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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED MARCH 31, 1995 COMMISSION FILE NUMBER 0-16059
JASON INCORPORATED
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1756840
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
411 E. WISCONSIN AVENUE, SUITE 2500, MILWAUKEE, WI 53202
(Address of principal executive offices)
(414) 277-9300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 ___
On March 31, 1995 there were outstanding 20,075,425 shares of the Registrant's
$.10 par value common stock.
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JASON INCORPORATED
FORM 10-Q
MARCH 31, 1995
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Statements of Income for the Three Months
Ended March 31, 1995 and April 1, 1994 ............................ 3
Balance Sheets as at March 31, 1995 and
December 30, 1994 ................................................. 4
Statements of Cash Flows for the Three Months
Ended March 31, 1995 and April 1, 1994 ........................... 5
Notes to Financial Statements ....................................... 6-8
Management's Discussion and Analysis of
Results of Operations and Financial Condition ..................... 9-11
PART II. OTHER INFORMATION
Item 1 Legal Proceedings ............................................ 11
Item 2 Changes in Securities ........................................ 11
Item 3 Defaults Upon Senior Securities .............................. 11
Item 4 Submission of Matters to a Vote of
Security Holders .......................................... 11
Item 5 Other Information ............................................ 11
Item 6 (a) Exhibits ................................................ 11
(b) Reports on Form 8-K ..................................... 11
Signatures .......................................................... 12
JASON INCORPORATED
STATEMENTS OF INCOME
(Dollars In Thousands, Except Earnings Per Share)
-------------------------------------------------
<TABLE>
<CAPTION>
For The Three Months Ended
------------------------------
March 31, April 1,
1995 1994
---------- ----------
(UNAUDITED)
-----------
<S> <C> <C>
NET SALES $108,666 $87,485
COST OF SALES 84,754 67,794
--------- ---------
Gross Profit 23,912 19,691
SELLING AND ADMINISTRATIVE EXPENSES 15,442 12,537
--------- ---------
Operating Income 8,470 7,154
INTEREST EXPENSE 2,428 1,892
OTHER (INCOME) EXPENSE 162 18
--------- ---------
Income Before Income Taxes And
Cumulative Effect Of Change In
Accounting Principle 5,880 5,244
PROVISION FOR INCOME TAXES 2,464 2,209
--------- ---------
Income Before Cumulative Effect Of
Change In Accounting Principle 3,416 3,035
Cumulative Effect Of Change In
Accounting Principle For
Postemployment Benefits --- 212
--------- ---------
Net Income $ 3,416 $ 2,823
========= =========
NET INCOME PER SHARE
--------------------
Income Before Cumulative
Effect Of Change In Accounting
Principle $ .17 $ .15
Cumulative Effect Of Change In
Accounting Principle For
Postemployment Benefits --- (.01)
--------- ----------
NET INCOME PER SHARE $ .17 $ .14
========= =========
AVERAGE SHARES OUTSTANDING 20,618,000 20,345,000
========== ==========
</TABLE>
JASON INCORPORATED
BALANCE SHEET
(Dollars In Thousands)
----------------------
<TABLE>
<CAPTION>
March 31, December 30,
1995 1994
------------- ------------
(UNAUDITED)
-----------
<S> <C> <C>
ASSETS
- - ------
Current Assets
Cash $ 205 $ 1,069
Accounts Receivable 53,261 48,791
Inventories (Note 3) 35,387 30,538
Costs And Earnings In Excess Of
Billings On Uncompleted Contracts 13,863 8,367
Deferred Income Taxes 5,520 7,494
Other Current Assets 5,805 6,224
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Total Current Assets 114,041 102,483
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Property, Plant and Equipment
Cost 114,134 103,000
Less Accumulated Depreciation (48,260) (45,004)
-------- --------
Net Property, Plant and Equipment 65,874 57,996
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Intangible Assets 98,969 68,715
Other Assets 4,284 4,347
------- -------
$283,168 $233,541
======= =======
LIABILITIES & SHAREHOLDERS' EQUITY
- - ----------------------------------
Current Liabilities
Current Portion of Long Term Debt $ 3,540 $ 3,840
Accounts Payable 29,166 22,753
