<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
(Fee required)
FOR THE FISCAL YEAR ENDED DECEMBER 27, 1996 or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
(No fee required) For the transition period from to
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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 EAST WISCONSIN AVENUE, SUITE 2500, MILWAUKEE, WI 53202
(Address of principal executive offices)
(414) 277-9300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange on which registered
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N/A N/A
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE
Title of Class
Indicate by 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The aggregate market value of the Common Stock of the Registrant held by
non-affiliates as of March 3, 1997: $66,318,919.
Number of shares of Common Stock outstanding as of March 3, 1997: 20,159,573
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<CAPTION>
DOCUMENTS INCORPORATED BY REFERENCE PART
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<S> <C>
Portions of the Annual Report to Shareholders for the Fiscal Year I, II, IV
Ended December 27, 1996
Portions of the Proxy Statement dated March 14, 1997, for the Annual
Meeting of Shareholders to be held on April 23, 1997 III
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JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
PART I
ITEM I. BUSINESS
The Company was incorporated in November 1985 and operates in three
primary business segments: motor vehicle products, power generation products
and industrial products. 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. 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.
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.
Information relating to the Company's three business segments is contained
in "Management's Discussion and Analysis of Results of Operations and Financial
Condition" and "Note 11 - Segment Information" which are incorporated into Item
8 of Part II of this report by reference to the Company's 1996 Annual Report to
Shareholders.
PRODUCTS
MOTOR VEHICLE PRODUCTS. The Company's Janesville Products business has
been in continuous operation since 1881. Janesville Products manufactures
nonwoven needled fiber insulation for the automotive industry. Because of
their low cost and thermal and acoustical insulating characteristics,
Janesville's products are used as an underlay for carpeting or as insulation
behind various interior trim parts of automobiles, light trucks and vans. In
addition to its traditional product, the Company also manufactures special
moldable padding products which can be used for contoured shapes for both
interior and trunk applications. Jason's automotive presence was increased
significantly in June 1991 with the acquisition of Sackner Products and
Schroeder Industries. Sackner has been in continuous operation since 1916 and
has historically been the dominant supplier of dielectric padding for
automotive applications. The use of dielectric padding behind a door or seat
fabric permits a seam or design to be embossed or molded into the fabric. In
1991 and 1992 Sackner extended its activities into two new areas: the
production of door panel subassemblies for automobiles and the development of a
substrate material for auto headliners. Schroeder Industries, which started in
business in 1985, provides still another insulation alternative for the Company
in the automotive market. Schroeder manufactures mastic, an asphaltic based
sound deadener. Mastic is most often used on the floor of a truck or car,
frequently in conjunction with Janesville's nonwoven padding.
In October 1996, the Company completed the acquisition of a majority
interest in Suroflex GmbH, a German manufacturer of acoustical insulation
products for the automotive industry. This acquisition allows Jason and
Suroflex to serve their U.S. and European customers on a worldwide basis.
In recent years, the automotive industry has put increasing reliance on
suppliers to develop new products and reduce costs. In response to this trend,
over the last few years, the Company has increased its product development
emphasis. Company personnel work
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JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
directly with the engineering departments of automotive companies to establish
the insulation design and specifications for new cars.
The Company has established an application engineering group to design new
products, explore the use of different fibers and combinations of fibers for
insulation purposes and improve the characteristics of its existing products.
Several new products, including the moldable products, have resulted from this
product development effort and have contributed to the increase in Company
sales per vehicle produced in the U.S.
To maximize its insulating characteristics, the Company's padding must
remain uniform in weight and thickness. It must also retain dimensional
stability so that it will hold its shape and fit properly into place. The
Company subjects its trim products to numerous quality control tests and
process controls during manufacturing to ensure that they retain proper
structural and dimensional characteristics. Its products have received high
quality ratings from its customers. See "Competition-Motor Vehicle Products."
Milsco Manufacturing Company was acquired by Jason on January 3, 1995.
Milsco was established in Milwaukee in 1924 and had been family owned since its
origin. Milsco is an international company specializing in the design and
manufacture of complete seating products for motorcycles, construction
equipment, agricultural equipment and lawn/turf care equipment. The company
was originally established as a harness maker and over the years became one of
the nation's leading seating innovators. Early in its history Milsco gained
notice as the first company to put padded seating on tractors and farm
implements. Today, it is known for its breakthrough developments in many areas
of research and development and for its consistently high quality products.
During 1994, 1995 and 1996 sales of motor vehicle products accounted for
approximately 28%, 36% and 36%, respectively, of the Company's total sales.
POWER GENERATION PRODUCTS. The Company believes that it is the only
manufacturer in the world that can supply all of the auxiliary equipment for a
gas turbine power plant. Braden manufactures the inlet silencers, the filter
houses, the turbine enclosures and the exhaust silencers which control the
incoming air stream and the outgoing exhaust gas stream; Braden-Europe designs
the diverter dampers which direct the exhaust gas to the silencer for simple
cycle installations and to the waste heat recovery boiler for combined cycle
installations; Deltak manufactures the waste heat recovery boilers which
convert the thermal energy in the exhaust gas into steam for the subsequent
generation of additional electricity.
The Company's Braden Manufacturing business was founded in Tulsa, Oklahoma
in 1923 as a fabricator of steel products. The business focused its steel
fabricating efforts on the gas turbine industry in the 1960's. Braden's major
product for the turbine industry is inlet and exhaust silencers. Braden's
early success in these products led to recent participation in enclosures for
the turbine itself, in filtration systems and in equipment packages for lube
oil, water injection, water wash and fuel forwarding. Braden made significant
strides in globalizing its business over the last several years. Foremost
among its actions in this regard was the November, 1992 acquisition of Metrio
Technologie International of Heerlen, the Netherlands. Metrio is a designer of
diverter dampers for gas turbine and other applications. This acquisition
provided Braden with the one product in the turbine exhaust stream which it had
not previously been able to offer and thereby also allowed the Company to offer
an entire exhaust system to its customers, a capability which no other
manufacturer can claim. In addition, Metrio's central European location is
ideal for servicing the large turbine manufacturing companies headquartered in
Europe. Braden-Europe, as the company is now known, is expected to contribute
significantly to Jason's growth in the power generation business in the next
several years.
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JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
A typical 70 megawatt turbine installation would have a value of approximately
$20 million. The Braden portion of such an installation would be worth up to
$1.5 million.
A second major program for Braden which has been in progress for several
years is the continued development of a matrix of manufacturing partners to
satisfy the requirements of various foreign power companies for local
manufacturing content. Arrangements have been completed in the Pacific Rim,
the Middle East and in Europe. Braden has developed the expertise to manage
these types of contracts and has completed several with commendation from both
the turbine manufacturers and the user power companies. This form of business
is expected to expand substantially in the next few years and Braden is
recognized as a leader in its development.
In January 1994, the Company acquired Deltak Corporation. Based in
Minneapolis, Deltak is a leading designer, engineer and manufacturer of steam
generators and heat recovery systems, with a current emphasis on the gas
turbine cogeneration and combined cycle electrical power generation markets.
Deltak also manufactures process steam and directly fired specialty boilers for
a wide variety of heat recovery applications and provides parts and field
service for boilers and related systems.
In 1986 the Company entered the market for magnetic and radio frequency
shielding for medical and electronic equipment installations and is currently a
major participant in this field. Electromagnetic shielding is designed to
protect equipment or systems from unwanted electromagnetic disturbances. Two
of the major applications for these products are magnetic shielding for
magnetic resonance imaging (MRI) medical diagnostic equipment and radio
frequency shielding for preventing eavesdropping or interference with
industrial and governmental electronic equipment.
During 1994, 1995 and 1996 power generation products accounted for
approximately 37%, 32% and 34%, respectively, of the Company's total sales.
INDUSTRIAL PRODUCTS. The Company's industrial brush business, Osborn
Manufacturing, was first established in 1887 in Cleveland, Ohio. The Company
supplies industrial power brushes and maintenance brushes to a variety of
industries. Power brushes are used as attachments to power tools or machines
which spin the brushes at high speeds. Maintenance brushes are used manually.
The Company manufactures and supplies over 3,000 different brushes which range
from tiny micro abrasive brushes to wide-face brushes for mill applications
which are up to 16 inches in diameter and 18 feet in length. These wide-face
or mill brushes are used primarily to remove scale from coils and from rolls in
steel and aluminum mills. In July, 1996, the Company added to Osborn's already
strong position in this market with the acquisition of the mill brush business
of the Milwaukee Brush Company. The Power brushes can be used for applications
ranging from small industrial deburring required by the electronics industry to
the removal of slag from steel mill rolling equipment. While power brushes are
generally used on metal surfaces, they can also be used on other materials such
as plastic. Maintenance brushes are used in a wide variety of industrial
applications. The Company sells power brushes primarily under the Osborn(R)
and ORBIT(R) trademarks and a line of maintenance brushes under the EMRO(R)
trademark. The Company considers these trademarks to be valuable in
distinguishing its products from those of its competitors.
To make its power brushes, the Company uses a variety of proprietary
processes which it has developed from its long experience in the industry. The
size and shape of a power brush, the type, length and density of its bristles
(or filler), and the construction and treatment of the filler, all influence
the finishing characteristics of a brush. For example, the Company uses a
steel wire drawn to its own specification for the brushes where long life is
important, stainless steel wire for brushes designed to work on unusual
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JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
metals, brass wire for brushes for special applications and a variety of
nonmetallic fillers for light finishing work. For some heavy-duty
applications, the Company treats its power brushes with hardening solutions
which give the contact surface of the brush a consistency similar to that of a
grinding wheel. The Company uses a variety of natural and synthetic fibers for
its maintenance brushes.
The Company's Jackson Buff business has been in operation since 1931. On
May 31, 1991, the Company acquired Lea Manufacturing and merged the two
businesses to form JacksonLea. In June 1992 the Company acquired The Buckeye
Products Company, a manufacturer of buffing compounds located in Cincinnati,
Ohio and in June 1993, the Company acquired the buff and compound business of
Hanson & Wells of Canada. In January 1997, the Company announced that it had
reached an agreement in principle to acquire Buller Buff Company, a Canadian
manufacturer of buffing wheels and other products for the metal finishing
industry. This transaction is expected to close by the end of the first
quarter. JacksonLea manufactures industrial buffing wheels and industrial
buffing compound primarily for use in high volume buffing operations. Buffing
wheels and buffing compound are used primarily to finish metal parts which
require a high degree of luster. The Company manufactures buffing wheels from
3 to 30 inches in diameter and roll-type buffing wheels up to 4 feet in length.
The Company makes both airway (ventilated) buffing wheels and conventional
buffing wheels. It uses a proprietary process to make its ventilated buffs.
Plumbing fixtures, door hardware, cookware, silverware, motorcycle parts and
automotive components are some of the many metal items which are commonly
buffed at some point in the manufacturing process. The buffing operation is
used either to give the product its final finished appearance, particularly
true for stainless steel or aluminum auto trim, or to prepare the product for a
final plating process, a technique commonly used to finish plumbing fixtures.
Although the Company's buffing wheels are primarily used on metal surfaces,
they can also be used with other materials. For example, a manufacturer might
buff a plastic product to remove seams which result from the bonding of two
pieces of plastic.
The characteristics of a buffing wheel and its associated buffing compound
must be carefully matched to a particular customer's needs. For example,
buffing wheels can be made in different sizes and use different types and
combinations of cloth which can be treated with different chemicals to harden
the buff to the desired degree, improve its life and increase its ability to
hold buffing compound. In conjunction with its design of a buff for a
particular purpose, the Company formulates a buffing compound for use with that
buff. Therefore, the Company's ability to supply a buff and buffing compound
appropriate for use by its customer is an important element of its success.
The Company sells its buffing compounds both in flow bins (which allow for
continuous operation of an automatic buffing machine), drums and in bar form
for use by its smaller customers who do not have automatic buffing equipment.
JacksonLea sells its buff products primarily under the "JACKSON", "LEA",
"BUCKEYE", "HANSON & WELLS" and "JACKSONLEA" trademarks which it considers to
be valuable in distinguishing its buff and compound products from competitive
products.
The Company also markets a line of plating chemicals, specialty brushes, a
limited line of coated abrasives, abrasive cutoff wheels and industrial
aerosols manufactured for it by third parties, and manufactures and markets a
line of idler rollers, its Load Runners(R) product line, for use by
manufacturers of material handling and other equipment. Load Runners(R) are
low friction heavy-duty metal rollers designed to carry radial and thrust loads
in all kinds of industrial conditions.
The Company's precision components businesses produce metal products for a
wide variety of industries and OEM applications. These businesses were
acquired on November 23, 1993 in connection with the acquisition of Koller
Industries Incorporated.
