<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 27, 1998 or
/X/ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______________ to _______________
COMMISSION FILE NUMBER 0-16059
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)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
On March 27, 1998 there were outstanding 20,245,126 shares of the Registrant's
$.10 par value common stock.
Page 1 of 12
<PAGE> 2
JASON INCORPORATED
FORM 10-Q
MARCH 27, 1998
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
--------
Statements of Income for the Three Months
Ended March 27, 1998 and March 28, 1997 ........ 3
Balance Sheets as at March 27, 1998 and
December 26, 1997 .............................. 4
Statements of Cash Flows for the Three Months
Ended March 27, 1998 and March 28, 1997 ........ 5
Notes to Financial Statements ..................... 6-8
Management's Discussion and Analysis of
Results of Operations and Financial Condition .. 9-11
PART II. OTHER INFORMATION
Item 1 Legal Proceedings ......................... 12
Item 2 Changes in Securities ..................... 12
Item 3 Defaults Upon Senior Securities ........... 12
Item 4 Submission of Matters to a Vote of
Security Holders ........................ 12
Item 5 Other Information ......................... 12
Item 6 (a) Exhibits ............................. 12
(b) Reports on Form 8-K .................. 12
Signatures ................................................. 12
Page 2 of 12
<PAGE> 3
JASON INCORPORATED
STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------
MARCH 27, MARCH 28,
1998 1997
----- ----
(UNAUDITED)
<S> <C> <C>
NET SALES $ 120,865 $ 125,227
COST OF SALES 95,412 102,055
--------- ---------
Gross Profit 25,453 23,172
SELLING AND ADMINISTRATIVE EXPENSES 18,091 17,055
--------- ---------
Operating Income 7,362 6,117
INTEREST EXPENSE 1,940 2,706
OTHER (INCOME) EXPENSE (490) (253)
--------- ---------
Income Before Income Taxes 5,912 3,664
PROVISION FOR INCOME TAXES 2,306 1,429
--------- ---------
NET INCOME $ 3,606 $ 2,235
========= =========
BASIC EARNINGS PER COMMON SHARE $ 0.18 $ 0.11
========= =========
DILUTED EARNINGS PER COMMON SHARE $ 0.17 $ 0.11
========= =========
</TABLE>
Page 3 of 12
<PAGE> 4
JASON INCORPORATED
BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
MARCH 27, DECEMBER 26,
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash And Cash Equivalents $ 3,064 $ 4,453
Accounts Receivable - Net 74,644 60,097
Inventories 44,659 38,062
Costs And Earnings In Excess Of
Billings On Uncompleted Contracts 13,348 9,281
Deferred Income Taxes 9,142 9,142
Other Current Assets 4,985 4,735
--------- ---------
Total Current Assets 149,842 125,770
--------- ---------
Property, Plant and Equipment
Cost 179,294 164,403
Less - Accumulated Depreciation (81,489) (78,781)
--------- ---------
Net Property, Plant and Equipment 97,805 85,622
--------- ---------
Intangible Assets - Net 92,590 85,520
Other Assets 1,589 1,656
--------- ---------
$ 341,826 $ 298,568
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current Portion of Long-Term Debt $ 28,452 $ 7,764
Accounts Payable 35,214 30,063
Accrued Compensation & Employee Benefits 14,186 15,535
Accrued Warranty 4,791 4,327
Accrued Interest 1,972 1,183
Accrued Income Taxes 1,759 109
Other Current Liabilities 16,245 11,947
Billings In Excess Of Costs And
Earnings On Uncompleted Contracts 18,375 15,724
--------- ---------
Total Current Liabilities 120,994 86,652
Revolving Loan 16,667 2,320
Other Long-Term Debt 71,225 83,311
Deferred Income Taxes 11,715 8,804
Other Long-Term Liabilities 4,027 3,927
Postemployment & Postretirement Health
And Other Benefits 6,358 6,290
--------- ---------
Total Liabilities 230,986 191,304
--------- ---------
Commitments and Contingencies -- --
SHAREHOLDERS' EQUITY
Common Stock & Additional
Contributed Capital 35,064 35,014
Retained Earnings 76,456 72,850
Accumulated Other Comprehensive Income (Loss) (680) (600)
--------- ---------
Total Shareholders' Equity 110,840 107,264
--------- ---------
$ 341,826 $ 298,568
========= =========
</TABLE>
Page 4 of 12
<PAGE> 5
JASON INCORPORATED