Accrued Compensation & Employee Benefits 11,248 11,830
Accrued Warranty 5,253 5,367
Accrued Interest 2,199 1,122
Accrued Income Taxes 26 311
Other Current Liabilities 7,916 7,916
Billings In Excess Of Costs And
Earnings On Uncompleted Contracts 14,912 14,208
------- -------
Total Current Liabilities 74,260 67,347
Revolving Loan 47,315 27,035
Other Long Term Debt 66,324 49,387
Deferred Income Taxes 9,765 7,979
Other Long Term Liabilities 1,792 1,653
Postemployment & Postretirement Health
And Other Benefits (Note 4) 5,782 5,769
------- -------
Total Liabilities 205,238 159,170
------- -------
Commitments and Contingencies --- ---
SHAREHOLDERS' EQUITY
- - --------------------
Common Shares & Additional
Contributed Capital 34,255 34,255
Retained Earnings 43,642 40,226
Foreign Currency Translation Adjustment 33 (110)
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Total Shareholders' Equity 77,930 74,371
------- -------
$283,168 $233,541
======= =======
</TABLE>
JASON INCORPORATED
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
----------------------
<TABLE>
<CAPTION>
For The Three Months Ended
--------------------------
March 31, April 1,
1995 1994
---------- ----------
(UNAUDITED)
-----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 3,416 $ 2,823
Adjustments To Reconcile Net Income To Net Cash
Provided By Operating Activities:
Cumulative Effect Of Change In Accounting Principle 212
Depreciation 3,299 2,603
Amortization 1,520 1,217
Deferred Income Taxes 1,786 1,375
Increase (Decrease) In Cash, Excluding Effects Of
Acquisitions, Due To Changes In:
Accounts Receivable (731) 6,320
Inventories (350) (1,280)
Cost And Earnings In Excess Of Billings
On Contracts (5,496) 542
Other Current Assets 2,618 592
Other Assets 1,182 (290)
Accounts Payable 4,616 (2,845)
Accrued Compensation & Employee Benefits (1,802) 336
Accrued Interest 1,077 1,108
Accrued Income Taxes (285) (449)
Billings In Excess Of Costs And Earnings
On Uncompleted Contracts 704 2,399
Other Liabilities (469) (322)
-------- --------
Total Adjustments 7,669 11,518
-------- --------
Net Cash Provided By Operations 11,085 14,341
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition Of Net Assets (45,123) (25,891)
Acquisition Of Property, Plant And Equipment (3,612) (3,650)
Disposal Of Property, Plant And Equipment - Net 13
Other Net 143 5
-------- --------
Net Cash Used For Investing Activities (48,579) (29,536)
-------- --------
Net Cash Provided (Used) Before Financing Activities (37,494) (15,195)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds From Revolving Loan 59,953 42,986
Repayments Of Revolving Loan (39,673) (43,487)
Proceeds From Convertible Notes 17,057
Repayments Of Other Long-Term Debt (707) (211)
Issuance Of Common Stock Net 14,923
-------- --------
Net Cash Provided By (Used For) Financing Activities 36,630 14,211
-------- --------
Net Increase (Decrease) In Cash (864) (984)
Cash Beginning Of Period 1,069 1,037
-------- --------
Cash End Of Period $ 205 $ 53
======== ========
Cash Paid During The Period For:
Interest 1,355 765
Income Taxes 963 1,089
</TABLE>
JASON INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF FINANCIAL STATEMENTS
The Company operates in three primary business segments: power generation
products, motor vehicle products, and industrial products. Power generation
products include the design and manufacture of silencing equipment, waste heat
recovery boilers, and other auxiliary equipment for the gas turbine and other
industries and the design and fabrication of electromagnetic shielding products
for medical and other electronic equipment applications. Motor vehicle products
include the manufacture and marketing of nonwoven needled fiber insulation,
mastic insulation, dielectric padding and other interior trim products primarily
for the automotive industry but also for furniture and industrial uses, plus
seating products for motorcycles, construction, agricultural and lawn/turf care
equipment. Industrial products include the manufacture and marketing of
industrial brushes, buffing wheels and compound used by manufacturers to finish
a wide variety of manufactured products, plus the manufacture and marketing of
precision components such as precision stampings, wire form components and
expanded metal products.