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JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
Koller Stamped Components produces small, high quality, progressive die
stampings for high volume applications. It is the world's largest manufacturer
of VHS cassette reel leaf springs, producing annually nearly one billion of
these springs for customers on a worldwide basis. The stamping operation is
also a major supplier to small engine manufacturers, electric motor
manufacturers and cookware producers.
Advance Wire Products serves a customer group similar to Koller Stampings
but with formed wire components. Advance Wire utilizes four-slide technology
to form both round wire and flat stock into a variety of shapes and uses.
These products are sold to a broad spectrum of U.S. industry including toys,
appliances, packaging, construction products, automobiles and lawn and garden.
A unique product line produced and marketed through Advance Wire Products is
the West Haven Buckle business. This product line includes a variety of metal
and plastic buckles for the medical and apparel industries.
The Assembled Products Group manufactures small, high volume assemblies
for the outdoor power and medical industries.
Metalex is the largest manufacturer of expanded metal products in the
United States. Expanded metal is found in a variety of uses including patio
furniture, truck and automotive air filters and building construction products.
During 1994, 1995 and 1996 industrial products accounted for approximately
35%, 32% and 30%, respectively, of the Company's total sales.
MARKETS AND MARKETING
MOTOR VEHICLE PRODUCTS. The Company believes that its Janesville Products
unit is the leading domestic manufacturer of nonwoven fiber insulation for
automotive use. Janesville markets its insulation through independent sales
representatives and in-house salespersons. While the Company's actual
customers are primarily automotive carpeting suppliers and trim fabricators,
the type of insulation used by a supplier is generally specified by the
automotive manufacturer. Therefore, the Company's sales representatives and
in-house sales and engineering staffs spend considerable time working directly
with the automobile companies during the design phase for a new automobile to
design a type of insulation which the Company can provide. After the type of
insulation is specified, it is rarely changed once an automobile goes into
production. Janesville is a leading supplier to all of the major carpeting
suppliers for the automobile industry. Janesville's insulation products are
used by Ford, General Motors and Chrysler and by Honda, Nissan, Toyota, Diamond
Star (Mitsubishi), Mazda and Isuzu, at their U.S. assembly facilities.
Sackner's automotive products fall into three primary categories:
Dielectric and other padding used in door panels and seats. These items
are generally sold as Tier 2 or Tier 3 components to interior trim
fabricators.
Door insert subassemblies comprised of either a fabric cover over a
substrate and dielectric or foam pad, or a fabric over a thermoformable
nonwoven substrate. These units provide a decorative and soft contrast
to the molded hard plastic door panels in certain models. They are sold
as a Tier 2 component to a door system assembler.
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JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
Substrate material utilized in a proprietary headliner system developed
in conjunction with a Tier 1 supplier for General Motors and Chrysler
products.
Both Sackner and Janesville also sell a number of related products outside
the automotive industry for furniture, industrial and appliance applications.
Approximately fifty percent of Milsco's sales are to Harley-Davidson.
Milsco has been the sole supplier of original equipment seats to
Harley-Davidson for over sixty years; Harley is Jason's largest customer. In
addition to seats for Harley's motorcycles, Milsco also manufactures saddle
bags and other accessories, plus a wide variety of seats and other products
sold to Harley-Davidson for the after market.
Milsco's major customers in addition to Harley include John Deere, Case,
Caterpillar, Toro and Jacobsen. The Company designs and manufactures seats for
these customers that are used on tractor backhoes, forklift trucks, lawn
tractors, front end loaders, agricultural tractors and a variety of other
units.
In 1996 approximately 54% of the Company's motor vehicle products sales
were made to five customers.
POWER GENERATION PRODUCTS. The Company believes that it is the leading
U.S. manufacturer of silencing equipment and auxiliary equipment packages for
gas turbine installations and a leading producer of waste heat recovery boilers
and diverter dampers. The market for gas turbine power plants throughout the
world, which is the driving force in the Company's power generation business,
continued to be dominated in 1996 by Asia. The most active markets in Asia in
1996 were China, Thailand, India, South Korea and Indonesia. Approximately 64%
of total power generation sales were outside of the U.S. and 43% were to Asia.
Jason services the gas turbine equipment market with sales offices and
manufacturing capabilities in the U.S., in the Far East and in Europe; it is
the only company in its industry with this breadth of capability. The
relationships which Braden established in the Far East over the last several
years were particularly critical to their 1996 performance and have also been a
big benefit to Deltak since its acquisition. In addition, Deltak's joint
venture in China provides the Company with a competitive advantage in the very
active Chinese power generation market.
Turbine manufacturers typically design and manufacture the turbine itself
but rely on outside suppliers for silencing equipment, diverter dampers,
boilers and other auxiliary equipment. In recent years the turbine producers
have moved towards providing only functional specifications to their equipment
suppliers thereby increasing the design responsibility of the equipment
manufacturer and consequently the proprietary nature of the business. Braden
designs and manufactures its equipment at its Tulsa, Oklahoma and Ft. Smith,
Arkansas facilities and designs its diverter dampers at its facility in
Heerlen, the Netherlands. Deltak designs and manufacturers its equipment at
four facilities in the Minneapolis/St. Paul, Minnesota area.
The Company believes it is also a leader in the market for architectural
electromagnetic shielding systems. The Company designs and manufactures these
systems and erects them through its construction subsidiary. A patent for an
integrated magnetic and radio frequency shield has enhanced the Company's
position in this field. The shielding market is serviced direct and through a
limited number of manufacturer's representatives.
In 1996 approximately 40% of the Company's power generation products sales
were made to four customers.
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JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
INDUSTRIAL PRODUCTS. The Company believes that it is the leading supplier
of industrial power brushes in the United States. It markets its power and
maintenance brushes through a network of approximately 400 industrial
distributors in North America which maintain a total of approximately 700
outlets. These distributors sell a variety of maintenance and repair items,
but typically do not sell items competitive with the Company's products. The
distributors sell the Company's products to a large variety of businesses in
many industries. The Company sells its products to its distributors at 10 to
50% discounts from published list prices and gives its distributors limited
rights to return a portion of unsold goods. The Company maintains a force of
technically trained field representatives who both train the Company's
distributors in the proper use of its brushes and assist the end users of the
Company's brushes in meeting their product finishing needs.
The Company believes that it is the leading supplier of industrial buffs
and buffing compound in the United States. The Company markets its buffing
compounds nationally. Manufacturers of plumbing fixtures, door hardware,
cookware, silverware, motorcycle and automotive components are the primary
customers for the Company's buffing products. The Company's Taiwanese and
Chinese joint ventures continue to produce products mostly for their local
markets.
The Company markets its buffing products through a direct sales force and
independent manufacturer's representatives. Its independent manufacturer's
representatives generally do not handle competitive products.
JacksonLea has regional operations in the Northeast, the Southeast, the
Midwest and the West, the only U.S. buffing wheel and compound manufacturer
that can provide this kind of customer service.
The Company sells its Load Runners(R) through independent distributors
which maintain approximately 1,000 outlets in the United States and Canada. It
sells its aerosol products and cutoff wheels through its network of brush
distributors, its plating chemicals through two direct salespeople plus
distributors and its coated abrasives through its buff distribution channels.
The majority of precision components products are made to customer orders
and specifications. These products include job shop stampings, wire forms,
mechanical and electrical assemblies and made-to-order components fabricated
from expanded metal. The majority of these products are brought to the
marketplace through a network of technically proficient manufacturing
representatives and in-house direct sales people who have a strong knowledge of
fabrication processes. Precision components engineering may adapt or offer
value enhancing modifications, but the basic design responsibility lies with
the customer.
Precision components product lines such as Keane stucco trim components
and stock size sheets of expanded metal are marketed through distributors who
in most cases provide distribution and sales services. Design responsibility
for these product lines is internal to the precision components group and in
most cases is protected with patents, copyrights and brand name identification.
Although the product lines are very narrow in scope, they provide the precision
components group a dominant position in niche markets.
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JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
The growth in the Company's precision components made-to-order (job shop)
products such as stampings and wire forms has come from major customer
corporations' restructuring activities. Automotive, computer and
electric/electronic equipment
manufacturers continue to move away from vertical integration to reduce their
fixed costs. Another major driver to growth in this business has been the
localization effort by United States operations of foreign corporations
(particularly Japanese automobile producers) attempting to increase U.S.
content of their products.
The precision components group comes to the marketplace as the Jason
Components Group while maintaining strong trade identity of Metalex (expanded
metal), Keane (stucco metal trim), Advance Wire Products (wire forms), West
Haven Buckle, Koller (stampings and video cassette components), Assembled
Products and Natorq (metal to metal seals). The Company acquired The Koller
Group in late 1993 and has continued the strategy of packaging the capabilities
of the entire organization to the marketplace. Sales effort is organized to
focus on the specific customer rather than product or market orientation.
Strong customer relationships are developed resulting in "partnership"
agreements and long term sales commitments.
The customer base for the industrial products segment is very diverse with
no customer accounting for more than 5% of total segment sales.
COMPETITION
MOTOR VEHICLE PRODUCTS. The Company sells its insulation and padding in
competition with other suppliers of nonwoven products as well as suppliers of
foam products. The Company believes that the markets for bonded fiber and foam
padding are smaller than the nonwoven needled fiber insulation and padding
market. Nonwoven needled fiber insulation is generally superior to
alternatives in cost, and the Company believes that it has superior thermal and
acoustical insulation characteristics as well. Additionally, the Company
believes that the new molded fiber products provide a fit and finish comparable
to foam. The Company also believes that the ever-increasing desire and demand
for environmentally friendly and recycled materials favors the type of raw
materials it uses and the products it produces.
The Company competes with other suppliers of nonwoven needled fiber
insulation and padding primarily on the basis of the price of its product,
quality, and its ability to engineer solutions for automotive designers. The
Company believes that none of its competitors has a higher quality rating with
any of the four primary automotive carpet suppliers or the domestic automotive
OEMs. Product development expenditures over the past several years have
resulted in new product introductions. Continued major investment in product
development is expected in 1997. The Company also believes that its multiple
plant locations and their proximity to its customers' facilities allow it to
reduce shipping costs and supply its customers on a "just in time" basis more
effectively than its competitors.
The Company has not experienced significant foreign competition in its
trim product market and does not expect increased import competition in the
U.S. market because shipping costs place foreign competitors at a price
disadvantage. The Company operates a majority owned Hermosillo, Sonora, Mexico
facility to service the Mexican automotive market and a majority owned German
operation, Suroflex GmbH, to service the European automotive market. (See
"Products" and "New Acquisitions.")
As mentioned above, Milsco has been the sole supplier of original
equipment seats to Harley-Davidson for over sixty years. Milsco also
manufactures saddle bags and other accessories, plus a wide variety of seats
and other products sold to Harley-Davidson
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JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
for the after market. They have maintained this competitive position by
providing style and design capabilities, competitive prices and on-time
delivery.
The Company also designs and manufactures seats for tractor backhoes,
skid-steer loaders, forklift trucks, lawn tractors, front end loaders,
agricultural tractors and a variety of other units. Competition for this
portion of Milsco's market is fragmented and is principally based on quality,
engineering, design, price and delivery.
The Company is unique among seating manufacturers in that it does
everything from research and development to cushion construction (foam-in-place
and integral-skin foam techniques), vinyl forming, sewing (cloth, vinyl and
leather), metal fabrication and assembly. Current employment is approximately
370, with over 40 individuals committed to the engineering effort. Milsco's
technical skills cover mechanical, electrical and chemical engineering as well
as industrial design. The Company has a long list of patents, covering
mechanical as well as foam seating innovations.
POWER GENERATION PRODUCTS. The Company sells its equipment in competition
with other equipment suppliers. Braden is a major supplier of exhaust
silencing systems to General Electric, Westinghouse, Asea-Brown Boveri and
Siemens (the major gas turbine producers in the world) and to Stewart and
Stevenson who packages gas turbine power plants. Deltak sells its products
either directly to the OEM's, to engineering/construction firms or directly to
the operator of the installation, a utility or an independent power producer.
The Company believes that its experience in product design and its experience
in doing business in the power generation industry worldwide as well as its
high level of quality control differentiate it from its competitors.
The Company sells its shielding product line in competition with several
other suppliers of approximately the same size and one supplier that is larger.
The Company attempts to differentiate itself from its competitors through
innovative design, high quality and on-time delivery.
INDUSTRIAL PRODUCTS. The Company believes that it is the leading domestic
supplier of industrial power brushes. The Company competes with many
manufacturers of maintenance brushes.
The Company competes with other brush manufacturers primarily on the basis
of quality, service and price. The Company believes that its comprehensive
network of distributors, supported by its technically trained field
representatives, provides it with a significant competitive advantage for all
of its product lines. Its field representatives enable the Company to provide
the end users of its brushes continuing support and assistance in meeting their
product finishing needs. The Company licenses its brush manufacturing
technology and the Osborn trademark in the European and South American markets
and receives modest royalties from these arrangements.
