<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 25, 1998 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
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
- ------------------- -----------------------------------------
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. [ ]
The aggregate market value of the Common Stock of the Registrant held by
non-affiliates as of March 1, 1999: $95,441,360
Number of shares of Common Stock outstanding as of March 1, 1999: 20,359,582
DOCUMENTS INCORPORATED BY REFERENCE PART
- ----------------------------------- ----
Portions of the Proxy Statement dated March 12, 1999, for the III
Annual Meeting of Shareholders to be held on April 21, 1999
1
<PAGE> 2
PART I
ITEM I. BUSINESS
The Company was incorporated in November 1985 and operates in two primary
business segments: motor vehicle products and industrial products. Motor vehicle
products include the manufacture and marketing of nonwoven needled 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 compounds 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.
On June 5, 1998, the Company completed the sale of its power generation
businesses to a management led group backed by Saw Mill Capital L.L.C. Net cash
proceeds from the sale approximated $30.1 million; there was no gain or loss on
the sale.
Information relating to the Company's two business segments is contained in
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and "Note 13 - Segment Information" which are included in Items 7 and
8 of Part II of this report.
PRODUCTS
MOTOR VEHICLE PRODUCTS. The Company's Janesville Products business has been
in continuous operation since 1881. Janesville Products manufactures nonwoven
fiber insulation for the automotive industry. Because of their low cost 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. The Company's
Sackner Products division 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. Currently, the
principal products of the Sackner business are the production of door panel
insert subassemblies, acoustical insulation products for automotive applications
and acoustical and other products for the furniture industry.
In October 1996, the Company acquired a 51% interest in Suroflex GmbH, a
German manufacturer of acoustical insulation products for the automotive
industry. The remaining 49% interest was purchased in October, 1998. 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 directly with the engineering departments of
automotive companies and Tier-1 suppliers 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 and thermoformed door
inserts 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."
The Company's Milsco Manufacturing unit was established in Milwaukee in
1924 and had been family owned until acquired by the Company in January 1995.
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 and for its consistently high quality
products.
During 1996, 1997 and 1998 sales of motor vehicle products accounted for
approximately 54%, 59% and 54%, respectively, of the Company's total sales.
INDUSTRIAL PRODUCTS. The Company's industrial brush business, Osborn
International, began in the 1800's in the U.S. and the U.K. The Company supplies
industrial power brushes and maintenance brushes to a variety of industries.
Power brushes
2
<PAGE> 3
are used as attachments to power tools or machines. Maintenance brushes are used
manually. The Company manufactures and supplies thousands of 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 in steel and aluminum mills. The
Company also manufactures strip brushes which are used for a variety of
applications including weather seal applications and artificial ski slopes.
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
brushes primarily under the Osborn (R), ORBIT (R), OSBORN PRO, ECO, DIXO and
DENDIX SKI trademarks. The Company considers these trademarks to be valuable in
distinguishing its products from those of its competitors.
On March 13, 1998, the Company completed the acquisition of Power Brushes
Ltd. Brushes International Ltd., a wholly-owned subsidiary of Power Brushes
Ltd., was one of the largest producers of industrial power brushes in Europe.
This business has been combined with Osborn Manufacturing, to form Osborn
International, the largest producer of industrial power brushes in the world.
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 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 March 1997, the Company acquired Buller Buff
Company, a Canadian manufacturer of buffing wheels and other products for the
metal finishing industry. In April 1997, the Company acquired Pulinova, a
Mexican manufacturer of buffing compounds and formed JacksonLea de Mexico.
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 (R)", "LEA (R)", "BUCKEYE (R)", "HANSON &
WELLS (R)" and "JACKSONLEA (R)" 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.
3
<PAGE> 4
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 and now constitute the Jason Components Group.
Koller Stamped Components produces small, high quality, progressive die
stampings for high volume applications. The stamping operation is a major
supplier to small engine manufacturers, electric motor manufacturers and
cookware producers.
Jason Precision Components of Shenzhen, China, is one of the leading
manufacturers of VHS cassette reel leaf springs for customers on a worldwide
basis.
Advance Wire Products manufactures wire formed 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.
industries 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 other 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 1996, 1997 and 1998 sales of industrial products accounted for
approximately 46%, 41% and 46%, respectively, of the Company's total sales.
MARKETS AND MARKETING
MOTOR VEHICLE PRODUCTS. The Company believes that it is the leading
manufacturer of nonwoven fiber insulation for automotive use. The Company
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. The Company is primarily a
Tier-2 supplier and is a leading supplier to the major carpeting suppliers and
interior trim fabricators for the automobile industry. The Company's insulation
products are used by Ford, General Motors and Daimler Chrysler and by Honda,
Nissan, Toyota, Mitsubishi, Mazda, Isuzu and BMW, at their U.S. assembly
facilities and by BMW, Mercedes, Opel and Audi at their European assembly
facilities.
The Company's dielectric and other automotive padding products 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
provide a decorative and soft contrast to the molded hard plastic door panels in
certain models and are sold as a Tier-2 component to door system assemblers.
The Company also sells a number of related products outside the automotive
industry for furniture, industrial and appliance applications. Additionally, it
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, the Company also manufactures saddle bags and other
accessories, plus a wide variety of seats and other products sold to
Harley-Davidson for the after market.
The Company'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 1998 approximately 53% of the Company's motor vehicle products sales
were made to five customers.
INDUSTRIAL PRODUCTS. The Company believes that it is the leading supplier
of industrial power brushes in the world. It markets power and maintenance
brushes in North America through a network of industrial distributors as well as
through catalogues. It markets its power and maintenance brushes internationally
through Company-owned sales and distribution outlets in France and Portugal as
well as industrial and retail distributors in various countries and also
directly to end users. 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, silver-
4
<PAGE> 5
ware, 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 the Jason Components Group products are made to customer
order 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 manufacturers
representatives and in-house direct sales people who have a strong knowledge of
fabrication processes. Jason Components engineering may adapt or offer value
enhancing modifications, but the basic design responsibility lies with the
customer.
Jason 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 Jason 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 Jason Components
Group a dominant position in niche markets.
The growth in the Company's precision components made-to-order (job shop)
products such as stampings and wire forms has come from major customers'
corporate restructuring activities. Automotive, computer and electric/electronic
equipment and power 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 Jason Components Group comes to the marketplace utilizing the 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,
however, one customer accounts for 6% 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 U.S. markets for bonded fiber and
foam padding are smaller than the nonwoven fiber insulation and padding market.
Nonwoven fiber insulation is recyclable, 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
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 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 its primary
automotive carpet customers 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
1999. 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's German subsidiary, Suroflex GmbH, serves the European automotive
market (See "Products" and "Recent Acquisitions").
5
<PAGE> 6
As mentioned above, the Company, through its Milsco division, 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 for the after
market. Milsco has 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. 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.
INDUSTRIAL PRODUCTS. The Company believes that it is the leading
supplier of industrial power brushes in the world. 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 Osborn trademark is recognized worldwide.
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.
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 fewer than six significant competitors in the expanded metal
market with the Jason Components Group being dominant in market share.
Competition in the VHS reel leaf spring product line is global in nature.
The Company manufacturers this product primarily in China through manufacturing
relationships. 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. The U.S. market is the largest for pre-recorded and high
grade video tapes in the world. 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.
