UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
________________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE PERIOD ENDED SEPTEMBER 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________
Commission file number 0-3041
JUSTIN INDUSTRIES, INC.
-----------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-0102185
- ---------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2821 West 7th Street
Fort Worth, TX 76107
-----------------------
(Address of principal executive officers)
(Zip Code)
(817) 336-5125
----------------------
(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 XX NO ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 25,480,683 shares of the
Company's Common Stock ($2.50 par value) were outstanding as of November 5,
1999.
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JUSTIN INDUSTRIES, INC.
Table of Contents
Page No.
PART I. FINANCIAL INFORMATION --------
Item 1. Financial Statements:
Consolidated Balance Sheet
September 30, 1999 and December 31, 1998 3
Consolidated Statement of Income
Three and Nine Months Ended September 30, 1999 and 1998 4
Consolidated Statement of Shareholders' Equity
Nine Months Ended September 30, 1999 and 1998 4
Consolidated Statement of Cash Flows
Nine Months Ended September 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 14
All other schedules and compliance information called for by the instructions
to Form 10-Q have been omitted since the required information is not present or
not present in amounts sufficient to require submission.
Page 2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
JUSTIN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
<CAPTION>
In Thousands of Dollars
September 30, December 31,
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash $ 4,961 $ 5,100
Accounts receivable, less allowance for doubtful
accounts of $3,818 and $3,534, respectively 95,639 80,155
Inventories:
Finished goods 93,517 106,706
Work-in-process 4,062 4,663
Raw materials 27,058 25,206
------------- -------------
Total inventories 124,637 136,575
Income taxes 10,608 7,093
Prepaid expenses 1,949 2,472
------------- -------------
Total current assets 237,794 231,395
Other assets, at cost 38,382 40,766
Assets held for sale 2,809 2,809
Property, plant, and equipment, at cost:
Land 22,157 20,704
Buildings and equipment 303,655 277,134
Construction-in-progress 33,235 10,913
------------- -------------
359,047 308,751
Less accumulated depreciation 195,770 186,829
------------- -------------
Net property, plant, and equipment 163,277 121,922
------------- -------------
$ 442,262 $ 396,892
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Trade accounts payable $ 19,565 $ 18,925
Other accrued items 45,846 36,575
------------- -------------
Total current liabilities 65,411 55,500
Long-term debt 60,750 30,750
Deferred income taxes 20,404 18,074
Shareholders' equity 295,697 292,568
------------- -------------
$ 442,262 $ 396,892
============= =============
<FN>
See notes to consolidated financial statements.
</TABLE>
Page 3
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<TABLE>
JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
In Thousands of Dollars (Except Per Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $136,296 $116,992 $376,774 $339,862
Cost of goods sold:
Cost of goods sold 83,898 73,818 234,649 215,699
Footwear special inventory provisions 7,024 - 7,024 -
-------- -------- -------- --------
Total cost of goods sold 90,922 73,818 241,673 215,699
Operating expenses:
Selling, general, and
administrative expenses 35,968 30,229 103,025 90,299
Footwear restructuring charge 5,521 - 5,521 -
-------- -------- -------- --------
Total operating expenses 41,489 30,229 108,546 90,299
Interest expense 178 485 1,245 1,374
-------- -------- -------- --------
Income before income taxes 3,707 12,460 25,310 32,490
Provision for income taxes 1,335 4,548 9,112 11,859
-------- -------- -------- --------
Net income $ 2,372 $ 7,912 $ 16,198 $ 20,631
======== ======== ======== ========
Earnings per share:
Basic $ .09 $ .30 $ .63 $ .78
======== ======== ======== ========
Diluted $ .09 $ .30 $ .63 $ .78
======== ======== ======== ========
</TABLE>
<TABLE>
JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Nine Months Ended September 30, 1999 and 1998
<CAPTION>
In Thousands of Dollars (Except Share and Per Share Data)
Capital In Unearned
Preferred Common Excess of Retained Compen- Treasury
Stock Stock Par Value Earnings sation Stock
- -------------------------- --------- --------- ---------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1999 $ - $ 69,674 $ 15,685 $ 223,915 $ - $ (16,706)
Net income - - - 16,198 - -
Purchase of 935,200 shares
of stock for treasury - - - - - (10,166)
Issuance of 70,000 shares
of restricted stock - 175 1,010 - (1,155) -
Exercise of stock options - - (134) - - 1,024
Cash dividends declared
($.15 per share) - - - (3,823) - -
--------- --------- ---------- --------- --------- ---------
Balance September 30, 1999 $ - $ 69,849 $ 16,561 $ 236,290 $ (1,155) $ (25,848)
========= ========= ========== ========= ========= =========
Balance January 1, 1998 $ - $ 69,674 $ 16,040 $ 202,645 $ - $ (15,379)
Net income - - - 20,631 - -
Purchase of 154,900 shares
of stock for treasury - - - - - (2,077)
Exercise of stock options - - (63) - - 520
Cash dividends declared
($.15 per share) - - - (3,955) - -
--------- --------- ---------- --------- --------- ---------
Balance September 30, 1998 $ - $ 69,674 $ 15,977 $ 219,321 $ - $ (16,936)
========= ========= ========== ========= ========= =========
<FN>
See notes to consolidated financial statements.
