<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[X] For the quarterly period ended July 4, 1998
-------------------------------------------
Commission file number 1-6687
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JOHNSTON INDUSTRIES, INC.
-------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-1749980
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 Thirteenth Street, Columbus, Georgia 31901
(Address of principal executive offices) (Zip Code)
(706) 641-3140
(Registrant's telephone number, including area code)
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 July 4,
1998 was 10,742,772 shares.
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JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
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Page(s)
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ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets
July 4, 1998 and January 3, 1998 3
Condensed Consolidated Statements of Operations
Three Months and Six Months ended July 4, 1998 and
June 28, 1997 4
Condensed Consolidated Statements of Cash Flows
Six Months ended July 4, 1998 and June 28, 1997 5-6
Notes to Condensed Consolidated Financial Statements 7-11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 12-18
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 19
SIGNATURE PAGE 20
EXHIBIT 10.28 - AMENDMENT #4 DATED APRIL 2, 1998
TO BANK CREDIT AGREEMENT 21-29
EXHIBIT 11 - STATEMENT OF COMPUTATION OF
EARNINGS PER SHARE 30
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
(For SEC Use Only) 31
</TABLE>
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, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 4, JANUARY 3,
1998 1998
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 284 $ 2,284
Accounts and Notes Receivables Net of Allowance for
Doubtful Accounts of $1,929 and $2,016 33,078 34,283
Inventories 51,126 51,083
Income Taxes Receivable 2,653 4,838
Deferred Income Taxes 304 406
Assets Held for Sale 4,573 5,010
Prepaid Expenses and Other 5,905 5,200
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Total Current Assets 97,923 103,104
Property, Plant and Equipment - Net 109,059 113,783
Goodwill 11,164 11,477
Intangible Asset - Pension 1,882 1,882
Other Assets 4,120 4,542
-------- --------
Total Assets $224,148 $234,788
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 12,536 $ 17,088
Accrued Expenses 10,474 10,264
Revolving Credit Loan 70,388 73,995
Current Maturities of Long-Term Debt 6,389 3,393
-------- --------
Total Current Liabilities 99,787 104,740
Long-Term Debt - Less Current Maturities 57,419 61,688
Other Liabilities 9,562 9,022
Deferred Income Taxes 9,759 10,214
STOCKHOLDERS' EQUITY:
Common Stock, Par Value $.10 per share; Authorized,
20,000,000 Shares; Issued 12,467,691 1,246 1,246
Additional Paid-In Capital 21,445 21,445
Retained Earnings 32,955 34,458
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Total 55,646 57,149
Less Treasury Stock; 1,724,919 shares (8,025) (8,025)
-------- --------
Total Stockholders' Equity 47,621 49,124
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Total Liabilities and Stockholders' Equity $224,148 $234,788
======== ========
</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, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
-------------------------- -------------------------
JULY 4, JUNE 28, JULY 4, JUNE 28,
1998 1997 1998 1997
------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $ 69,063 $ 87,724 $ 148,902 $ 174,502
--------- --------- ---------- ----------
Costs and Expenses:
Cost of Sales, excluding Depreciation and Amortization 55,472 73,320 120,439 143,099
Selling, General and Administrative 6,874 7,287 13,927 13,451
Depreciation and Amortization 5,037 5,336 10,287 10,676
Restructuring and Impairment Charges -- 7,081 100 7,081
--------- --------- ---------- ----------
Total Costs and Expenses 67,383 93,024 144,753 174,307
--------- --------- ---------- ----------
Income (Loss) from Operations 1,680 (5,300) 4,149 195
Other Expenses (Income):
Interest Expense 3,451 3,449 6,664 6,858
Interest Income (417) (100) (496) (456)
Other -- Net (228) 468 440 338
--------- --------- ---------- ----------
Total Other Expenses--Net 2,806 3,817 6,608 6,740
Realized and Unrealized Investment Gain -- 219 -- 193
--------- --------- ---------- ----------
Equity in Earnings of Equity Investments 63 63
--------- --------- ---------- ----------
Loss from Continuing Operations before Tax Benefit (1,063) (8,898) (2,396) (6,352)
Benefit for Income Taxes (495) (2,263) (893) (1,267)
--------- --------- ---------- ----------
Loss from Continuing Operations (568) (6,635) (1,503) (5,085)
DISCONTINUED OPERATIONS:
Income (Loss) from Discontinued Operations of Jupiter
National net of applicable income tax (benefit) of $4
for the three months and ($5) for the six months -- 6 -- (11)
Gain on Disposal of Jupiter National net of applicable
income tax of $65 for the three months and $60 for
six months -- 146 -- 137
--------- --------- ---------- ----------
Income from Discontinued Operations -- 152 -- 126
--------- --------- ---------- ----------
Net Loss (568) (6,483) (1,503) (4,959)
Dividends on Preferred Stock -- 40 -- 81
--------- --------- ---------- ----------
Net Loss Available to Common Stockholders $ (568) $ (6,523) $ (1,503) $ (5,040)
========= ========= ========== ==========
Earnings (Loss) Per Common Share-Basic:
Loss from Continuing Operations $ (0.05) $ (0.64) $ (0.14) $ (0.50)
Discontinued Operations -- 0.01 -- 0.01
--------- --------- ---------- ----------
Net Loss Per Common Share-Basic $ (0.05) $ (0.63) $ (0.14) $ (0.49)
========= ========= ========== ==========
Dividends Per Share $ -- $ 0.20 -- $ 0.20
========= ========= ========== ==========
Weighted Average Number of Common Shares Outstanding 10,743 10,404 10,743 10,392
========= ========= ========== ==========
</TABLE>
See notes to Condensed Consolidated Financial Statements
4
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JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
------------------------------------
JULY 4, JUNE 28,
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES:
CONTINUING OPERATIONS:
Net Loss from Continuing Operations $ (1,503) $ (5,085)
Adjustments to Reconcile Net Loss from Continuing Operations
to Net Cash Provided by Operating Activities:
Depreciation and Amortization 10,287 10,676
Restructuring and Impairment Charges -- 7,081
Provisions for Bad Debts 363 220
Loss on Disposal of Fixed Assets 262 --
Net Unrealized Gain on Portfolio Investments -- (193)
Undistributed Income in Equity Investments (63) --
Changes in Operating Assets and Liabilities:
Accounts and Notes Receivables 842 (6,736)
Inventories (43) 3,979
Deferred Income Taxes (353) (2,097)
Prepaid Expenses and Other Assets (413) 1,902
Accounts Payable (3,376) (1,906)
Accrued Expenses 210 (1,418)
Income Taxes Receivable 2,185 1,723
Other Liabilities 540 (1,038)
Other -- Net 24 --
------------- -----------
Total Adjustments 10,105 12,193
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Net Cash Provided by Continuing Operations 8,602 7,108
DISCONTINUED OPERATIONS:
Loss from Discontinued Operations -- (11)
Gain on Disposal of Discontinued Operations -- 137
Cash Provided by Discontinued Operations -- 1,904
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Net Cash Provided by Discontinued Operations -- 2,030
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Net Cash Provided by Operating Activities 8,602 9,138
INVESTING ACTIVITIES:
Additions to Property, Plant and Equipment (5,512) (5,100)
Decrease in Non-Operating Accounts Payable (816) (1,001)
Investment Sales 630 --
------------- -----------
Net Cash Used in Investing Activities (5,698) (6,101)
</TABLE>
Continued
5
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JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
------------------------------
July 4, June 28,
1998 1997
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<S> <C> <C>
FINANCING ACTIVITIES:
Principal Payments of Term Loan (704) (5,264)
Net (Payments) Borrowings under Revolving Line of Credit Arrangement (4,200) 3,500
Proceeds from Issuance of Common Stock -- 36
Dividends Paid -- (2,157)
------- -------
Net Cash Used in Financing Activities (4,904) (3,885)
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,000) (848)
CASH AND CASH EQUIVALENTS
Beginning of Period 2,284 1,748
------- -------
End of Period $ 284 900
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid (Received) During the Six Months for:
Interest $ 6,106 6,613
======= =======
Income Taxes $(2,525) (771)
======= =======
See notes to Condensed Consolidated Financial Statements Concluded
</TABLE>
6
<PAGE> 7
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements as of and for
the three months and six months ended July 4, 1998 and June 28, 1997 are
unaudited. The July 4, 1998 statement include the accounts of Johnston
Industries, Inc. ("Johnston"), its direct wholly owned subsidiary,
Johnston Industries Alabama, Inc. ("JI Alabama") and its indirect wholly
owned subsidiaries, Johnston Industries Composite Reinforcements, Inc.
