<PAGE> 1
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 October 2, 1999
----------------------------------------------
Commission file number 1-6687
------
JOHNSTON INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 11-1749980
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 Thirteenth Street, Columbus, Georgia 31901
(Address of principal executive offices) (Zip Code)
(706) 641-3140
----------------------------------------------------
(Registrant's telephone number, including area code)
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 October
2, 1999 was 10,721,872 shares.
<PAGE> 2
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
PAGE(S)
<S> <C> <C>
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
- ------
Consolidated Balance Sheets
October 2, 1999 and January 2, 1999 4
Consolidated Statements of Operations
Three Months and Nine Months ended
October 2, 1999 and October 3, 1998 5
Consolidated Statements of Cash Flows
Nine Months ended
October 2, 1999 and October 3, 1998 6-7
Notes to Condensed Consolidated Financial Statements 8-12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------ CONDITION AND RESULTS OF OPERATIONS 13-19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
- ------ ABOUT MARKET RISK 20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 21
- ------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 21
- ------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 21
- ------
SIGNATURE PAGE 22
EXHIBIT 11 - STATEMENTS OF COMPUTATION OF
PER SHARE EARNINGS 23
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
(For SEC Use Only) 24
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE> 4
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF OCTOBER 2, 1999 AND JANUARY 2, 1999
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
==================================================================================================
October 2, January 2,
1999 1999
---------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,391 $ 1,231
Accounts and notes receivable, net of allowance for
doubtful accounts of $1,635 and $1,442 35,304 34,768
Inventories 51,070 58,079
Assets held for sale 3,758 3,788
Deferred income taxes 1,877 1,249
Income taxes receivable 60 --
Prepaid expenses and other 2,427 3,111
---------- --------
Total current assets 95,887 102,226
Property, plant and equipment-net 89,696 99,486
Goodwill - net of accumulated amortization of $2,201 and $1,728 10,372 10,845
Intangible asset-pension 1,651 1,651
Other assets 3,399 5,331
---------- --------
Total assets $ 201,005 $219,539
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 13,755 $ 13,867
Accrued expenses 11,254 9,859
Revolving credit facility 63,615 66,954
Current maturities of long-term debt 53,659 9,989
Income taxes payable -- 479
---------- --------
Total current liabilities 142,283 101,148
Long-term debt - less current maturities 1,216 51,109
Other liabilities 7,535 8,878
Deferred income taxes 8,035 10,130
---------- --------
Total liabilities 159,069 171,265
STOCKHOLDERS' EQUITY:
Common stock, par value $.10 per share; authorized,
20,000 shares; issued 12,468 1,246 1,246
Additional paid-in capital 21,445 21,445
Retained earnings 27,512 33,850
---------- --------
Total 50,203 56,541
Less treasury stock; 1,746 shares (8,267) (8,267)
---------- --------
Total stockholders' equity 41,936 48,274
---------- --------
Total liabilities and stockholders' equity $ 201,005 $219,539
========== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE> 5
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 2, 1999 AND OCTOBER 3, 1998
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
=========================================================================================================================
Three Months Ended Nine Months Ended
-------------------------- ---------------------------
October 2, October 3, October 2, October 3,
1999 1998 1999 1998
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Net sales $ 63,330 $ 69,572 $ 196,124 $ 218,474
--------- --------- --------- ----------
Costs and expenses:
Cost of sales 57,929 60,164 177,234 190,577
Selling, general and administrative 6,394 6,821 19,445 20,748
Amortization of goodwill 158 158 473 471
Restructuring and impairment charges -- (4) -- 96
--------- --------- --------- ----------
Total costs and expenses 64,481 67,139 197,152 211,892
--------- --------- --------- ----------
Income (loss) from operations (1,151) 2,433 (1,028) 6,582
Other expenses (income):
Interest expense 2,960 3,477 9,140 10,141
Interest income (113) (290) (483) (786)
Other-net 345 201 480 641
--------- --------- --------- ----------
Total other expenses - net 3,192 3,388 9,137 9,996
Equity in earnings of equity investee 247 114 555 177
Realized and unrealized investment loss (50) (19) (50) (19)
--------- --------- --------- ----------
Loss before benefit for income taxes (4,146) (860) (9,660) (3,256)
Benefit for income taxes (1,460) (1,000) (3,322) (1,893)
--------- --------- --------- ----------
Net income (loss) $ (2,686) $ 140 $ (6,338) $ (1,363)
========= ========= ========= ==========
Net income (loss) per common share:
Basic and diluted $ (0.25) $ 0.01 $ (0.59) $ (0.13)
========= ========= ========= ==========
Weighted average number of common shares outstanding 10,722 10,743 10,722 10,743
========= ========= ========= ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE> 6
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 2, 1999 AND OCTOBER 3, 1998
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
============================================================================================
Nine Months Ended
---------------------------
October 2, October 3,
1999 1998
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (6,338) $ (1,363)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 13,952 14,933
Amortization of goodwill 473 471
Amortization of deferred financing costs 1,581 1,326
Provision for bad debts 528 627
Loss on disposal of fixed assets 145 106
Net unrealized loss on portfolio investments 50 19
Undistributed earnings of equity investee (555) (177)
Changes in operating assets and liabilities:
Accounts and notes receivable (764) (4,663)
Inventories 7,009 (4,853)
Deferred income taxes (2,723) (714)
Prepaid expenses and other assets 768 (271)
Accounts payable 69 1,379
Accrued expenses 1,395 2,162
Income taxes payable (539) 2,266
Other liabilities (1,343) 381
---------- ----------
Total adjustments 20,046 12,992
---------- ----------
Net cash provided by operating activities 13,708 11,629
---------- ----------
INVESTING ACTIVITIES:
Additions to property, plant and equipment (4,400) (7,578)
Decrease in non-operating accounts payable (181) (1,414)
Proceeds from sale and leaseback -- 870
Proceeds from sale of fixed assets 154 307
Proceeds from sale of Cusseta plant 440 --
Proceeds from sale of Jupiter assets 33 630
---------- ----------