RECENT ACQUISITIONS
On February 9, 1999, the Company completed the acquisition of Sealeze
Corporation for approximately $18.6 million. Sealeze is a major producer of
strip brushes for industrial and consumer applications and will be integrated
into the Company's industrial products segment.
On February 3, 1999, the Company completed the acquisition of the
acoustical insulation manufacturing and molding operations of Lear Corporation
based on Colne, England for approximately $2 million. This acquisition further
expands Jason's European automotive capabilities.
In October 1998, the Company acquired the remaining minority interest in
Suroflex GmbH, a German manufacturer of acoustical insulation products for the
automotive industry for approximately $2.5 million. In October 1996, the Company
made its initial majority investment in Suroflex. This acquisition allows Jason
and Suroflex to serve their U.S. and European customers on a worldwide basis.
6
<PAGE> 7
On March 13, 1998, the Company completed the acquisition of Power Brushes
Ltd. for approximately $16.9 million, including cash and acquisition costs, plus
the assumption of approximately $10.3 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.
Additional information relating to the Power Brushes Ltd. and Suroflex GmbH
acquisitions are contained in "Note 2 - Acquisitions" which is incorporated into
Item 8 of Part II of the report.
EMPLOYEES
The Company has approximately 2,400 hourly and 850 salaried employees. The
Company's work forces at its Conover, Santa Fe Springs, Burns Flat, Old Fort,
Statesville, Verona, Cincinnati, 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 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 Waterbury and Janesville locations are
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 25, 1998 and December 26, 1997, the Company's backlogs were
approximately $51 million and $49 million, respectively. The Company expects to
fill substantially all of its December 25, 1998 backlog by the end of 1999.
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
segment operations most significantly but also have somewhat of an impact on the
Industrial Products segment due to the effect on automotive suppliers which use
the Company's industrial products.
ITEM 2. PROPERTIES
The following table sets forth information with respect to the Company's
principal facilities. These facilities have approximately 3 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 (3)
Old Fort, North Carolina (1)
Burns Flat, Oklahoma (1)
Janesville, Wisconsin (1)
Colne, Great Britain (1)
SUROFLEX GMBH
Sulzbach-Rosenberg, Germany
MILSCO MANUFACTURING COMPANY
Milwaukee, Wisconsin
Redgranite, Wisconsin
Coventry, Great Britain (1)
7
<PAGE> 8
SACKNER PRODUCTS
Grand Rapids, Michigan (2)
Statesville, North Carolina (1)
Verona, Mississippi (1)
Los Angeles, California (1)
INDUSTRIAL PRODUCTS:
JACKSONLEA
Conover, North Carolina
Santa Fe Springs, California (1)
Waterbury, Connecticut (1)
Cincinnati, Ohio (1)
Cambridge, Ontario, Canada (1)
Mississauga, Ontario, Canada (1)
Mexico City, Mexico (1)
Shanghai, Peoples Republic of China (1)
JASON COMPONENTS GROUP
Hartland, Wisconsin (1)
Koller Stamped Components
Milwaukee, Wisconsin (1)
Assembled Products
Wheeling, Illinois (1)
Jason Precision Components
Shanghai, Peoples Republic of China (1)
Shenzhen, Peoples Republic of China (1)
Advance Wire Products
Addison, Illinois (1)
Metalex
Libertyville, Illinois (1)
OSBORN INTERNATIONAL
Cleveland, Ohio
Nogales, Sonora, Mexico (1)
Burgwald, Germany
Chepstow, Great Britain
Sexdraga, Sweden
Gura Humoruli, Romania
Sao Paulo, Brazil (1)
Ningbo, Peoples Republic of China (1)
Beco das Lages, Portugal (1)
Gonesse, France (1)
SEALEZE
Richmond, Virginia
(1) Leased
(2) 2 Plants -- Both leased
(3) 3 Plants , 1 office -- 3 leased
ITEM 3. LEGAL PROCEEDINGS
As of December 25, 1998, the Company was not subject to any legal
proceedings which management believes would have a material effect on the
Company's business or financial condition.
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 25, 1998.
8
<PAGE> 9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
(a) and (b)
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1998
First Quarter . . . . . . . . . . . . . . . . . . . . . 10 3/4 7 5/8
Second Quarter. . . . . . . . . . . . . . . . . . . . . 10 3/4 8
Third Quarter . . . . . . . . . . . . . . . . . . . . . 8 3/4 6 1/2
Fourth Quarter. . . . . . . . . . . . . . . . . . . . . 8 5/8 7
1997
First Quarter . . . . . . . . . . . . . . . . . . . . . 7 1/2 6
Second Quarter. . . . . . . . . . . . . . . . . . . . . 7 1/4 5 3/4
Third Quarter . . . . . . . . . . . . . . . . . . . . . 8 1/4 5 3/4
Fourth Quarter. . . . . . . . . . . . . . . . . . . . . 8 3/4 7 1/2
</TABLE>
The Company's stock is traded on The NASDAQ Stock Market under the
symbol JASN. As of February 15, 1999, there were 233 shareholders of record and
approximately 1,000 beneficial shareholders.
(c) The Company's current financing agreements contain restrictions on the
payment of dividends as more fully described in Note 7 of the Notes to Financial
Statements, (which appears under ITEM 8).
9
<PAGE> 10
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
JASON INCORPORATED
SELECTED FINANCIAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS (1)
(in thousands except per share data)
DECEMBER 25, DECEMBER 26, DECEMBER 27, DECEMBER 29, DECEMBER 30,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 390,853 $ 338,666 $ 291,676 $ 275,199 $ 224,433
Cost of sales 303,568 264,766 226,070 214,657 174,031
Gross profit 87,285 73,900 65,606 60,542 50,402
Operating income 28,301 23,499 21,858 20,109 17,720
Interest expense (6,661) (7,837) (7,375) (7,560) (5,558)
--------- --------- --------- --------- ---------
Other income (expense) 1,272 1,410 211 (225) (216)
========= ========= ========= ========= =========
Income from continuing operations before income taxes
and cumulative effect of change in accounting principle 22,912 17,072 14,694 12,324 11,946
Income from continuing operations before cumulative
effect of change in accounting principle 13,975 10,414 8,964 7,261 7,005
Income (loss) from discontinued operations,
net of tax 1,278 1,813 (98) 4,270 4,263
Cumulative effect of change in accounting
principle, net of tax -- -- -- -- (153)
--------- --------- --------- --------- ---------
Net income $ 15,253 $ 12,227 $ 8,866 $ 11,531 $ 11,115
========= ========= ========= ========= =========
EARNINGS PER COMMON SHARE - BASIC:
Income from continuing operations before cumulative
effect of change in accounting principle $ .69 $ .52 $ .45 $ .36 $ .35
Income (loss) from discontinued operations .06 .08 (.01) .21 .22
Cumulative effect of change in accounting
principle -- -- -- -- (.01)
--------- --------- --------- --------- ---------
Net income $ .75 $ .60 $ .44 $ .57 $ .56
========= ========= ========= ========= =========
EARNINGS PER COMMON SHARE - DILUTED:
Income from continuing operations before cumulative
effect of change in accounting principle $ .66 $ .51 $ .44 $ .36 $ .34
Income (loss) from discontinued operations .06 .08 (.01) .19 .21
Cumulative effect of change in accounting
principle -- -- -- -- (.01)
--------- --------- --------- --------- ---------
Net income $ .72 $ .59 $ .43 $ .55 $ .54
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA (1)
(in thousands) December 25, December 26, December 27, December 29, December 30,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total assets $ 299,181 $ 263,285 $ 290,718 $ 254,986 $ 196,357
Long-term debt 62,849 85,631 134,467 110,067 76,422
Working capital, excluding net assets
of discontinued operations 45,092 36,803 45,123 33,234 36,954
Shareholders' equity 123,943 107,264 95,264 86,218 74,371
</TABLE>
No cash dividends have been declared on the Company's common stock for the years
presented.