Page 4
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</TABLE>
<TABLE>
JUSTIN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
In Thousands of Dollars
Nine Months Ended
September 30,
-----------------------
1999 1998
---------- ----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 16,198 $ 20,631
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 14,453 13,187
Amortization 1,643 701
Provision for losses on accounts receivable 699 1,133
(Gain) loss on sale of property, plant, and equipment 4 (206)
Deferred federal income taxes 37 (26)
Non-cash compensation expense 30 -
Footwear restructuring charge 5,521 -
Footwear special inventory provision 7,024 -
Changes in assets and liabilities:
Increase in accounts receivable (14,097) (5,409)
(Increase) decrease in inventories 7,420 (1,874)
(Increase) decrease in other current assets (2,816) 2,109
Increase (decrease) in accounts payable
and accrued expenses 6,028 (938)
---------- ----------
Net cash provided from operating activities 42,144 29,308
Cash flows from investing activities:
Proceeds from the sale of property, plant, and equipment 1,253 330
Capital expenditures (39,022) (18,137)
Increase in other long-term assets (537) (7,078)
Acquisition of Texas Clay and Eureka Brick in 1999,
net of cash acquired (20,838) (2,134)
---------- ----------
Net cash used in investing activities (59,144) (27,019)
Cash flows from financing activities:
Borrowings 56,000 23,000
Repayment of borrowings (26,000) (18,000)
Dividends paid (3,863) (3,959)
Purchase of treasury stock (10,166) (2,077)
Proceeds from exercise of stock options 890 457
---------- ----------
Net cash provided from (used in)
financing activities 16,861 (579)
---------- ----------
Net increase (decrease) in cash (139) 1,710
Cash at beginning of period 5,100 5,113
---------- ----------
Cash at end of period $ 4,961 $ 6,823
========== ==========
<FN>
See notes to consolidated financial statements.
Page 5
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JUSTIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
1. Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. Interim results are not necessarily indicative of results
for a full year.
A summary of the company's significant accounting policies is presented on
page 24 of its 1998 Annual Report to Shareholders. Users of financial
information produced for interim periods are encouraged to refer to the
footnotes contained in the Annual Report to Shareholders when reviewing interim
financial results. There has been no material change in the accounting policies
followed by the company during 1999.
Assets held for sale are carried at the lower of cost or fair value less cost
to sell.
In the opinion of management, the accompanying interim financial statements
contain all material adjustments, consisting only of normal recurring
adjustments (except for the adjustments described in Note 6 below), necessary to
present fairly the consolidated financial position, results of operations, cash
flows, and shareholders' equity of Justin Industries, Inc. for interim periods.
2. Long-Term Debt
Certain loan agreements contain minimum requirements as to working capital,
cash flow from operations, and tangible net worth, redemption of outstanding
stock, and change in control of the company. As of September 30, 1999, the
company was in compliance with all such requirements and restrictions.
3. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings
per share: (in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
Numerator for basic and
diluted earnings per share $ 2,372 $ 7,912 $ 16,198 $ 20,631
======== ======== ======== ========
Denominator for basic
earnings per share--
weighted average shares 25,419 26,377 25,516 26,375
Effect of dilutive securities:
Employee stock options 282 293 236 239
Convertible preferred stock 3 3 3 3
-------- -------- -------- --------
Dilutive potential common shares 285 296 239 242
-------- -------- -------- --------
Denominator for diluted
earnings per share--
adjusted weighted average
shares and assumed conversions 25,704 26,673 25,755 26,617
======== ======== ======== ========
Basic earnings per share $ .09 $ .30 $ .63 $ .78
======== ======== ======== ========
Diluted earnings per share $ .09 $ .30 $ .63 $ .78
======== ======== ======== ========
Page 6
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4. Segment Disclosures
The following information is presented as required by Statement No. 131: (in
thousands of dollars)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Building
September 30, 1999 Materials Footwear All Other Total
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 93,939 $ 42,357 $ - $136,296
Operating profit (loss) (1) 18,808 (13,065) (1,858) 3,885
Depreciation and amortization expense 4,752 1,289 109 6,150
Identifiable assets 245,866 177,299 19,097 442,262
Expenditures for long-lived assets 15,326 305 7 15,638
- --------------------------------------------------------------------------------------
Three Months Ended
September 30, 1998
- -------------------------------------
Net sales (2) $ 77,273 $ 39,344 $ 375 $116,992
Operating profit (loss) 14,683 10 (1,748) 12,945
Depreciation and amortization expense 3,435 1,221 119 4,775
Identifiable assets 189,253 178,814 27,356 395,423
Expenditures for long-lived assets 5,811 989 235 7,035
- --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended Building
September 30, 1999 Materials Footwear All Other Total
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $259,454 $117,320 $ - $376,774
Operating profit (loss) (1) 48,974 (17,701) (4,718) 26,555
Depreciation and amortization expense 11,841 3,912 343 16,096
Identifiable assets 245,866 177,299 19,097 442,262
Expenditures for acquisition of
Texas Clay and Eureka Brick,
net of cash acquired 20,838 - - 20,838
Expenditures for long-lived assets 37,307 1,553 162 39,022
- --------------------------------------------------------------------------------------
Nine Months Ended
September 30, 1998
- -------------------------------------
Net sales (2) $215,631 $120,973 $ 3,258 $339,862
Operating profit (loss) 37,050 1,116 (4,302) 33,864
Depreciation and amortization expense 10,080 3,474 334 13,888
Identifiable assets 189,253 178,814 27,356 395,423
Expenditures for long-lived assets 13,618 4,221 298 18,137
- --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Reconciliation
Total operating profit above $ 3,885 $ 12,945 $ 26,555 $ 33,864
Interest expense 178 485 1,245 1,374
-------- -------- -------- --------
Consolidated income before income taxes $ 3,707 $ 12,460 $ 25,310 $ 32,490
======== ======== ======== ========
<FN>
(1) Footwear's operating loss for the periods ended September 30, 1999 include
a restructuring charge of $5,521 and a related special inventory provision of
$7,024. See Note 6 below.
(2) Net sales from reportable segments below the quantitative thresholds are
attributable to the Company's evaporative cooler business. This segment has
never met the quantitative thresholds for determining reportable segments. This
business was sold effective December 31, 1998.
</TABLE>
Page 7
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5. Acquisitions and Disposition
Effective December 31, 1998, the Company sold its evaporative cooler
business, Tradewinds Technologies, Inc., for cash of approximately $3.2 million.
The effects of the sale and the operations of Tradewinds, which are included in
All Other in the reportable segments disclosures, are immaterial to consolidated
operations.
Effective July 1, 1998, the Company's subsidiary, Acme Brick Company,
purchased Witt Brick for a total purchase price of approximately $2,400,000.
Assets acquired primarily included accounts receivable and inventory. Witt
Brick was a brick distributor in Temple, Texas. Operations of the business,
which are immaterial to consolidated operations, are included in the
Consolidated Statement of Income from date of acquisition.
In early January 1999, Acme Brick Company acquired the assets of Texas Clay
Industries, a division of Temtex Industries, Inc. The total purchase price of
approximately $13.7 million was paid $12.7 million in cash plus assumption of
approximately $1 million in liabilities. The assets acquired consisted of
approximately $1.2 million in accounts receivable, $1.3 million in inventory and
supplies, and $11.2 million in land, buildings, and equipment related to one
brick plant and associated clay reserves in Malakoff, Texas, approximately 70
miles southeast of the Fort Worth/Dallas metroplex area. Sales generated by
this plant in 1998 approximated $11.7 million, which are considered immaterial
to consolidated operations. The plant added about 7% to Acme's production
capacity. The acquisition has been accounted for as a purchase in 1999, and as
such, the results of operations of the plant, which are immaterial to
consolidated operations, are included with that of the Company from the date of
closing, January 5, 1999.
Effective June 30, 1999, Acme Brick Company acquired Eureka Brick and Tile.