Net cash used in investing activities (3,954) (7,185)
---------- ----------
Continued
</TABLE>
6
<PAGE> 7
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 2, 1999 AND OCTOBER 3, 1998
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
============================================================================================
Nine Months Ended
---------------------------
October 2, October 3,
1999 1998
---------- ----------
<S> <C> <C>
FINANCING ACTIVITIES:
Principal payments of long-term debt (205,535) (75,876)
Proceeds from issuance of long-term debt 195,941 70,384
---------- ----------
Net cash used in financing activities (9,594) (5,492)
---------- ----------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 160 (1,048)
CASH AND CASH EQUIVALENTS:
Beginning of Period 1,231 2,284
---------- ----------
End of Period $ 1,391 $ 1,236
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid (received) during the period for:
Interest $ 8,670 $ 9,306
========== ==========
Income taxes $ (63) $ (2,524)
========== ==========
Concluded
</TABLE>
See Notes to Condensed Consolidated Financial Statements
7
<PAGE> 8
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF OCTOBER 2, 1999 AND
JANUARY 2, 1999, AND FOR THE NINE MONTHS ENDED OCTOBER 2, 1999 AND OCTOBER 3,
1998
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial 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"). All significant intercompany balances have been eliminated in
consolidation.
The accompanying interim condensed consolidated financial statements have been
prepared without audit pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading. In the opinion of
management, the unaudited condensed consolidated financial statements reflect
all adjustments 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
nine months ended October 2, 1999 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 2, 1999.
2. ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments imbedded in other contracts, and for hedging
activities. It requires that, at adoption, hedging relationships should be
designated anew and that entities recognize all derivatives as either assets or
liabilities in the statement of financial position and to measure those
instruments at fair value. The accounting for changes in the fair value of a
derivative depends on the intended use of the derivative and the resulting
designation. As issued, this statement is effective for all fiscal quarters of
all fiscal years beginning after June 15, 1999.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133." This statement defers the effective date for SFAS No. 133,
which will now be effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. The adoption of SFAS No. 133 is not expected to
have a material impact on the Company.
8
<PAGE> 9
3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
=================================================================================================================
OCTOBER 2, 1999 JANUARY 2, 1999
--------------- ---------------
<S> <C> <C>
Inventories-FIFO cost flow assumption
Finished goods ............................................... $ 30,281 $ 33,136
Work-in process .............................................. 7,902 8,793
Raw materials ................................................ 9,277 12,317
Direct materials and supplies ................................ 4,464 4,687
----------- -----------
51,924 58,933
Less LIFO reserve ............................................ (854) (854)
----------- -----------
Inventories - LIFO cost flow assumption ............... $ 51,070 $ 58,079
=========== ===========
=================================================================================================================
4. ASSETS HELD FOR SALE
Assets held for sale consisted of the following:
<CAPTION>
=================================================================================================================
OCTOBER 2, 1999 JANUARY 2, 1999
--------------- ---------------
<S> <C> <C>
Jupiter investments .................................................. $ 3,744 $ 3,272
Other property, plant and equipment .................................. 14 516
----------- -----------
$ 3,758 $ 3,788
=========== ===========
=================================================================================================================
</TABLE>
Concurrent with the acquisition of Jupiter National, Inc. in March 1996, the
Company's management made the decision to discontinue the venture capital
investment segment of Jupiter's operation. The remaining portfolio investments
are included in assets held for sale.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
=================================================================================================================
OCTOBER 2, 1999 JANUARY 2, 1999
--------------- ---------------
<S> <C> <C>
Land ................................................................. $ 933 $ 935
Buildings ............................................................ 36,761 36,105
Machinery and equipment .............................................. 205,676 202,680
----------- -----------
243,370 239,720
Less accumulated depreciation ........................................ (153,674) (140,234)
----------- -----------
Property, plant and equipment - net .......................... $ 89,696 $ 99,486
=========== ===========
=================================================================================================================
</TABLE>
9
<PAGE> 10
6. LONG-TERM DEBT AND REVOLVING CREDIT FACILITY
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
=================================================================================================================
OCTOBER 2, 1999 JANUARY 2, 1999
--------------- ---------------
<S> <C> <C>
Term loans ........................................................... $ 53,326 $ 59,402
Revolving credit facility ............................................ 63,615 66,954
Purchase money mortgage debt ......................................... 848 913
Industrial development note (net of unamortized discount) ............ 471 439
Capital lease obligations ............................................ 230 344
----------- -----------
Total ................................................................ 118,490 128,052
Less current maturities and revolving credit facility ................ (117,274) (76,943)
----------- -----------
$ 1,216 $ 51,109
=========== ===========
================================================================================================================
</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,
including a revolving credit loan (the "Revolving Credit Facility") of up to
$80,000, a term loan for $40,000 ("Term Loan A") and a second term loan for an
additional $40,000 ("Term Loan B"). The maturity date for all borrowings under
the Bank Credit Agreement is July 1, 2000.