(1) Historical amounts have been restated to reflect the reclassification of the
power generation businesses as discontinued operations.
10
<PAGE> 11
<TABLE>
<CAPTION>
JASON INCORPORATED
SELECTED FINANCIAL DATA
(IN THOUSANDS)
- --------------------------------------------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net Sales:
Motor vehicle products $ 212,416 $ 198,562 $ 157,276
Industrial products 178,437 140,104 134,400
--------- --------- ---------
$ 390,853 $ 338,666 $ 291,676
========= ========= =========
Operating Income:
Motor vehicle products $ 20,034 $ 17,065 $ 14,481
Industrial products 10,845 8,740 9,473
30,879 25,805 23,954
--------- --------- ---------
Corporate and other expenses (2,578) (2,306) (2,096)
--------- --------- ---------
$ 28,301 $ 23,499 $ 21,858
========= ========= =========
Depreciation and Amortization:
Motor vehicle products $ 8,740 $ 8,500 $ 6,779
Industrial products 7,157 6,288 6,041
Corporate 561 650 657
--------- --------- ---------
$ 16,458 $ 15,438 $ 13,477
========= ========= =========
Identifiable Assets:
Motor vehicle products $ 122,358 $ 120,988 $ 123,287
Industrial products 139,796 102,932 101,910
Corporate 37,027 8,114 11,983
Net assets of discontinued operations -- 31,251 53,538
--------- --------- ---------
$ 299,181 $ 263,285 $ 290,718
========= ========= =========
Capital Expenditures:
Motor vehicle products $ 11,409 $ 7,004 $ 11,956
Industrial products 5,244 5,739 4,398
Corporate 38 42 3
--------- --------- ---------
$ 16,691 $ 12,785 $ 16,357
========= ========= =========
</TABLE>
11
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
On June 5, 1998, the Company completed the sale of its power generation
business to a management led group backed by Saw Mill Capital L.L.C. As such,
the financial statements and related notes within Item 8 have been reclassified
to reflect the power generation business as discontinued operations. Net cash
proceeds from the sale approximated $30.1 million; there was no gain or loss on
the sale. Sales and operating profit of the power generation businesses for the
period ended June 5, 1998 were $61 million and $2.6 million, respectively. Sales
of the power generation businesses were $142.7 million and $151.7 million for
the years ended December 26, 1997 and December 27, 1996, respectively. Operating
profit was $4.2 million and $2.1 million for the years ended December 26, 1997
and December 27, 1996, respectively.
RESULTS OF OPERATIONS
1998 COMPARED TO 1997
Sales for 1998 increased by 15% from $338,666,000 in 1997 to $390,853,000.
Sales of motor vehicle products increased by 7% from $198,562,000 to
$212,416,000. Sales of industrial products increased by 27% from $140,104,000 to
$178,437,000.
The higher motor vehicle products sales were the result of an increase in
both the automotive products business and the seating business. Automotive
products sales increased by 8%. This increase in sales was due to an increase in
sales of the Company's German subsidiary, Suroflex GmbH, as well as an increase
in the Company's content per vehicle resulting from improved sales of the
Company's Marabond (R) moldable insulation product, plus increased sales of door
insert products. These increases more than offset the effect of a less than one
percent decrease in North American automobile industry production for 1998
compared to last year. The strike at General Motors had only a minor negative
impact on 1998 sales and operating income. The Company's seating products
business was up 11% in 1998 compared to the prior year. This was primarily the
result of an increase in Harley-Davidson original equipment and parts and
accessories business.
Industrial products sales in 1998 were higher due to an increase in sales
of finishing products of 44%. Component sales were relatively consistent with
the prior year. The Osborn International brush business showed the most
significant increase due primarily to the acquisition of Power Brushes Ltd. in
March 1998, but increases were also achieved for the JacksonLea buff and
compound businesses. Sales for the components business were stronger for
assembled products and wire forms but weaker for stampings, video springs and
expanded metal.
Operating income increased in 1998 from $23,499,000 in 1997 to $28,301,000.
Operating income for the motor vehicle products segment improved from
$17,065,000 in 1997 to $20,034,000. This was due primarily to higher volume and
margins in the automotive businesses, as mentioned above, including improved
volume and operating results from the Company's German subsidiary, Suroflex
GmbH. These results more than offset reduced profitability in the seating
business due to one time costs incurred in the conversion to cellular
manufacturing. Management believes this conversion is necessary to enable the
Company to meet an expected increase in customer volume levels in the future.
Operating income for the industrial products segment increased from
$8,740,000 in 1997 to $10,845,000. This increase in operating income was
primarily a result of an increase in operating income at Osborn International
due to the acquisition of Power Brushes Ltd. in March 1998 as well as an
increase in operating income for the JacksonLea buff and compound business. This
was partially offset by lower operating earnings for the components businesses.
Corporate expenses increased from $2,306,000 in 1997 to $2,578,000. This
increase is primarily due to personnel additions. The increase in other income
in 1998 is due to an increase in royalty income. Minority interests in
subsidiaries decreased in 1998 due to improved operating results at the
Company's German subsidiary, Suroflex GmbH.
Interest expense decreased in 1998 from $7,837,000 in 1997 to $6,661,000
which is a result of cash flow received from the sale of the Company's power
generation businesses.
The Company's effective income tax rate for 1998 was 39% which is the same
as the rate for 1997.
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
Sales for 1997 increased by 16% from $291,676,000 in 1996 to $338,666,000.
Sales of motor vehicle products increased by 26% from $157,276,000 to
$198,562,000. Sales of industrial products increased by 4% from $134,400,000 to
$140,104,000.
The higher motor vehicle products sales was a result of sales increases at
both the automotive products business and the seating business. Excluding
Suroflex GmbH, the European manufacturer of automotive insulation products
acquired in the
12
<PAGE> 13
fourth quarter of 1996, automotive product sales increased by 26%. This increase
in sales was due to an increase in the Company's content per vehicle which was
due to improved sales of the Company's Marabond (R) moldable insulation product,
plus a 2% increase in U.S. automobile industry production for 1997 compared to
1996. The Company's seating products business was up 20% in 1997 compared to
1996. 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.
Industrial products experienced a relatively strong economy and sales in
1997 were up compared to 1996 with the Osborn brush business showing the most
significant increase, but increases were also achieved for the JacksonLea buff
and compound businesses and the components businesses.
Operating income increased in 1997 from $21,858,000 in 1996 to $23,499,000.
Operating income for the motor vehicle products segment improved from
$14,481,000 in 1996 to $17,065,000 due primarily to higher volume in both the
automotive and seating businesses, as mentioned above.
Operating income for the industrial products segment declined from
$9,473,000 in 1996 to $8,740,000. This decrease in operating income was a result
of higher material costs combined with price level pressures in the components
businesses.
Corporate expenses for 1997 were $2,306,000 compared to $2,096,000 in 1996.
