereof, shall be for the three (3) year period
commencing September 22, 1997, and ending on September 22, 2000, ("Employment
Term").
3. COMPENSATION; BENEFITS.
(a) Salary. As full compensation for all Executive's services,
Company agrees to pay to Executive a base salary in the amount of $180,000 per
year, payable in equal monthly installments on the last day of each month as
long as this Agreement shall be in effect. Salary for partial months shall be
prorated. During the term of this Agreement, Executive's base salary may be
adjusted from time to time and in such amounts as shall be mutually agreed upon
by Company and Executive.
(b) Deferred Compensation. On January 15, 1998, Company shall pay to
Executive $20,000 as deferred compensation.
(c) Bonuses. Company may at any time and from time to time pay to
Executive such bonus or other additional compensation, in addition to the base
salary provided for hereinabove, as Company may determine in Company's sole
discretion. If, during the Employment Term, Executive shall participate in a
general formula bonus plan of the Company under which the amount of the bonus is
based in part on Executive's base salary, then for the purposes of such bonus,
Executive's base salary for 1997 only shall be deemed to be $160,000, and
thereafter it shall be the amount of Executive's actual base salary. Company has
no obligation to adopt any bonus plans or to pay any bonuses during the
Employment Term.
(d) Benefits. Executive shall be eligible to participate in such
employee benefits as from time to time are provided for executive employees of
Company generally, such as group life insurance and medical and pension
benefits, subject to the provisions of such benefit plans as may be in effect
from time to time during the term of this Agreement. Company shall not be
obligated to adopt or maintain any particular employee benefits or plans
<PAGE> 2
therefor, such adoption or maintenance to be within the sole discretion of
Company. During the first ninety (90) days of the Employment Term, during which
time Executive and Executive's family shall not be eligible for coverage under
Company's Employee Health Plan, Executive shall continue his coverage under the
KPMG Plan and pay the premiums therefor as charged by KPMG or its health
insurer, and Company will reimburse to Executive the difference between the
amount so charged for said coverage during said ninety (90) day period and the
share of such premiums presently being paid by Executive.
(e) Moving Expenses; Temporary Living Expenses; Relocation
Assistance. Company shall pay directly, or reimburse Executive, for Executive's
reasonable moving expenses from Chicago, Illinois, to Columbus, Georgia and
shall also pay or reimburse reasonable temporary living expenses incurred by
Executive in Columbus, Georgia, for up to 30 days after the commencement of the
Employment Term. In addition, in connection with Executive's present residence
in Chicago, Illinois, and the sale thereof and his acquisition of a new
residence in Columbus, Georgia, Company will make an interest free bridge loan
to Executive in the amount of $50,000 which shall be payable in full upon the
sale of Executive's present residence, and in addition, Company will reimburse
Executive for a portion of the interest payable by Executive on his present
mortgage having an approximate current principal balance of $206,000, as
follows: 100% of interest for the first two (2) months of the Employment Term,
with said percentage declining by ten percent (10%) per month to a minimum of
fifty percent (50%) of said mortgage interest effective for the seventh (7th)
month and thereafter. If Executive is unable to sell said present residence by
December 31, 1997, and does not opt to repay the bridge loan and have the
mortgage interest subsidy cease at that time, then Company shall have the right,
specifically granted by Executive hereby, to cause such home to be sold on such
terms as Company may determine, in its sole discretion; provided, however, if
the net proceeds from such sale caused by Company are less than ninety-five
percent (95%) of the original purchase price thereof to Executive, Company shall
pay to Executive the excess of ninety-five percent (95%) of Executive's original
purchase price over the amount of the net sale proceeds.
4. ASSIGNMENT BY COMPANY. This Agreement may be transferred or assigned
by Company to corporation with or into which Company shall merge or consolidate,
or to which Company shall transfer all or substantially all of its assets, and
such assignee or successor corporation shall thereupon be obligated to perform
the terms and provisions hereof pertaining to Company (and such successor shall
thereupon be deemed Company hereunder). In the event of any such assignment or
transfer by Company, Executive shall continue to be bound by the terms and
provisions of this Agreement.