As of October 2, 1999, the Company had outstanding borrowings under the Bank
Credit Agreement of $116,941 and $8,836 available under the Revolving Credit
Facility net of $125 of standby letters of credit. Availability under the
Revolving Credit Facility is limited by the levels of eligible collateral, as
defined in the Bank Credit Agreement.
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 cash dividends on its Common Stock provided certain financial tests are
met. Under these financial tests, at October 2, 1999, the Company was not
permitted to declare or pay cash dividends.
Proceeds from the sale of certain defined assets are generally applied against
the term loans in inverse order of the loan maturities.
AMENDMENTS TO THE BANK CREDIT AGREEMENT - The Bank Credit Agreement has been
amended several times, the latest amendment of which was executed on April 1,
1999 (the "1999 Amendment") to modify certain covenants. In addition to covenant
modifications, the 1999 Amendment also included an increase in interest rates of
1/2 of 1% which took effect on April 4, 1999.
In addition to limited covenant modifications, which were effective through
January 2, 1999, and increased interest rates, a March 30, 1998 amendment (the
"March 1998 Amendment") required the Company to adopt new cash management
procedures during the second quarter of 1998, which included establishment of a
lock-box with instruction for customers to remit payments directly to the
lock-box.
10
<PAGE> 11
Pursuant to the March 1998 Amendment, the Company agreed that a collateral
monitoring arrangement should be put into effect whereby the Company is
required, through an independent collateral monitoring agent, to report certain
financial data on a periodic basis to the lenders.
The Company paid amendment fees as a result of both the 1999 Amendment and the
March 1998 Amendment in an amount equal to 1/4 of 1% of Term Loan A, Term Loan
B, and the Revolving Credit Facility, respectively.
As of October 2, 1999, the Company was not in compliance with certain of the
covenants under the Bank Credit Agreement. The lenders which are parties to the
Bank Credit Agreement have waived the events of non-compliance at October 2,
1999. The Company paid fees as a result of the waivers in an amount equal to 18
basis points of the outstanding obligations under the Bank Credit Agreement. No
assurances can be given that the Lenders will waive future events of
non-compliance, if they occur, for the fourth quarter of 1999 and beyond.
All borrowings under the Bank Credit Agreement have a maturity date of July 1,
2000 and have been classified as a current liability.
7. EARNINGS PER SHARE
Earnings per share is not presented on a diluted basis, as the effect of
dilutive securities was either anti-dilutive due to net losses or immaterial
for all periods presented.
8. INCOME TAXES
The benefit for income taxes as computed under SFAS No. 109, "Accounting for
Income Taxes", is comprised of the following:
<TABLE>
<CAPTION>
==============================================================================================================
NINE MONTHS ENDED
-----------------
OCTOBER 2, 1999 OCTOBER 3, 1998
--------------- ---------------
<S> <C> <C>
Federal:
Current ...................................................... $ (370) $ (1,184)
Deferred ..................................................... (2,560) (647)
---------- ----------
(2,930) (1,831)
State:
Current ...................................................... (229) 1
Deferred ..................................................... (163) (63)
---------- ----------
(392) (62)
Benefit for income taxes ............................................. $ (3,322) $ (1,893)
========== ==========
==============================================================================================================
The reconciliation of the Company's effective income tax benefit rate to the
Federal statutory rate of 34% follows:
<CAPTION>
==============================================================================================================
NINE MONTHS ENDED
-----------------
OCTOBER 2, 1999 OCTOBER 3, 1998
--------------- ---------------
<S> <C> <C>
Federal income tax benefit at statutory rate ......................... $ (3,284) $ (1,107)
State income tax benefit, net of Federal tax benefit ................. (258) (41)
Amortization of goodwill ............................................. 160 159
Net operating loss refund (10 year carryback) ........................ -- (920)
Other - net .......................................................... 60 16
---------- ----------
$ (3,322) $ (1,893)
---------- ----------
Effective rate ....................................................... 34.38% 58.14%
========== ==========
==============================================================================================================
</TABLE>
11
<PAGE> 12
9. SEGMENT AND RELATED INFORMATION
The Company's principal operations include manufacturing and marketing of
finished and unfinished (greige) fabrics plus processing and marketing of
textile waste fibers and fabrics. The Company's operations are organized around
manufacturing processes and its reportable business segments include the Greige
Fabrics Division, the Finished Fabrics Division and the Fiber Products
Division. All remaining operations have been aggregated as "All Other".
Segments are evaluated on the basis of income (loss) on continuing operations
before interest expense and income taxes. Intersegment transactions are
generally recorded at cost.