This increase was primarily due to an increase in management incentive
compensation. Other income for 1997 represents deferred financing cost
amortization more than offset by royalty income from foreign licensees of the
Company's industrial products plus minority interest in losses at Suroflex GmbH.
Other income for 1996 represents deferred financing cost amortization more than
offset by royalty income from foreign licensees of the Company's industrial
products.
Interest expense increased in 1997 from $7,375,000 in 1996 to $7,837,000
which is a result of working capital requirements and capital expenditures in
1996 and 1997.
The Company's effective income tax rate for 1997 was 39% which was the same
as the rate for 1996.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," which established standards for reporting and display of
comprehensive income and its components. This 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. The Company has adopted this
standard in 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This standard requires that companies
disclose "operating segments" based on the way management disaggregates the
Company for making internal operating decisions. The Company has adopted this
standard in 1998.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." This standard's objective is
to improve pension and other postretirement benefits disclosure. The Company has
adopted this standard in 1998.
FUTURE ACCOUNTING CHANGES
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires all derivative
instruments to be recorded in the Consolidated Balance Sheets at their fair
value. Changes in fair value of derivatives are required to be recorded each
period in current earnings or other comprehensive income, depending on whether
the derivative is designated as part of a hedge transaction and if it is, the
type of hedge transaction. This statement is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. The effect of adoption of this
statement on the Company's earnings or statement of financial position is
expected to be minimal.
LIQUIDITY AND CAPITAL RESOURCES
During 1998, the Company satisfied the capital requirements of its
operations with internally generated funds and approximately $30.1 million of
net proceeds received from the sale of the power generation businesses. In
addition, the net proceeds from the sale of the power generation businesses
enabled the Company to pay off its revolving loan with its banks and end the
year with $30.7 million of cash on its balance sheet. Subsequent to year end
1998, the Company used this cash to finance new acquisitions and to pay down
additional debt. For the foreseeable future, the Company believes it will
generate funds from operations to meet the capital requirements of its existing
operations. Also, subsequent to year end 1998, the Company completed a new $50
million bank loan agreement which reflects the requirements of both its domestic
and international operations. As of December 25, 1998, the Company had no
borrowings against its bank facility and letters of credit outstanding of
$2,765,000. During 1997, the Company also satisfied the capital requirements of
its operations with internally generated funds.
13
<PAGE> 14
During 1998, working capital decreased by $22,962,000 from $68,054,000 at
December 26, 1997 to $45,092,000. This decrease was primarily the result of a
reclassification of $17.1 million of convertible notes due in January 1999 to
current portion of long-term debt and the elimination of the net assets of
discontinued operations. During 1998, the Company generated $26,404,000 in cash
from continuing operations.
During 1998 and 1997, the Company made capital expenditures of $16,691,000
and $12,785,000, respectively. The major 1998 expenditures were in the motor
vehicle products segment for equipment at Milsco to support the conversion to
cellular manufacturing, at Janesville Products to support new programs and to
improve efficiency, and in the industrial products segment for equipment at
JacksonLea, Osborn and the components business to support new programs at those
locations. The major 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 the components businesses, Osborn and JacksonLea to support new
programs at those locations. Capital expenditures for 1999 are anticipated to
more than double due to the requirements of new programs and to provide for
plant modernization. No significant commitments are outstanding as of December
25, 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's State of Readiness - The Company's main financial and
manufacturing hardware and software systems have been tested and are now
believed to be year 2000 compliant. This was accomplished primarily through
systems upgrades and maintenance performed over the last few years to enhance
functionality of the systems, not solely to achieve year 2000 compliance. The
only systems that remain to be upgraded for year 2000 are certain ancillary,
mostly PC based, interface systems used for shop floor control and report
writing functions. Year 2000 compliance for these systems is ongoing and is
expected to be completed by mid 1999. Major customers and suppliers have been
surveyed and to date the Company has not been made aware of significant year
2000 issues that would materially affect its business.
Costs to Address the Company's Year 2000 Issues - The majority of the
Company's year 2000 issues were corrected either through systems upgrades
required for other business purposes or normal maintenance contracts. Therefore,
these improvements have not resulted in costs significantly incremental to
non-year 2000 planned information systems activities. The estimated costs to
correct the remaining ancillary systems still not compliant are not expected to
exceed $350,000.
Risks to the Company for Year 2000 Issues - With regard to systems under
the Company's control, management does not believe that the Company has
significant exposure to the year 2000 issue since, if necessary, systems are
capable of accepting manually entered data. The believed worst case scenario is
that the Company would have to revert back to certain manual systems for a small
portion of its systems, for example, shop floor labor collection and certain
internal reporting functions. Our customers and vendors are at various stages of
compliance, but management is not aware of significant year 2000 issues that
would materially affect the Company's business with them. The Company will
continue to monitor year 2000 compliance with its customers and vendors
throughout 1999, but will be unable to achieve the same degree of certainty that
it has achieved with internal systems.
The Company's Contingency Plans - By the middle of 1999, the Company
expects to be fully year 2000 compliant. To the extent that it has minor
internal systems that are not year 2000 compliant by mid-year, the Company will
have time to implement manual systems by year end 1999 which management believes
will significantly reduce the financial risk to the Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk stemming from changes in foreign
exchange rates, interest rates and commodity prices. Changes in these factors
could cause fluctuations in earnings and cash flows. In the normal course of
business, exposure to interest rates is managed by fixing interest rates on the
majority of the Company's long-term debt. Fluctuation in commodity prices, for
example steel and cotton cloth, are managed by strategic purchasing which
generally provides the time necessary to allow for price increases to customers,
where appropriate. In rare situations where commitments are made for extended
periods (more than 60 days), outside of functional currencies, for example, a
commitment to purchase European equipment for use in a U.S. plant which will
take six months to deliver, exposure is managed by entering into hedging
transactions authorized under Company policies that place controls on these
activities. Hedging transactions involve the use of
14
<PAGE> 15
derivative financial instruments and are used only where there is an underlying
exposure; not for trading or speculative purposes. At December 25, 1998, there
were no outstanding hedging transaction.
Foreign Operations - The Company has significant foreign operations, for
which the functional currencies are denominated primarily in German Marks and
British Pounds and to a lesser extent, Canadian Dollars, Swedish Kronor, French
Francs, Mexican Pesos, Brazilian Reals, Chinese Renminbi and Portuguese Escudos.
As the values of the currencies of the foreign countries in which the Company
has operations increases or decreases relative to the U.S. Dollar, the sales,
expenses, profits, assets and liabilities of the Company's foreign operations,
as reported in the Company's Consolidated Financial Statements, increase or
decrease, accordingly. The Company's primary method of reducing this exposure is
to approximately balance current assets and liabilities within each functional
currency. The Company does not use derivative financial instruments to hedge
this exposure. Because the Company has significant operations across member
countries of the European Monetary Union, the introduction of the Euro on
January 1, 1999 is expected to simplify the management of foreign exchange
exposure by aggregating the assets and liabilities of several currencies that
now have to be managed individually.