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
For The Three Months Ended
--------------------------
MARCH 27, MARCH 28,
1998 1997
---- ----
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 3,606 $ 2,235
Adjustments To Reconcile Net Income To Net Cash
Provided By Operating Activities:
Depreciation 3,667 3,733
Amortization 1,243 1,239
Deferred Income Taxes 50 264
Increase (Decrease) In Cash, Excluding Effects Of
Acquisitions, Due To Changes In:
Accounts Receivable (9,528) (13,519)
Inventories 14 691
Costs And Earnings In Excess Of Billings
On Uncompleted Contracts (4,067) 7,218
Other Current Assets 273 2,519
Other Assets 7 (241)
Accounts Payable 2,888 393
Accrued Compensation & Employee Benefits (1,349) (2,043)
Accrued Warranty 464 (59)
Accrued Interest 789 775
Accrued Income Taxes 1,650 1,429
Billings In Excess Of Costs And Earnings
On Uncompleted Contracts 2,651 4,259
Other Liabilities 43 (1,376)
-------- --------
Total Adjustments (1,205) 5,282
-------- --------
Net Cash Provided By Operations 2,401 7,517
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition Of Net Assets (16,072) --
Acquisition Of Property, Plant And Equipment (3,485) (2,533)
Disposal Of Property, Plant And Equipment - Net 1,223 5
Other, Net (71) 343
-------- --------
Net Cash Used For Investing Activities (18,405) (2,185)
-------- --------
Net Cash (Used) Provided Before Financing Activities (16,004) 5,332
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds From Revolving Loan 39,942 29,225
Repayments Of Revolving Loan (25,595) (36,415)
Proceeds From (Repayments Of) Other Long-Term Debt 218 367
Issuance Of Common Stock - Net 50 --
-------- --------
Net Cash Provided By (Used For) Financing Activities 14,615 (6,823)
-------- --------
Net Increase (Decrease) In Cash And Cash Equivalents (1,389) (1,491)
Cash And Cash Equivalents, Beginning of Period 4,453 2,978
-------- --------
Cash And Cash Equivalents, End of Period $ 3,064 $ 1,487
======== ========
Cash Paid For:
Interest 1,236 1,990
Income Taxes Paid (Refunded) 662 (2,507)
</TABLE>
Page 5 of 12
<PAGE> 6
JASON INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF FINANCIAL STATEMENTS
The Company operates in three primary business segments: power generation
products, motor vehicle products, and industrial products. Power generation
products include the design and manufacture of silencing equipment, waste heat
recovery boilers, and other auxiliary equipment for the gas turbine and other
industries and the design and fabrication of electromagnetic shielding products
for medical and other electronic equipment applications. Motor vehicle
products include the manufacture and marketing of needled nonwoven fiber
insulation, dielectric padding and other interior trim products primarily for
the automotive industry but also for furniture and industrial uses, plus
seating products for motorcycles, construction, agricultural and lawn/turf care
equipment. Industrial products include the manufacture and marketing of
industrial brushes, buffing wheels and compound used by manufacturers to finish
a wide variety of manufactured products, plus the manufacture and marketing of
precision components such as precision stampings, wire form components and
expanded metal products.
The financial statements at March 27, 1998 and March 28, 1997 and for the
three month periods then ended are unaudited, however, in the opinion of
management, all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the financial position at these dates and
the results of operations and cash flows for these periods have been included.
The results for the three month period ended March 27, 1998 are not necessarily
indicative of the results that may be expected for the full year or any other
interim period.
NOTE 2 - ACQUISITION
On March 13, 1998, the Company completed the acquisition of Power Brushes Ltd.
for $16.1 million, plus the assumption of $8.7 million of debt of Power Brushes
Ltd. Brushes International Ltd, a wholly-owned subsidiary of Power Brushes
Ltd, is one of the largest producers of industrial power brushes in Europe.