The Company competes with many different suppliers of buffs and buffing
compounds on the basis of price, quality and service. The Company feels that
its ability to solve its customers' buffing problems through the proper design
and application of buffing wheels and compound and its willingness to provide
continuing in-plant service for its customers make its products highly
competitive.
The Company does not experience significant foreign competition in most
areas of its domestic power and maintenance brush and buff markets.
- 10 -
<PAGE> 11
JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
Competition for the Company's precision components' products varies
significantly. Geographic, technological and specific product characteristics
have a major impact on the Company's approach to its competitors.
The made-to-order (job shop) stamping, wire form, and assembly business is
an extremely fragmented marketplace. Thousands of U.S. competitors exist, but
the quality of the Company's customer base limits competition to approximately
100 world class job shop competitors. Particularly in the metal stamping
business, this competition is global in nature and Koller Stamped Components
successfully sells its products to international markets.
There are less than six significant competitors in the expanded metal
market with the Jason Components Group being dominant in market share.
Competition in the important VHS reel leaf spring product line is global
in nature. The Company manufacturers this product primarily in China through
manufacturing relationships. Reel leaf springs accounted for approximately 5%
of industrial product segment sales in 1996. The Company has a comprehensive
global patent portfolio covering reel leaf springs. Since both customers and
competitors are concentrating in China and other Pacific Rim areas, the
enforcement of these proprietary rights is an ongoing challenge, but the
Company has been successful in defending these proprietary rights.
Additionally, the U.S. market is the largest for pre-recorded and high grade
video tapes in the world and since the protection of copyrighted materials such
as movies is a major issue in the United States, the Company has been
successful in protecting its proprietary rights position by maintaining close
relationships with the final user of the foreign produced video cassette, i.e.,
U.S. duplicators or video tape marketers.
SOURCES OF SUPPLY
Generally, the Company has multiple sources of supply for the important
materials it uses, both foreign and domestic.
NEW ACQUISITIONS
In October 1996, the Company completed the acquisition of a majority
interest in Suroflex GmbH, a German manufacturer of acoustical insulation
products for the automotive industry. This acquisition allows Jason and
Suroflex to serve their U.S. and European customers on a worldwide basis.
Additional information relating to this acquisition is contained in "Note
2 - Acquisitions" which is incorporated into Item 8 of Part II of the report by
reference to the Company's 1996 Annual Report to Shareholders.
In July, 1996, the Company added to Osborn's already strong position in
the mill brush market with the acquisition of the mill brush business of the
Milwaukee Brush Company.
EMPLOYEES
The Company currently has approximately 2,146 hourly and 953 salaried
employees. The Company's work forces at its Conover, Santa Fe Springs, Burns
Flat, Old Fort, Statesville, Miamisburg, Verona, Cincinnati, Fort Smith,
Plymouth, St. Paul, Addison, Libertyville and Wheeling locations are nonunion.
Its work forces at its three Norwalk plants and two Grand Rapids plants are
represented by the Amalgamated
- 11 -
<PAGE> 12
JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
Clothing and Textile Workers of America. Its work forces at its Milsco
Milwaukee and Redgranite plants are represented by the United Paperworkers
International. Its work forces at its Cleveland and Koller Milwaukee plants
are represented by the United Auto Workers. Its work force at its Tulsa
location is represented by the International Iron Workers. Its work force at
its Waterbury and Janesville location is represented by the Teamsters. The
Company believes its relationship with its employees to be good which has had a
positive impact on its productivity.
ENVIRONMENTAL REGULATION
Like all United States manufacturers, the Company is subject to
environmental regulation with respect to its operations. The Company believes
that it is operating in substantial compliance with environmental requirements.
BACKLOG
As of December 27, 1996 and December 29, 1995, the Company's backlogs were
approximately $120.3 million and $106.1 million, respectively. The December
27, 1996 backlog includes $79.7 million for its power generation business
compared to $69.4 million at December 29, 1995. The Company expects to fill
substantially all of its December 27, 1996 backlog by the end of 1997.
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 automotive trim
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
industrial products.
- 12 -
<PAGE> 13
JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
ITEM 2. PROPERTIES
The following table sets forth information with respect to the Company's
principal facilities. These facilities have approximately 2.5 million square
feet of floor space and, unless otherwise indicated, the Company owns these
facilities. The Company believes that its current facilities are suitable and
adequate to meet its current and anticipated future needs. Substantially all
of the Company's facilities are operating at normal levels based on capacity.
CORPORATE HEADQUARTERS:
Milwaukee, Wisconsin (1)
MOTOR VEHICLE PRODUCTS:
JANESVILLE PRODUCTS
Norwalk, Ohio (4)
Old Fort, North Carolina (1)
Miamisburg, Ohio (1)
Burns Flat, Oklahoma (1)
Janesville, Wisconsin (1)
Hermosillo, Sonora, Mexico
SUROFLEX GMBH
Sulzbach-Rosenberg, Germany
MILSCO MANUFACTURING COMPANY
Milwaukee, Wisconsin
Redgranite, Wisconsin
Coventry, England (1)
SACKNER PRODUCTS
Grand Rapids, Michigan (2)
Statesville, North Carolina (1)
Verona, Mississippi (1)
Los Angeles, California (1)
POWER GENERATION PRODUCTS:
JASON POWER SYSTEMS GROUP
Tulsa, Oklahoma (1)
BRADEN MANUFACTURING
Tulsa, Oklahoma (2)
Fort Smith, Arkansas (5)
Heerlen, The Netherlands (1)
Singapore (1)
DELTAK
Plymouth, Minnesota (3)
St. Paul, Minnesota (1)
Shenzhen, Peoples Republic of China (1)
- 13 -
<PAGE> 14
JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
INDUSTRIAL PRODUCTS:
JACKSONLEA
Conover, North Carolina
Santa Fe Springs, California (1)
Waterbury, Connecticut (1)
Cincinnati, Ohio (1)
Mississauga, Ontario, Canada (1)
Shanghai, Peoples Republic of China (1)
JASON COMPONENTS GROUP
Hartland, Wisconsin (1)
Koller Manufacturing
Milwaukee, Wisconsin (1)
Wheeling, Illinois (1)
Shenzhen, Peoples Republic of China (1)
Advance Wire Products
Addison, Illinois (1)
Metalex
Libertyville, Illinois (1)
OSBORN MANUFACTURING
Cleveland, Ohio
Nogales, Sonora, Mexico (1)
(1) Leased
(2) 2 Plants -- Both leased
(3) 2 Plants , 1 office -- 2 leased
(4) 3 Plants , 1 office -- 2 leased
(5) 2 Plants, 1 leased
-14 -
<PAGE> 15
JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
ITEM 3. LEGAL PROCEEDINGS
As of December 27, 1996 the Company was not subject to any material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
No matter was submitted to a vote of the Company's security holders during
the fourth quarter of the year ended December 27, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS
(a) and (b) The information set forth in the "Common Stock Market
Prices" section appearing on Page 28 of the Company's 1996 Annual Report to
Shareholders is incorporated by reference in this Form 10-K Annual Report. The
Company's stock is traded on The NASDAQ Stock Market under the symbol JASN.
(c) The Company's current financing agreements contain restrictions on the
payment of dividends as more fully described in Note 6 of the Notes to
Financial Statements, which appears on pages 21-22 of the Company's 1996 Annual
Report to Shareholders and which is incorporated by reference in this Form 10-K
Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the five years ended December 27, 1996
which appears on page 27 of the Company's 1996 Annual Report to Shareholders is
incorporated by reference in this Form 10-K Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
The information set forth under Management's Discussion and Analysis of
Results of Operations and Financial Condition which appears on pages 14 through
16 of the Company's 1996 Annual Report to Shareholders is incorporated by
reference in this Form 10-K Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, together with the report thereon of Price
Waterhouse LLP dated January 31, 1997 which appear on pages 17 through 26 of
the Company's 1996 Annual Report to Shareholders, including Note 12 (Interim
Financial Information, Unaudited) are incorporated by reference in this Form
10-K Annual Report.
- 15 -
<PAGE> 16
JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
The information on pages 2 and 3 of the Company's Proxy Statement, dated
March 14, 1997, under "Nominees for Election as Directors" and "Executive
Officers" is incorporated by reference in this Form 10-K Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
The information on pages 4 through 6 of the Company's Proxy Statement,
dated March 14, 1997, under "Executive Compensation" is incorporated by
reference in this Form 10-K Annual Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information on page 7 of the Company's Proxy Statement, dated March
14, 1997, under "Security Ownership" is incorporated by reference in this Form
10-K Annual Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information on page 8 of the Company's Proxy Statement, dated March
14, 1997, under "Certain Transactions" is incorporated by reference in this
Form 10-K Annual Report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. FINANCIAL STATEMENTS. The following financial statements of
the Company, included on pages 17 through 26 of the Company's Annual
Report to Shareholders for the fiscal year ended December 27, 1996,
are incorporated by reference in Item 8.
- 16 -
<PAGE> 17
JASON INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED 12/27/96
Consolidated Statements of Income - years ended December 27, 1996,
December 29, 1995 and December 30, 1994.
Consolidated Statements of Shareholders' Equity - years ended
December 27, 1996, December 29, 1995 and December 30, 1994.
Consolidated Balance Sheets - as of December 27, 1996 and December
29, 1995
Consolidated Statements of Cash Flows - years ended December 27,
1996, December 29, 1995 and December 30, 1994.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
2. FINANCIAL STATEMENT SCHEDULE:
A Financial Statement Schedule for the years ended December 27,
1996, December 29, 1995 and December 30, 1994.
Report of Independent Accountants on Financial Statement Schedule
Schedule II Valuation and Qualifying Accounts and Reserves
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions, are
inapplicable or the required information is shown in the financial
statements or notes thereto, and therefore have been omitted.
- 17 -
<PAGE> 18
3. Exhibits:
3.1 Articles of Incorporation of the Company.
3.2 Agreement and Plan of Merger between the Company
(formerly known as Jason Merger Corp.) and its predecessor Jason Incorporated,
a Delaware corporation.
3.3 By-Laws of the Company.
4.1 Specimen Common Stock certificate.
10.1 Lease Agreement, dated August 30, 1985, between
Norwalk Community Development Corporation and AMCA International Corporation;
Assignment and Assumption of Lease dated December 31, 1985 between the Company
and AMCA International Corporation.
10.2 Lease between Donald W. Helgeson and Amtel, Inc.
dated July 1, 1986 of premises located in Janesville, Wisconsin; Assignment and
Assumption of Lease dated December 31, 1985 between Jason Incorporated and
Amtel, Inc.
10.3 Assignment and Assumption of Lease of property
located in Santa Fe Springs, California dated December 31, 1985 between AMCA
International Corporation and Jason Incorporated (copy of lease attached).
10.4 Jason Incorporated Deferred Compensation Plan for
Employees dated September 26, 1986.
10.5 Jason Employee Savings and Profit Sharing Plan
effective January 1, 1986.
10.6 Jason Incorporated Management Incentive Compensation
Plan effective January 1, 1987.
10.7 Jason Incorporated Key Executive Incentive
Compensation Plan effective January 1, 1987.
10.8 Lease of property located in Old Fort, North Carolina
dated June 10, 1988.
<PAGE> 19
10.9 Jason Incorporated 1987 Nonqualified Stock Option
Plan dated April 16, 1987 as amended and restated January 30, 1989.
10.10 Jason Employee Savings and Profit Sharing Plan
Modifications: subsection 7.3(a) of Article VII, section 7.2 of Article VII,
section 2.1, section 3.1, section 4.2, section 2.2, section 2.3, section 2.1,
section 6.4 and section 3.7.
10.11 Sublease Agreement dated September 1, 1988 between
Midwestern Oklahoma Development Authority and Jason Incorporated for the Burns
Flat, Oklahoma facility.
10.12 Lease Agreement dated June 21, 1988 between Southview
Business Center, Ltd. and Janesville Products Co. for the Norwalk, Ohio
offices.
10.13 Jason Incorporated Note Agreement dated as of October
1, 1989 re: $10,000,000 10.60% Senior Subordinated Notes Due October 15, 2000.
10.14 Lease Agreement dated October 9, 1985 between Braden
Steel Corporation and AMCA International Corporation; assumed by Jason
Incorporated June 30, 1989.
10.15 Lease Agreement dated October 15, 1988 between Ron T.
Miller and AMCA International Corporation; assumed by Jason Incorporated June
30, 1989.
10.16 Commercial Lease and Deposit Receipt dated January
28, 1991 between Braden Manufacturing and Pine Bluff Warehouse Company.
10.17 Purchase and Sale Agreement dated June 28, 1991 for
the purchase of the assets of Sackner.
10.18 Purchase and Sale Agreement dated May 31, 1991 for
the purchase of the assets of Lea.