("JICR") and Greater Washington Investments, Inc. ("GWI") (collectively,
the "Company"). All significant intercompany balances have been eliminated
in consolidation.
The June 28, 1997 statements include the accounts of Johnston, JI Alabama,
JICR, GWI and JI Alabama's former wholly owned subsidiary, T.J. Beall
Company ("TJ Beall").
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and do
not include all of the information in footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, the unaudited condensed consolidated financial
statements reflect all adjustments and 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 three months and six months ended July 4, 1998
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 January 3, 1998. 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
January 3, 1998.
2. ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") 129, "Disclosure of
Information about Capital Structure." This statement establishes standards
for disclosing information about an entity's capital structure and is
effective for periods ending after December 15, 1997. The Company has
adopted this statement effective for the first quarter of 1998.
In February 1997, the Financial Accounting Standards Board issued SFAS 130
"Reporting Comprehensive Income." This statement 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 financial statements for periods beginning
after December 15, 1997. The Company has adopted this statement effective
for the first quarter of 1998. For the three and six month periods ended
July 4, 1998 and June 28, 1997, there are no differences between
comprehensive income and net income.
In June 1997, the Financial Accounting Standards Board issued SFAS 131
"Disclosure about Segments of an Enterprise and Related Information." This
statement 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 Company in required to present the segment
disclosures in the current fiscal year, however, disclosure in interim
financial reports issued to shareholders is not required during the year
of adoption. This statement is effective for financial statements for
periods beginning after December 15, 1997.
7
<PAGE> 8
In March 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position ("SOP") 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." This statement, which provides
guidance on accounting for the costs of computer software developed or
obtained for internal use, defines "internal use," provides guidance for
determination of capital and expense costs, and is effective for fiscal
years beginning after December 15, 1998, but earlier adoption is
encouraged. The Company has adopted this statement effective for the first
quarter of 1998.
3. DISCONTINUANCE OF THE VENTURE CAPITAL SEGMENT
Concurrent with the acquisition of Jupiter National, Inc. (the "Jupiter
Acquisition") in March 1996, 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 accordingly, 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 portfolio investments were reclassified
from net assets of discounted operations to assets held for sale on the
consolidated balance sheet. Beginning with the quarter ended June 28,
1997, the results of continuing operations for these remaining portfolio
investments have been reported as income from continuing operations in the
consolidated statements of operations and prior periods presented have
been restarted accordingly.
For the six months ended June 28, 1997, the loss from discounted
operations was $11,000 net if income tax benefit of $5,000.
Also for the six months ended June 28, 1997, the gain on disposal of
Jupiter was $137,000 net of income tax of $60,000.
4. T.J. BEALL COMPANY
On March 25, 1996, the Company acquired all of the outstanding common
stock of TJ Beall, a broker in cotton by-products located in West Point,
Georgia, for shares of nonvoting convertible preferred stock with an
estimated value of $3,250,000. In September 1997, an agreement was reached
culminating in the sale of substantially all of the assets and current
liabilities of TJ Beall back to a member of the Beall family. In
conjunction with the sale, the Company recorded a note receivable in the
amount of $1,500,000 payable in annual installments of $300,000 plus
interest at 10% per annum over a five year period.
5. RESTRUCTURING CHARGES AND LOSSES ON IMPAIRMENT
During the Second Quarter of 1997, the Company announced its plan to cease
manufacturing operations at its Langdale facility, close its outlet store
in West Point, Georgia and realign its divisions. The Langdale facility
had contained both weaving operations and yarn manufacturing operations.
The yarn manufacturing operations were eliminated while selected
equipment and associated product offerings of the weaving operations
were relocated to other of the Company's facilities. The remainder of the
weaving operation at the Langdale facility was closed. The Langdale
facility has been retained as warehouse, distribution and potential
future manufacturing space for JI Alabama's Fiber Products Division. The
sale of the outlet store building closed during December 1997. Beginning
in the third quarter of 1997 and continuing through the first quarter of
1998, severance reserves were accrued to restructuring costs as employees
were notified of the elimination of their job. During the six months ended
July 4, 1998, the Company recorded restructuring charge totaling $100,000
which included $175,000 in severance costs related to closure of the
Langdale facility and the 1997 realignment of divisions less a favorable
adjustment of $75,000 to the impairment reserve for Jupiter's former
office building in Rockville, Maryland, which was sold in February 1998.
8
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6. INVENTORIES
Inventories consisted of the following at July 4, 1998 and January 3, 1998:
<TABLE>
<CAPTION>
July 4, 1998 JANUARY 3, 1998
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<S> <C> <C>
Inventories--FIFO Cost Flow Assumption
Finished Goods $ 29,086,000 $ 30,367,000
Work-In Process 9,392,000 10,581,000
Raw Materials and Supplies 16,298,000 13,607,000
------------ ------------
54,776,000 54,555,000
Less LIFO Reserve (3,650,000) (3,472,000)
Inventories--LIFO Cost Flow Assumption $ 51,126,000 $ 51,083,000
============ ============
</TABLE>
7. LONG-TERM FINANCING AND SHORT-TERM BORROWINGS
Long-term debt and short-term borrowings consisted of the following at
July 4, 1998 and January 3, 1998:
<TABLE>
<CAPTION>
July 4, 1998 JANUARY 3, 1998
------------ ---------------
<S> <C> <C>
Term Loans $ 62,336,000 $ 63,040,000
Revolving Credit Loan 70,388,000 73,995,000
Purchase Money Mortgage Debt 957,000 1,000,000
Industrial Development Note
(net of unamortized discount) 515,000 491,000
Other Loans (mortgage) 0 550,000
------------ ------------
Total 134,196,000 139,076,000
Less Current Maturities (6,389,000) (3,393,000)
Less Revolving Credit Loan
classified as Current (70,388,000) (73,995,000)
------------ ------------
$ 57,419,000 $ 61,688,000
============ ============
</TABLE>
The Company has a credit agreement with a syndicate of lenders (the "Bank
Credit Agreement"), which was entered into on March 28, 1996. The Bank
Credit Agreement, as amended to date, provides aggregate loans of up to
$160,000,000 including a revolving credit loan (the "Revolving Credit
Facility") 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"). The
maturity date for all borrowings under the Bank Credit Agreement is July
1, 2000.
As of July 4, 1998, the Company had outstanding borrowings under the Bank
Credit Agreement of $132,724,000, and $8,882,000 unused under the Revolver
net of $730,000 of standby letters of credit. Upon the sale in February
1998 of Jupiter's former office in Rockville, Maryland, the $550,000
mortgage associated with that property was discharged.
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, places a
limit on the Company's level of capital expenditures and its ability to
effect certain types of mergers or acquisitions, and permits the Company
to pay dividends on its Common Stock provided certain financial tests are
met. Under these financial tests, at July 4, 1998, the Company was not
permitted to declare or pay dividends.
The Bank Credit Agreement has been amended several times to modify certain
covenants, the latest amendment of which was executed on March 30, 1998
(the "1998 Amendment") to modify certain covenants. Prior to the execution
of these amendments, the Company was in technical noncompliance with
9
<PAGE> 10
certain of the financial covenants contained therein or noncompliance was
considered to be imminent. In addition to covenant modifications, the 1998
Amendment also included increases in interest rates, effective April 5,
1998, ranging from 1/4% to 1% over the rates in effect prior to that date,
revision of the final maturity date for all obligations under the Bank
Credit Agreement and modifications to the scheduled repayment of term
loans which decreased required payments for 1998 and 1999. All past events
of noncompliance as described above have been waived by the syndicate of
lenders who are parties to the Bank Credit Agreement. As of July 4, 1998,
the Company was in compliance with the covenants under the Bank Credit
Agreement. The Company continues to explore alternatives which would
reduce the likelihood of future non-compliance with the covenants of the
Bank Credit Agreement, including restructuring the long-term debt.