The financial statements at March 31, 1995 and April 1, 1994 and for the three
month periods then ended are unaudited, however, in the opinion of management,
all adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation of the financial position at these dates and the results of
operations and cash flows for these periods have been included. The results for
the three month period ended March 31, 1995 are not necessarily indicative of
the results that may be expected for the full year or any other interim period.
For purposes of the Consolidated Statement of Cash Flows, the Company considers
all investments with a maturity of three months or less at the time of purchase
to be cash equivalents.
Earnings per share are computed using the weighted average number of common and
common equivalent shares outstanding during the period. The weighted average
number of common and common equivalent shares outstanding during the first
quarters of 1995 and 1994 amounted to 20,618,000 and 20,345,000, respectively.
Shares issuable under employee stock option plans are included in the earnings
per share computations for all periods presented.
NOTE 2 - ACQUISITIONS
On January 3, 1995, the Company completed the acquisition of Milsco
Manufacturing company for $45.3 million, including acquisition costs. Milsco is
a designer and manufacturer of seating for motorcycles, construction equipment,
agricultural equipment and lawn/turf care equipment.
On January 31, 1994 the Company acquired the stock and business of DLTK, Inc.
("Deltak") for approximately $30.3 million, including acquisition costs. Deltak
is a manufacturer of heat recovery steam generators and specialty boilers
serving the power generation market.
The aforementioned acquisitions have been accounted for using the purchase
method and, as such, their operating results have been included in the Company's
financial statements since their respective acquisition dates. The unaudited
information shown below presents, on a pro forma basis, the consolidated results
of the Company's operations for the three months ended March 31, 1995 and
April 1, 1994 as though the purchases were made as of the beginning of the
period. The unaudited pro forma information assumed that the acquisitions were
accounted for using the purchase method; as such, the assets acquired and the
liabilities assumed are recorded at their estimated fair values at the dates of
the acquisitions. Studies will be made to determine the fair value of the net
assets of Milsco, however, such studies have not been completed and when
complete will result in adjustments to these preliminary estimates.
The unaudited pro forma information does not necessarily reflect the operations
of Jason, Milsco and Deltak as they would have been had these entities existed
as one for the periods shown and the operating results should not be deemed to
be indicative of the future operations of the combined entity.
The unaudited pro forma information is based upon certain assumptions that
management believes are reasonable. (Amounts are in thousands, except per share
data):
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1995 APRIL 1, 1994
Net Sales $108,666 $102,880
Gross Profit 23,912 23,410
Operating Income 8,470 7,768
Income Before Cumulative
Effect of Change in Accounting
Principle 3,416 2,851
Earnings Per Share $ .17 $ .14
NOTE 3 - INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market and
consisted of the following (in thousands of dollars):
MARCH 31, DECEMBER 30,
1995 1994
(Unaudited)
Raw materials $20,618 $15,963
Work in process 3,440 2,138
Finished goods 11,329 12,437
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$35,387 $30,538
======= =======
NOTE 4 - POSTEMPLOYMENT BENEFITS
Effective January 1,1994, the Company adopted Statement of Financial Accounting
Standards No. 112 "Employers' Accounting for Postemployment Benefits", which
requires employers to account for the cost of these benefits on an accrual
basis. The Company's postemployment obligations consist primarily of disability
benefits. The effect on first quarter fiscal 1994 net income was as follows:
(Thousands)
Postemployment obligation $353
Income tax benefit (141)
---
Decrease in net income $ 212
===
Decrease in earnings per share $ .01
===
JASON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Three months ended March 31, 1995 compared to the three months ended April 1,
1994:
Sales for the three months ended March 31, 1995 increased by 24% from
$87,485,000 for the three months ended April 1, 1994 to $108,666,000. Sales of
power generation products increased by 17% from $29,931,000 to $34,977,000.