10.19 Purchase and Sale Agreement dated June 21, 1991 for
the purchase of the assets of Schroeder.
10.20 Lease Agreement between Metrio Technology
International B.V.V.A. and Braden-Metrio B.V.
2
<PAGE> 20
10.21 Second Amendment to Lease Agreement between Southgate
Eureka Associates Limited Partnership and Jason Incorporated.
10.22 Lease between First National Bank of Fort Smith,
Arkansas and Braden Manufacturing, a Unit of Jason Incorporated.
10.23 Lease Agreement between Southview Business Center,
Ltd. and Janesville Products Co.
10.24 Lease between Schroeder Industries, Inc., to be known
as SI Properties, Inc., and Jason Incorporated.
10.25 Lease between Arrowhead Corporation and Jason
Incorporated dated January 23, 1991.
10.26 Lease between Arrowhead Corporation and Jason
Incorporated dated April 1, 1992.
10.27 Credit Agreement by and among Jason Incorporated, The
First National Bank of Chicago and The First National Bank of Boston, as
amended.
10.28 Note Agreements dated as of November 15, 1992 re:
$16,000,000 7.65% Senior Secured Notes due December 1, 2002.
10.29 Stock Purchase Agreement between the Company and the
majority stockholders of Koller Industries, Inc.
10.30 Stock Purchase Agreement between the Company and the
minority stockholders of Koller Industries, Inc.
10.31 Agreement and Plan of Merger between Jason Minnesota
Incorporated and DLTK, Inc. relating to the acquisition by the Company of all
of the outstanding capital stock of Deltak Corporation.
10.32 Form of Stock Purchase Agreement executed by the
Company in connection with the January 1994 private placement of common stock.
10.33 Lease for the facility at 6800 West Calumet Road,
Milwaukee, WI.
3
<PAGE> 21
10.34 Lease for the facility at 1530 Artaius Parkway,
Libertyville, IL.
10.35 Lease for the facility at 140 South Mitchell Court,
Addison, IL.
10.36 Lease for the facility at 466 and 468 Diens Drive,
Wheeling, IL.
10.37 Lease for the facility at 7842 North Faulkner Road,
Milwaukee, WI.
10.38 Purchase and Sale Agreement between the Company and
Milsco Manufacturing Company.
10.39 Form of Convertible Note issued by the Company in
connection with the Purchase and Sale Agreement with Milsco Manufacturing
Company.
13.1 Portions of the Annual Report to Shareholders for the
Year Ended December 27, 1996.
21.1 Subsidiaries
23.1 Consent of Price Waterhouse
24.1 Power of Attorney
28.1 Amended and Restated Shareholder Voting Agreement
between Vincent Martin and Mark Train dated as of April 14, 1987.
(b) Reports on Form 8-K.
(c) Exhibits.
The response to this portion of Item 14 is submitted as a separate
section of this report.
(d) Financial Statement Schedules.
4
<PAGE> 22
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors
of Jason Incorporated
Our audits of the consolidated financial statements referred to in our report
dated January 31, 1997 appearing on page 26 of the 1996 Annual Report to
Shareholders of Jason Incorporated (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.
Price Waterhouse LLP
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
January 31, 1997
<PAGE> 23
SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
(thousands of dollars)
<TABLE>
<CAPTION>
Additions
-----------------------------
Balance At Charged to Acquired Balance At
Beginning Costs Allowances End
of Year and Expenses and Reserves Deductions of Year
----------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 27, 1996
- ----------------------------
Allowance for doubtful accounts $ 2,717 392 - (1,061) $ 2,048
Year ended December 29, 1995
- ----------------------------
Allowance for doubtful accounts $ 2,108 741 23 (155) $ 2,717
Year ended December 30, 1994
- ----------------------------
Allowance for doubtful accounts $ 1,608 606 487 (593) $ 2,108
</TABLE>
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
BY /s/ Vincent L. Martin
-----------------------------
Vincent L. Martin,
Chief Executive Officer
Date: March 21, 1997
5
<PAGE> 25
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Vincent L. Martin and Mark
Train, and each of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments to
this report and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and to perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, were there or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Vincent L. Martin Chairman of the Board, March 21, 1997
- -------------------------- Chief Executive Officer and Director
Vincent L. Martin (Principal Executive Officer)
/s/ Mark Train
President, Secretary, Treasurer and March 21, 1997
- -------------------------- Director (Principal Financial and
Mark Train Accounting Officer)
/s/ Wayne C. Oldenburg Director March 21, 1997
- --------------------------
Wayne C. Oldenburg
/s/ Wayne G. Fethke Director March 21, 1997
- --------------------------
Wayne G. Fethke
/s/ Frank W. Jones Director March 21, 1997
- --------------------------
Frank W. Jones
/s/ David J. Drury Director March 21, 1997
- --------------------------
David J. Drury
</TABLE>
6
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential Page
Number Number
- ------- -----------------
<S> <C> <C>
3.1 Articles of Incorporation of (11)
the Company, as amended
3.2 Agreement and Plan of Merger (11)
between the Company (formerly
known as Jason Merger Corp.) and its
predecessor, Jason Incorporated,
a Delaware corporation
3.3 By-Laws of the Company (11)
4.1 Specimen Common Stock (1)
certificate
10.1 Lease Agreement, dated (1)
August 30, 1985 between Norwalk
Community Development Corpo-
ration and AMCA International
Corporation; Assignment and
Assumption of Lease dated
December 31, 1986 between the
Company and AMCA International
Corporation
10.2 Lease between Donald W. Helgeson (1)
and Amtel, Inc. dated July 1, 1986
of premises located in Janesville,
Wisconsin; Assignment and Assumption
of Lease dated December 31, 1985
between Jason Incorporated and
Amtel, Inc.
</TABLE>
7
<PAGE> 27
<TABLE>
<S> <C> <C>
10.3 Assignment and Assumption of (1)
Lease of property located in
Santa Fe Springs, California
dated December 31, 1985 between
AMCA International Corporation
and Jason Incorporated (copy of
lease attached).
10.4 Jason Incorporated Deferred (1)
Compensation Plan for Employees
dated September 26, 1986.
10.5 Jason Employee Savings & Profit (1)
Sharing Plan effective January 1, 1986.
10.6 Jason Incorporated Manage- (1)
ment Incentive Compensation
Plan effective January 1, 1987.
10.7 Jason Incorporated (1)
Executive Incentive Compensation
Plan effective January 1, 1987.
10.8 Lease of property located in (3)
Old Fort, North Carolina
dated June 10, 1988.
10.9 Jason Incorporated 1987 (3)
Nonqualified Stock Option Plan
dated April 16, 1987 as amended
and restated January 30, 1989.
10.10 Jason Employee Savings and Profit (3)
Sharing Plan Modifications:
subsection 7.3(a) of Article VII,
section 7.2 of Article VII, section 2.1,
section 3.1, section 4.2, section 2.2,
section 2.3, section 2.1, section 6.4 and
section 3.7
</TABLE>
8
<PAGE> 28
<TABLE>
<S> <C> <C>
10.11 Sublease Agreement dated (3)
September 1, 1988 between
Midwestern Oklahoma Development
Authority and Jason Incorporated
for the Burns Flat, Oklahoma facility.
10.12 Lease Agreement dated (3)
June 21, 1988 between
Southview Business Center, Ltd.
and Janesville Products Co.
for the Norwalk, Ohio offices.
10.13 Jason Incorporated Note Agreement (5)
dated as of October 1, 1989 re:
$10,000,000 10.60% Senior
Subordinated Notes Due
October 15, 2000.
10.14 Lease Agreement dated (5)
October 9, 1985 between
Braden Steel Corporation
and AMCA International Corporation;
assumed by Jason Incorporated
June 30, 1989.
10.15 Lease Agreement dated (5)
October 15, 1985 between
Ron T. Miller and AMCA International
Corporation; assumed by
Jason Incorporated June 30, 1989.
10.16 Commercial Lease and Deposit Receipt (6)
dated January 28, 1991 between Braden
Manufacturing and Pine Bluff Warehouse
Company.
</TABLE>
9
<PAGE> 29
<TABLE>
<S> <C> <C>
10.17 Purchase and Sale Agreement dated (7)
June 28, 1991 for the purchase of
the assets of Sackner.
10.18 Purchase and Sale Agreement dated (7)
May 31, 1991 for the purchase of
the assets of Lea.
10.19 Purchase and Sale Agreement dated (7)
June 21, 1991 for the purchase of
the assets of Schroeder.
10.20 Lease Agreement between Metrio (8)
Technology International B.V.V.A.
and Braden-Metrio B.V.
10.21 Second Amendment to Lease Agreement (8)
between Southgate Eureka Associates
Limited Partnership and Jason
Incorporated.
10.22 Lease between First National Bank (8)
of Fort Smith, Arkansas and Braden
Manufacturing, a Unit of Jason
Incorporated.
10.23 Lease Agreement between Southview (8)
Business Center, Ltd. and
Janesville Products Co.
10.24 Lease between Schroeder Industries, (8)
Inc., to be known as SI Properties,
Inc., and Jason Incorporated.
10.25 Lease between Arrowhead Corporation (8)
and Jason Incorporated dated
January 23, 1991.
10.26 Lease between Arrowhead Corporation (8)
and Jason Incorporated dated
April 1, 1992.
</TABLE>
10
<PAGE> 30
<TABLE>
<S> <C> <C>
10.27 Credit Agreement by and among Jason (8)
Incorporated, The First National Bank
of Chicago and the First National Bank
of Boston, as amended.
10.28 Note Agreements dated as of November 15, (8)
1992 re: $16,000,000 7.65% Senior Secured
Notes due December 1, 2002
10.29 Stock Purchase Agreement between the (9)
Company and the majority stockholders of
Koller Industries, Inc.
10.30 Stock Purchase Agreement between the (9)
Company and the minority stockholders of
Koller Industries, Inc.
10.31 Agreement and Plan of Merger between Jason (10)
Minnesota Incorporated and DLTK, Inc. relating
to the acquisition by the Company of all of the
outstanding capital stock of Deltak Corporation.
10.32 Form of Stock Purchase Agreement executed (12)
by the Company in connection with the
January 1994 private placement of common
stock.
10.33 Lease for the facility at 6800 West Calumet (12)
Road, Milwaukee, WI.
10.34 Lease for the facility at 1530 Artaius (12)
Parkway, Libertyville, IL.
10.35 Lease for the facility at 140 South Mitchell (12)
Court, Addison, IL.
10.36 Lease for the facility at 466 and 468 Diens (12)
Drive, Wheeling, IL.
10.37 Lease for the facility at 7842 North Faulkner (12)
Road, Milwaukee, WI.
</TABLE>
11
<PAGE> 31
<TABLE>
<S> <C> <C>
10.38 Purchase and Sale Agreement between the (13)
Company and Milsco Manufacturing Company.
10.39 Form of Convertible Note issued by the (13)
Company in connection with the Purchase and
Sale Agreement with Milsco Manufacturing
Company.
13.1 Portions of the Annual Report to Shareholders
for the year ended December 27, 1996.
21.1 Subsidiaries
23.1 Consent of Price Waterhouse.
24.1 Power of Attorney (14)
28.1 Amended and Restated Shareholder (1)
Voting Agreement between
Vincent Martin and Mark Train
dated as of April 14, 1987.
</TABLE>
(1) Exhibit incorporated by reference to the Company's Registration
Statement filed on Form S-1, Registration No. 33-13717, effective June 16,
1987.
(2) Exhibit incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended December 25, 1987.
(3) Exhibit incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended December 30, 1988.
(4) Exhibit incorporated by reference to the Company's Current Report on
Form 8-K dated June 30, 1989.
(5) Exhibit incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended December 29, 1989.
(6) Exhibit incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended December 28, 1990.
12
<PAGE> 32
(7) Exhibit incorporated by reference to the Company's Current Report on
Form 8-K filed with the Commission July 12, 1991.
(8) Exhibit incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended December 25, 1992.
(9) Exhibit incorporated by reference to the Company's Current Report on
Form 8-K filed with the Commission December 8, 1993.
(10) Exhibit incorporated by reference to the Company's Current Report on
Form 8-K filed with the Commission February 15, 1994.
(11) Exhibit incorporated by reference to the Company's Proxy Statement
dated (and filed with the Commission) March 19, 1993.
(12) Exhibit incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993.
(13) Exhibit incorporated by reference to the Company's Current Report on
Form 8-K filed with the Commission January 12, 1995.
(14) Appears on signature page to this report.
13
<PAGE> 1
EXHIBIT 13.1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
- ---------------------
1996 COMPARED TO 1995
- ---------------------
Sales for 1996 increased by 9% from $407,412,000 in 1995 to $443,406,000.