This business has been combined with the Company's industrial brush business,
Osborn Manufacturing, to form Osborn International, the largest producer of
industrial power brushes in the world.
NOTE 3 - INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market and
consisted of the following (in thousands of dollars):
<TABLE>
<CAPTION>
MARCH 27, DECEMBER 26,
1998 1997
----------- ------------
<S> <C> <C>
(Unaudited)
Raw materials $22,276 $18,960
Work in process 6,158 5,544
Finished goods 16,225 13,558
----------- ------------
$44,659 $38,062
=========== ============
</TABLE>
Page 6 of 12
<PAGE> 7
NOTE 4 - EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income available to common
shareholders by the weighted-average number of common shares outstanding during
the period. Diluted earnings per share is computed by giving effect to all
dilutive potential common shares. A reconciliation of the income (numerator)
and shares (denominator) used in the basic and diluted earnings per common
share computations, respectively, are as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 27, 1998
-------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
BASIC EARNINGS PER COMMON SHARE
Net income $3,606,000 20,238,718 $.18
---------
EFFECT OF DILUTIVE SECURITIES
Options -- 522,070
Convertible notes 184,220 1,516,182
----------- -------------
DILUTED EARNINGS PER COMMON SHARE
Net income plus assumed
conversions $3,790,220 22,276,970 $.17
----------- ------------- ---------
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 28, 1997
-------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
BASIC EARNINGS PER COMMON SHARE
Net income $2,235,000 20,159,573 $.11
---------
EFFECT OF DILUTIVE SECURITIES
Options -- 360,936
----------- -------------
DILUTED EARNINGS PER COMMON SHARE
Net income plus assumed
conversions $2,235,000 20,520,509 $.11
----------- ------------- ---------
</TABLE>
The impact of the assumed conversion of the $17,057,000 convertible notes,
which bear interest at 7%, was included within the earnings per share
calculations for the periods in which such conversion had a dilutive effect.
Page 7 of 12
<PAGE> 8
NOTE 5- COMPREHENSIVE INCOME
In June, 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." The standard requires that certain items recognized
under accounting principles as components of comprehensive income be reported
in an annual financial statement that is displayed with the same prominence as
other financial statements.
Total Comprehensive Income totaled $3,526,000 and $1,813,000 for the three
months ended March 27, 1998 and March 28, 1997, respectively. Total
Comprehensive Income for the three months ended March 27, 1998 is comprised of
net income of $3,606,000 and Other Comprehensive Income (Loss) of $(80,000).
Total Comprehensive Income for the three months ended March 28, 1997 is
comprised of net income of $2,235,000 and Other Comprehensive Income (Loss) of
$(422,000). Other Comprehensive Income (Loss) is comprised entirely of foreign
currency translation adjustments.
Page 8 of 12
<PAGE> 9
JASON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Three months ended March 27, 1998 compared to the three months ended March 28,
1997:
Sales for the three months ended March 27, 1998 decreased by 3% from
$125,227,000 for the three months ended March 28, 1997 to $120,865,000. Sales
of power generation products decreased by 25% from $40,412,000 to $30,200,000.
Sales of motor vehicle products increased by 7% from $49,431,000 to
$52,974,000. Sales of industrial products increased by 7% from $35,384,000 to
$37,691,000.
The lower power generation sales for the first quarter of 1998 compared to last
year were a result of the timing of customer projects and a lower backlog at
the beginning of 1998 compared to a year ago. Total power generation backlog
at the beginning of 1998 was $77 million compared to $80 million a year
earlier. Bookings in the first quarter, however, were quite strong and
amounted to $43 million compared to $30 million in the first quarter of 1997.
Sales in the first quarter of $30 million compared to $40 million in the first
quarter of 1997 leaving a backlog at the end of the first quarter of 1998 of
$90 million compared to $70 million a year ago.
The increase in the Company's motor vehicle products sales was the result of
increases in both the automotive products business and the seating business.