Management believes that it will be successful in these efforts. However,
no assurance can be given that an acceptable alternative can be agreed
upon or that any amendment or restructuring can be achieved on terms
acceptable to the Company.
In connection with the 1998 Amendment, approximately $480,000 of deferred
costs were charged to Other - net during the first quarter of 1998. This
amount represents the unamortized balance of the original loan costs,
which were to be amortized over the term of the Bank Credit Agreement, and
the new deferred loan costs of approximately $647,000 were capitalized in
connection with the 1998 Amendment and will be amortized over the
remaining term of the Bank Credit Agreement.
The 1998 Amendment required the Company to adopt new cash management
procedures which were adopted in the third quarter of 1998. The new
procedures include the daily application of customer remittances received
by Johnston's lockbox against the Revolving Credit Facility, which
management believes will generally enhance the Company's availability
under the Revolving Credit Facility. As a result of this Lock-box
arrangement and in compliance with the Emerging Issues Task Force Issue
No. 95-22, "Balance Sheet Classification of Borrowings Outstanding under
Revolving Credit Agreements that Include both a Subjective Acceleration
Clause and a Lock-Box Arrangement," the revolving credit loan, which has a
maturity date of July 1, 2000, has been classified as a current liability.
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 significant assets.
8. EARNINGS PER SHARE
Earnings per share is not presented on a diluted basis as the effect of
dilutive securities was anti-dilutive due to net losses.
10
<PAGE> 11
9. INCOME TAXES
The benefit for income taxes from continuing operations as computed under
SFAS No. 109, "Accounting for Income Taxes", is comprised of the following
for the six months ended July 4, 1998 and June 28, 1997:
<TABLE>
<CAPTION>
1998 1997
--------- -----------
<S> <C> <C>
Federal:
Current $(829,000) $ 640,000
Deferred (27,000) (2,075,000)
--------- -----------
(856,000) (1,435,000)
State:
Current (15,000) 370,000
Deferred (22,000) (202,000)
--------- -----------
(37,000) 168,000
Provision (benefit) for income taxes $(893,000) $(1,267,000)
========= ===========
</TABLE>
The reconciliation of the Company's effective income tax rate to the
Federal statutory rate from continuing operations of 34% for the six months
ended July 4, 1998 and June 28, 1997 follows:
<TABLE>
<CAPTION>
1998 1997
--------- -----------
<S> <C> <C>
Federal income taxes at statutory rate $(815,000) $(2,160,000)
State income taxes, net of Federal tax benefit (24,000) 110,000
Amortization of Goodwill 106,000 798,000
Other -- Net (160,000) (15,000)
--------- -----------
$(893,000) $(1,267,000)
--------- -----------
Effective rate 37.3% 20.0%
========= ===========
</TABLE>
The effective tax rates in 1998 and 1997 were distorted by the amortization
of goodwill, which is not tax deductible. The 1998 tax rate also reflects
partial recognition of a tax refund due as a result of a net operating loss
carryback.
10. RELATED PARTY TRANSACTIONS
Redlaw Industries, Inc. ("Redlaw"), a stockholder, is the commissioned
sales agent for the Company for substantially all sales of the Company's
products into Canada under the terms of a non-exclusive sales agency
agreement. For the six months ended July 4, 1998, there were no sales to
Redlaw. As of July 4, 1998 commissions payable to Redlaw were $21,164.
Johnston maintains inventory at a public warehouse in Ontario, Canada which
is supervised by Redlaw. At July 4, 1998, there was approximately $186,035
of inventory located at the warehouse in Canada.
11
<PAGE> 12
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 six months ended July 4, 1998 and June 28, 1997 are unaudited. The
July 4, 1998 statements include the accounts of Johnston Industries, Inc.
("Johnston"), its direct wholly owned subsidiary, Johnston Industries Alabama,
Inc. ("JI Alabama") and its indirect wholly owned subsidiaries, Johnston
Industries Composite Reinforcements, Inc. ("JICR") and Greater Washington
Investments, Inc. ("GWI") (collectively, the "Company").
The June 28, 1997 statements include the accounts of Johnston, JI Alabama, JICR,
GWI and JI Alabama's former indirect wholly owned subsidiary, T.J. Beall Company
("TJ Beall").
Concurrent with the acquisition of Jupiter National, Inc. (the "Jupiter
Acquisition") in March 1996, 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 were recorded as discontinued operations.
At June 28, 1997, the remaining portfolio investments were reclassified from net
assets of discontinued operations to assets held for sale on the consolidated
balance sheet. Beginning with the quarter ended June 28, 1997, the results of
continuing operations for these remaining portfolio investments have been
reported as income from continuing operations in the consolidated statements of
operations and prior periods presented have been restated accordingly.
Results of Operations
The second quarter operating results reflect year to year quarterly improvement
notwithstanding a decline in revenue, both before and after considering the
significant restructuring charges recorded in the second quarter of 1997.
Revenue decline from the second quarter of 1997 is attributed to the elimination
of unprofitable operations and product lines during the second half of 1997, one
less operating week during the second quarter of 1998 compared to the second
quarter of 1997, and shortfalls in sales for the Greige Fabrics Division due to
lost production from a tornado which hit the Company's Opp Mill in April and
weakness in indirect exports from the currency and financial instability in
Russia and Eastern Europe. June marked the fourth consecutive month of improved
financial performance at the Finished Fabrics Division. Margins have improved
for the Finished Fabrics Division while off quality and customer returns have
declined. The Company's Fiber Products Division improved its performance for the
second consecutive quarter through cost containment and favorable manufacturing
variances. JICR, the Company's fastest growing division, set a new record for
sales in the first six months of 1998 and reached a record level of customer
backlog by mid-year.
For the three month and six month periods ended July 4, 1998, the
Company's net sales decreased $18,661,000 (21.3%) and $25,600,000
(14.7%) respectively, compared with the three months and six months
ended June 28, 1997. Three factors contributed significantly to the
change between periods. The normal plant shutdown for the week of July 4
fell in the June accounting period for 1998 resulting in the second
quarter 1998 having 12 weeks of sales and production as opposed to 13
weeks for the second quarter of 1997. This resulted in approximately $5
million less revenues that would have been realized had the shutdown
week been in the third quarter of 1998. Economic difficulties in Eastern
Europe as noted above resulted in approximately $5 to $6 million reduced
sales by the Greige Fabrics Division for the second quarter. Further, TJ
Beall, which was sold in September 1997, recorded sales of $6,489,000
and $11,623,000 for the three and six months ended June 28, 1997.
12
<PAGE> 13
An analysis of changes in net sales by market is as follows:
<TABLE>
<CAPTION>
2ND QTR 1998 YTD 1998
INCR/(DECR) FROM INCR/(DECR) FROM
2ND QTR 1997 YTD 1997
---------------- ----------------
<S> <C> <C>
Automotive 301,000 775,000
Industrial (2,886,000) (4,379,000)
Home Furnishings (5,627,000) (5,281,000)
Apparel (1,673,000) (618,000)
Specialty Markets (8,677,000) (15,016,000)
Miscellaneous (99,000) (1,081,000)
---------------- ----------------
Net Sales (18,661,000) (25,600,000)
================ ================
</TABLE>
* Sales of automotive fabrics for the quarter and for the first six months
reflect some increased activity plus an unusual increase in demand for a
long standing product which has been on the decline for several years.
* Sales of industrial fabrics for the three and six months ended July 4,
1998 decreased 15.6% and 11.9% respectively as compared to the same
periods in 1997. Of the industrial fabrics, only sales of wallcovering
substrate grew, while sales of fabrics for footwear, filtration, rubber
products and abrasives declined. Filtration fabrics generated record sales
in 1997 and have now receded to normal levels. Of the other industrial
fabrics which have declined, although no assurances can be given,
management believes that these declines are only temporary.
* Sales of home furnishing fabrics receded by 13.0% and 6.0% from the levels
reported for the three months and six months ended June 28, 1997. Reduced
indirect export sales, as noted above, contributed significantly to the
decline in home furnishing sales for the second quarter and year to date
periods of 1998. Sales of certain discontinued window covering fabrics for
1998 are sharply reduced from the prior year. New cotton and poly/cotton
upholstery fabrics introduced by the Finished Fabrics Division in the
first quarter of 1998, are in response to changing consumer preference away
from rayon, however, these lines have not yet achieved the expected market
penetration. Decline in sales of home furnishing fabrics has been
mitigated in part by increased sales of greige (unfinished - for further
processing) upholstery fabrics and top of the bed fabrics by the Greige
Fabrics Division plus increased sales of napery by the Finished Fabrics
Division.