Sales of power generation products increased by 15% from $132,213,000 to
$151,730,000. Sales of motor vehicle products increased by 8% from $145,463,000
to $157,276,000. Sales of industrial products increased by 4% from $129,736,000
to $134,400,000.
The power generation backlog at the beginning of 1996 was $69 million
compared to $74 million a year earlier. Bookings of new orders were up 28% in
1996 compared to 1995 from $127 million to $163 million. Sales were $152
million for 1996 compared to $132 million for 1995 leaving the backlog at the
end of 1996 at $80 million compared to $69 million a year ago. Bookings for the
year, as well as the year end backlog, were up even though there has been a
continuing weakness in the U.S. power generation market. Overseas demand for
the Company's power generation products was strong throughout the year and
there are still many promising booking prospects. The Company has been able to
capitalize on its ability to market and produce its products at numerous
foreign locations.
The increase in motor vehicle products sales in 1996 is a result of an
increase in the Company's sales content per vehicle produced in the automotive
industry and an increase in sales of motorcycle seating and accessories to
Harley-Davidson. The U.S. automobile industry built 2% fewer vehicles in 1996
than last year, however, the sales dollar content per vehicle improved in 1996
due to an increase in sales of the Company's moldable fiber insulation product,
Marabond(R). The U.S. automotive industry has announced a production schedule
for the first quarter of 1997 that is above the production level in the first
quarter of 1996. Dealer inventories at the end of 1996 are down to 69 days
compared to 73 days at the end of 1995. Whether or not the industry will build
the number of units called for in the schedule depends on retail vehicle sales
during the first quarter of 1997.
The increase in industrial products sales is principally due to
an improvement in the JacksonLea buff and compound business but also in the
Koller precision components operations and the Osborn brush business.
Operating income declined in 1996 from $29,679,000 in 1995 to $23,927,000
due to lower power generation earnings. Operating income for the power
generation products segment declined from $9,570,000 in 1995 to $2,069,000.
This decrease in power generation segment operating income is a result of lower
price levels, new product introductions, complexities involved on certain
foreign projects and costs involved in gearing up to handle a rapid increase in
bookings and backlog.
Operating income for the motor vehicle products segment improved from
$13,992,000 in 1995 to $14,481,000 due primarily to an improvement in operating
income for the Milsco seating business which is a result of a higher level of
sales of motorcycle seating and accessories to Harley-Davidson. Operating
income for the automotive businesses were about the same as last year even
though sales volume was 6% higher. Continuing price level pressure was the
primary reason for the lower operating income percentage for the automotive
operations.
Operating income for the industrial products segment improved from
$8,159,000 in 1995 to $9,473,000. This increase in operating income was
primarily a result of improved volume and profitability at JacksonLea, as well
as modest increases at both Osborn and Koller.
Corporate expenses increased in 1996 from $2,042,000 in 1995 to
$2,096,000. This increase is primarily due to an increase in salaries and other
expenses.
Interest expense decreased in 1996 from $9,932,000 in 1995 to $9,624,000.
This decrease in interest expense is a result of lower average debt outstanding
and slightly lower interest rates.
Other income for 1996 represents deferred financing cost amortization
more than offset by royalty income from foreign licensees of the Company's
industrial products. Other expense for 1995 represents deferred financing cost
amortization and peso devaluation losses, partially offset by royalty income.
The Company's effective income tax rate for 1996 was 39% as compared to
41.1% and 41.4% in 1995 and 1994, respectively. This decrease in the effective
income tax rate in 1996 was due principally to an increase in international
profits resulting in a lower overall tax rate.
RESULTS OF OPERATIONS
- ---------------------
1995 COMPARED TO 1994
- ---------------------
Sales for 1995 increased by 14% from $356,638,000 in 1994 to $407,412,000.
Sales of power generation products were about equal to the prior year,
increasing slightly from $132,205,000 to $132,213,000. Sales of motor vehicle
products increased by 44% from $100,816,000 to $145,463,000. Sales of
industrial products increased by 5% from $123,617,000 to $129,736,000.
Power generation sales were about equal to the prior year even though 1995
included a full year for Deltak, a manufacturer of heat recovery steam
generators and specialty boilers acquired January 31, 1994,
---------------------
JASON INCORPORATED 14
---------------------
<PAGE> 2
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
DECEMBER 27 DECEMBER 29 DECEMBER 30
- ---------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
Net Sales:
Power generation
products ......... $151,730 $132,213 $132,205
Motor vehicle
products ......... 157,276 145,463 100,816
Industrial
products ......... 134,400 129,736 123,617
$443,406 $407,412 $356,638
Operating Income:
Power generation
products ......... $ 2,069 $9,570 $ 9,123
Motor vehicle
products ......... 14,481 13,992 12,422
Industrial
products ......... 9,473 8,159 6,987
26,023 31,721 28,532
Corporate and
other expenses ... (2,096) (2,042) (1,689)
$ 23,927 $ 29,679 $ 26,843
Depreciation and Amortization:
Power generation
products ......... $ 3,748 $ 3,744 $ 3,472
Motor vehicle
products ......... 6,801 6,976 4,717
Industrial
products ......... 6,041 6,682 6,234
Corporate .......... 657 799 548
$ 17,247 $ 18,201 $ 14,971
Identifiable Assets:
Power generation
products ......... $ 85,822 $ 73,461 $ 75,726
Motor vehicle
products ......... 123,287 94,132 43,901
Industrial
products ......... 101,910 101,539 104,111
Corporate .......... 12,107 10,395 9,803
$323,126 $279,527 $233,541
Capital Expenditures:
Power generation
products ......... $ 1,318 $ 2,472 $ 2,149
Motor vehicle
products ......... 11,964 9,249 8,345
Industrial
products ......... 4,398 4,216 3,895
Corporate .......... 3 22 19
$ 17,683 $ 15,959 $ 14,408
</TABLE>
compared to eleven months in 1994. Including Deltak for a full year in
1994 would result in power generation sales of $137,233,000 compared to
$132,213,000 in 1995, a decrease of 4%. The power generation backlog at the
beginning of 1995 was $74 million compared to $104 million a year earlier.
Bookings were up 18% in 1995 compared to 1994 from $108 million to $127
million. Sales were $132 million for 1995 compared to $137 million for 1994
leaving the backlog at the end of 1995 at $69 million compared to $74 million
in the prior year. Backlog was down from the prior year as a result of a
continuing weakness in the U.S. power generation market and delays of several
large overseas booking prospects caused by financing, contract terms and other
factors.
The increase in motor vehicle products sales in 1995 was primarily
a result of the inclusion of Milsco Manufacturing, acquired on January 3, 1995.
Excluding Milsco, sales for the segment were down 1% compared to last year. The
U.S. automobile industry built 2% fewer vehicles in 1995 than in 1994, however,
the sales dollar content per vehicle improved in 1995 due to an increase in
sales of the Company's moldable fiber insulation product, Marabond(R).
The increase in industrial products sales was a result of an improvement
in the Koller precision components operations as well as an improvement in the
Osborn brush business. Sales for the JacksonLea buff and compound business were
about the same as the prior year.
Operating income improved in 1995 from $26,843,000 in 1994 to $29,679,000.
Operating income for the power generation products segment improved from
$9,123,000 in 1994 to $9,570,000. This improvement in power generation segment
operating income was a result of a mix of higher margin projects for exhaust
systems and dampers which more than offset a mix of lower margin projects for
heat recovery steam generators.
Operating income for the motor vehicle products segment improved from
$12,422,000 in 1994 to $13,992,000 due to the addition of Milsco, acquired
January 3, 1995. Excluding Milsco, segment operating income declined from
$12,422,000 last year to $7,563,000 due to lower automotive industry production
levels, downward pressure on price levels, a less profitable product mix at
Sackner Products, rising material costs, 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
$6,987,000 in 1994 to $8,159,000. This increase in operating income was a
result of improved volume and profitability at the Osborn brush and Koller
precision components operations, offset by higher material costs at the
Company's JacksonLea operation.
---------------------
JASON INCORPORATED 15
---------------------
<PAGE> 3
Corporate expenses increased in 1995 from $1,689,000 in 1994 to
$2,042,000. This increase was primarily due to an increase in salaries and
other expenses.
Interest expense increased in 1995 from $7,313,000 in 1994 to $9,932,000.
This increase in interest expense was a result of increased borrowings made in
connection with the acquisition of Milsco Manufacturing on January 3, 1995
($45.5 million purchase price).
Other expense for 1995 represented deferred financing cost amortization
and peso devaluation losses, partially offset by royalty income from foreign
licensees of the Company's industrial products. Other expense for 1994
represented deferred financing cost amortization offset by royalty income.
The Company's effective income tax rate for 1995 was 41.1% as compared to
41.4% and 38.8% in 1994 and 1993, respectively. This increase in the effective
income tax rate in 1994 was due principally to non deductible goodwill
resulting from recent acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
During 1996, the Company satisfied the capital requirements of its
operations with internally generated funds and additional borrowings under its
revolving loan agreement with its banks. For the foreseeable future, the
Company believes it will generate funds from operations to meet the capital
requirements of its existing operations. As of December 27, 1996 the Company
had available unused borrowing capacity of $35 million under its bank revolving
loan facility.
During 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 $45.5 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. In May 1995, the Company completed a $20 million
private debt placement with an insurance company, the proceeds of which were
used to pay down the revolving loan. The revolving loan commitment was then
reduced from $115 million to $95 million.
During 1996, working capital increased by $18,367,000 from $47,670,000 at
December 29, 1995 to $66,037,000 at December 27, 1996. This increase was a
result of strong bookings in power generation requiring an increase in working
capital for new jobs in progress plus working capital acquired in connection
with the acquisition of Suroflex GmbH on October 31, 1996. During 1996, the
Company generated $6,899,000 in cash from operations. The Company anticipates
generating higher cash flow from operations during 1997.
In 1996 and 1995, the Company made capital expenditures of $17,683,000 and
$15,959,000, respectively. The major 1996 expenditures were in the motor
vehicle segment for equipment to support new Marabond(R) programs at Janesville
Products and for plant and office additions to support an increased level of
business at Milsco. The major 1995 expenditures were in the motor vehicle
products segment for equipment at Janesville Products to support new molded
Marabond(R) programs and to improve efficiency and at Koller, Milsco and
Sackner to support new programs at those locations. No significant commitments
were outstanding as of December 27, 1996.
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 industrial products.
FORWARD LOOKING STATEMENTS
Statements in this Annual Report regarding the future performance of the
Company or management's opinions or beliefs constitute forward-looking
statements which are subject to certain risks and uncertainties that could
cause actual future results and developments to differ materially from those
currently projected. Such risks and uncertainties include, but are not limited
to, the effectiveness of tighter management controls in the Power Generation
business, the timing of the Company's new product introductions and market
receptivity to such products, changes in auto maker production schedules,
delays in customer delivery requirements and general economic conditions in the
Company's market segments.
---------------------
JASON INCORPORATED 16
---------------------
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(in thousands except per share data) FOR THE YEAR ENDED
- --------------------------------------------------------------------------------------------
DECEMBER 27 DECEMBER 29 DECEMBER 30
- --------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales ........................................ $443,406 $407,412 $356,638
Cost of sales .................................... 357,552 319,188 279,003
Gross profit ..................................... 85,854 88,224 77,635
Selling and administrative expenses .............. 61,927 58,545 50,792
Operating income ................................. 23,927 29,679 26,843
Interest expense ................................. (9,624) (9,932) (7,313)
Other income (expense) ........................... 231 (185) (208)
Income before income taxes and cumulative
effect of change in accounting principle ........ 14,534 19,562 19,322
Provision for income taxes ....................... (5,668) (8,031) (7,995)
Income before cumulative effect of change
in accounting principle ......................... 8,866 11,531 11,327
Cumulative effect of change in accounting
principle, net of income taxes (Note 10)......... -- -- (212)
Net income ....................................... $8,866 $11,531 $11,115
Earnings per share:
Income before cumulative effect of
change in accounting principle ................. $.43 $.56 $.55
Cumulative effect of change in
accounting principle ........................... -- -- (.01)
Net income ....................................... $.43 $.56 $.54
</TABLE>
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
COMMON CONTRIBUTED RETAINED TRANSLATION
(in thousands) STOCK CAPITAL EARNINGS ADJUSTMENT TOTAL
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 .............. $1,464 $17,633 $29,111 $ (34) $48,174
Net income ................................ -- -- 11,115 -- 11,115
Common stock private placement ............ 136 14,636 -- -- 14,772
Effect of exchange rates .................. -- -- -- (76) (76)
Stock split ............................... 402 (402) -- -- --
Exercise of options ....................... 6 380 -- -- 386
Balance at December 30, 1994 .............. 2,008 32,247 40,226 (110) 74,371
Net income ................................ -- -- 11,531 -- 11,531
Effect of exchange rates .................. -- -- -- 36 36
Exercise of options ....................... 5 275 -- -- 280
Balance at December 29, 1995 .............. 2,013 32,522 51,757 (74) 86,218
Net income ................................ -- -- 8,866 -- 8,866
Effect of exchange rates .................. -- -- -- 28 28
Exercise of options ....................... 3 149 -- -- 152
Balance at December 27, 1996 .............. $2,016 $32,671 $60,623 $ (46) $95,264
</TABLE>
The accompanying notes are an integral part of the financial statements.