The Company's automotive products business was up 5% in the first quarter of
1998 compared to the prior year. The U.S. automobile industry built only 1%
more vehicles in the first quarter of 1998 than it did last year, however, the
Company's content per vehicle increased as a result of improved sales of the
Company's Marabond(R) moldable insulation product and thermoformed door inserts.
The Company's seating products business was up 13% in the first quarter of 1998
compared to the prior year. This was primarily the result of an increase in
Harley-Davidson original equipment and parts and accessories business as well
as an increase in the Company's content per motorcycle produced.
The increase in industrial products sales in the first quarter of 1998 compared
with last year was primarily a result of an increase in the Osborn brush
business and the components business. The JacksonLea buff and compound
business was up slightly.
Operating income improved in the first quarter of 1998 from $6,117,000 in the
first quarter of 1997 to $7,362,000.
Operating income for the power generation products segment improved from
$400,000 in the first quarter of 1997 to $1,572,000. The increase in operating
income is the result of a mix of higher margin projects in the
first quarter of 1998 compared to last year. The first quarter of 1997
included a less profitable product mix comprising new products such as inlet
filters and complex equipment packages.
Operating income for the motor vehicle products segment improved from
$4,646,000 in the first quarter of 1997 to $4,725,000 due primarily to improved
profitability in the automotive products business, a result of greater capacity
utilization, a more profitable product mix and improved operating efficiencies.
This more than offset reduced profitability in the seating business due to one
time costs incurred in the conversion to
Page 9 of 12
<PAGE> 10
cellular manufacturing required to enable the Company to meet an expected
increase in customer volume levels in the future.
Operating income for the industrial products segment increased slightly from
$1,815,000 in the first quarter of 1997 to $1,838,000. This increase in
operating income was a result of improved operating income at Osborn, a result
primarily of higher volume, offset by reduced profitability at JacksonLea due
to higher operating expenses.
Corporate expenses for the first quarter of 1998 were $773,000 compared to
$744,000 last year. This increase is primarily due to an increase in
management incentive compensation.
Interest expense decreased significantly to $1,940,000 in the first quarter of
1998 from $2,706,000 in the first quarter of 1997 due to lower average domestic
debt levels which is a result of cash flow from operations in 1997 which
reduced debt levels by $45 million. The increase in other income in the first
quarter of 1998 compared to last year is primarily a result of a gain on the
sale of the distributor business of Metalex, one of the Components businesses.
The Company's effective income tax rate for the first quarter of 1998 was 39%
which is the same as the rate for the first quarter of 1997.
In June, 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information", which establishes annual and interim
reporting standards for an enterprise's business segments and related
disclosures about its products, services, geographic areas and major customers.
Adoption of this statement will not impact the Company's consolidated
financial position, results of operations or cash flows. The Company will
adopt this statement in its financial statements for the year ending December
25, 1998.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1998, the Company satisfied the capital
requirements of its operations with internally generated funds. For the
foreseeable future, the Company believes it will generate funds from operations
to meet the capital requirements of its existing operations. As of March 27,
1998, the Company had available unused borrowing capacity of $28,437,000 under
its bank revolving loan facility. During the first quarter of 1997, the
Company also satisfied the capital requirements of its operations with
internally generated funds.
During the first quarter of 1998, working capital decreased by $10,270,000 from
$39,118,000 at December 26, 1997, to $28,848,000 at March 27, 1998. This
decrease in working capital was the result of a $20.7 million increase in the
current portion of long-term debt due primarily to the reclassification of $17
million of convertible notes which are due in January, 1999. Excluding the
increase in current portion of long-term debt, working capital increased by
$10,418,000 which is primarily the result of the inclusion of the working
capital of Brushes International, acquired in March, 1998. During the first
quarter of 1998, the Company generated $2,401,000 in cash from operations. The
Company anticipates generating additional cash flow from operations during the
balance of the year.