* The Greige Fabrics Division capitalized on certain short term
opportunities to sell apparel fabrics at attractive margins during 1997
and early 1998. Demand from these orders has now been filled and apparel
activity has returned to a normal level.
* Reduced sales to specialty markets reflect the disposition of TJ Beall in
September 1997 as noted above, but also reflects discontinued sales yarn
business formerly located at the Langdale facility, which was closed in
1997. Sales of $1,733,000 and $3,779,000 for yarn produced at Langdale
were recorded for the three months and six months ended June 28, 1997.
Sales of composite reinforcement fabrics for the three and six months
ended July 4, 1998 grew by 19.7% and 33.0%, respectively, over levels
recorded for the three and six months ended June 28, 1997.
* Sales of miscellaneous fabrics, which now represent less than 1% of total
sales, shows declines from 1997 levels but reflect the Company's
discontinuance of certain unprofitable products characterized by short
runs and low margins.
The Company's backlog of customer orders was $69,422,000 at July 4, 1998
compared to $69,447,000 at January 3, 1998 and $65,141,000 million at June 28,
1997, after exclusion of TJ Beall which was sold in September 1997. Change in
the components of order backlog reflect change in product mix, a portion of
which results from products discontinued by the Company in connection with the
1997 realignment.
Gross margin, excluding depreciation, as a percentage of net sales for the three
and six months ended July 4, 1998 was 19.7% and 19.1%, respectively, compared to
16.4% and 18.0% for the same periods in 1997. The increases in gross margin
reflect elimination of unprofitable products, increased manufacturing
efficiencies and reductions in raw material prices. The 1997 realignment
included closure of the Langdale facility, elimination of certain unprofitable
product lines, and relocation of select manufacturing equipment and products to
the Southern Phenix Facility and to the Micolas Facility. During the first
quarter of 1998, the Finished Fabrics Division incurred the negative impact of
costs for administering the phase out of the discontinued products plus
inefficiencies associated
13
<PAGE> 14
with absorption of the relocated production. The second quarter of 1998 reflects
improvement as these transitional activities were substantially completed during
the first quarter of 1998. Contributing in part to the improvement in margins
was the reclassification of costs for corporate human resources functions which
were included in costs of sales for 1997, but have been included in general and
administrative costs for 1998.
For the three months ended July 4, 1998, selling, general and administrative
expenses decreased by $413,000 from $7,287,000 in the prior year period, but
for the six months ended July 4, 1998, increase $476,000 over the $13,451,000
recorded for the six months ended June 28, 1997. Beginning in April 1997, the
Company incurred professional fees associated with the 1997 realignment. Both
the first and second quarters through June of 1998 include charges for such
professional services as compared to 1997 when such charges were recorded in
the second quarter but not in the first quarter. Use of these professional
services had begun to decline significantly by April of 1998. Additionally, for
the six months ended July 4, 1998, approximately $450,000 was included in
general and administrative expenses for corporate human resource functions
which had been included in cost of sales for 1997.
During the Second Quarter of 1997, the Company announced its plan to cease
manufacturing operations at its Langdale facility, close its outlet store in
West Point, Georgia and realign its divisions. The Langdale facility had
contained both weaving operations and yarn manufacturing operations. The yarn
manufacturing operations were eliminated while selected equipment and associated
product offerings of the weaving operations were relocated to other of the
Company's facilities. The remainder of the weaving operation at the Langdale
facility was closed. The Langdale facility has been retained as a warehouse,
distribution and potential future manufacturing space for JI Alabama's Fiber
Products Division. The sale of the outlet store building closed during December
1997. Beginning in the third quarter of 1997 and continuing through the first
quarter of 1998, severance reserves were accrued as restructuring costs as
employees were notified of the elimination of their jobs. During the first six
months of 1998, the Company recorded restructuring charges totaling $100,000
which included $175,000 in severance costs related to closure of the Langdale
facility and the 1997 realignment of divisions less of favorable adjustment of
$75,000 to the impairment reserve for Jupiter's former office building in
Rockville, Maryland which was sold in February 1998.
For the three months and six months ended July 4, 1998, depreciation and
amortization expense was $5,037,000 and $10,287,000, respectively, reductions
of $299,000 and $389,000 from the same periods in 1997. These declines are
principally due to the reduction in depreciable assets from the sale of the
assets of TJ Beall in September 1997 and also from the closure of the Langdale
facility which was completed in the fourth quarter of 1997. The decline was
partially offset by the impact of additional depreciation resulting from the
1997 and 1998 capital investment plans. Capital investment for the six months
ended July 4, 1998 was $5,512,000 compared to $5,100,000 million for the six
months ended June 28, 1997.
Interest expense was $3,451,000 for the three months and $6,664,000 for the six
months ended July 4, 1998. Interest expense for the first six months of 1998
represents only a minimal decrease of $194,000 from the level recorded for the
same period in 1997. Changes in interest expense include both reduced average
borrowings and increased average rates associated with the March 30, 1998
amendment to the Bank Credit Agreement, as discussed below. Obligations under
the Company's Bank Credit Agreement at July 4, 1998 were $14,050,000 and
$4,311,000 less than obligations at June 28, 1997 and January 3, 1998
respectively. Additionally, the $550,000 mortgage associated with Jupiter's
former office in Rockville, Maryland, was discharged upon its sale in February
1998.
In connection with the 1998 amendment to the Company's Bank Credit Agreement,
approximately $480,000 of deferred loan costs were charged to Other - net
during the first quarter of 1998. This amount represents the unamortized
balance of the original loan costs, which were to be amortized over the term of
the Bank Credit Agreement, and the new deferred loan costs of approximately
$647,000 were capitalized in connection with the 1998 Amendment and are being
amortized over the remaining term of the Bank Credit Agreement which now
matures on July 1, 2000. The Other-net for three months ended July 4, 1998
includes approximately $250,000 for insurance proceeds receivable as a result
of storm damage at the Opp Mill as noted above.
14
<PAGE> 15
DISCONTINUED OPERATIONS
Concurrent with the acquisition of Jupiter National, Inc. (the "Jupiter
Acquisition") in March 1996, 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 accordingly, 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 were recorded as discontinued operations.
At June 28, 1997, the remaining portfolio investments were reclassified from
net assets of discontinued operations to assets held for sale on the
consolidated balance sheet. Beginning with the quarter ended June 28, 1997,
the results of ongoing operations for these remaining portfolio investments
have been reported as income from continuing operations on the consolidated
statements of operations and prior periods presented have been restated
accordingly.
For the six months ended June 28, 1997, the loss from discontinued operations
was $11,000 net of income tax benefit of $5,000.
Also for the six months ended June 28, 1997, a gain on disposal of Jupiter's
venture capital investment segment was recorded for $137,000 net of income tax
of $60,000 in final settlement of reserves established in 1996 for loss on
disposal.
LIQUIDITY AND CAPITAL RESOURCES
The Company's needs for capital resources have been filled through cash
generated from operating activities and have been supported by availability of
borrowings under its Bank Credit Agreement, which was entered into on March 28,
1996. The Bank Credit Agreement, as amended to date, provides aggregate loans
of up to $160,000,000 including a revolving credit loan (the "Revolving Credit
Facility") 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"). The maturity
date for all borrowings under the Bank Credit Agreement is July 1, 2000.
As of July 4, 1998, the Company had outstanding borrowings under the Bank
Credit Agreement of $132,724,000, and $8,882,000 unused under the Revolver net
of $730,000 of standby letters of credit. Principal payments since January 3,
1998 have reduced the outstanding amount of the Revolver by $3,607,000. Upon
the sale in February 1998, of Jupiter's former office in Rockville, Maryland,
the $550,000 mortgage associated with that property was discharged.
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, places a limit on the
Company's level of capital expenditures and its ability to effect certain types
of mergers or acquisitions, and permits the Company to pay dividends on its
Common Stock provided certain financial tests are met. Under these financial
tests, at July 4, 1998, the Company was not permitted to declare and pay
dividends.