The total purchase price, net of cash acquired, was approximately $10.6 million,
comprised of cash paid of $8.1 million and liabilities assumed of $2.5 million.
The assets acquired consisted of approximately $.8 million in accounts
receivable, $1.2 million in inventory and supplies, $.8 in other assets, and
$7.8 million in land, buildings, and equipment related to one brick plant and
associated clay reserves in Clarksville, Arkansas, about 60 miles east of Fort
Smith and about 100 miles from Little Rock. Sales generated by this plant prior
to acquisition are considered immaterial to consolidated operations. The plant
added about 5% to Acme's production capacity. The acquisition has been
accounted for as a purchase in 1999, and as such, the results of operations of
the plant, which are immaterial to consolidated operations, will be included
with that of the Company from the date of closing, June 30, 1999.
6. Commitments and Contingencies
Commitments to Construct New Brick and Block Plants - The Company is
currently constructing new brick and block plants in South Texas. At September
30, 1999, the remaining commitments for these capital projects, expected to be
completed in late 1999, were approximately $8.6 million. Interest cost of
$643,000 was capitalized in 1999 related to these projects.
Footwear Computer System - As previously reported, the Footwear division
has had significant difficulties with new computer systems activated at the
beginning of October 1998. It appears these problems have been substantially
solved; however, the Company believes higher than normal amounts will be spent
in this area over the remainder of the year.
Restructuring Charges - In July 1999, the Company's Footwear division
committed to specific steps to be taken as part of its new strategic planning
initiatives to improve Footwear operating results. These steps include
repositioning certain product lines, reducing the number of stock items,
expanding distribution channels, plant closings, and other administrative
realignments. A restructuring charge for exit costs of $5.5 million was
recognized during the third quarter of 1999. In addition, inventories were
evaluated in light of these changes and inventory write-downs of $7 million were
recorded at the end of the third quarter. The following chart describes the
components of the restructuring charge and the activity in the restructuring
reserve during the third quarter.
Page 8
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<TABLE>
<CAPTION>
Beginning Ending
Balance Restructuring Balance
Footwear Restructuring Charge 6/30/99 Charge Write-offs Payments 9/30/99
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Impaired assets $ - $ 2,793 $ (2,793) $ - $ -
Severance costs - 2,072 - (232) 1,840
Other plant closure costs - 656 - (46) 610
-------------------------------------------------------------
$ - $ 5,521 $ (2,793) $ (278) $ 2,450
=============================================================
<FN>
The severance and other costs will be paid during the fourth quarter of 1999
and the first quarter of 2000.
</TABLE>
7. Subsequent Events
Subsequent to September 30, 1999, the company received a net cash
settlement of approximately $3.2 million from a vendor. In accordance with the
settlement agreement, the settlement amount represents partial reimbursement for
certain capitalized costs of computer systems and costs of remediation efforts
continuing through the fourth quarter of 1999. None of this amount will be
reflected as income in the fourth quarter of 1999.
Page 9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Sales - Consolidated net sales for the third quarter of 1999 were $136.3
million versus $117 million for the same period in 1998, an increase of 16.5%.
Consolidated net sales for the first nine months of 1999 were $376.8 million
compared to $339.9 million for the nine months ended September 30, 1998, an
increase of 10.9%.
Building Materials Segment Sales - Sales in the Building Materials
segment for 1999's third quarter increased 21% to $93.9 million compared
to the same quarter of 1998. For the first nine months ended September
30, 1999, net sales increased 18.5% to $259.5 million compared to the
same period in 1998. These comparisons include 1998 sales of $.4
million and $3.3 million, respectively, for Tradewinds Technologies,
Inc., a small subsidiary that was sold effective December 31, 1998.
Sales for Acme Brick Company ("Acme") grew approximately 22.9% in the
third quarter and 22.1% for the nine-month period of 1999, compared to
the same periods a year ago. Additional brick production capacity of
about 12% provided by the Texas Clay and Eureka Brick acquisitions in
January 1999 and June 1999, respectively, coupled with strong
construction markets in Acme's sales territories allowed Acme to
increase both the number of units sold and average selling prices to set
new sales records during the 1999 periods. With backlogs at record
highs and the expected December 1999 completion of a new $28 million
brick plant in Central Texas, Acme is well prepared for continued
growth.
Featherlite Building Products Corporation's ("Featherlite") posted
impressive sales gains of 26.3% and 20.9% for both the third quarter and
year-to-date periods of 1999, respectively, compared to the same time in
1998. Most locations have realized growth in 1999 with significant
increases at the newest block plants in Dallas and Austin, Texas.