5. NON-COMPETITION. Executive agrees during the term of this Agreement
and any extension hereof not to have or acquire any ownership interest, directly
or indirectly, in, or be employed by, any person, firm or corporation which is
engaged in a business competitive with any of the businesses now or hereafter
engaged in by Company or by any of Company's affiliates or subsidiaries or which
is a supplier or customer of Company or of any of Company's affiliates or
subsidiaries, except that Executive may acquire or own securities listed on any
recognized public exchange. Executive acknowledges that he is knowledgeable of
the businesses now engaged in by Company and by Company's affiliates and
subsidiaries and is knowledgeable of the principal customers and suppliers of
Company and of Company's affiliates and subsidiaries. In addition, should
Executive terminate his employment with the Company for any reason prior to the
expiration of the Employment Term, if he shall violate the provisions of this
Section 5 prior to the first January 15 following said termination, Company
shall have no obligation whatsoever to pay to Executive the deferred
compensation to which he otherwise would be entitled on said date under the
provisions of Section 3(b) hereof.
6. NON-SOLICITATION OF EMPLOYEES AND CUSTOMERS. Executive shall not at
any time during his employment hereunder and for a period of one year after the
date his employment is terminated for any reason, directly or indirectly, for
himself or for any other person, firm, corporation, partnership, association or
other entity, (i) attempt to employ, employ or enter into any contractual
arrangement with any employee or former employee of the Company, its affiliates,
or predecessors-in-interest, unless such employee or former employee has not
been employed by the Company, its affiliates, or predecessors-in-interest for a
period in excess of six months; and/or (ii) call on or solicit any of the actual
or targeted prospective customers or suppliers of the Company or its
predecessor-in-interest with respect to
2
<PAGE> 3
any matters, related to or competitive with the business of the Company, nor
shall Executive make known the names or addresses of such customers or suppliers
or any information relating in any manner to the Company's trade or business
relationships with such customers or suppliers.
7. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Except as expressly
permitted by the Company, or in connection with the performance of his duties
hereunder, Executive shall not at any time during or subsequent to his
employment by the Company, disclose, directly or indirectly to any person, firm,
corporation, partnership, association or other entity any proprietary or
confidential information relating to the Company or any information concerning
the Company's financial condition or prospects, the Company's customers or
suppliers, the Company's sources of leads and methods of obtaining new business,
the design, development, manufacture or selling of the Company's products or the
Company's methods of doing and operating its business (collectively,
"Confidential Information") except when required to do so by a court of
competent jurisdiction, by any governmental agency having supervisory authority
over the business of the Company or, as the case may be, an affiliate of the
Company or by any administrative body or legislative body (including a committee
thereof) with jurisdiction to order Executive to divulge, disclose or make
accessible such information. Confidential Information shall not include
information which, at the time of disclosure, is known or available to the
general public by publication or otherwise through no act or failure to act on
the part of Executive. Executive acknowledges and agrees that the Confidential
Information is a valuable, special and unique asset of the Company's business.
8. BOOKS AND RECORDS. All books, records, and accounts relating in any
manner to the Company's customers or suppliers, whether prepared by the
Executive or otherwise coming into the Executive's possession, and all copies
thereof in the Executive's possession, shall be the exclusive property of the
Company and shall be returned immediately to the Company upon termination of the
Executive's employment hereunder or upon the Company's request at any time.
9. TERMINATION OF EMPLOYMENT.
(a) Death. In the event of Executive's death during the term of this
Agreement, this Agreement shall automatically terminate upon the date of
Executive's death, and in such event, Company shall pay to Executive's personal
representative any accrued and unpaid salary or benefits to the date of
Executive's death, and in addition, Company shall pay to Executive's personal
representative an amount equal to Executive's salary for six months, which
amount may be paid either in a lump sum or in six equal monthly installments,
without interest, at the option of Company.