The Bank Credit Agreement has been amended several times to modify certain
covenants, the latest amendment of which was executed on March 30, 1998 (the
"1998 Amendment") 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 or noncompliance was considered to be
imminent. In addition to covenant modifications, the 1998 Amendment also
included increases in interest rate, effective April 5, 1998, ranging from 1/4%
to 1% over the rates in effect prior to that date, revision of the final
maturity date for all obligations under the Bank Credit Agreement and
modifications to the scheduled repayment of term loans which decreased required
payments for 1998 and 1999. All past events of noncompliance as described above
have been waived by the syndicate of lenders who are parties to the Bank Credit
Agreement. As of July 4, 1998, the Company was in compliance with the covenants
under the Bank Credit Agreement. The Company continues to explore alternatives
which would reduce the likelihood of future non-compliance with the covenants
of the Bank Credit Agreement, including restructuring the long-term debt.
Management believes that it will be successful in these efforts. However, no
assurance can be given that an acceptable alternative can be agreed upon or
that any amendment or restructuring can be achieved on terms acceptable to the
Company.
15
<PAGE> 16
In connection with the 1998 Amendment, approximately $480,000 of deferred loan
costs were charged to Other -- net during the first quarter of 1998. This amount
represents the unamortized balance of the original loan costs, which were to be
amortized over the term of the Bank Credit Agreement, and the new deferred loan
costs of approximately $647,000 were recorded in connection with the 1998
Amendment and are being amortized over the remaining term of the Bank Credit
Agreement.
The 1998 Amendment required the Company to adopt new cash management procedures
which were adopted in the third quarter of 1998. The new procedures include the
daily application of customer remittances received by Johnston's lockbox against
the Revolving Credit Facility, which management believes will generally enhance
the Company's availability under the Revolving Credit Facility. As a result of
this lock-box arrangement and in compliance with the Emerging Issues Task Force
Issue No. 95-22, ""Balance Sheet Classification of Borrowings Outstanding under
Revolving Credit Agreements that Include both a Subjective Acceleration Clause
and a Lock-Box Arrangement," the revolving credit loan, which has a maturity
date of July 1, 2000, has been classified as a current liability.
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
significant assets.
Cash flow provided by operating activities declined by $536,000 compared to the
first six months of 1997, however, 1997 included $2,030,000 net cash provided by
discontinued operations. Although total long term financing and short term
borrowings have been reduced by approximately 10% over the last twelve months,
the Company continues to be highly leveraged in comparison to periods preceding
March of 1996. In consideration of the high levels of indebtedness, management
has focused efforts on reduction of debt and associated debt service costs.
Although 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 in the Company's 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, judicious review of its short term capital expenditure plans,
and potential use of leasing programs in lieu of cash purchases for portions of
its capital investment plan. Although no assurance can be given that cash
provided by operating and financing activities will be sufficient, Management
believes that through careful planning and constraint of discretionary cash
expenditures, cash generated by operations and cash available under the Bank
Credit Agreement will be sufficient to satisfy the Company's liquidity
requirements for at least the next year.
ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") 129, "Disclosure of Information about
Capital Structure." This statement establishes standards for disclosing
information about an entity's capital structure and is effective for periods
ending after December 15, 1997. The Company has adopted this statement effective
for the first quarter of 1998.
In February 1997, the Financial Accounting Standards Board issued SFAS 130
"Reporting Comprehensive Income." This statement 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 financial statements for periods beginning after December
15, 1997. The Company has adopted this statement effective for the first quarter
of 1998. For the three months ended April 4, 1998 and March 29, 1997, there are
no differences between comprehensive income and net income.
In June 1997, the Financial Accounting Standards Board issued SFAS 131
"Disclosure about Segments of an Enterprise and Related Information." This
statement 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 Company is
required to present the segment disclosures in the current fiscal year, however,
disclosure in interim financial reports issued to shareholders is not required
during the year of adoption. This statement is effective for financial
statements for periods beginning after December 15, 1997.
16
<PAGE> 17
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position ("(SOP")
98-1 "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." This statement, which provides guidance on accounting for the
costs of computer software developed or obtained for internal use, defines
"internal use," provides guidance for determination of capital and expensed
costs, and is effective for fiscal years beginning after December 15, 1998, but
earlier adoption is encouraged. The Company has adopted this statement effective
for the first quarter of 1998.
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 has engaged counsel and advisors to
assist in exploring possible remedies.
On Friday, April 17, 1998, a tornado struck the Company's Opp Mill in Opp,
Alabama, damaging the structure's roof and outside walls as well as damaging
certain inventory, electronic controls and production equipment contained within
the facility. The Opp Mill, which runs a seven day, 24 hour production schedule,
resumed partial production on Monday, April 20, 1998 and had all major equipment
back in service by Friday, April 24, 1998. Management believes that
substantially all losses associated with this storm will be recovered through
property and business interruption insurance, however, no assurances can be
given as to when or whether acceptable settlements will be reached with the
Company's insurance provider.
YEAR 2000 INITIATIVES
As a result of computer programs which historically were written using a two
rather than four digit convention to define the year component of dates, a
concern commonly known as the Year 2000 ("Year 2000") issue has arisen globally.
Computer programs and equipment that use a two digit convention may not be able
to differentiate between the 20th and 21st centuries (e.g. "00" could be either
1900 or 2000). This could result in system failures or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
The Company has reviewed significant systems which are not presently Year 2000
compliant. Two major software replacement projects remain for the Company, both
of which involve replacing current systems with purchased systems that are Year
2000 compliant. A major software replacement project is underway at the
Company's Finished Fabrics Division and upon its completion, the Company intends
to replace the major systems at its Fiber Products Division, which are
considerably less sophisticated than the Finished Fabrics Systems.
The Company screens all new equipment purchases and presently is reviewing its
systems and operations to determine what systems imbedded in sophisticated
production equipment or support equipment may be vulnerable to Year 2000 issues.
This review will be followed with a formal communication program with equipment
vendors to certify that the systems are Year 2000 compliant. Remediation steps,
if any, will be implemented, though there can be no guarantee that vendors will
successfully remediate the equipment systems and that any failure to timely
remediate would not have a material effect on the Company's systems.
As a result of the upgrades described above and assuming the remaining projects
are completed in satisfactory manner, management currently believes that the
Year 2000 issue will not pose significant operational problems for the
Company's computer systems. The Company anticipates completing the Year 2000
project no later than August, 1999. Management believes that the cost of Year
2000 modifications will not have a material effect on results of operations.
There can be no guarantee that the software replacement projects will be
successful or that the vendors supplying software to the Company will provide
new software releases that are Year 2000 compliant. In addition, there can be no
assurances that there will not be problems identified when screening production
and support equipment and ancillary systems and that such problems will not have
a material effect on the operating results.
17
<PAGE> 18
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 may vary from the
Company's expectations with respect to anticipated proceeds from the sale of
assets. 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 January
3, 1998, which cautionary statement is incorporated by reference herein.
18
<PAGE> 19
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No reportable legal proceedings arose in the quarter ended July 4, 1998.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 27, 1998, the Annual Meeting of Stockholders was held at the Company's
offices located at 105 Thirteenth Street, Columbus, Georgia 31901. There were
present in person or by proxy 9,870,196 shares of Common Stock entitled to vote.
The following shares were voted for election of nominees for Director:
<TABLE>
<CAPTION>
NOMINEE NO. OF SHARES IN FAVOR WITHHELD
------- ---------------------- --------
<S> <C> <C>
J. Reid Bingham 9,821,967 48,229
David L. Chandler 9,801,027 69,169
John A. Friedman 9,822,767 47,429
William J. Hart 9,823,967 46,229
Gaines R. Jeffcoat 9,825,467 44,729
D. Clark Ogle 9,824,467 45,729
C. Philip Stanley 9,826,467 43,729
</TABLE>
There were no abstentions or broker non-votes applicable to the election of
Directors. All the nominees were elected as Directors.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.28 Amendment #4 dated April 2, 1998 to Bank Credit Agreement
11 Statements of Computation of Per Share Earnings
27 Financial Data Schedule (Filed Electronically)
(b) Reports on Form 8-K
(i) Notice of change in the Registrant's certifying accountant, as filed
on Form 8-K dated June 2, 1998, is incorporated by reference herein.