Financial and related information for business segments is as follows:
<TABLE>
<CAPTION>
==================================================================================================================================
Greige Finished Fiber All Reconciling
Period Fabrics Fabrics Products Other Eliminations Consolidated
- --------------------------------------------------- -------- -------- -------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
AS OF AND FOR THE NINE MONTHS ENDED OCTOBER 2, 1999
Trade revenues $ 90,704 $ 72,173 $24,557 $ 8,690 $ -- $ 196,124
Intersegment revenues 4,139 3,874 494 -- (8,507) --
Income (loss) before income taxes 587 771 621 (11,639) -- (9,660)
Total assets 97,168 68,142 18,924 315,223 (298,391) 201,066
AS OF AND FOR THE NINE MONTHS ENDED OCTOBER 3, 1998
Trade revenues $108,104 $ 75,759 $26,348 $ 8,263 $ -- $ 218,474
Intersegment revenues 5,349 3,090 840 -- (9,279) --
Income (loss) before income taxes 11,095 (2,200) 1,865 (14,016) -- (3,256)
Total assets 112,631 75,794 19,312 341,792 (319,838) 229,691
==================================================================================================================================
</TABLE>
10. RELATED PARTY TRANSACTIONS
Redlaw Industries, Inc. ("Redlaw"), a stockholder, was 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 from May
1994 until December 1998. As of October 3, 1998 there was approximately $77 of
inventory located at a warehouse in Canada, which was supervised by Redlaw, and
there were accrued commissions payable to Redlaw of $35. Commissions of
approximately $59 and $234, respectively, were paid to Redlaw for the three
months and the nine months ended October 3, 1998.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The accompanying unaudited condensed consolidated financial 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").
RESULTS OF OPERATIONS
During the past two years, world demand for U.S. textile products has lessened.
This is a result of a combination of factors, including the strong U.S. Dollar
and financial instability in many regions of the world. In addition, textile
imports into the U.S., particularly apparel, have increased sharply as foreign
producers seek U.S. dollars to offset weakness in their domestic economies.
These factors have led to deflationary price pressures on textile products and
increased competition from both foreign producers, as described above, and U.S.
producers seeking to offset lost demand by entering the Company's markets.
Management believes that though there may have been certain fundamental shifts
in world textile markets, such as apparel, the recent trend of opportunistic,
price driven purchasing in many of the Company's markets is not sustainable.
Management anticipates that, by necessity, these markets will gravitate back to
high quality, service-oriented manufacturers that can best satisfy the
customer's long-term needs.
Net sales for the three months and nine months ended October 2, 1999 decreased
$6.2 million and $22.3 million, respectively, from the three months and nine
months ended October 3, 1998. An analysis of changes in net sales by market is
as follows (in thousands):
<TABLE>
<CAPTION>
3RD QTR 1999 YTD 1999
INCR/(DECR) FROM INCR/(DECR) FROM
3RD QTR 1998 YTD 1998
---------------- ----------
<S> <C> <C>
Industrial/Automotive ................................................ $ (1,213) $ (2,105)
Home Furnishings/Hospitality ......................................... (5,664) (22,449)
Apparel .............................................................. 2,474 4,433
Specialty Markets/Miscellaneous ...................................... (1,839) (2,229)
---------- ----------
Net Sales .................................................... $ (6,242) $ (22,350)
========== ==========
</TABLE>
- - Sales of industrial and automotive fabrics for the quarter and year to
date periods decreased from the same periods, respectively, in 1998.
Sales of automotive fabrics have declined as a result of both soft
demand and changes in construction of automotive seating by seating
manufacturers. Third quarter sales of industrial fabrics are relatively
unchanged compared to the third quarter of 1998, while year to date
sales of industrial fabrics have declined slightly compared to the same
period in 1998. Reduced demand for certain industrial fabrics , as a
result of certain customer initiatives to reduce their inventory
levels, has been largely offset by the addition of a new industrial
fabric customer.
- - Overall sales of home furnishing and hospitality fabrics for the
quarter and the first nine months of 1999 declined heavily from the
levels recorded for the three months and nine months ended October 3,
1998. Reduced sales of upholstery substrate fabrics of the type
produced by the Greige Fabrics Division account for the majority of
this reduction. Currency and economic difficulties in Eastern Europe
arising during the second quarter of 1998 sharply impacted demand for
fabrics produced by customers of the Greige Fabrics Division. Economic
conditions in this region of the world have precluded a recovery of
this demand to date. Additionally, sales of casual furniture fabrics
have been reduced by stiff competition from imports and sales of
residential upholstery fabrics have also declined. Sales of napery
fabrics by the Finished Fabrics Division continues to grow, partially
offsetting the declines as discussed above.
- - The Greige Fabrics Division capitalized on certain short-term
opportunities to sell apparel fabrics at attractive margins during
early 1998. During the second and third quarters of 1999, the Greige
Fabrics Division booked
13
<PAGE> 14
an increased level of apparel orders at lower margins in order to
utilize available capacity, but this trend is not expected to extend
beyond a short period of time.
- - Sales to specialty markets reflect declines in sales of yarn by the
Greige Fabrics Division and sales of remnants by the Fiber Products
Division. Additionally, the Fiber Products Division experienced
disruption in production and inventory levels during the second quarter
following a fire at the Fiber Products Division's DeWitt Plant in March
1999 (see discussion below at Legal and Other Matters). Despite interim
measures to supply customers, post-fire inventory was not sufficient to
fully meet demand. The DeWitt Plant has operated near capacity, while
rebuilding its available for sale stock, since production resumed in
April 1999. Competitive conditions have driven prices for sales yarn
very low, making it difficult to sell yarn profitably. Growth in sales
at the Company's Composite Reinforcement operation, however, has
mitigated, in part, the effect of the declines described above.