In the first quarter of 1998 and 1997, the Company made capital expenditures of
$3,485,000 and $2,533,000, respectively. The major first quarter 1998
expenditures were in the motor vehicle segment for equipment to support the
conversion to cellular
Page 10 of 12
<PAGE> 11
manufacturing at Milsco. The major first quarter 1997 expenditures were in the
motor vehicle products segment for equipment at Milsco, Janesville Products
and Sackner to support new programs and to improve efficiency and in the
industrial products segment for equipment at Osborn, JacksonLea and Koller to
support new programs at those locations. Capital expenditures for 1998 are
anticipated to approximate $18.0 million. No significant commitments are
outstanding as of March 27, 1998.
SEASONALITY
U.S. auto makers traditionally shut down for the annual model changeover in the
third quarter. In addition, adjustments to production schedules are made
throughout the year based on retail auto sales and the level of dealer
inventories. These seasonal patterns affect the Company's motor vehicle
products operations most significantly but also have somewhat of an impact on
industrial products due to the effect on automotive suppliers which use the
Company's precision components and finishing products.
YEAR 2000 ISSUES
The Company has investigated the extent to which its computer operations are
subject to Year 2000 issues. The Company has assessed the measures it believes
will be necessary to avoid any material disruption to its operations relating
to Year 2000 complications in the Company's computers. The Company has
developed a plan to implement such measures prior to December 1999. Management
believes that the cost to the Company of the necessary modifications and
upgrades to the Company's computer systems will not be material. The Company
has not conducted a detailed investigation of the Year 2000 readiness of its
material suppliers. It is uncertain whether such suppliers will be prepared
fully for Year 2000 issues. Based on inquiries it has received from many of
its largest customers, management believes such customers are assessing their
Year 2000 issues. There can be no assurances, however, that none of the
Company's key customers will have a Year 2000 issue that adversely affects the
Company.
FORWARD-LOOKING STATEMENTS
This report contains certain statements as to the Company's belief, expectation
or anticipation regarding future developments. Such statements constitute
forward-looking statements and 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, changes in auto maker production schedules, delays in customer
delivery requirements and general economic conditions in the Company's market
segments.
Page 11 of 12
<PAGE> 12
PART II
OTHER INFORMATION
ITEM 1 Legal Proceedings - None
ITEM 2 Changes in Securities - None
ITEM 3 Defaults Upon Senior Securities - None
ITEM 4 Submission of Matters to a Vote of Security Holders - None
ITEM 5 Other Information - None
ITEM 6 (a) Financial Data Schedule
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JASON INCORPORATED (Registrant)
by /s/ Mark Train
----------------------------
Mark Train
President
(Chief Financial Officer)
Page 12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JASON
INCORPORATED CONSOLIDATED BALANCE SHEET AT MARCH 27, 1998, AND CONSOLIDATED
INCOME STATEMENT FOR THE THREE MONTH PERIOD ENDED MARCH 27, 1998. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000813471
<NAME> JASON INCORPORATED
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-25-1998
<PERIOD-START> DEC-27-1997
<PERIOD-END> MAR-27-1998
<CASH> 3,064
<SECURITIES> 0
<RECEIVABLES> 74,644
<ALLOWANCES> 0<F1>
<INVENTORY> 44,659
<CURRENT-ASSETS> 149,842
<PP&E> 193,280
<DEPRECIATION> 95,475
<TOTAL-ASSETS> 341,826
<CURRENT-LIABILITIES> 120,994
<BONDS> 87,892<F2>
0
0
<COMMON> 35,064
<OTHER-SE> 75,776
<TOTAL-LIABILITY-AND-EQUITY> 341,826
<SALES> 120,865
<TOTAL-REVENUES> 120,865
<CGS> 95,412
<TOTAL-COSTS> 95,412
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,940
<INCOME-PRETAX> 5,912
<INCOME-TAX> 2,306
<INCOME-CONTINUING> 3,606
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,606
<EPS-PRIMARY> .18<F3>
<EPS-DILUTED> .17
<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>THE EPS UNDER THE EPS PRIMARY TAG REPRESENTS BASIC EARNINGS PER SHARE IN
ACCORDANCE WITH STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO. 128 EARNINGS PER
SHARE.
</FN>
</TABLE>