_______________________________________________________________________________
19
<PAGE> 20
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: August 18, 1998 By: /s/ JAMES J. MURRAY
-------------------
James J. Murray
Executive Vice President and
Chief Financial Officer
By: /s/ JAMES J. MURRAY
-------------------
James J. Murray
(Principal Accounting Officer)
20
<PAGE> 1
EXHIBIT 10.28 AMENDMENT NO.4
TO
CREDIT AGREEMENT
AMENDMENT NO. 4 dated as of March 30, 1998 by and among Johnston
Industries, Inc., a Delaware corporation ("Johnston"), Johnston Industries
Alabama, Inc., and Alabama corporation formerly known as Opp and Micolas Mills,
Inc. ("Johnston Alabama"), J.I. Georgia, a Georgia corporation formerly known as
T.J. Beall Company ("JIG") and Johnston Industries Composite Reinforcements,
Inc., an Alabama corporation ("JICR", and collectively with Johnston, Johnston
Alabama and JIG, the "Borrowers" and each individually a "Borrower"),
NationsBank, N.A., as Syndication Agent, The Chase Manhattan Bank, the successor
by merger to The Chase Manhattan Bank, N.A., as Agent for the banks ("Banks")
named in the Credit Agreement dated as of March 28, 1996 among Johnston,
Wellington Sears Company ("Wellington"), Southern Phenix Textiles, Inc.
("Phenix"), Opp and Micolas Mills, Inc. ("Opp"), T.J. Beall Company ("TJB") and
JICR, the banks named therein, The Chase Manhattan Bank, N.A., as Administrative
Agent, Chase Securities, Inc. as the Arranger, and NationsBank, N.A. as
Syndication Agent, as amended by Amendment No. 1 to the Credit Agreement dated
as of June 28, 1996, Amendment No. 2 dated as of February 28, 1997 and Amendment
No. 3 dated as of December 18, 1997 (the "Credit Agreement"). All capitalized
terms used, but not otherwise defined herein, shall have the meanings given them
in the Credit Agreement.
W I T N E S S E T H
-------------------
WHEREAS, pursuant to the Credit Agreement, the Banks named therein
made Revolving Credit Loans, Term Loans A and Term Loans B to Johnston,
Wellington, Phenix, Opp, TJB and JICR, jointly and severally, in the aggregate
principally amounts of $80,000,000, $40,000,000, and $40,000,000, respectively;
and
WHEREAS, the Borrowers have requested, and the Banks have agreed,
subject to the terms and conditions hereinafter set forth, to (i) amend certain
provisions of the Credit Agreement and (ii) modify certain of the Borrower's
covenants set forth in the Credit Agreement, and the Borrowers further wish to
confirm and reaffirm their joint and several obligations under the Credit
Agreement as amended hereby.
NOW THEREFORE, each Bank, the Agent, the Syndication Agent and each
Borrower, on a joint and several basis, hereby agree as follows:
1. Amendment to Definitions. Section 1.01 of the Credit Agreement is
amended hereby as follows:
a. The definition of "Capital Expenditures" is hereby amended by
inserting the phrase "and Operating Leases" after the words "Capital Leases" in
the fifth line thereof.
b. The definition of "Applicable Margin" is hereby amended to (i)
delete the first paragraph thereof up to ending before the table contained in
said definition in its entirety and substitute it with the following:
"Applicable Margin" shall mean (i) with respect to the Revolving
Credit Loans and Term Loans A, the amount calculated by reference to
the Debt Ratio as at the last day of the most recently ended fiscal
quarter of Johnston ("Testing Date"), which if such Debt Ratio falls
within any of the ranges set forth below, then the "Applicable Margin"
shall be the respective basis points set forth opposite such range in
the table below during the period commencing on the Margin Change Date
(as defined below) for such Testing Date to, but not including the
Margin Change Date for the next succeeding testing date:",
21
<PAGE> 2
(ii) delete the table contained in said definition in its entirety and
substitute it with the following:
<TABLE>
<CAPTION>
REVOLVER TERM LOAN A
-------- -----------
DEBT RATIO LIBOR BASE RATE LIBOR BASE RATE
---------- ----- --------- ----- ---------
<S> <C> <C> <C> <C>
Less than or equal to 2.00:1 150.00 bp 25.00 bp 200.00 bp 50.00 bp
Greater than 2.00:1 but less than 175.00 bp 25.00 bp 225.00 bp 50.00 bp
or equal to 2.75:1
Greater than 2.75:1 but less than 200.00 bp 50.00 bp 250.00 bp 75.00 bp
or equal to 3.50:1
Greater than 3.50:1 but less than 250.00 bp 100.00 bp 300.00 bp 125.00 bp
or equal to 4.25:1
Greater than 4.25:1 300.00 bp 150.00 bp 350.00 bp 175.00 bp
</TABLE>
and (iii) delete clause (2) thereof in its entirety and replace it with the
following:
"[2] with respect to Term Loan B: (a) if such Loan is a Eurodollar Loan,
four hundred (400) basis points (4.00%), and (b) if such Loan is a Base
Rate Loan, two hundred twenty-five (225) basis points (2.25%)."
The Borrowers agree that the foregoing rate increases shall become
effective on April 5, 1998 and that all outstanding Debt of the Borrowers under
the Credit Agreement and the Notes shall be subject to the repricing set forth
herein on April 5, 1998, notwithstanding anything to the contrary contained in
the Credit Agreement.
c. The definition of "Revolving Credit Termination Date" is hereby
amended by deleting said definition in its entirety and substituting it with
the following:
"'Revolving Credit Termination Date' means July 1, 2000."
d. The definition of "Term Loan A Termination Date" is hereby amended by
deleting said definition in its entirety and substituting it with the following:
"'Term Loan A Termination Date' means July 1, 2000."
e. The definition of "Term Loan B Termination Date" is hereby amended by
deleting said definition in its entirety and substituting it with the following:
"'Term Loan B Termination Date' means July 1, 2000."
f. The definition of "Interest Payment Date" is hereby amended by
deleting clause (ii) thereof in its entirety and substituting it with the
following:
"(ii) with respect to each Base Rate Loan, April 4, 1998 and the last
day of each consecutive fiscal quarter of Johnston (as set forth on
Schedule 1.01 attached hereto) thereafter."
2. Amendment to Section 1.04 - Payments on a Day Other than a
Business Day. Section 1.04 of the Credit Agreement is hereby amended by
deleting all language contained in the parenthetical after the word "Day" in
the last three lines of said Section.
3. Amendment to Section 2.01(b) - Repayment of Term Loans. Section
2.01(b) of the Credit Agreement is hereby amended by deleting the second
sentence and table of said Section in their entirety and substituting them with
the following:
22
<PAGE> 3
"The Term Loans shall be repaid in quarterly installments set forth
below commencing on April 4, 1998 until and including the Term Loan A
Termination Date and Term Loan B Termination Date, respectively, such
that on the last Business Day of each fiscal quarter of Johnston, each
Bank shall be paid an amount equal to such Bank's pro rata share of
the quarterly installment amounts set forth below for Term Loan A or
Term Loan B, as the case may be (calculated based on each Bank's Term
Loan Percentage):"
<TABLE>
<CAPTION>
TERM LOAN A TERM LOAN B
----------- -----------
<S> <C> <C>
April 4, 1998 $ 470,000 $ 30,000
July 4, 1998 $ 480,000 $ 20,000
October 3, 1998 $ 480,000 $ 20,000
January 2, 1999 $ 960,000 $ 40,000
April 3, 1999 $ 2,000,000 $ 125,000
July 3, 1999 $ 2,000,000 $ 125,000
October 2, 1999 $ 2,500,000 $ 125,000
January 1, 2000 $ 2,500,000 $ 125,000
April 1, 2000 $ 2,500,000 $ 125,000
July 1, 2000 $15,413,162.82 $32,798,257.38
</TABLE>
4. Amendment to Section 6.01 -- Representations and Warranties.
Section 6.01 is hereby amended by adding a new subsection thereto to read in its
entirety as follows:
"(v) Year 2000. Substantially all of the reprogramming required to permit
the proper functioning, in and following the year 2000, of
(i) the Borrowers' computer systems and (ii) equipment
containing embedded microchips (including systems and
equipment supplied by others or with which Borrowers'
systems interface) and the testing of all such systems and
equipment, as so programmed, will be completed by June 30,
1999. The cost to the Borrowers of such reprogramming and
testing and of the reasonably foreseeable consequences of
year 2000 to the Borrowers (including, without limitation,
reprogramming errors and the failure of others' systems or
equipment) will not result in a Default or a Material
Adverse Effect. Except for such of the reprogramming
referred to in the preceding sentence as may be necessary,
the computer and management information systems of the
Borrowers are and, with ordinary course upgrading and
maintenance, will continue for the term of this Agreement
to be, sufficient to permit the Borrowers to conduct their
business without Material Adverse Effect."