Solid construction markets in Texas also boosted sales at American
Tile Supply Company ("American Tile") by approximately 9.9% and 11.1%
ahead of last year's third quarter and first nine months, respectively.
New marketing and sales efforts are underway at American Tile to further
improve their sales growth.
Footwear Segment Sales - Total Footwear sales for the quarter ended
September 30, 1999 were up 7.7% to $42.4 million from 1998's third
quarter of $39.3. For the nine-month period ended September 30, 1999,
revenues were about 3% behind the same period a year ago. The increase
in sales for the quarter reflect the impact of new sales initiatives and
new lower price-point product strategies. These new lower-priced
product introductions resulted in an 8.6% increase in units sold for the
quarter. Sales during the first few months of 1999 were impacted by
computer and shipping problems that are now substantially resolved.
Costs and Expenses - The consolidated gross profit margin in the third
quarter of 1999 of 33.3% (compared to 36.9% in the same quarter of 1998) was
affected by 5.1 percentage points due to the special inventory provision that
related to Footwear's new strategic plans. Excluding this provision, gross
profit margins were 38.4% for the quarter with the improvement provided by both
segments. For the nine-month periods ended September 30, 1999 and 1998, gross
profit margins were 35.9% (37.7% before the special inventory provision) and
36.5%, respectively. Building Materials' gross margin improved from 42.2% in
1998's third quarter to 42.7% in the third quarter of 1999. During the first
nine months of 1999, the ratio for Building Materials improved to 42.1% from 41%
for the same period in 1998. The improvement in both periods can be attributed
to higher volumes and higher average brick selling prices. Gross profit margins
in the Footwear business were 12.3% (28.9% before the special inventory
provision) for the third quarter and 22.1% (28.1% before the special inventory
provision) for the first nine months of 1999, versus 26.5% and 28.4% for the
third quarter and the first nine months of 1998, respectively. Higher sales
volumes and improved production efficiencies account for the quarter-over-
quarter improvement before the special provision, while higher returns and
discounts caused by computer and shipping problems in the first part of 1999,
problems that were absent in the same period of 1998, explain the lower margin
realized in 1999's first nine months.
Page 10
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Selling, general and administrative expenses increased to 26.4% of sales in
the third quarter of 1999 compared to 25.8% in the third quarter of 1998. For
the first nine months of 1999, such expenses were 27.3% of sales compared to
26.6% during the first nine months of 1998. In the Building Materials segment,
these expenses declined as a percentage of sales but in actual dollars were up
15.4% and 12.3% for the quarter and year-to-date periods, respectively,
primarily due to higher sales and higher administrative costs associated with
new facilities. Footwear's selling, general and administrative expenses were up
22.6% and 14.7% during the same respective periods largely due to higher
computer and warehousing costs. These costs are expected to decrease over the
remainder of 1999. In addition, during the third quarter, Footwear recognized a
restructuring charge of $5.5 million. This amount mainly relates to severance
and other plant closing costs incurred or to be incurred with respect to the
strategic plan adopted in the third quarter.
While average effective interest rates decreased slightly in the first nine
months of 1999 compared to 1998, average debt levels increased during the same
period, resulting in an increase in interest cost from $1,374,000 in 1998 to
$1,888,000 in the first nine months of 1999. Interest expense in 1999 was
$1,245,000; however, $643,000 of interest cost was capitalized into the cost of
new brick and block plants that will begin operations in late 1999.
Provision for Income Taxes - The Company's provision for income tax was 36%
of pre-tax income in the first nine months of 1999, the current estimated
effective rate for the full year, compared to 36.5% in the same period of 1998.
In July 1999, the Company's Footwear division committed to specific steps
to be taken as part of its new strategic planning initiatives to improve
Footwear operating results. These steps included repositioning certain product
lines, reducing the number of stock items, expanding distribution channels,
plant closings, and other administrative realignments. A restructuring charge
for exit costs of $5.5 million was recognized during the third quarter of 1999.
Approximately $2.7 million of this amount relates to cash payments payable in
the future. These amounts will be payable in the fourth quarter of 1999 and in
the first quarter of 2000. In addition, inventories were evaluated in light of
these changes and inventory write-downs of $7 million were recorded during the
third quarter.
The information above contains forward-looking statements, including, without
limitation, statements relating to the Company's plans, strategies, objectives,
expectations, intentions, and adequate resources that are made pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Readers are cautioned that forward-looking statements about the Company's
future business prospects should be read in conjunction with the Company's
disclosures under the heading Forward Looking Information.