The Company's backlog of customer orders was $60.4 million at October 2, 1999,
$49.4 at January 2, 1999 and $61.3 million at October 3, 1998. Order backlog at
October 2, 1999 has declined only slightly from October 3, 1998, however the
mix of products composing this order backlog have changed during the past
twelve months. Management expects continued softness in demand for certain of
the markets in which the Company sells its products, principally residential
upholstery, and continued import pressure on prices and markets for textile
products in general. However, while no assurances can be given, management
expects some moderate strengthening in markets for certain upholstery
substrates and greige decorative fabrics during the fourth quarter of 1999.
Gross margin as a percentage of net sales for the three months and nine months
ended October 2, 1999 was 8.5% and 9.6% compared to 13.5% and 12.8% for the
same periods in 1998, respectively. Lower capacity utilization associated with
decreased revenues, plus initiatives to reduce inventory levels, has
contributed to reduced gross margin for both the third quarter and the first
nine months of 1999. Depressed virgin cotton prices have driven prices for
recycled textile waste products to new lows, negatively affecting margins for
the Fiber Products Division. Additionally, these margins were further weakened
by increased shipping costs during the second quarter of 1999 when mid-western
customers were serviced from the Lantuck Plant in Lanett, Alabama following a
fire at the Fiber Products Division's DeWitt Plant (see discussion below at
Legal and Other Matters).
For the three months and nine months ended October 2, 1999, selling, general
and administrative expenses decreased by $427 thousand (6.3%) and $1.3 million
(6.3%), respectively, from the same periods in 1998. Cost containment
initiatives and, to a lesser degree, decreased commissions on sales of certain
upholstery fabrics have resulted in reduced selling costs. Additionally,
professional services associated with a 1997 realignment were substantially
concluded in April 1998.
Interest expense was $3.0 million and $9.1 million, respectively, for the three
months and nine months ended October 2, 1999 compared to $3.5 million and $10.1
million for the three months and nine months ended October 3, 1998. Changes in
interest expense reflect the effects of both reduced average borrowings and
increased average rates associated with the March 30, 1998 and April 1, 1999
amendments to the Company's bank credit agreement (the "Bank Credit
Agreement"), as discussed below. The three months ended October 2, 1999 marks
the eighth consecutive quarter of debt reduction. Obligations under the Bank
Credit Agreement at October 2, 1999 were reduced by $9.4 million and $12.7
million from obligations at October 2, 1999 and October 3, 1998, respectively.
During the first nine months of 1999 and 1998, respectively, approximately $419
thousand and $480 thousand of deferred loan costs, respectively, were charged
to Other-net. These amounts represent the unamortized balance of original loan
costs and prior amendment costs which are related to provisions of the Bank
Credit Agreement which were amended on March 30, 1998 and April 1, 1999,
respectively. In March 1999, approximately $346 thousand of deferred loan costs
were capitalized in connection with the 1999 amendment and are being amortized
over the remaining term of the 1999 amendment, which is effective through
January 1, 2000. A net amount of approximately $223 thousand has been recorded
in Other-net in 1999 for business interruption insurance proceeds as a result
of fire damage at the Fiber Products Division's DeWitt Plant (see discussion
below at Legal and Other Matters).
14
<PAGE> 15
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 million including a revolving credit loan (the "Revolving Credit
Facility") of up to $80 million, a term loan for $40 million ("Term Loan A") and
a second term loan for an additional $40 million ("Term Loan B"). The maturity
date for all borrowings under the Bank Credit Agreement is July 1, 2000.
As of October 2, 1999, the Company had outstanding borrowings under the Bank
Credit Agreement of $116.9 million, and $8.8 million available under the
Revolver net of $125 thousand in standby letters of credit. Availability under
the Revolving Credit Facility is limited by the levels of eligible collateral,
as defined in the Bank Credit Agreement. Principal payments since January 2,
1999 have reduced outstanding borrowings under the Bank Credit Agreement by
$9.4 million.
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 cash dividends on its
Common Stock provided certain financial tests are met. Under these financial
tests, at October 2, 1999, the Company was not permitted to declare and pay
cash dividends.
Proceeds from the sale of certain defined assets are generally applied against
the term loans in inverse order of the loan maturities.
The Bank Credit Agreement has been amended several times, the latest amendment
of which was executed on April 1, 1999 (the "1999 Amendment") to modify certain
covenants. In addition to covenant modifications, the 1999 Amendment also
included an increase in interest rates of 1/2 of 1% which took effect on April
4, 1999.
In addition to limited covenant modifications, which were effective through
January 2, 1999, and increased interest rates, a March 30, 1998 amendment (the
"March 1998 Amendment") required the Company to adopt new cash management
procedures during the second quarter of 1998, which included establishment of a
lock-box with instruction for customers to remit payments directly to the
lock-box. Pursuant to the March 1998 Amendment, the Company agreed that a
collateral monitoring arrangement should be put into effect whereby the Company
is required, through an independent collateral monitoring agent, to report
certain financial data on a periodic basis to the lenders.