(b) Disability. If Executive shall become incapacitated during the
period of his employment hereunder to such an extent that in the judgment of
Company he is unable to perform his duties hereunder, and such incapacity shall
continue for at least six (6) successive calendar months, Company may, at any
time after the end of such period of six (6) consecutive calendar months and
during the continuance of such incapacity, give notice to Executive of the
termination of his employment hereunder on a date stated in such notice, which
shall not be less than thirty (30) days after the date of the giving of such
notice, and in such event, notwithstanding any provisions hereof to the
contrary, this Agreement and Executive's employment hereunder shall terminate on
such date, and Executive's right to the base salary provided for herein and any
other compensation and benefits provided for hereunder shall terminate on such
date.
(c) For Cause. Company may terminate this Agreement and Executive's
employment hereunder at any time for cause. For the purposes of this Agreement,
for cause shall include any violation by Executive of the provisions of Section
6, Section 7 or Section 8 hereof, Executive's failure or refusal to perform
adequately the duties assigned to him, the conviction of Executive by a court of
competent jurisdiction of any felony or the engagement by the Executive in any
illegal or other wrongful conduct substantially detrimental to the business or
the reputation of the Company. Upon the occurrence of any such event, Company
may terminate this Agreement and Executive's employment hereunder immediately
upon the giving of written notice of such termination to Executive, and in such
event, Executive shall be entitled to receive only the salary and other
compensation and benefits provided for
3
<PAGE> 4
hereunder which have accrued to the date of such termination, prorated on a per
diem basis and shall not be entitled to any deferred compensation otherwise
payable hereunder.
(d) Without Cause. Company may terminate this Agreement and
Executive's employment hereunder at any time, without cause, by giving to
Executive written notice of such termination, and in such event, Company shall
continue to pay to Executive at the time such payments would otherwise be
payable hereunder the salary specified herein (or Executive's salary then in
effect, as the case may be) of Executive, including deferred compensation, for
the remainder of the Employment Term. In addition, for the same time period
during which Company is required to continue Executive's salary, Company shall
continue to provide the employee benefits to Executive which were being provided
at the time of such termination, but only to the extent that such benefits can
be provided under and consistent with the terms of any plans or insurance
policies in effect with Company governing the provision of such benefits,
including, without limitation, the terms of any group life or medical insurance
policies or plans and pension or other qualified retirement plans. During such
period, Company shall not be obligated to provide any bonuses to Executive.
(e) By Executive. In the event Executive shall terminate his
employment with Company during the term of this Agreement, then Executive shall
only be entitled to receive the base salary and other compensation and benefits
provided for hereunder which shall have accrued to the date of such termination,
prorated on a per diem basis. In such event, Executive shall not be entitled to
deferred compensation hereunder. Notwithstanding the foregoing, in the event
during the Employment Term Company shall hire a new Chief Executive Officer and
the new Chief Executive Officer desires to hire another Chief Financial Officer
which would result in a change of position and duties of Executive which are
unacceptable to Executive, then, within thirty (30) days after the hiring of
such new Chief Financial Officer, Executive may give notice to Company of his
intent to terminate this Agreement after a transition period (and Executive
agrees that the time of such transition period shall be determined by Company,
but not to exceed ninety (90) days after the date of such notice), and this
Agreement shall be deemed terminated upon the conclusion of said transition
period, and in such event, Company shall pay to Executive, upon such
termination, severance pay in an amount equal to one (1) year of Executive's
base salary hereunder, which shall be the sole obligation of Company hereunder,
and shall not include any benefits other than those which shall have accrued to
the date of such termination, and shall not include any deferred compensation.
10. GOVERNING LAW. This Agreement shall be interpreted, construed and
governed by and in accordance with the laws of the State of Georgia.
11. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with regard to the subject matter hereof and may not
be altered or amended except by written agreement of the parties.
12. NOTICES. Unless otherwise agreed in writing by the parties hereto,
all notices provided for hereunder shall be in writing and shall be deemed to be
given when delivered in person or the third day after being deposited in the
United States mail, certified, return receipt requested, postage prepaid, and
addressed as follows:
(a) If to Company:
Johnston Industries, Inc.