EURO CONVERSION
On January 1, 1999, member countries of the European Monetary Union (EMU)
began a three-year transition from their national currencies to a new common
currency, the "Euro". In the first phase, the permanent rates of exchange
between the members' national currency and the Euro has been established and
monetary, capital, foreign exchange, and interbank markets will be converted to
the Euro. National currencies will continue to exist as legal tender and may
continue to be used in commercial transactions. By January 2002, Euro currency
will be issued and by July 2002, the respective national currencies will be
withdrawn. The Company has operations in member countries of the EMU and,
accordingly, has established action plans that are continuing to be implemented
to address the Euro's impact on information systems, currency exchange rate
risk, taxation, contracts, competition and pricing. Based on its current
assessment, management believes that the costs of the Euro conversion will not
have a material impact on the operations, cash flows or financial condition of
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 capital expenditure requirements, the ability
of the Company and its suppliers and customers to address Year 2000 issues and
general economic conditions in the Company's market segments.
15
<PAGE> 16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JASON INCORPORATED
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 25, 1998 AND
DECEMBER 26, 1997
16
<PAGE> 17
JASON INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
December 25, December 26,
1998 1997
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 30,676 $ 4,453
Accounts receivable - net 46,558 40,347
Inventories 46,368 35,543
Deferred income taxes 5,663 5,819
Net assets of discontinued operations -- 31,251
Other current assets 4,732 4,149
--------- ---------
Total current assets 133,997 121,562
--------- ---------
PROPERTY, PLANT AND EQUIPMENT
Cost 172,965 145,210
Less: accumulated depreciation (80,268) (69,419)
--------- ---------
Net property, plant and equipment 92,697 75,791
--------- ---------
INTANGIBLE ASSETS - NET 70,421 64,445
--------- ---------
OTHER ASSETS 2,066 1,487
--------- ---------
$ 299,181 $ 263,285
========= =========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
December 25, December 26,
1998 1997
---- ----
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 29,947 $ 7,764
Accounts payable 26,557 22,679
Accrued compensation and employee benefits 15,942 12,209
Accrued interest 1,059 1,183
Accrued income taxes 1,551 101
Other current liabilities 13,849 9,572
--------- ---------
Total current liabilities 88,905 53,508
REVOLVING LOAN -- 2,320
OTHER LONG-TERM DEBT 62,849 83,311
POSTRETIREMENT HEALTH AND OTHER
BENEFITS 6,337 6,290
DEFERRED INCOME TAXES 15,345 6,665
OTHER LONG-TERM LIABILITIES 1,802 3,927
--------- ---------
Total liabilities 175,238 156,021
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY
Common stock and additional contributed
capital 35,556 35,014
Retained earnings 88,103 72,850
Accumulated other comprehensive income (loss) 284 (600)
--------- ---------
123,943 107,264
--------- ---------
$ 299,181 $ 263,285
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 18
JASON INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales $ 390,853 $ 338,666 $ 291,676
Cost of sales 303,568 264,766 226,070
--------- --------- ---------
Gross profit 87,285 73,900 65,606
Selling and administrative expenses 58,984 50,401 43,748
--------- --------- ---------
Operating income 28,301 23,499 21,858
Interest expense (6,661) (7,837) (7,375)
Other income (expense) 832 614 (38)
Minority interests in subsidiaries 440 796 249
--------- --------- ---------
Income before income taxes 22,912 17,072 14,694
Provision for income taxes (8,937) (6,658) (5,730)
--------- --------- ---------
Income from continuing operations 13,975 10,414 8,964
Income (loss) from discontinued operations,
net of applicable income taxes 1,278 1,813 (98)
--------- --------- ---------
Net income $ 15,253 $ 12,227 $ 8,866
========= ========= =========
Earnings per share - basic
Income from continuing operations $ .69 $ .52 $ .45
Income (loss) from discontinued operations .06 .08 (.01)
--------- --------- ---------
Net income per share $ .75 $ .60 $ .44
========= ========= =========
Earnings per share - diluted
Income from continuing operations $ .66 $ .51 $ .44
Income (loss) from discontinued operations .06 .08 (.01)
--------- --------- ---------
Net income per share $ .72 $ .59 $ .43
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 19
JASON INCORPORATED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON CONTRIBUTED RETAINED COMPREHENSIVE
STOCK CAPITAL EARNINGS INCOME (LOSS) TOTAL
----- ------- -------- ------------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 29, 1995 $ 2,013 $32,522 $51,757 $ (74) $ 86,218
Comprehensive income:
Net income -- -- 8,866 -- 8,866
Translation adjustments -- -- -- 28 28
Total comprehensive income 8,894
Exercise of options 3 149 -- -- 152
------- ------- ------- ----- ---------
Balance at December 27, 1996 2,016 32,671 60,623 (46) 95,264
Comprehensive income:
Net income -- -- 12,227 -- 12,227
Translation adjustments -- -- -- (554) (554)
Total comprehensive income 11,673
Exercise of options 7 320 -- -- 327
------- ------- ------- ----- ---------
Balance at December 26, 1997 2,023 32,991 72,850 (600) 107,264
Comprehensive income:
Net income -- -- 15,253 -- 15,253
Translation adjustments -- -- -- 884 884
Total comprehensive income 16,137
Exercise of options 12 530 -- -- 542
------- ------- ------- ----- ---------
Balance at December 25, 1998 $ 2,035 $33,521 $88,103 $ 284 $ 123,943
======= ======= ======= ===== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 20
JASON INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 13,975 $ 10,414 $ 8,964
-------- -------- -------
Adjustments to reconcile income from continuing
operations to net cash provided by operating
activities of continuing operations:
Depreciation 13,191 12,206 9,852
Amortization 3,267 3,232 3,625
Equity in net income of affiliates (163) (146) (75)
Deferred income taxes (74) (940) 1,460
(Gain) loss on sale of property, plant and
equipment (282) 65 (91)
Increase (decrease) in cash, excluding
effects of acquisitions, due to changes in:
Accounts receivable 2,993 (3,482) (4,211)
Inventories (3,586) (1,305) 20
Income taxes receivable - 2,250 (2,250)
Other current assets (568) 1,179 (1,639)
Accounts payable (1,096) 2,839 (874)
Accrued compensation and employee benefits 936 1,922 (859)
Accrued interest (130) (372) (104)
Accrued income taxes (1,140) 518 (3,949)
Other, net (919) 1,574 (1,434)
-------- -------- -------
Total adjustments 12,429 19,540 (529)
-------- -------- -------
Net cash provided by operating activities of
continuing operations 26,404 29,954 8,435
-------- -------- -------
Net cash provided (used) by operating activities
of discontinued operations 14,772 24,858 (1,536)
-------- -------- -------
Net cash provided by operating activities 41,176 54,812 6,899
-------- -------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 21
JASON INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of property,
plant and equipment $ 1,842 $ 3,302 $ 195
Acquisition of property, plant and equipment (16,691) (12,785) (16,357)
Investment in joint ventures -- (18) (80)
Net proceeds from sale of discontinued operations 30,094 -- --
Investing activities of discontinued operations (308) (758) (1,314)
Other, net 783 (782) 30
-------- --------- ---------
Net cash provided (used) for investing activities,
excluding acquisitions 15,720 (11,041) (17,526)
-------- --------- ---------
Net cash provided (used) before financing
activities, excluding acquisitions 56,896 43,771 (10,627)
Acquisition of net assets, net of cash acquired (18,995) -- (231)
-------- --------- ---------
Net cash provided (used) before financing activities 37,901 43,771 (10,858)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving loans 59,762 67,215 129,270
Repayments on revolving loans (62,082) (107,085) (114,090)
Repayments of senior notes (6,513) (2,667) (2,000)
Repayments of senior subordinated notes (1,250) (1,250) (1,250)
(Repayments) proceeds of other long-term debt, net (2,137) 1,164 (136)
Proceeds from issuance of common stock 542 327 152
-------- --------- ---------
Net cash (used) provided by financing activities (11,678) (42,296) 11,946
-------- --------- ---------
Net increase in cash and cash equivalents 26,223 1,475 1,088
Cash and cash equivalents, beginning of year 4,453 2,978 1,890
-------- --------- ---------
Cash and cash equivalents, end of year $ 30,676 $ 4,453 $ 2,978
-------- --------- ---------
Cash paid during the year for:
Interest $ 6,785 $ 9,789 $ 9,568
Income taxes $ 9,164 $ 6,136 $ 9,068
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 22
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements and related notes have been
reclassified to reflect the Company's divestiture in 1998 of the power
generation products segment, accounted for as discontinued operations
(see Note 3). The term "Company" as used in these consolidated
financial statements refers to Jason Incorporated and its subsidiaries.