---------------------
JASON INCORPORATED 17
---------------------
<PAGE> 5
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
(in thousands)
- ---------------------------------------------------------------------------------------------
DECEMBER 27 DECEMBER 29
- ---------------------------------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------------------------------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents .......................................... $ 2,978 $ 1,890
Accounts receivable -- net ......................................... 61,483 54,819
Inventories ........................................................ 37,839 35,602
Costs and earnings in excess of billings on uncompleted contracts .. 21,626 9,999
Income taxes receivable ............................................ 2,250 --
Deferred income taxes .............................................. 7,795 8,045
Other current assets ............................................... 6,029 4,179
Total current assets .............................................. 140,000 114,534
PROPERTY, PLANT AND EQUIPMENT
Cost ............................................................... 158,057 124,322
Less -- accumulated depreciation ................................... (66,624) (55,512)
Net property, plant and equipment ................................. 91,433 68,810
INTANGIBLE ASSETS -- NET ............................................ 89,876 94,171
OTHER ASSETS ........................................................ 1,817 2,012
Total non-current assets .......................................... 91,693 96,183
$323,126 $279,527
LIABILITIES AND SHAREHOLDERS' EQUITY
(in thousands)
- ---------------------------------------------------------------------------------------------
DECEMBER 27 DECEMBER 29
- ---------------------------------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Current portion of long-term debt .................................. $ 3,917 $ 3,386
Accounts payable ................................................... 31,397 27,361
Accrued compensation and employee benefits ......................... 13,050 12,553
Accrued warranty ................................................... 4,434 3,289
Accrued interest ................................................... 1,580 1,275
Accrued income taxes ............................................... -- 1,968
Billings in excess of costs and earnings on uncompleted contracts .. 9,570 8,995
Other current liabilities .......................................... 10,015 8,037
Total current liabilities ......................................... 73,963 66,864
REVOLVING LOAN ...................................................... 42,190 27,010
OTHER LONG-TERM DEBT ................................................ 92,277 83,057
POSTRETIREMENT HEALTH AND OTHER BENEFITS ............................ 5,985 5,868
DEFERRED INCOME TAXES ............................................... 8,544 8,062
OTHER LONG-TERM LIABILITIES ......................................... 4,903 2,448
Total liabilities ................................................. 227,862 193,309
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY
Common stock and additional contributed capital .................... 34,687 34,535
Retained earnings .................................................. 60,623 51,757
Foreign currency translation adjustment ............................ (46) (74)
Total shareholders' equity ........................................ 95,264 86,218
$323,126 $279,527
</TABLE>
The accompanying notes are an integral part of the financial statements.
---------------------
JASON INCORPORATED 18
---------------------
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(in thousands) FOR THE YEAR ENDED
- ------------------------------------------------------------------------------------------------------------------------------
DECEMBER 27 DECEMBER 29 DECEMBER 30
- ------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................................................... $ 8,866 $ 11,531 $ 11,115
Adjustments to reconcile net income to net cash provided by operating activities:
Cumulative effect of change in accounting principle .............................. -- -- 212
Depreciation ..................................................................... 11,775 12,145 10,049
Amortization ..................................................................... 5,472 6,056 4,922
Equity in net income of affiliates ............................................... (75) (35) (62)
Deferred income taxes ............................................................ 900 (530) (951)
(Gain) loss on sale of property, plant and equipment ............................. (91) 266 19
Increase (decrease) in cash, excluding effects of acquisitions, due to changes in:
Accounts receivable ............................................................ (5,353) (2,325) 12,554
Inventories .................................................................... (642) (567) (2,115)
Costs and earnings in excess of billings on uncompleted contracts .............. (11,627) (1,632) 2,012
Income taxes receivable ........................................................ (2,250) -- --
Other current assets ........................................................... (1,710) 2,369 (3,232)
Other assets ................................................................... (574) 4,163 (606)
Accounts payable ............................................................... 2,088 2,812 (2,600)
Accrued compensation and employee benefits ..................................... (669) (612) 2,930
Accrued warranty ............................................................... 1,145 (2,078) (749)
Accrued interest ............................................................... (104) 153 403
Accrued income taxes ........................................................... (2,136) 1,657 (183)
Billings in excess of costs and earnings on uncompleted contracts .............. 575 (5,213) 5,846
Other liabilities .............................................................. 1,309 336 630
Total adjustments ............................................................ (1,967) 16,965 29,079
Net cash provided by operating activities ............................................ 6,899 28,496 40,194
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of property, plant and equipment ............................ 199 313 303
Acquisition of property, plant and equipment ....................................... (17,683) (15,959) (14,408)
Plant and equipment insurance proceeds ............................................. -- -- 4,589
Investment in joint ventures ....................................................... (72) -- (150)
Other, net ......................................................................... 30 36 (76)
Net cash used for investing activities, excluding acquisitions ....................... (17,526) (15,610) (9,742)
Net cash (used) provided before financing activities, excluding acquisitions ......... (10,627) 12,886 30,452
Acquisition of net assets ............................................................ (231) (45,536) (25,891)
Net cash (used) provided before financing activities ................................. (10,858) (32,650) 4,561
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving loans ...................................................... 129,270 131,988 122,602
Repayments on revolving loans ...................................................... (114,090) (132,013) (161,563)
Proceeds from convertible notes .................................................... -- 17,057 --
Proceeds from issuance of senior secured notes ..................................... -- 20,000 25,000
Repayments of senior notes ......................................................... (2,000) (2,000) (2,000)
Repayments of senior subordinated notes ............................................ (1,250) (1,250) (1,250)
Repayments of other long-term debt ................................................. (136) (591) (2,476)
Proceeds from common stock private placement ....................................... -- -- 14,772
Proceeds from issuance of common stock ............................................. 152 280 386
Net cash provided by (used for) financing activities ................................. 11,946 33,471 (4,529)
Net increase in cash and cash equivalents ............................................ 1,088 821 32
Cash and cash equivalents, beginning of year ....................................... 1,890 1,069 1,037
Cash and cash equivalents, end of year ............................................. $ 2,978 $ 1,890 $ 1,069
Cash paid during the year for:
Interest ........................................................................... $ 9,568 $ 9,826 $ 6,910
Income taxes ....................................................................... $ 9,068 $ 7,183 $ 8,489
</TABLE>
The accompanying notes are an integral part of the financial statements.
---------------------
JASON INCORPORATED 19
---------------------
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE ONE
- --------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
- --------------------------------------------
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of all wholly-owned and majority-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated.
CASH AND CASH EQUIVALENTS -- For purposes of the Consolidated Statements
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.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The carrying amounts in the
Consolidated Balance Sheets for cash and cash equivalents, accounts receivable,
accounts payable and long-term debt instruments approximate their fair market
value.
INVENTORIES -- Inventories are stated at the lower of cost (first-in,
first-out) or market.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are stated
at cost and are depreciated over estimated useful lives on a straight-line
basis for financial reporting purposes and accelerated methods for income tax
purposes. Leasehold improvements are amortized over the term of the respective
leases using the straight-line method. Expenditures for maintenance and repairs
are charged to operations as incurred. Renewals and betterments are
capitalized.
REVENUE RECOGNITION -- Sales are recorded at the time of shipment;
however, within the Power Generation segment, certain sales are recognized
under percentage-of-completion methods of accounting.
INTANGIBLE ASSETS -- Intangible assets are comprised of the following
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 27 DECEMBER 29
- -------------------------------------------------------------
1996 1995
- -------------------------------------------------------------
<S> <C> <C>
Goodwill ......................... $93,246 $92,571
Other intangible assets .......... 18,975 18,888
112,221 111,459
Less--accumulated amortization ... (22,345) (17,288)
$89,876 $94,171
</TABLE>
Other intangible assets include patents, computer software, engineering
drawings, trademarks and covenants not-to-compete. Intangible assets are being
amortized over their respective estimated useful lives ranging from 5-30 years.
The Company reviews the carrying value of intangible assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. Measurement of any impairment would include a
comparison of estimated future operating cash flows anticipated to be generated
during the remaining life of the intangible assets to the net carrying value of
the intangible assets.
DEFERRED FINANCING COSTS --Expenses associated with the issuance of debt
instruments are capitalized by the Company and amortized over the respective
terms of the debt instruments. Net deferred financing costs included in other
assets at December 27, 1996 and December 29, 1995 were $957,000 and $1,322,000,
respectively.
EARNINGS PER SHARE -- Earnings per share are computed using the weighted
average number of common and common equivalent shares outstanding during the
period. On April 27, 1994, the Company declared a five for four common stock
split. The effects of the common stock split are reflected in the share and
earnings per share data for all periods presented. The weighted average number
of common and common equivalent shares outstanding were 20,595,000 for 1996,
20,642,000 for 1995, and 20,590,000 for 1994.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.
NOTE TWO
- ------------
ACQUISITIONS
- ------------
Effective October 31, 1996, the Company acquired 51% of the stock of
Suroflex GmbH ("Suroflex") for approximately $2.9 million, including cash of
$2.7 million and acquisition costs. Suroflex is a German manufacturer of
nonwoven insulation products for the automotive industry. In connection with
this acquisition, the Company was provided a ten year option to purchase the
remaining 49% interest in Suroflex for 4 million Deutsche Marks (approximately
$2.6 million at December 27, 1996). The holders of the 49% interest were also
provided the right to require the Company to purchase their 49% ownership
interest but only if Suroflex were to achieve certain minimum future income
levels. The required purchase price is dependent upon these future income
levels but in no event will exceed the amount of the Company's purchase option.
Effective January 3, 1995, the Company acquired the assets and business of
Milsco Manufacturing ("Milsco") for approximately $45.5 million, including
acquisition costs. Milsco is a manufacturer of seats for the motorcycle,
construction, agricultural and lawn/turf care industries serving the motor
vehicle products market.
The aforementioned acquisitions have been accounted for using the purchase
method and, accordingly, their operating results are included in the Company's
consolidated financial statements since their respective acquisition dates. The
purchase prices were allocated to the assets acquired and liabilities assumed
based upon their estimated fair values. The purchase prices were allocated as
follows (in thousands):
---------------------
JASON INCORPORATED 20
---------------------
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SUROFLEX MILSCO
- ----------------------------------------------------------
<S> <C> <C>
Working capital, excluding cash ...... $ 3,046 $ 4,939
Fixed assets ......................... 16,436 8,371
Other assets ......................... -- 1,561
Intangible assets .................... 261 30,952
Liabilities assumed .................. (19,512) (287)
$45,231 $45,536
</TABLE>
The operating results of the Company as reported in the Consolidated
Statements of Income for the years ended December 27, 1996 and December 29,
1995 would not differ significantly if the purchase of Suroflex had occurred at
the beginning of 1995.
NOTE THREE
- -------------------
ACCOUNTS RECEIVABLE
- -------------------
Accounts receivable consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27 DECEMBER 29
- ------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
Accounts receivable .............. $63,531 $57,536
Allowance for doubtful accounts .. (2,048) (2,717)
$61,483 $54,819
</TABLE>
NOTE FOUR
- -----------
INVENTORIES
- -----------
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27 DECEMBER 29
- ------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
Raw materials .................... $18,588 $18,134
Work-in-process .................. 4,898 4,519
Finished goods ................... 14,353 12,949
$37,839 $35,602
</TABLE>
NOTE FIVE
- -----------------------------
PROPERTY, PLANT AND EQUIPMENT
- -----------------------------
Property, plant and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27 DECEMBER 29
- ------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
Land and improvements ............ $ 2,782 $ 1,997
Buildings and improvements ....... 33,361 18,881
Machinery and equipment .......... 117,020 96,368
Construction in progress ......... 4,894 7,076
158,057 124,322
Less--accumulated depreciation .. (66,624) (55,512)
$ 91,433 $ 68,810
</TABLE>
NOTE SIX
- ------------------------
REVOLVING LOAN AGREEMENT
AND OTHER LONG-TERM DEBT
- ------------------------
The revolving loan and other long-term debt consisted of the following
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 27 DECEMBER 29
- ------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
Revolving loan ............. $42,190 $27,010
- ------------------------------------------------------------------------
Convertible notes .......... $17,057 $17,057
Senior note--1995 ......... 20,000 20,000
Senior note--1994 ......... 25,000 25,000
Senior notes--1992 ........ 16,000 16,000
Senior notes--1989 ........ -- 2,000
Senior subordinated notes .. 5,000 6,250
Suroflex notes ............. 13,137 --
Other ...................... -- 136
96,194 86,443
Less--current maturities .. (3,917) (3,386)
Other long-term debt ....... $92,277 $83,057
</TABLE>
The revolving loan facility provides for borrowings of up to $95 million
at December 27, 1996. Maximum borrowings under the revolving loan facility
decrease to $85 million on December 31, 1997, to $70 million on December 31,
1998 and to $50 million on December 31, 1999. Letters of credit outstanding
($17.4 million at December 27, 1996) on the Company's behalf reduce
availability under the facility. Borrowings under the revolving loan agreement
mature on December 31, 2000 and bear interest at either a floating rate based
upon the bank's prime rate or a Eurodollar rate plus 1.0% (the average rate on
outstanding borrowings was 7.4% at December 27, 1996). A commitment fee of
.375% per annum on the unused portion of the revolving loan facility is payable
on a quarterly basis.