The Company paid amendment fees as a result of both the 1999 Amendment and the
March 1998 Amendment in amounts equal to 1/4 of 1% of Term Loan A, Term Loan B,
and the Revolving Credit Facility, respectively.
As of October 2, 1999, the Company was not in compliance with certain of the
covenants under the Bank Credit Agreement. The lenders, which are parties to the
Bank Credit Agreement, have waived the events of non-compliance at October 2,
1999. The Company paid fees as a result of the waivers in an amount equal to 18
basis points on the outstanding obligations under the Bank Credit Agreement. No
assurances can be given that the lenders will waive future events of
non-compliance, if they occur, for the fourth quarter of 1999 and beyond.
All borrowings under the Bank Credit Agreement have a
maturity date of July 1, 2000 and have been classified as a current liability.
On September 28, 1998, the Company entered into an agreement with Boeing
Capital Corporation, a subsidiary of The Boeing Company, which provides for
leasing of manufacturing equipment up to $10 million. As of October 2, 1999,
approximately $9.4 million of equipment had been placed on lease schedules and
the remaining $600 thousand will not be used.
15
<PAGE> 16
Cash flow provided by operating activities provided for capital reinvestment of
approximately $4.4 million, plus a reduction in obligations under the Bank
Credit Agreement of $9.4 million during the nine months ended October 2, 1999.
While total long-term financing and short-term borrowings have been reduced by
approximately 9.8% over the last twelve months, the Company continues to be
highly leveraged in comparison to periods preceding March 1996. In
consideration of the high levels of indebtedness, management continues to focus
its 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, from continued discipline in cost containment,
reduction in inventories, judicious review of its short term capital
expenditure plans, and 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 or
that a replacement financial agreement will be in place before the maturity of
the existing Bank Credit Agreement, 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 the remaining
term of the Bank Credit Agreement.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments imbedded in other contracts, and for hedging
activities. It requires that, at adoption, hedging relationships should be
designated anew and that entities recognize all derivatives as either assets or
liabilities in the statement of financial position and to measure those
instruments at fair value. The accounting for changes in the fair value of a
derivative depends on the intended use of the derivative and the resulting
designation. As issued, this statement is effective for all fiscal quarters of
all fiscal years beginning after June 15, 1999.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133." This statement defers the effective date for SFAS No. 133,
which will now be effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. The adoption of SFAS No. 133 is not expected to
have a material impact on the Company.
YEAR 2000
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.
YEAR 2000 PLAN - In 1997, the Company began systematic replacement of legacy
software applications, both purchased and developed in-house, with purchased
software as to which the vendor has represented to be Year 2000 compliant.
During 1998, the Company appointed a Year 2000 Coordinator, assembled a Year
2000 Team, and prepared a Year 2000 Plan. The Company's Year 2000 Plan is
subject to modification and is revised periodically as additional information
is developed.
The Company's plan to resolve potential Year 2000 problems involved the
following four phases: assessment, remediation, testing, and implementation.
Assessment of significant computer application systems was completed in 1998.
All systems were considered to be vulnerable until objective data could be
obtained and in the case of packaged software, until vendor certification was
obtained, to support our assessment. Several of the Company's
16
<PAGE> 17
computer application systems were determined to be Year 2000 compliant and the
remainder were identified for replacement or remediation.
The majority of the Company's application systems have been completely replaced
by packaged systems represented as being Year 2000 compliant. The largest
replacement project began in August 1997 for the Company's Finished Fabrics
Division. Replacement for the Fiber Products Division, which is considerably
less sophisticated than the Finished Fabrics systems, began in November 1998.
As software has been replaced or reprogrammed, a working model has been
prepared followed by testing and implementation. Critical elements of the
replacements, as identified above, have been completed. There will continue to
be work with implementation of modules of these new systems which are unrelated
to Year 2000 preparedness. For the remaining computer application systems which
were not to be replaced, remediation and subsequent testing has been completed.
Management believes that lines of code for systems which required remediation,
as opposed to those requiring replacement, represented only a small percentage
of the total lines of computer code in service. Several upgrades for minor
systems will be installed and final wrap up work will be completed prior to the
end of November, 1999. To the extent practicable, the Company has developed
contingency plans including data back up, disaster recovery and a schedule to
print listings of critical databases prior to December 31, 1999.
For personal computers which are critical to operations or which are part of
decision support systems, the hardware, operating systems, and application
software have been reviewed for compliance. The Company has upgraded or
replaced all such systems as they were identified as out of compliance.
Management is not aware of any personal computers, which will have been
identified as critical, which have not been verified as compliant as of this
date.
YEAR 2000 EXPOSURE FOR PRODUCTS - Based on a review of its product line, the
Company has determined that all of the products it has sold and will continue
to sell contain no electronic or computerized components which would require
remediation to be Year 2000 compliant. Accordingly, the Company believes that
it does not have material exposure as it relates to the Company's products.
THIRD PARTY READINESS - The Company has material relationships with third
parties whose failure to be Year 2000 compliant could have material adverse
impacts on the Company's business, operations or financial condition. Third
parties considered by the Company's Year 2000 Team to be in this category ("Key
Business Partners") include critical suppliers, significant customers,
financial institutions, and utility providers. In conjunction with
identification of Key Business Partners, the Company's assessment of Year 2000
risk included evaluation of production equipment, building systems, and
critical services provided by Key Business Partners.