5. Amendment to Section 7.02 -- Negative Covenants. Section 7.02
(e) is hereby amended by deleting said paragraph in its entirety and
substituting it with the following:
"(e) Leases. Create, incur, assume or suffer to exist, or permit
any Consolidated Entity to create, incur, assume or suffer to exist, any
obligation as lessee for the rental or hire of any real or personal property,
except: (i) leases (inclusive of Capital Leases and Operating Leases) existing
on the date of this Agreement and any extensions or renewals thereof; (ii)
leases (other than Capital Leases) which do not in the aggregate require the
Consolidated Entities, on a consolidated basis, to make payments (including
taxes, insurance, maintenance and similar expenses required under the terms of
any lease (but excluding down payments made in connection with
23
<PAGE> 4
Operating Leases subsequently refunded and not exceeding, in the aggregate, the
amount of $3,000,000) in the fiscal year ending January 2, 1999 and for all
fiscal years thereafter in excess of $4,500,000; (iii) Capital Leases permitted
by Section 7.02(a); and (iv) Capital Leases and Operating Leases entered into by
a Consolidated Entity after the date hereof pursuant to and permitted by Section
7.03(b)."
Section 7.02(p) is amended by deleting the name "Gerald Andrews" from
the first sentence thereof and inserting "Clark Ogle" in substitution therefor.
6. Amendment to Section 7.03 - Financial Covenants. Section 7.03 of
the Credit Agreement is hereby amended to delete the paragraphs set forth below
in their entirety and to substitute said paragraphs with the following:
"(a) Total Loan Commitment. Permit the Total Loan Commitment at any one
time outstanding under this Agreement to exceed $142,336,000 for the fiscal
quarter of Johnston ending April 3, 1998, $141,836,000 for the fiscal
quarter ending July 4, 1998, $141,336,000 for the fiscal quarter ending
October 3, 1998, $140,500,000 for the fiscal quarter ending January 2,
1999, $138,375,000 for the fiscal quarter ending April 3, 1999,
$136,250,000 for the fiscal quarter ending July 3, 1999, $133,625,000 for
the fiscal quarter ending October 2, 1999, $131,000,000 for the fiscal
quarter ending January 1, 2000 and $128,375 for the fiscal quarter ending
April 1, 2000 and for all times thereafter."
"(b) Capital Expenditures. Permit Consolidated Capital Expenditures to
exceed (i) $17,500,000 for the fiscal year ending January 2, 1999,
provided that (A) Consolidated Capital Expenditures consisting of direct
cash purchases or related disbursements during such fiscal year shall not
exceed $11,500,000 in the aggregate (excluding, however, down payments
made in connection with Operating Leases subsequently refunded and not
exceeding, in the aggregate, the amount of $3,000,000); (B) Consolidated
Capital Expenditures for and/or incurred with respect to Capital Leases
during such fiscal year shall not exceed $10,000,000 in the aggregate, and
(C) the computation of Consolidated Capital Expenditures for and/or
incurred with respect to Operating Leases during such fiscal year shall
include the notional value of equipment leased pursuant to such Operating
Leases during such fiscal year; and (ii) $20,000,000 for the fiscal year
ending January 1, 2000 and each fiscal year thereafter, of which no more
than $8,500,000 may be committed for expenditure but not expended during
the period from January 3, 1999 through January 1, 2000.
"(d) Consolidated Tangible Net Worth. Permit its Consolidated Tangible Net
Worth, as determined at the end of each fiscal quarter, to be less than
the amount set forth opposite such period:
<TABLE>
<CAPTION>
PERIOD: AMOUNT:
------- -------
<S> <C>
01/04/98 - 04/04/98 $36,500,000
04/05/98 - 07/14/98 $35,550,000
07/15/98 - 10/03/98 $35,300,000
10/04/98 - 01/02/99 $36,750,000
As of 01/03/99 and at all times thereafter $70,000,000"
</TABLE>
"(e) Leverage Ratio. Permit the Leverage Ratio, as determined at the end
of each fiscal quarter, to be greater than the ratio set forth opposite
the following periods:
<TABLE>
<CAPTION>
PERIOD: AMOUNT:
------- -------
<S> <C>
01/04/98 - 04/04/98 4.00:1.00
04/05/98 - 07/04/98 4.00:1.00
07/05/98 - 10/03/98 4.00:1.00
10/04/98 - 01/02/99 3.75:1.00
As of 01/03/99 and at all times thereafter 2.00:1.00"
</TABLE>
24
<PAGE> 5
"(g) Interest Coverage Ratio. Permit its Interest Coverage Ratio, as
determined at the end of each fiscal quarter, to be less than the ratio set
forth opposite the following periods:
<TABLE>
<CAPTION>
PERIOD: RATIO:
------- ------
<S> <C>
01/04/98 - 04/04/98 0.39:1.00
04/05/98 - 07/04/98 0.32:1.00
07/05/98 - 10/03/98 0.67:1.00
10/04/98 - 01/02/99 0.90:1.00
As of 01/03/99 and at all times thereafter 3.00:1.00"
</TABLE>
"(h) Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio,
as determined at the end of each fiscal quarter, to be less than the ratio
set forth opposite the following periods:
<TABLE>
<CAPTION>
PERIOD: RATIO:
------- ------
<S> <C>
01/04/98 - 04/04/98 0.68:1.00
04/05/98 - 07/04/98 0.68:1.00
07/05/98 - 10/03/98 0.73:1.00
10/04/98 - 01/02/99 0.90:1.00
As of 01/03/99 and at all times thereafter 1.50:1.00"
</TABLE>
"(i) Debt Ratio. Permit the Debt Ratio, as determined at the end of each
fiscal quarter, to be greater than the ratio set forth opposite the
following periods:
<TABLE>
<CAPTION>
PERIOD: RATIO:
------- ------
<S> <C>
01/04/98 - 04/04/98 5.30:1.00
04/05/98 - 07/04/98 5.30:1.00
07/05/98 - 10/03/98 4.45:1.00
10/04/98 - 01/02/99 4.15:1.00
As of 01/03/99 and at all times thereafter 3.00:1.00"
</TABLE>
For the purpose of calculating Consolidated EBIT during the period commencing
on the third fiscal quarter in fiscal year 1997 of the Consolidated Entities
through and including the first fiscal quarter of the Consolidated Entities in
the fiscal year 1998, amounts designated by the Consolidated Entities in its
Financial Statements as "restructuring and impairment charges" incurred or
arising during fiscal year ended 1997 and the fiscal quarter ended January 4,
1998, in an aggregate amount not in excess of $7,328,000, shall be added back to
the computation of Consolidated EBIT for said periods only.
7. Collateral Monitoring Arrangement. Borrowers agree that a
collateral monitoring arrangement, which shall be established and implemented
on the basis of a full dominion and control asset-based structure and on terms
and conditions approved in advance by the Required Banks (including, without
limitation, the selection of a collateral monitoring agent), shall be
operational and fully documented on or before May 31, 1998. The Borrowers
further agree that any such arrangement shall include cash management/lock-box
account and related agreements in form and substance reasonably acceptable to
the Required Banks.