During 1995, in conjunction with the acquisition of Milsco (see Note 2),
the Company issued $17,057,000 of convertible notes to the former Milsco
shareholders. The notes bear interest at 7% payable quarterly. The principal
portion of the notes are payable on January 3, 1999. At any time after January
31, 1996, and prior to payment in full of the principal amount of the notes,
the holders may convert all or any portion of the outstanding notes into shares
of the Company's $.10 par value common stock. The number of common shares to be
received by the holder is obtained by dividing the outstanding principal
balance of the notes on the date of conversion by the conversion price of
$11.25 per common share.
During 1995, the Company entered into a $20,000,000 senior note agreement
with an insurance company. The senior note bears interest at 7.34% payable
quarterly. The principal portion of the note is payable in seven equal annual
installments of $2,857,143 commencing May 31, 1999. The note proceeds were used
to reduce amounts outstanding under the revolving loan used to finance the
Milsco acquisition (see Note 2).
---------------------
JASON INCORPORATED 21
---------------------
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 1994, the Company entered into a $25,000,000 senior note agreement
with an insurance company. The senior note bears interest at 7.72% payable
quarterly. The principal portion of the note is payable in thirteen equal
semi-annual installments of $1,923,077 commencing April 27, 1998. The note
proceeds were used to reduce amounts outstanding under the revolving loan.
During 1992, the Company entered into a $16,000,000 senior note agreement
with two insurance companies. These senior notes bear interest at 7.65% payable
semiannually. The notes are payable in six equal annual installments of
$2,667,000 commencing December 1, 1997.
As of December 27, 1996, the interest rate on the 1989 senior subordinated
notes was 11.775%. The senior subordinated notes are payable in equal annual
installments of $1,250,000 in October of each year with interest payable
semiannually. Under the terms of these agreements, the interest rate decreases
as the Company's leverage ratio decreases.
The 1989 senior notes were payable in equal annual installments of
$2,000,000 in October of each year with interest payable semiannually. The
senior notes were paid in full in October, 1996.
Long-term debt of $13.1 million, held principally by German banks, was
outstanding at the time of the Company's acquisition of Suroflex (see Note 2).
These obligations are not guaranteed by the Company and there is no requirement
for the Company to repay these obligations in the event Suroflex would be
unable to do so. In connection with the acquisition, the repayment terms were
modified to eliminate principal repayments through 1999. Thereafter, annual
payments will be required in an amount equal to the excess of 49% of the pretax
income of Suroflex over interest paid on the aforementioned obligations.
Amounts outstanding under the debt agreements bear interest at a weighted
average interest rate of 5.52% and are secured by substantially all of the
assets of Suroflex. Because of the uncertainty surrounding the repayment of
these obligations in years 2000 and 2001, no amounts have been presented in the
table of debt maturities summarized below.
Future annual maturities of long-term debt, excluding the revolving loan
and the Suroflex notes, are as follows (in thousands):
<TABLE>
<S> <C>
1997 ........ $ 3,917
1998 ........ 7,764
1999 ........ 27,678
2000 ........ 10,621
2001 ........ 9,371
Thereafter .. 23,706
$83,057
</TABLE>
All of the Company's lending agreements contain restrictions, including
limitations on dividends, capital expenditures, new indebtedness and
disposition of assets. The agreements also contain various leverage, interest
coverage, fixed charge coverage, working capital and net worth requirements,
among others. The Company's revolving loan and other long-term debt is secured
by substantially all Company assets.
NOTE SEVEN
- -----------------
LEASE OBLIGATIONS
- -----------------
The Company leases machinery, transportation equipment, and office,
warehouse and manufacturing facilities which expire at various dates.
Future minimum lease payments under operating leases at December 27, 1996
are (in thousands):
<TABLE>
<S> <C>
1997 ............................. $ 6,297
1998 ............................. 5,407
1999 ............................. 4,042
2000 ............................. 3,340
2001 ............................. 2,045
Subsequent to 2001 ............... 2,044
Total minimum lease payments ..... $23,175
Total rental expense for all operating leases was as follows (in thousands):
For the year ended
December 27, 1996 ................ $ 6,667
December 29, 1995 ................ $ 5,993
December 30, 1994 ................ $ 5,810
</TABLE>
NOTE EIGHT
- --------------------
SHAREHOLDERS' EQUITY
- --------------------
COMMON STOCK -- The Company has authorized 30,000,000 shares of $.10 par
value common stock of which 20,159,573 and 20,122,293 shares were issued and
outstanding at December 27, 1996 and December 29, 1995, respectively.
STOCK OPTION PLAN -- On April 16, 1987, the Company adopted a nonqualified
stock option plan. The plan provides for the issuance of up to 2,687,500 shares
of common stock to executives and other key employees. The option price
generally equals the fair market value of the common shares on the day of the
grant and an option's maximum term is ten years. Substantially all options
granted vest ratably over a three-year period. Transactions and options
outstanding under this plan, after restatement for the effects of the stock
splits, were:
<TABLE>
<CAPTION>
PRICE
OPTIONS PER SHARE
<S> <C> <C>
- -------------------------------------------------------------
Outstanding at December 31, 1993 .. 1,137,268 $ 1.30-$10.20
Granted .......................... 215,250 $ 8.16-$10.20
Exercised ........................ (67,280) $ 1.30-$ 3.66
Cancelled ........................ (9,375) $ 6.88-$10.20
Outstanding at December 30, 1994 .. 1,275,863 $ 1.30-$10.20
Granted .......................... 238,750 $ 6.75-$ 8.50
Exercised ........................ (44,868) $ 1.58-$ 6.40
Cancelled ........................ (34,251) $ 6.40-$10.20
Outstanding at December 29, 1995 .. 1,435,494 $ 1.30-$10.20
Granted .......................... 165,500 $ 6.50-$ 7.50
Exercised ........................ (37,280) $ 1.29-$ 6.08
Cancelled ........................ (6,500) $ 8.25-$10.20
Outstanding at December 27, 1996... 1,557,214 $ 1.30-$10.20
Exercisable at December 27, 1996... 910,214 $ 1.30-$10.20
</TABLE>
---------------------
JASON INCORPORATED 22
---------------------
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for
options granted under the stock option plan. Had compensation cost been
determined based on the fair value at the grant date for awards in 1995 and
1996 consistent with the provisions of SFAS No. 123, the Company's pro forma
net income and earnings per share would have been as presented below (in
thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
- -------------------------------------------------------------------
DECEMBER 27 DECEMBER 29
- -------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------
<S> <C> <C>
Net income -- as reported ............ $8,866 $11,531
Net income -- pro forma .............. 8,712 11,376
Net income per share -- as reported .. .43 .56
Net income per share -- pro forma .... .42 .55
</TABLE>
The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions
used for grants in 1996:
<TABLE>
<S> <C>
Expected stock price volatility 30.27%
Risk-free interest rate 6.31%
Expected life of options 7 years
</TABLE>
The weighted average exercise prices per share for options outstanding and
exercisable at December 27, 1996 are $5.61 and $4.38, respectively. The
weighted average contractual life of options outstanding at December 27, 1996
is 6.17 years. The weighted average fair value of options granted during 1996
is $3.05 per share.
NOTE NINE
- ------------
INCOME TAXES
- ------------
The Company calculates its income tax provision in accordance with SFAS
109, "Accounting for Income Taxes." SFAS 109 is an asset and liability approach
that requires recognition of deferred tax assets and liabilities for the
expected future consequences of differences between the financial reporting and
tax bases of assets and liabilities.
The Company's income before income taxes and cumulative effect of change
in accounting principle consisted of the following (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
- ----------------------------------------------------------
December 27 December 29 December 30
- ----------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------
<S> <C> <C> <C>
Domestic .. $14,266 $19,127 $18,883
Foreign ... 268 435 439
$14,534 $19,562 $19,322
</TABLE>
The Company's provision for income taxes consisted of the following
(in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
- --------------------------------------------------------------------
December 27 December 29 December 30
- --------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal ......................... $3,774 $6,802 $6,807
State ........................... 900 1,600 1,400
Foreign ......................... 94 159 75
4,768 8,561 8,282
Deferred
Federal ......................... 700 (400) (247)
State ........................... 200 (130) (36)
Foreign ......................... -- -- (4)
900 (530) (287)
$5,668 $8,031 $7,995
</TABLE>
The reconciliation between the Federal statutory tax rate expressed as a
percent of pre-tax income and the effective tax rate is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
- --------------------------------------------------------------
December 27 December 29 December 30
- --------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory
tax rate ........... 35.0% 35.0% 35.0%
State income taxes,
net of federal
benefit ............ 5.2 4.9 4.7
Nondeductible
amortization of
intangible assets .. 3.9 2.9 2.9
Foreign sales
corporation benefit (3.9) (1.8) (1.1)
Other ................ (1.2) .1 (.1)
39.0% 41.1% 41.4%
</TABLE>
Deferred income taxes are provided for the temporary differences between
the financial reporting and tax bases of the Company's assets and liabilities.
The Company's temporary differences which give rise to deferred tax assets and
liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27 DECEMBER 29
- ---------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Accrued expenses and reserves ......... $ 4,416 $ 4,994
Postretirement and postemployment
benefits ............................ 2,308 2,320
Employee benefits ..................... 2,112 2,036
Foreign operating loss carryforwards .. 12,450 --
Other ................................. 1,267 1,015
Valuation allowance ................... (12,450) --
10,103 10,365
Deferred tax liabilities:
Property, plant and equipment ......... (7,942) (8,084)
Intangible assets ..................... (1,140) (886)
Other ................................. (1,770) (1,412)
(10,852) (10,382)
Net deferred tax liability .............. $ (749) $ (17)
</TABLE>
---------------------
JASON INCORPORATED 23
---------------------
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The deferred tax asset valuation allowance is related entirely to
certain of the Company's foreign operations, including German net operating
loss carryforwards acquired in connection with the Suroflex transaction
totaling approximately $25,900,000 and for which a valuation allowance was
provided at the time of the acquisition. At December 27, 1996, the Company's
foreign subsidiaries had approximately $27,900,000 in net operating losses
available for carryforward; approximately $2,000,000 of such carryforwards
expire at various times through 2001 while the remainder of these carryforwards
are available for an unlimited period.
NOTE TEN
- ----------------------
EMPLOYEE BENEFIT PLANS
- ----------------------
The Company maintains three defined benefit pension plans covering certain
union employees at two of its divisions. Additionally, the Company maintains
savings and profit sharing plans for the majority of employees not covered by
union defined benefit plans.
Net pension (benefit) expense for the defined benefit plans includes
the following components (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
- ---------------------------------------------------------------
December 27 December 29 December 30
- ---------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
Service cost........... $ 20 $ 97 $ 75
Interest on projected
benefit obligation... 277 274 246
Actual return on
plan assets.......... (415) (644) 39
Net amortization
and deferral......... 112 375 (315)
Net pension
(benefit) expense.... $ (6) $ 102 $ 45
</TABLE>
The funded status of the plans was as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
- ------------------------------------------------------------------------
DECEMBER 27 DECEMBER 29
- ------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation ................ $3,795 $3,706
Accumulated benefit obligation ........... $3,836 $3,739
Projected benefit obligation ............... $3,836 $3,739
Plan assets at fair value .................. 3,849 3,676
Assets (greater) less than projected
benefit obligation ....................... (13) 63
Unrecognized net transition liability ...... (51) (62)
Unrecognized net gain ...................... 275 264
Additional minimum liability ............... 46 --
Accrued pension liability .................. $ 257 $ 265
</TABLE>
The projected benefit obligation was determined using assumed discount
rates ranging from 7.5% to 7.75% at December 27, 1996 and 7.0% to 7.75% at
December 29, 1995, and an assumed long-term rate of return on plan assets
ranging from 7.0% to 9.0% at December 27, 1996 and December 29, 1995. Plan
assets consist principally of common stocks and government obligations.