Production (manufacturing) and building (telephone, alarm, fire control,
climate control, etc.) equipment has been investigated for compliance.
Additionally, the Company screens all purchases to insure that all new
equipment acquisitions are compliant. The Key Business Partner representing
each model of equipment in use has been contacted to determine (a) if the
equipment contains any hardware or software with Year 2000 exposure, (b) if any
equipment with Year 2000 exposure is non-compliant, and (c) to obtain upgrades
or enhancements for all non-compliant equipment. To date, the Company is not
aware of any Key Business Partner representing production and building
equipment which has not been contacted and who has not responded. The Company
is not presently aware of any equipment at risk for which remedial upgrades or
enhancements has not been obtained and which will not be implemented prior to
December 1999.
Vendors and suppliers of raw materials, operating supplies, utilities, plus
financial and other critical services have been surveyed for Year 2000
readiness, and the Company's Year 2000 Team has met with those who were
identified as Key Business Partners. Responses from vendors and suppliers of
less critical importance to our business have been evaluated and contingency
plans have been prepared by the Company as deemed appropriate. The Company is
not aware of any Key Business Partner for these goods and services which has
not been contacted and who have not responded.
Significant customers identified by the Company's Year 2000 Team as Key
Business Partners have been contacted for the purpose of assessing Year 2000
preparedness. The Company is not aware of any customer which has been
identified as a Key Business Partner, who has not responded. The Company is not
presently aware of any customer
17
<PAGE> 18
identified as a Key Business Partner who has been determined to be at risk and
whose failure as a result of Year 2000 exposure would materially impact the
Company's business, operations or financial condition.
To date, the Company is not aware of any Key Business Partner who has been
identified as vulnerable and whose failure would materially impact the
Company's business, operations or financial condition. Although no assurance
can be given that acceptable alternatives can be developed to mitigate a
failure of business partners with respect to Year 2000 compliance, the Company
will continue to monitor business partners for exposure and to the extent
practicable, contingency plans will be evaluated for any critical business
partner who may be identified as vulnerable prior to December 31, 1999.
YEAR 2000 RISKS AND COSTS - As a result of the upgrades described above and
minor work to be completed by the end of November, 1999, the Company believes
that the Year 2000 issue will not pose significant operational problems for the
Company's computer systems and that it will be prepared in time to minimize any
material impact to the Company's business, operations or financial condition.
Failure to achieve a timely state of readiness or failure of a Key Business
Partner or other third party to effectively remediate their affected systems
could have a materially adverse impact on the Company's business operations, or
financial condition. While Year 2000 preparations are substantially complete,
the Company does not anticipate any remediation or replacement work for the
Year 2000 project to extend beyond November 1999.
The cost of addressing the Year 2000 issues has been and will continue to be
substantially absorbed in the budget for improvement in management information
systems and by normal costs for administrative and technical employees. The
Company does not anticipate incurring significant third party costs to test or
reprogram systems, however the Company has from time to time retained contract
programmers and consultants to work on discrete projects or review aspects of
the Company's information systems, and will continue this practice into the
foreseeable future. Management believes that the cost of Year 2000
modifications will not have a material effect on its business, operations or
financial condition.
The Company has a high level of dependence on computer application systems,
which are used to drive the business, and manufacturing equipment, which may
include advanced computerized controls. The Company believes that a number of
Key Business Partners also rely on such systems and equipment. 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 adverse effect on the Company's business, operations or financial
condition. Additionally, as the Company relies on representations given by its
Key Business Partners and other third parties, there can be no assurances that
all such representations are accurate and effective in identifying Key Business
Partners and other third parties potentially at risk and that unidentifiable
risk will not have a material adverse impact on the Company's business,
operations or financial condition.
LEGAL AND 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, results of operations or liquidity.
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. On October 8, 1998, the Company filed suit in Alabama seeking
recourse for damages and losses resulting from these alleged activities. The
case is currently in the discovery process.
On Thursday March 11, 1999, a fire damaged the Company's DeWitt Plant in
DeWitt, Iowa. The fire is believed to have started in an electrical junction
box in the warehouse. The warehouse incurred substantial damage and other
portions of the facility received lesser damage caused by smoke, heat and
water. The DeWitt Plant, which produces pads for the Fiber Products Division,
resumed operations on April 12, 1999. Substantially all losses associated with
this fire have been recovered through property and business interruption
insurance.
18
<PAGE> 19
From time to time, the Company receives unsolicited indications of interest
relating to the acquisition of the Company or certain assets of the Company by
others. As was previously reported in August, the Company received an
unsolicited, tentative proposal involving a price of $3.00 per share. This
group has proceeded with their due diligence. Review and discussions are
ongoing with the Company, however, no agreement as to any particular type of
transaction has been reached. Management and the Board of Directors will
continue to review each offer in accordance with the appropriate discharge of
their fiduciary duties to the shareholders of the Company. Neither the Company
or any of its operations are currently considered "for sale" as management
continues to weigh all opportunities for maximizing shareholder value.