105 Thirteenth Street
Columbus, Georgia 31901
Attention: Chief Executive Officer
(b) If to Executive:
James J. Murray
105 Thirteenth Street
Columbus, Georgia 31901
4
<PAGE> 5
IN WITNESS WHEREOF, Company has caused this Agreement to be executed by
one of its officers thereunto duly authorized, and Executive has hereto
subscribed his name, as of the day and year first above written.
JOHNSTON INDUSTRIES, INC.
By: David L. Chandler
-----------------------------------
/s/ Kathy Lamb Title: Chairman of the Board and CEO
- --------------------------- -----------------------------------
Witness:
"Company"
/s/ Robert C. Christian /s/ James J. Murray (L.S.)
- --------------------------- -----------------------------------
Witness: JAMES J. MURRAY
"Executive"
5
<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
basis are as follows:
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 10,726,272 10,362,874 10,503,139 10,429,998
Shares issued from assumed exercise of
incentive stock options(1)(2) -- -- -- 185,718
Shares issued from assumed exercise of
nonqualified stock options(1)(2) -- -- -- 88,676
----------- ----------- ----------- -----------
Weighted average number of shares outstanding,
as adjusted 10,726,272 10,362,874 10,503,139 10,704,389
=========== =========== =========== ===========
Loss from continuing operations $(3,289,000) $(1,117,000) $(8,374,000) $(1,278,000)
Income (Loss) from discontinued operations -- (34,000) 126,000 4,722,000
Extraordinary loss -- -- -- (527,000)
----------- ----------- ----------- -----------
Net Income (Loss) (3,289,000) (1,151,000) (8,248,000) 2,917,000
Dividends on Preferred Stock -- 41,000 81,000 84,000
----------- ----------- ----------- -----------
Net Income available to common
stockholders $(3,289,000) $(1,192,000) $(8,329,000) $ 2,833,000
=========== =========== =========== ===========
Earnings (Loss) per common share:
Income from continuing operations $ (.31) $ (.11) $ (.80) $ (.13)
Discontinued operations -- (.01) .01 .44
Extraordinary loss -- -- -- (.05)
----------- ----------- ----------- -----------
Earnings per common share $ (.31) $ (.12) $ (.79) $ .26
=========== =========== =========== ===========
</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.
(2) For the three months ended September 27, 1997 and September 28, 1996
and the nine months ended September 27, 1997, common shares from
assumed exercise of stock options are not presented as they are
antidilutive in periods for which a loss is reported.
Note: Fully diluted earnings per share are not presented because the difference
from primary earnings per share is insignificant for all periods presented.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JOHNSTON
INDUSTRIES, INC. AND SUBSIDIARIES FINANCIAL STATEMENTS AS OF SEPTEMBER 27, 1997
AND FOR THE NINE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-27-1997
<CASH> 5,798,000
<SECURITIES> 0
<RECEIVABLES> 43,738,000
<ALLOWANCES> 1,958,000
<INVENTORY> 59,942,000
<CURRENT-ASSETS> 113,384,000
<PP&E> 236,698,000
<DEPRECIATION> 117,982,000
<TOTAL-ASSETS> 249,351,000
<CURRENT-LIABILITIES> 44,472,000
<BONDS> 137,104,000
0
3,000
<COMMON> 1,246,000
<OTHER-SE> 49,812,000
<TOTAL-LIABILITY-AND-EQUITY> 249,351,000
<SALES> 252,990,000
<TOTAL-REVENUES> 252,990,000
<CGS> 209,856,000
<TOTAL-COSTS> 209,856,000
<OTHER-EXPENSES> 23,982,000
<LOSS-PROVISION> 512,000
<INTEREST-EXPENSE> 10,131,000
<INCOME-PRETAX> (11,699,000)
<INCOME-TAX> (3,325,000)
<INCOME-CONTINUING> (8,734,000)
<DISCONTINUED> 126,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,248,000)
<EPS-PRIMARY> (.79)
<EPS-DILUTED> 0
</TABLE>