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 depreciated over
their estimated useful lives using the straight-line method 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
Revenue is recognized from product sales at the time of shipment.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. A valuation allowance is provided for deferred
tax assets where it is considered more likely than not that the Company
will not realize the benefit of such assets.
22
<PAGE> 23
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INTANGIBLE ASSETS
Intangible assets are comprised of the following (in thousands):
<TABLE>
<CAPTION>
December 25, December 26,
1998 1997
------------ ------------
<S> <C> <C>
Goodwill $ 79,779 $ 71,170
Other intangible assets 8,959 8,887
------------ ------------
88,738 80,057
Less: accumulated amortization (18,317) (15,612)
------------ ------------
$ 70,421 $ 64,445
============ ============
</TABLE>
Other intangible assets include patents, computer software, 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 and amortized over the respective terms of the debt
instruments. Net deferred financing costs included in other assets at
December 25, 1998 and December 26, 1997 were $433,000 and $689,000,
respectively.
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 reporting period. Actual results could differ
from those estimates.
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.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income," which established standards for
reporting and display of comprehensive income and its components. This
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. The Company has adopted this standard in
1998.
23
<PAGE> 24
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." This standard requires that
companies disclose "operating segments" based on the way management
disaggregates the Company for making internal operating decisions. The
Company has adopted this standard in 1998.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." This standard's
objective is to improve pension and other postretirement benefits
disclosure. The Company has adopted this standard in 1998.
FUTURE ACCOUNTING CHANGES
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires all
derivative instruments to be recorded in the Consolidated Balance
Sheets at their fair value. Changes in fair value of derivatives are
required to be recorded each period in current earnings or other
comprehensive income, depending on whether the derivative is designated
as part of a hedge transaction and if it is, the type of hedge
transaction. This statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The effect of adoption of
this statement on the Company's earnings or statement of financial
position is expected to be minimal.
2. ACQUISITIONS
Effective March 13, 1998, the Company completed the acquisition of
Power Brushes Ltd. for approximately $16.9 million, including cash and
acquisition costs, plus the assumption of approximately $10.3 million
of debt. 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 integrated within the
Company's industrial products segment.
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. Effective October 25, 1998, the Company
exercised its option to purchase the remaining 49% interest for
approximately $2.5 million.
The aforementioned acquisitions have been accounted for using the
purchase method and, accordingly, operating results are included in the
consolidated financial statements since the respective acquisition
dates. The respective purchase prices were allocated to the assets
acquired and liabilities assumed based upon their estimated fair
values.
3. DISCONTINUED OPERATIONS
Effective June 5, 1998, the Company completed the sale of its power
generation businesses. Net cash proceeds from the sale approximated
$30.1 million; there was no gain or loss on the sale. The provision
(benefit) for income taxes on discontinued operations was $817,000,
$1,159,000 and $(62,000) for 1998, 1997 and 1996, respectively.
24
<PAGE> 25
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Sales and operating profit of the power generation businesses were
$61.0 million and $2.6 million, respectively, for the period ended June
5, 1998. Sales of the power generation businesses were $142.7 million
and $151.7 million for the years ended December 26, 1997 and December
27, 1996, respectively. Operating profit was $4.2 million and $2.1
million for the years ended December 26, 1997 and December 27, 1996,
respectively.
4. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 25, December 26,
1998 1997
------------- -------------
<S> <C> <C>
Accounts receivable $ 48,404 $ 41,225
Allowance for doubtful accounts (1,846) (878)
------------- -------------
$ 46,558 $ 40,347
============= =============
</TABLE>
5. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 25, December 26,
1998 1997
------------- -------------
<S> <C> <C>
Raw materials $ 19,881 $ 16,441
Work-in-process 5,817 5,544
Finished goods 20,670 13,558
------------- -------------
$ 46,368 $ 35,543
============= =============
</TABLE>
25
<PAGE> 26
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in
thousands):
<TABLE>
<CAPTION>
December 25, December 26,
1998 1997
------------- -------------
<S> <C> <C>
Land and improvements $ 2,373 $ 1,855
Buildings and improvements 32,361 23,673
Machinery and equipment 134,173 116,834
Construction-in-progress 4,058 2,848
------------- -------------
172,965 145,210
Less: accumulated depreciation (80,268) (69,419)
------------- -------------
$ 92,697 $ 75,791
============= =============
</TABLE>
7. 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 25, December 26,
1998 1997
------------- -------------
<S> <C> <C>
Revolving loan $ -- $ 2,320
============= =============
Convertible notes $ 17,057 $ 17,057
Senior note - 1995 20,000 20,000
Senior note - 1994 21,154 25,000
Senior notes - 1992 10,666 13,333
Senior subordinated notes 2,500 3,750
Suroflex notes 13,732 11,935
Other 7,687 --
------------- -------------
92,796 91,075
Less: current maturities (29,947) (7,764)
------------- -------------
$ 62,849 $ 83,311
============= =============
</TABLE>
The revolving loan facility provides for borrowings of up to $65
million at December 25, 1998. Future maximum borrowings under the
revolving loan facility may not exceed $50 million as of December 31,
1999. Letters of credit outstanding ($2.8 million at December 25, 1998)
on the Company's behalf reduce availability under the facility. The
revolving loan agreement matures on December 31, 2000; borrowings bear
interest at either a floating rate based upon the bank's prime rate or
a Eurodollar rate plus 1.0%. A commitment fee of .375% per annum on the
unused portion of the revolving loan facility is payable on a quarterly
basis.
26
<PAGE> 27
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
During 1995, in conjunction with the Company's acquisition of Milsco
Manufacturing Company ("Milsco"), 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. In January 1999, the
Company repaid the entire principal portion of the Milsco notes.
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. 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 which
commenced April 27, 1998. 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 which commenced
December 1, 1997.
As of December 25, 1998, the interest rate on the 1989 senior
subordinated notes was 11.275%. 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.
Long-term debt generated from the Company's acquisition of Suroflex
(see Note 2) and held principally by German banks of $13.7 million at
December 25, 1998 is 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 5.83% and are secured by substantially all of the assets of
Suroflex.
27
<PAGE> 28
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Future annual maturities of long-term debt are as follows (in
thousands):
<TABLE>
<S> <C>
1999 $ 29,947
2000 10,621
2001 9,371
2002 9,371
2003 6,704
Thereafter 26,782
-----------
$ 92,796
===========
</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.