RISKS AND UNCERTAINTIES
Except for historical information contained herein, the matters set forth in
this report are forward looking statements which are intended to be covered by
the "Safe Harbor" provisions of the "Private Securities Litigation Reform Act
of 1995" and 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 2, 1999, which cautionary statement is
incorporated by reference herein.
19
<PAGE> 20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates and
changes in commodity prices. Exposure to interest rate risk relates to variable
rate obligations under the Company's Bank Credit Agreement which permits the
Company to allocate its total obligations between prime and LIBOR rate basis.
Interest rate swap agreements are utilized to manage overall borrowing costs
and reduce exposure to adverse fluctuations in interest rates. An interest rate
swap agreement is currently in place under which the Company pays an average of
certain LIBOR based variable rates on $26.5 million notional principal. This
agreement, which was entered into on June 3, 1999, expires on July 1, 2000,
also contains interest rate caps which further limit interest rate exposures.
If interest rates related to the Company's LIBOR obligations increased by 100
basis points over the rates in effect at January 2, 1999, interest expense,
after considering the effects of interest rate swap agreements, would increase
by approximately $1 million in 1999. These amounts were determined by
considering the impact of hypothetical interest rates on the Company's
borrowing cost and interest rate swap agreements. The analyses do not consider
the effects of the overall reduced debt levels experienced in 1999. Further, in
the event of a change of such magnitude, management would likely take actions
to further mitigate its interest rate exposures. An April 1, 1999 amendment to
the Company's bank credit agreement included an increase in interest rates of
1/2% which took effect on April 4, 1999.
The Company purchases cotton through approximately ten established merchants
with whom it has long standing relationships. The majority of the Company's
purchases are executed using "on-call" contracts. These on-call arrangements
are used to insure that an adequate supply of cotton is available for the
Company's requirements. Under on-call contracts, the Company agrees to purchase
specific quantities for delivery on specific dates, with pricing to be
determined at a later time. Prices are set according to prevailing prices, as
reported by the New York Cotton Exchange, at the time of the Company's election
to fix specific contracts.
Cotton contracts with a fixed price at October 2, 1999 were valued at $1.4
million compared to $7.4 million at January 2, 1999, and are scheduled for
delivery from October through December of 1999. At October 2, 1999, the Company
had unpriced on-call contracts for deliveries between October 1, 1999 and
December 31, 2000. Based on the prevailing price at October 2, 1999, the value
of these commitments is approximately $4.3 million for deliveries between
October and December of 1999 and approximately $13.6 million for deliveries
between January and December of 2000. As commodity price aberrations are
generally short-term in nature, and have not historically had a significant
long-term impact on operating performance, financial instruments are not used
to hedge commodity price risk.
The Company does not utilize financial instruments for trading or other
speculative purposes.
20
<PAGE> 21
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No reportable legal proceedings arose in the quarter ended October 2, 1999.
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
There were no matters submitted for a vote of Security Holders during the
quarter ended October 2, 1999.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statements of Computation of Per Share Earnings
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None.
21
<PAGE> 22
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 16, 1999 By: /s/James J. Murray
-------------------------- ------------------------------
James J. Murray
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
22
<PAGE> 1
JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 11
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
(In thousands except per share amounts)
<TABLE>
<CAPTION>
===========================================================================================================================
The weighted average number of common and common share equivalents on a primary
basis are as follows:
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
-------------------------- -------------------------
OCTOBER 2, OCTOBER 3, OCTOBER 2, OCTOBER 3,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 10,722 10,743 10,722 10,743
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 10,722 10,743 10,722 10,743
========== ========== =========== ===========
Net loss $ (2,686) $ 140 $ (6,338) $ (1,363)
========== ========== =========== ===========
Net loss per common share:
Basic and diluted $ (.25) $ .01 $ (.59) $ (.13)
========== ========== =========== =========
===========================================================================================================================
</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 nine months ended October 2, 1999 and October
3, 1998, common shares from assumed exercise of stock options are not
presented as they were either antidilutive due to net losses or
immaterial.
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JOHNSTON
INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF
OCTOBER 2, 1999 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> JAN-02-2000
<PERIOD-END> OCT-02-1999
<CASH> 1,391,000
<SECURITIES> 0
<RECEIVABLES> 36,939,000
<ALLOWANCES> 1,635,000
<INVENTORY> 51,070,000
<CURRENT-ASSETS> 95,948,000
<PP&E> 243,370,000
<DEPRECIATION> 153,674,000
<TOTAL-ASSETS> 201,066,000
<CURRENT-LIABILITIES> 142,313,000
<BONDS> 118,490,000
0
0
<COMMON> 1,246,000
<OTHER-SE> 40,690,000
<TOTAL-LIABILITY-AND-EQUITY> 201,066,000
<SALES> 196,124,000
<TOTAL-REVENUES> 196,124,000
<CGS> 177,234,000
<TOTAL-COSTS> 177,234,000
<OTHER-EXPENSES> 19,918,000
<LOSS-PROVISION> 528,000
<INTEREST-EXPENSE> 9,140,000
<INCOME-PRETAX> (9,660,000)
<INCOME-TAX> (3,322,000)
<INCOME-CONTINUING> (6,338,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,338,000)
<EPS-BASIC> (.59)
<EPS-DILUTED> (.59)
</TABLE>