FINANCIAL CONDITION AND LIQUIDITY
At September 30, 1999, working capital amounted to $172.4 million versus
$175.9 million at December 31, 1998. Cash decreased from $5.1 million at year-
end to $5 million at the end of 1999's third quarter.
Cash provided by operating activities during the first nine months of 1999
totaled $42.1 million. These funds and bank financing were used primarily to
acquire two brick companies for approximately $20.8 million, net of cash
obtained; purchase $39 million of capital assets; buy 935,200 shares of treasury
stock totaling $10.2 million; and pay $3.9 million in dividends.
In the first nine months of 1999, total interest-bearing debt increased $30
million to $60.8 million from $30.8 million at year-end 1998, and the ratio of
long-term debt-to-equity was increased to .21 to 1 from .11 to 1 at year-end. At
September 30, 1999, unused credit facilities approximated $35 million; an amount
well above the company's estimated requirements.
Page 11
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Cash dividends declared in the first, second and third quarters of 1999 and
1998 were $.05 a share.
GENERAL DESCRIPTION OF THE YEAR 2000 ISSUE AND THE NATURE AND EFFECTS OF THE
YEAR 2000 ON INFORMATION TECHNOLOGY (IT) AND NON-IT SYSTEMS
As more completely described on page 19 of the Company's 1998 Annual Report
to Shareholders, the Company has determined that only minor modifications or
replacement of portions of its IT software systems and non-IT systems, such as
those used in production, would be necessary in order to properly utilize dates
beyond December 31, 1999. Many of these changes have already been made.
Although the Company anticipates all remaining modifications or replacements
will be completed in the Fall of 1999, if such modifications and replacements
were not made, or were not completed timely, management believes the Year 2000
Issue would still not have a material impact on the operations of the Company.
To date, the Company is not aware of any external agent with a Year 2000 issue
that would materially affect the Company's results of operations, liquidity, or
capital resources. However, the Company has no means of ensuring that external
agents will be Year 2000 ready. The inability of external agents to complete
their Year 2000 resolution process in a timely fashion could materially impact
the Company. The effect of non-compliance by external agents is not
determinable.
The information above contains forward-looking statements, including, without
limitation, statements relating to the Company's plans, strategies, objectives,
expectations, intentions, and adequate resources that are made pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Readers are cautioned that forward-looking statements about the Year 2000
should be read in conjunction with the Company's disclosures under the heading
Forward Looking Information.
FORWARD LOOKING INFORMATION
Certain statements in this Item and elsewhere in this report are forward-
looking in nature and relate to trends and events that may affect the Company's
future financial position and operating results. Such statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The terms "expect," "anticipate," "intend," and "project"
and similar words or expressions are intended to identify forward-looking
statements. These statements speak only as of the date of this report. The
statements are based on current expectations, are inherently uncertain, are
subject to risks, and should be viewed with caution. Actual results and
experience may differ materially from the forward-looking statements as a result
of many factors, including changes in economic conditions in the markets served
by the Company, increasing competition, fluctuations in raw materials and energy
prices, increases in interest rates, and other unanticipated events and
conditions. It is not possible to foresee or identify all such factors. The
Company makes no commitment to update any forward-looking statement or to
disclose any facts, events, or circumstances after the date hereof that may
affect the accuracy of any forward-looking statement.
Page 12
===============================================================================
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The company is not presently involved in any lawsuits seeking damages
relating to the normal conduct of its business that if adversely determined
would have a material effect on the consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The information required by this item was provided in the company's Form 10-Q
for the quarter ended June 30, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule for the period ended September 30, 1999
(b) Reports on Form 8-K
On September 15, 1999, the Company announced that the Board of
Directors approved Amendment No. 2 to the Rights Agreement, dated as
of October 6, 1999, between Justin Industries, Inc. and The Bank of
New York as successor Rights Agent. Such amendment extends the Rights
Agreement for an additional five years until October 6, 2004. The
Form 8-K was filed on September 16, 1999.
Page 13
===============================================================================
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, The
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JUSTIN INDUSTRIES, INC.
/S/ RICHARD J. SAVITZ
Richard J. Savitz
Senior Vice President/
Chief Financial Officer
Dated this 12th day of November 1999.
Page 14
===============================================================================
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1999 Financial Statements included in the Company's Form 10-Q and
is qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1999
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0
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