8. 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 25,
1998 are (in thousands):
<TABLE>
<S> <C>
1999 $ 6,256
2000 5,227
2001 3,511
2002 2,502
2003 1,954
Thereafter 5,494
-----------
Total minimum leaspayments $ 24,944
===========
</TABLE>
Total rental expense under operating leases was as follows (in
thousands):
<TABLE>
<CAPTION>
For the year ended:
<S> <C>
December 25, 1998 $ 6,376
December 26, 1997 5,768
December 27, 1996 4,917
</TABLE>
28
<PAGE> 29
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. EARNINGS PER SHARE
A reconciliation of the income (numerator) and shares (denominator)
used in the computations of basic and diluted earnings per common share
from continuing operations, respectively, are as follows (in thousands
except per share data):
<TABLE>
<CAPTION>
For the Year Ended
December 25, 1998
------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- --------------
BASIC EARNINGS PER COMMON
SHARE
<S> <C> <C> <C>
Income from continuing operations $ 13,975 20,295 $ .69
==============
EFFECT OF DILUTIVE SECURITIES
Options -- 435
Convertible notes 737 1,516
----------- -------------
DILUTED EARNINGS PER COMMON
SHARE
Income from continuing operations
plus assumed conversions $ 14,712 22,246 $ .66
=========== ============= ==============
<CAPTION>
For the Year Ended
December 26, 1998
------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- --------------
BASIC EARNINGS PER COMMON
SHARE
<S> <C> <C> <C>
Income from continuing operations $ 10,414 20,188 $ .52
==============
EFFECT OF DILUTIVE SECURITIES
Options -- 395
Convertible notes 368 758
----------- -------------
DILUTED EARNINGS PER COMMON
SHARE
Income from continuing operations
plus assumed conversions $ 10,782 21,341 $ .51
=========== ============= ==============
</TABLE>
29
<PAGE> 30
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
December 27, 1998
------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- --------------
BASIC EARNINGS PER COMMON
SHARE
<S> <C> <C> <C>
Income from continuing operations $ 8,964 20,137 $ .45
----------- ------------- ==============
EFFECT OF DILUTIVE SECURITIES
Options -- 458
Convertible notes 356 758
----------- -------------
DILUTED EARNINGS PER COMMON
SHARE
Income from continuing operations
plus assumed conversions $ 9,320 21,353 $ .44
=========== ============= ==============
</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 those periods in which such conversion had a
dilutive effect.
10. SHAREHOLDERS' EQUITY
COMMON STOCK - The Company has authorized 30,000,000 shares of $.10 par
value common stock of which 20,354,633 and 20,237,705 shares were
issued and outstanding at December 25, 1998 and December 26, 1997,
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.
30
<PAGE> 31
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Substantially all options granted vest ratably over a three-year
period. Transactions and options outstanding under this plan were:
<TABLE>
<CAPTION>
Options Price Per Share
----------- ---------------
<S> <C> <C>
Outstanding at December 29, 1995 1,435,494 $ 1.30 - $10.20
Granted 165,500 $ 6.50 - $7.50
Exercised (37,280) $ 1.30 - $6.08
Canceled (6,500) $ 8.25 - $10.20
-----------
Outstanding at December 27, 1996 1,557,214 $ 1.30 - $10.20
Granted 146,250 $ 6.25 - $7.69
Exercised (78,132) $ 1.30 - $6.40
Canceled (60,000) $ 6.50 - $10.20
-----------
Outstanding at December 26, 1997 1,565,332 $ 1.30 - $10.20
Granted 125,000 $ 8.00 - $9.75
Exercised (116,928) $ 1.30 - $8.32
Canceled (145,500) $ 6.50 - $7.69
-----------
Outstanding at December 25, 1998 1,427,904 $ 1.30 - $10.20
-----------
Exercisable at December 27, 1996 910,214 $ 1.30 - $10.20
Exercisable at December 26, 1997 1,101,332 $ 1.30 - $10.20
Exercisable at December 25, 1998 1,137,904 $ 1.30 - $10.20
</TABLE>
The Company has adopted the disclosure-only provisions of 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 1996, 1997 and 1998 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
except per share data):
31
<PAGE> 32
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
-----------------------------------------------
December 25, December 26, December 27,
1998 1997 1996
------------- ------------- --------------
<S> <C> <C> <C>
Net income - as reported $ 15,253 $ 12,227 $ 8,866
Net income - pro forma 15,013 12,022 8,712
Basic earnings per common share,
as reported .75 .60 .44
Diluted earnings per common share,
as reported .72 .59 .43
Basic earnings per common share,
pro forma .74 .59 .43
Diluted earnings per common share,
pro forma .71 .58 .42
</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 grant
assumptions used:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Expected stock price volatility 30.42% 29.88% 30.27%
Risk-free interest rate 4.83% 5.83% 6.31%
Expected life of options 7 years 7 years 7 years
</TABLE>
The weighted average exercise prices per share for
options outstanding at December 25, 1998, December 26, 1997 and
December 27, 1996 are $6.19, $5.86 and $5.61, respectively. The
weighted average exercise prices per share for options exercisable at
December 25, 1998, December 26, 1997 and December 27, 1996 are $5.85,
$5.34 and $4.38, respectively. The weighted average remaining
contractual life of options outstanding at December 25, 1998 is 8.35
years. The weighted average fair value of options granted during 1998,
1997 and 1996 is $3.58, $3.48 and $3.05 per share, respectively.
11. INCOME TAXES
The components of income (loss) for the Company's continuing domestic
and foreign operations were as follows (in thousands):
<TABLE>
<CAPTION>
For the Year Ended
-----------------------------------------------
December 25, December 26, December 27,
1998 1997 1996
------------- ------------- --------------
<S> <C> <C> <C>
Domestic $ 19,878 $ 18,005 $ 14,890
Foreign 3,034 (933) (196)
------------- ------------- --------------
$ 22,912 $ 17,072 $ 14,694
============= ============= ==============
</TABLE>
32
<PAGE> 33
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The consolidated provision for income taxes related to continuing
operations included in the Consolidated Statements of Income consisted
of the following (in thousands):
<TABLE>
<CAPTION>
For the Year Ended
-----------------------------------------------
December 25, December 26, December 27,
1998 1997 1996
------------- ------------- --------------
<S> <C> <C> <C>
Current:
Federal $ 6,328 $ 6,212 $ 3,440
State 1,500 1,330 830
Foreign 1,183 56 -
------------- ------------- --------------
9,011 7,598 4,270
------------- ------------- --------------
Deferred:
Federal (64) (740) 1,140
State (10) (200) 320
------------- ------------- --------------
(74) (940) 1,460
------------- ------------- --------------
$ 8,937 $ 6,658 $ 5,730
============= ============= ==============
</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 25, December 26, December 27,
1998 1997 1996
---------------- ----------------- -----------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% 35.0%
State income taxes, net of
federal benefit 3.6 4.3 4.9
Nondeductible amortization of
intangible assets 1.4 1.8 2.2
Foreign sales corporation benefit (0.3) (1.0) (1.0)
Other (0.7) (1.1) (2.1)
---------------- ----------------- -----------------
39.0% 39.0% 39.0%
================ ================= =================
</TABLE>
33
<PAGE> 34
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 25, December 26,
1998 1997
------------- -------------
<S> <C> <C>
Deferred tax assets:
Accured expenses and reserves $ 2,894 $ 2,110
Postretirement and postemployment
benefits 2,406 2,426
Employee benefits 1,483 1,577
Foreign operating loss carryforwards 13,400 12,900
Valuation allowance (13,400) (12,900)
------------- -------------
6,783 6,113
------------- -------------
Deferred tax liabilities:
Property, plant and equipment (7,570) (5,894)
Intangible assets (1,802) (1,247)
Other (7,093) 182
------------- -------------
(16,465) (6,959)
------------- -------------
Net deferred tax liability $ (9,682) $ (846)
============= =============
</TABLE>
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 $26,545,000 (at December
25, 1998 exchange rates) and for which a valuation allowance was
provided at the time of the acquisition. At December 25, 1998, the
Company's foreign subsidiaries had approximately $30,100,000 in net
operating losses available for carryforward; approximately $2,200,000
of such carryforwards expire at various times through 2001 while the
remainder of these carryforwards are available for an unlimited period.