Sales of motor vehicle products increased by 51% from $26,067,000 to
$39,451,000. Sales of industrial products increased by 9% from $31,487,000 to
$34,238,000.
The increase in power generation products sales was primarily a result of the
inclusion of three months sales of Deltak (a manufacturer of heat recovery steam
generators and specialty boilers, acquired January 31, 1994) in the first
quarter of 1995 compared to two months sales in the first quarter of 1994.
Excluding sales of Deltak, power generation sales for the first quarter of 1995
increased by 2%. This increase was a function of the timing of customer project
requirements that led to slightly greater job completions in the first quarter
of 1995 compared to last year. Power generation backlog at the end of the first
quarter of 1995 amounted to $79 million compared to $91 million a year ago.
Bookings in the first quarter of 1995 were up 79% compared to the first quarter
of 1994 from $22.3 million to $39.9 million. Bookings of heat recovery steam
generators for the domestic market were particularly strong, but bookings also
improved for exhaust systems and dampers for the overseas market. Although
backlog at the end of the first quarter of 1995 is lower than last year, the
markets are showing signs of improvement and sales in this segment for the
balance of the year are expected to exceed last year.
The increase in motor vehicle products sales is primarily a result of the
inclusion of Milsco Manufacturing, acquired on January 3, 1995 in the results
for the first quarter of 1995. Milsco is a designer and manufacturer of seating
for motorcycles, construction equipment, agricultural equipment and lawn/turf
care equipment. Excluding Milsco, sales for the segment increased by 7%. The
U.S. automobile industry built only 1% more vehicles in the first quarter of
1995 than they did last year, however, the door insert program for the
Oldsmobile Aurora, which began production in mid 1994, improved sales in the
first quarter of 1995 compared to the prior year. The U.S. automotive industry
has announced a production schedule for the second quarter of 1995 that is 2%
higher than the production level in the second quarter of 1994. Dealer
inventories are up compared to last year from 59 days at the end of the first
quarter of 1994 to 72 days. Whether or not the industry will build the number
of units called for in the schedule depends on retail vehicle sales during the
second quarter.
The increase in industrial products sales is a result of an improvement in the
Koller expanded metal, wire form, stamped components and assembled products
operations as well as an improvement in the Osborn brush business and the
JacksonLea buff and compound business. With the improvement in the economy,
management expects that sales for the industrial products segment for the second
quarter, will be up compared to the prior year.
Operating income improved in the first quarter of 1995 from $7,154,000 in the
first quarter of 1994 to $8,470,000.
Operating income for the power generation products segment declined from
$2,638,000 in the first quarter of 1994 to $2,516,000. The decline in operating
income is the result of a less profitable product mix at Braden, partially
offset by a higher sales level for Deltak, whose results were included for the
entire first quarter in 1995 compared to only two months since acquisition last
year.
Operating income for the motor vehicle products segment improved from $3,286,000
in the first quarter of 1994 to $4,401,000 due primarily to the addition of
Milsco, acquired January 3, 1995 and higher sales volume at Sackner Products,
partially offset by lower earnings at Janesville Products, a result of downward
pressure on price levels, start up costs associated with a new facility and
lower earnings from the Mexican joint venture due to the Peso devaluation and
its effect on the Mexican economy.
Operating income for the industrial products segment improved from $1,952,000 in
the first quarter of 1994 to $2,124,000. This increase in operating income was
a result of an improvement of sales volume levels, primarily at Osborn and
Koller, partially offset by a lower video spring margins at Koller.
Corporate expenses for the first quarter of 1995 were $571,000 compared to
$722,000 last year. This decrease is primarily due to an decrease in management
incentive compensation.