The Company also provides postretirement health care benefits and life
insurance coverage to certain eligible employees at one of its divisions. The
Company accounts for these benefits in accordance with SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions". Under
SFAS No. 106, the costs of retiree health care benefits and life insurance
coverage are accrued over the employee service periods.
The net postretirement benefit expense includes the following components
(in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
- --------------------------------------------------------------------------
DECEMBER 27 DECEMBER 29
- --------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Service cost for benefits earned
during the year ........................... $ 65 $ 64
Interest on accumulated postretirement
benefit obligation ........................ 395 398
Net postretirement benefit expense .......... $460 $462
</TABLE>
Presently, the Company's postretirement benefit plans are not funded.
The status of the Company's plans is as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
- ----------------------------------------------------------------------------
DECEMBER 27 DECEMBER 29
- ----------------------------------------------------------------------------
1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees .................................. $3,477 $3,786
Other active plan participants ............ 1,589 1,525
5,066 5,311
Unrecognized net gain ....................... 665 349
Accrued postretirement benefit obligation ... $5,731 $5,660
</TABLE>
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.75% at December 27, 1996 and December 29, 1995. The
assumed health care cost trend rates used in measuring the accumulated
postretirement benefit obligation were 8.0% and 6.0% for the hourly and
salaried plans, respectively, at December 27, 1996 and 9.0% and 6.5% for the
hourly and salaried plans, respectively, at December 29, 1995. It was assumed
that these rates will decline to 1% over periods of 30 years and 25 years for
the hourly and salaried plans at December 27, 1996 and December 29, 1995.
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, a one percentage-point increase in the assumed
health care cost trend rate would increase the accumulated postretirement
benefit obligation as of December 27, 1996 by approximately $346,000 and would
increase the net postretirement benefit expense for 1996 by approximately
$40,000.
---------------------
JASON INCORPORATED 24
---------------------
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Effective January 1, 1994, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits" which requires employers to account for
the cost of providing certain benefits to former or inactive employees after
employment but before retirement on an accrual basis.
The Company's postemployment obligations consist primarily of disability
benefits. Adoption of this standard resulted in a one time transition
obligation charge of $353,000 ($212,000 or $.01 per share on an after tax
basis). In accordance with the requirements of SFAS No. 112, the transition
obligation was charged to 1994 income as a cumulative effect of a change in
accounting principle.
The Company maintains an incentive compensation plan which provides for
incentive payments to certain employees upon the achievement of defined
operating results. Incentive compensation expense totaled $2,277,000,
$2,943,000 and $2,888,000 in 1996, 1995 and 1994, respectively. These amounts
are included in accrued compensation and employee benefits in the accompanying
balance sheets.
NOTE ELEVEN
- --------------------------------------------------------------------------------
SEGMENT INFORMATION
- --------------------------------------------------------------------------------
Reference is made to pages 14 through 16 for segment financial data and an
unaudited description and discussion of the Company's business segments.
Power generation products include businesses which are designers and
manufacturers of auxiliary equipment for gas turbine power plant installations.
Sales to three major gas turbine manufacturers amounted to approximately 12% of
the Company's consolidated sales in 1996 and 1995. Receivables outstanding with
these customers represented approximately 13% and 10% of the Company's December
27, 1996 and December 29, 1995 accounts receivable balances, respectively.
Motor vehicle products include businesses which are manufacturers of
nonwoven fiber padding for the automotive industry and, beginning in 1995,
seating products for motorcycles and a broad array of other mobile equipment
(see Note 2). The four largest customers of this segment comprised
approximately 16% and 15% of the Company's consolidated sales in 1996 and 1995,
respectively. Receivables outstanding with these customers represented
approximately 13% and 11% of the Company's accounts receivable balance at
December 27, 1996 and December 29, 1995, respectively.
Industrial products include businesses which are manufacturers of
finishing products for industrial applications and of precision components for
original equipment manufacturers throughout the world.
The Company's export sales by geographic area are summarized below
(in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
---------------------------------------------------------------------------
December 27 December 29 December 30
---------------------------------------------------------------------------
1996 1995 1994
---------------------------------------------------------------------------
<S> <C> <C> <C>
Asia ............ $61,339 $42,474 $30,264
Middle East ..... 7,574 4,787 8,380
Canada and Mexico 14,078 7,626 10,741
Other ........... 13,782 8,065 11,666
$96,773 $62,952 $61,051
</TABLE>
Information regarding the Company's geographic areas is summarized below
(in thousands). Amounts presented in the eliminations column represent sales
between geographic areas primarily comprised of sales made by the Company's
operations in the United States.
<TABLE>
<CAPTION>
CANADA
AND
UNITED STATES EUROPE MEXICO ELIMINATIONS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 27, 1996
Sales to unaffiliated customers $425,399 $27,144 $6,121 ($15,258) $443,406
Operating income (loss) 23,366 719 (158) -- 23,927
Identifiable assets 285,678 34,082 3,366 -- 323,126
Year Ended December 29, 1995
Sales to unaffiliated customers $393,771 $10,761 $5,277 ($ 2,397) $407,412
Operating income (loss) 29,117 629 (67) -- 29,679
Identifiable assets 271,167 5,811 2,549 -- 279,527
Year Ended December 30, 1994
Sales to unaffiliated customers $348,141 $ 6,203 $6,862 ( $4,568) $356,638
Operating income 26,126 96 621 -- 26,843
Identifiable assets 224,112 4,298 5,131 -- 233,541
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
---------------------
JASON INCORPORATED 25
---------------------
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE TWELVE
- -------------------------------------------------------------------------------
INTERIM FINANCIAL INFORMATION (UNAUDITED)
- -------------------------------------------------------------------------------
Summarized quarterly financial data for 1996 and 1995 are presented
below (in thousands of dollars, except per share amounts):
<TABLE>
<CAPTION>
QUARTER
- --------------------------------------------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
- --------------------------------------------------------------------------------------------------------------------------------
Net sales ............................... $104,631 $111,034 $106,730 $121,011 $443,406
Gross profit ............................ 21,458 23,114 21,322 19,960 85,854
Net income .............................. 2,609 2,866 2,270 1,121 8,866
Earnings per share ...................... .13 .14 .11 .05 .43
QUARTER
- --------------------------------------------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
- --------------------------------------------------------------------------------------------------------------------------------
1995
- --------------------------------------------------------------------------------------------------------------------------------
Net sales ............................... $108,666 $107,233 $96,453 $95,060 $407,412
Gross profit ............................ 23,912 23,409 19,003 21,900 88,224
Net income .............................. 3,416 3,463 1,406 3,246 11,531
Earnings per share (1) .................. .17 .17 .07 .16 .56
</TABLE>
(1) The sum of the quarterly earnings per share does not equal the total
for the year due to rounding.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Jason Incorporated
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Jason
Incorporated and its subsidiaries at December 27, 1996 and December 29, 1995,
and the results of their operations and their cash flows for each of the three
years in the period ended December 27, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 10 to the consolidated financial statements, the Company
changed its method of accounting for postemployment benefits effective January
1, 1994.
/s/ Price Waterhouse LLP
Milwaukee, Wisconsin
January 31, 1997
-----------------------------
JASON INCORPORATED 26
-----------------------------
<PAGE> 14
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
OPERATING RESULTS
(in thousands except per share data) December 27 December 29 December 30 December 31 December 25
- ------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales ................................ $443,406 $407,412 $356,638 $235,397 $206,977
Cost of sales ............................ 357,552 319,188 279,003 183,516 161,699
Gross profit ............................. 85,854 88,224 77,635 51,881 45,278
Operating income ......................... 23,927 29,679 26,843 17,690 13,929
Interest expense ......................... (9,624) (9,932) (7,313) (3,901) (3,788)
Fire insurance gain ...................... -- -- -- 2,192 --
Other income (expense) ................... 231 (185) (208) (70) (369)
Income before income taxes and cumulative
effect of change in accounting
principles .............................. 14,534 19,562 19,322 15,911 9,772
Income before cumulative effect of change
in accounting principles ................ 8,866 11,531 11,327 9,743 6,010
Net income ............................... $ 8,866 $ 11,531 $ 11,115 $ 6,496 $ 6,010
Earnings per share (1)
Income before cumulative effect of change
in accounting principles .............. $ .43 $ .56 $ .55 $ .52 $ .32
Net income .............................. $ .43 $ .56 $ .54 $ .34 $ .32
BALANCE SHEET DATA
(in thousands) December 27 December 29 December 30 December 31 December 25
- ------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
Total assets ............................. $323,126 $279,527 $233,541 $197,374 $111,953
Long-term debt ........................... $134,467 $110,067 $ 76,422 $ 93,922 $ 36,346
Working capital .......................... $ 66,037 $ 47,670 $ 35,136 $ 53,360 $ 30,174
Shareholders' equity ..................... $ 95,264 $ 86,218 $ 74,371 $ 48,174 $ 41,331
</TABLE>
(1) See Note 1 of financial statements.
No cash dividends have been declared on the Company's common stock for the
years presented.
---------------------
JASON INCORPORATED 27
---------------------
<PAGE> 15
COMMON STOCK MARKET PRICES
<TABLE>
<CAPTION>
- --------------------------------
HIGH LOW
- --------------------------------
<S> <C> <C>
1995
- --------------------------------
First Quarter ... $ 9 3/4 $7 3/4
Second Quarter .. 10 1/4 8
Third Quarter ... 11 7 3/8
Fourth Quarter .. 9 6
- --------------------------------
1996
- --------------------------------
First Quarter ... $ 7 1/2 $5 5/8
Second Quarter .. 8 1/2 $6 3/4
Third Quarter ... 8 3/4 $6 3/4
Fourth Quarter .. 8 1/4 6
</TABLE>
As of February 17, 1997, there were 269 shareholders of record and
approximately 1,500 beneficial shareholders.
---------------------
JASON INCORPORATED 28
---------------------
<PAGE> 1
EXHIBIT 21.1
JASON INCORPORATED
SUBSIDIARIES
1O-K
<TABLE>
<CAPTION>
PERCENT OF
SUBSIDIARY COUNTRY OWNERSHIP
---------- ------ ----------
<S> <C> <C>
Braden Construction Services, Inc U.S. 100%
Braden Europe, BV Netherlands 100%
Deltak Construction Services, Inc U.S. 100%
JacksonLea Canada, a subsidiary of Jason Canada Canada 100%
JacksonLea de Mexico Mexico 100%
Janesville de Mexico Mexico 79.2%
Jason Canada Incorporated Canada 100%
Jason Industrial Products International Corporation Barbados 100%
Jason Ohio Corporation U.S. 100%
Jason, GmbH Germany 100%
Osborn de Mexico Mexico 100%
Osborn de Venezuela Venezuela 100%
Shanghai JacksonLea Polishing Materials Co., Ltd. P.R.C. 50%
Shenzhen Deltak Energy Systems Company, Ltd. P.R.C. 60%
Suroflex, Gmbh Germany 51%
</TABLE>
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements listed below of Jason Incorporated of our report dated January 31,
1997 appearing on page 26 of the 1996 Annual Report to Shareholders which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page 22 of this Form 10-K.
1. Registration Statement on Form S-8 (Registration No. 33-18791)
2. Registration Statement on Form S-8 (Registration No. 33-30688)
3. Registration Statement on Form S-3 (Registration No. 33-31473)
\s\ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
March 21, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SECHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) JASON
INCORPORATED CONSOLIDATED BALANCE SHEET AND CONSOLIDATED INCOME STATEMENT FOR
THE TWELVE MONTH PERIOD ENDED DECEMBER 27, 1996. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000813471
<NAME> JASON INCORPORATED
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-27-1996
<PERIOD-START> DEC-30-1995
<PERIOD-END> DEC-27-1996
<CASH> 2978
<SECURITIES> 0
<RECEIVABLES> 61483
<ALLOWANCES> 0<F1>
<INVENTORY> 37839
<CURRENT-ASSETS> 140000
<PP&E> 158057
<DEPRECIATION> 66624
<TOTAL-ASSETS> 323126
<CURRENT-LIABILITIES> 73963
<BONDS> 134467<F2>
0
0
<COMMON> 34687
<OTHER-SE> 60577
<TOTAL-LIABILITY-AND-EQUITY> 323126
<SALES> 443406
<TOTAL-REVENUES> 443406
<CGS> 357552
<TOTAL-COSTS> 357552
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9624
<INCOME-PRETAX> 14534
<INCOME-TAX> 5668
<INCOME-CONTINUING> 8866
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8866
<EPS-PRIMARY> .43
<EPS-DILUTED> 0<F3>
<FN>
<F1>Company presents receivables on a net basis in compliance with Article 10
Regulation S-X.
<F2>Includes all non-current portion of debt obligations.
<F3>Not Reported.
</FN>
</TABLE>