8. Representations, Warranties and Covenants of the Borrowers. Each
Borrower hereby represents and warrants to each Bank that on and as of the date
hereof (i) the representations and warranties of the Borrowers contained in the
Credit Agreement and any other Loan Document delivered in connection therewith
to which it is a party (or to which its predecessor by merger or name change is
a party) are true and correct and apply to the Borrowers hereto with the same
force and effect as though made on and as of the date hereof and regardless of
the mergers and name change described in the recitals above, (ii) the Borrowers
are in compliance with all covenants contained in the Credit Agreement (as
amended hereby), and (iii) no Default or Event of Default has occurred and is
continuing under the Credit Agreement (as amended hereby) or any other Loan
Document delivered in connection therewith to which it is a party (or to which
its predecessor by merger or name change is a party),
25
<PAGE> 6
after giving effect to this Amendment. To the extent any claim or off-set may
exist as of the date hereof, each Borrower, on behalf of itself and its
successors and assigns, hereby forever and irrevocably (a) releases each Bank,
the Agent and the Syndication Agent and their respective officers,
representatives, agents, attorneys, employees, successors and assigns
(collectively, the "Released Parties"), from any and all claims, demands,
damages, suits, cross-complaints and causes of action of any kind and nature
whatsoever, whether known or unknown and wherever and however arising, and (b)
waives any right of off-set such Borrower may have against any of the Released
Parties.
9. Amendment Fee. Borrowers agree to pay the Agent, for the benefit
of each Bank, a fee equal to 1/4 of 1% of the Revolving Credit Commitment plus
1/4 of 1% of the Term Loan A Commitment and the Term Loan B Commitment
respectively outstanding as of the date hereof ("Amendment Fee"), together with
the costs and expenses (including, without limitation, reasonable attorneys'
fees) incurred by the Agent for the preparation, negotiation and delivery of
this Amendment, in consideration for the Banks' agreement to enter into this
Amendment, payable as follows: one-half of the Amendment Fee shall be due and
payable upon execution of this Amendment and the remaining half of the Amendment
Fee shall be due and payable upon the earlier to occur of (x) July 31, 1998, and
(y) the date on which all of the Borrowers' payments under the Credit Agreement
and Loan Documents have been made in full and all of the Borrowers' other
obligations thereunder have been fully paid and discharged to the satisfaction
of the Banks.
10. Restructuring Fees. In further consideration of the Banks'
willingness to enter into this Amendment and the arrangements contemplated
hereby, Borrowers agree to pay the Agent, for the benefit of each Bank, on
October 31, 1998 a fee of $100,000.
11. Payment of Fees. The Amendment Fee and Restructuring Fees
described in Sections 9 and 10 herein shall be paid to the Agent, for the
account of each Bank pro rata in accordance with their respective percentage
share of the Commitment outstanding at the time of payment.
12. Credit Agreement in Full Force and Effect. Except as expressly
modified hereby, the Credit Agreement shall remain unchanged and in full force
and effect as executed and each Borrower hereby confirms and reaffirms all of
the terms and conditions of the Credit Agreement.
13. Entire Understanding. The Credit Agreement and this Amendment
contain the entire understanding of and supersede all prior agreements, written
and verbal, among the Banks, the Administrative Agent, the Syndication Agent
and the Borrowers with respect to the subject matter hereof and shall not be
modified except in writing executed by the parties hereto.
14. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York without giving effect to
its conflict of laws principles.
26
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE BORROWERS:
JOHNSTON INDUSTRIES, INC. JOHNSTON INDUSTRIES ALABAMA, INC.
By: /s/ JAMES J. MURRAY By: /s/ JAMES J. MURRAY
--------------------------- ------------------------
Name: James J. Murray Name: James J. Murray
Title: Executive Vice President & Title: Vice President
Chief Executive Officer
J.I. GEORGIA, INC. JOHNSTON INDUSTRIES COMPOSITE
REINFORCEMENTS, INC.
By: /s/ JAMES J. MURRAY By: /s/ JAMES J. MURRAY
--------------------------- ------------------------
Name: James J. Murray Name: James J. Murray
Title: Vice President Title: Vice President
THE ADMINISTRATIVE AGENT:
THE CHASE MANHATTAN BANK
By: /s/ SUSAN H. ATHA
---------------------------
Name: Susan H. Atha
Title: Vice President
THE SYNDICATION AGENT:
NATIONSBANK, N.A.
By: /s/ E. Phifer Helms
---------------------------
Name: E. Phifer Helms
Title: Senior Vice President
27
<PAGE> 8
<TABLE>
<S> <C>
THE BANKS:
THE CHASE MANHATTAN BANK NATIONSBANK, N.A.
By: /s/ SUSAN H. ATHA By: /s/ E. PHIFER HELMS
----------------------------------------- -----------------------------------------
Name: Susan H. Atha Name: E. Phifer Helms
Title: Vice President Title: Senior Vice-President
REGIONS BANK COMERICA BANK
By: /s/ MARK BURR By:
----------------------------------------- -----------------------------------------
Name: Mark Burr Name:
Title: VP -- Nat'l Accts Division Title:
VAN KAMPEN AMERICAN CAPITAL CORESTATES BANK, N.A.
PRIME RATE INCOME TRUST
By: By:
----------------------------------------- -----------------------------------------
Name: Name:
Title: Title:
WACHOVIA BANK OF GEORGIA, N.A. THE SUMITOMO BANK, LTD.
By: By:
----------------------------------------- -----------------------------------------
Name: Name:
Title: Title:
By:
-----------------------------------------
Name:
Title:
</TABLE>
28
<PAGE> 9
Schedule 1.01
SCHEDULE OF JOHNSTON'S FISCAL QUARTER-END DATES
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
<S> <C> <C> <C> <C>
FISCAL YEAR April 4, 1998 July 4, 1998 October 3, 1998 January 2, 1999
1998
FISCAL YEAR April 3, 1999 July 3, 1999 October 2, 1999 January 1, 2000
1999
FISCAL YEAR April 1, 2000 July 1, 2000
2000
</TABLE>
29
<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 SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JULY 4, JUNE 28, JULY 4, JUNE 28,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 10,742,772 10,403,923 10,742,772 10,391,545
Shares issued from assumed exercise of
incentive stock options(1)(2) -- -- -- --
Shares issued from assumed exercise of
nonqualified stock options(1)(2) -- -- -- --
---------- ----------- ----------- -----------
Weighted average number of common and common
equivalent shares outstanding as adjusted 10,742,772 10,403,923 10,742,772 10,391,545
========== =========== =========== ===========
Loss from continuing operations $ (568,000) $(6,635,000) $(1,503,000) $(5,085,000)
Income from discontinued operations -- 152,000 -- 126,000
---------- ----------- ----------- -----------
Net Loss (568,000) (6,483,000) (1,503,000) (4,959,000)
Dividends on Preferred Stock -- 40,000 -- 81,000
---------- ----------- ----------- -----------
Net Loss available to common
stockholders $ (568,000) $(6,523,000) $(1,503,000) $(5,040,000)
========== =========== =========== ===========
Earnings (Loss) per common share-basic:
Loss from continuing operations $ (.05) $ (.64) $ (.14) $ (.50)
Discontinued operations -- .01 -- .01
---------- ----------- ----------- -----------
Net Loss per common share-basic $ (.05) $ (.63) $ (.14) $ (.49)
========== =========== =========== ===========
</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 and six months ended July 4, 1998 and June 28,
1997, common shares from assumed exercise of stock options are not
presented as they are antidilutive in periods for which a loss is reported.
30
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JOHNSTON
INDUSTRIES, INC. AND SUBSIDIARIES FINANCIAL STATEMENTS AS OF JULY 4, 1998 AND
FOR THE THREE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> JAN-04-1998
<PERIOD-END> JUL-04-1998
<CASH> 284,000
<SECURITIES> 0
<RECEIVABLES> 35,007,000
<ALLOWANCES> 1,929,000
<INVENTORY> 51,126,000
<CURRENT-ASSETS> 97,923,000
<PP&E> 240,514,000
<DEPRECIATION> 131,455,000
<TOTAL-ASSETS> 224,148,000
<CURRENT-LIABILITIES> 99,787,000
<BONDS> 127,807,000
0
0
<COMMON> 1,246,000
<OTHER-SE> 46,375,000
<TOTAL-LIABILITY-AND-EQUITY> 224,148,000
<SALES> 148,902,000
<TOTAL-REVENUES> 148,902,000
<CGS> 120,439,000
<TOTAL-COSTS> 120,439,000
<OTHER-EXPENSES> 10,387,000
<LOSS-PROVISION> 294,000
<INTEREST-EXPENSE> 6,664,000
<INCOME-PRETAX> (2,396,000)
<INCOME-TAX> (893,000)
<INCOME-CONTINUING> (1,503,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,503,000)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