Interest expense increased by $536,000 in the first quarter of 1995 from
$1,892,000 in the first quarter of 1994 to $2,428,000. This increase in
interest expense is a result of increased borrowings made in connection with the
acquisitions of Milsco Manufacturing on January 3, 1995 ($45.3 million purchase
price) and Deltak Corporation on January 31, 1994 ($30.3 million purchase
price), partially offset by the issuance of $15 million of equity in January
1994. Other expense in the first quarter of 1995 represents deferred financing
cost amortization and peso devaluation losses, partially offset by royalty
income from foreign licensees of the Company's finishing products. Other
expense in the first quarter of 1994 represents deferred financing cost
amortization offset by royalty income.
In April 1995 a fire destroyed the building and equipment comprising the fiber
processing line of Janesville de Mexico, the Company's Mexican joint venture,
located in Hermosillo, Sonora. Insurance is in place to cover the replacement
cost of the building and the equipment as well as for business interruption.
The Company believes that there will not be an adverse financial impact on the
Company resulting from the fire.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1995, the Company satisfied the capital requirements
of its operations with internally generated funds. In the first quarter of
1995, the purchase price for Milsco amounting to $45.3 million was financed by
an extension of the Company's bank revolving loan facility and $17 million of
proceeds from the issuance of convertible notes to several of the former
shareholders of Milsco. For the foreseeable future, the Company believes it
will generate funds from operations to meet the capital requirements of its
existing operations. As of March 31, 1995, the Company had available unused
borrowing capacity of $60,620,000 under its bank revolving loan facility.
During the first quarter of 1994, the Company also satisfied the capital
requirements of its operations with internally generated funds. In the first
quarter of 1994, the purchase price for Deltak amounting to $30.3 million was
financed by an extension of the Company's bank revolving loan facility and $15
million of proceeds from the private placement of 1,363,637 restricted shares of
its $.10 par value common stock to several institutional investors. As of
April 1, 1994, the Company had available unused borrowing capacity of
$28,296,000 under its bank revolving loan facility.
During the first quarter of 1995, working capital increased by $4,645,000 from
$35,136,000 at December 30, 1994 to $39,781,000 at March 31, 1994. This
increase was a result of working capital acquired in connection with the
acquisition of Milsco on January 3, 1995. During the first quarter of 1995, the
Company generated $11,085,000 in cash from operations. The Company anticipates
generating additional cash flow from operations during the balance of the year.
In the first quarter of 1995 and 1994, the Company made capital expenditures of
$3,612,000 and $3,650,000, respectively. The major 1995 expenditures were in
the motor vehicle products segment for equipment at Janesville Products to
support new molded Marabond_ programs and to improve efficiency and at Koller,
Milsco and Sackner to support new programs at those locations. Capital
expenditures for 1995 are anticipated to approximate $16.0 million. No
significant commitments are outstanding as of March 31, 1995.
SEASONALITY
U.S. auto makers traditionally shut down for the annual model changeover in the
third quarter. In addition, adjustments to production schedules are made
throughout the year based on retail auto sales and the level of dealer
inventories. These seasonal patterns affect the Company's motor vehicle
products operations most significantly but also have somewhat of an impact on
industrial products due to the effect on automotive suppliers which use the
Company's precision components and finishing products.
PART II
OTHER INFORMATION
ITEM 1 Legal Proceedings - None
ITEM 2 Changes in Securities - None
ITEM 3 Defaults Upon Senior Securities - None
ITEM 4 Submission of Matters to a vote of Security Holders - None
ITEM 5 Other information - None
ITEM 6 (a) Exhibits - None
(b) Reports on Form 8-K:
A report on Form 8-K was filed on January 12, 1995 relating to
the acquisition of Milsco Manufacturing Company, including
historical financial statements for the acquired company, along
with pro forma statements giving effect to the acquisition.
A report on Form 8-K was filed on February 14, 1994 relating to
the acquisition of Deltak Corporation. Amendment No. 1 was filed
on April 14, 1994, including historical financial statements for
the acquired company, along with pro forma statements giving
effect to the acquisition.
SIGNATURES
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.
JASON INCORPORATED (Registrant)
by ________________________
Mark Train
Executive Vice President
(Chief Financial Officer)