12. EMPLOYEE BENEFIT PLANS
The Company maintains defined benefit pension plans covering union
employees at certain of its divisions. Additionally, the Company
maintains savings and profit sharing plans for the majority of
employees not covered by union
defined benefit plans.
34
<PAGE> 35
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Net periodic costs for the defined benefit plans includes the following
components (in thousands):
<TABLE>
<CAPTION>
December 25, December 26, December 27,
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Service cost $ 378 $ 24 $ 20
Interest cost 271 287 277
Return on plan assets (15) (754) (415)
Amortization and deferrals (428) 432 112
---------------- ---------------- ----------------
Net periodic benefit cost (income) $ 206 $ (11) $ (6)
================ ================ ================
</TABLE>
The following provides a reconciliation of benefit obligations, plan
assets and funded status of the plans (in thousands):
<TABLE>
<CAPTION>
December 25, December 26,
1998 1997
----------------- ----------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 3,934 $ 3,836
Acquisition 1,922 -
Service cost 378 24
Interest cost 271 287
Actuarial loss 60 19
Benefits paid (304) (232)
Plan termination (207) -
----------------- ----------------
Benefit obligation at end of year 6,054 3,934
----------------- ----------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year 4,399 3,849
Acquisition 2,691 -
Actual return on plan assets 15 754
Employer contribution 166 28
Benefits paid (304) (232)
Plan termination (207) -
----------------- ----------------
Fair value of plan assets at end of year 6,760 4,399
----------------- ----------------
Funded status 706 465
Unrecognized actuarial gain (207) (669)
Unrecognized transition liability 31 41
Additional minimum liability - (37)
----------------- ----------------
Prepaid (accrued) benefit cost $ 530 $ (200)
================= ================
</TABLE>
<PAGE> 36
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The projected benefit obligation was determined using assumed discount
rates of 7.25% at December 25, 1998 and ranging from 7.0% to 7.75% at
December 26, 1997, and an assumed long-term rate of return on plan
assets of 9.0% at December 25, 1998 and ranging from 7.0% to 9.0% at
December 26, 1997. 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 costs of retiree health care benefits and life insurance
coverage are accrued over the employee service periods.
The net postretirement benefit costs include the following components
(in thousands):
<TABLE>
<CAPTION>
For the Year Ended
---------------------------------------------------------
December 25, December 26, December 27,
1998 1997 1996
---------------- ----------------- -----------------
<S> <C> <C> <C>
Service cost $ 61 $ 62 $ 65
Interest cost 377 377 395
Amortization and deferrals (28) (16) --
---------------- ----------------- -----------------
Net periodic benefit cost $ 410 $ 423 $ 460
---------------- ----------------- -----------------
</TABLE>
Presently, the Company's postretirement benefit plans
are not funded. The following provides a reconciliation of benefit
obligations, plan assets and the funded status of the plans (in
thousands):
<TABLE>
<CAPTION>
December 25, December 26,
1998 1997
---------------- ----------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 5,084 $ 5,066
Service cost 61 62
Interest cost 377 377
Actuarial gain (192) (129)
Benefits paid (302) (292)
---------------- ----------------
Benefit obligation at end of year 5,028 5,084
---------------- ----------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year - -
Employer contribution 302 292
Benefits paid (302) (292)
---------------- ----------------
Fair value of plan assets at end of year - -
---------------- ----------------
Funded status (5,028) (5,084)
Unrecognized actuarial gain (942) (777)
---------------- ----------------
Accrued benefit cost $ (5,970) $ (5,861)
================ ================
</TABLE>
36
<PAGE> 37
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.50% and 7.75% at December 25, 1998 and
December 26, 1997, respectively. The assumed health care cost trend
rates used in measuring the accumulated postretirement benefit
obligation were 6.0% and 5.0% for the hourly and salaried plans,
respectively, at December 25, 1998 and December 26, 1997. It was
assumed that these rates will decline to 1% over periods of 30 years
and 25 years for the hourly and salaried plans, respectively.
The health care cost trend rate assumption has a significant effect on
the amounts reported. To illustrate, a one percentage-point change in
the assumed health care cost trend rate would change the accumulated
postretirement benefit obligation as of December 25, 1998 by
approximately $347,000 and would change the net postretirement benefit
expense for 1998 by approximately $34,000.
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 $2,571,000,
$3,055,000 and $2,277,000 in 1998, 1997 and 1996, respectively. These
amounts are included in accrued compensation and employee benefits in
the accompanying Consolidated Balance Sheets.
13. SEGMENT INFORMATION
Reference is made to pages 11 through 15 for segment financial data and
an unaudited description and discussion of the Company's business
segments.
The Company has adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," in 1998 which changes the way the
Company reports information about its operating segments. The
information for 1997 and 1996 has been restated from the prior year's
presentation in order to conform to the 1998 presentation.
The Company's six business units have separate management teams and
infrastructures that offer different products and services. The
business units have been aggregated into two reportable segments (motor
vehicle products and industrial products) since the long term financial
performance of these segments is affected by similar economic
conditions. The Company evaluates performance based on operating
earnings of the respective business units.
Motor vehicle products include businesses which are manufacturers of
nonwoven fiber padding for the automotive industry and seating products
for motorcycles and a broad array of other mobile equipment. The four
largest customers of this segment comprised approximately 27%, 26% and
24% of consolidated sales in 1998, 1997 and 1996, respectively.
Receivables outstanding with these customers represented approximately
26% of accounts receivable balances at both December 25, 1998 and
December 26, 1997, 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.
37
<PAGE> 38
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Information regarding the Company's geographic areas is summarized
below (in thousands). Revenues are attributed to countries based on
origination of sale. 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. Net assets of
discontinued operations have been excluded from long-lived assets.
<TABLE>
<CAPTION>
United States Germany All Other Eliminations Total
-------------- ------------ -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Year Ended December 25, 1998
Sales to unaffiliated customers $ 349,311 $ 34,872 $ 24,080 $ (17,410) $ 390,853
Long-lived assets 134,011 25,296 5,877 -- 165,184
Year Ended December 26, 1997
Sales to unaffiliated customers $ 328,043 $ 12,036 $ 12,970 $ (14,383) $ 338,666
Long-lived assets 125,641 14,133 1,949 -- 141,723
Year Ended December 27, 1996
Sales to unaffiliated customers $ 278,624 $ 999 $ 13,790 $ (1,737) $ 291,676
Long-lived assets 130,079 16,784 2,270 -- 149,133
</TABLE>
38
<PAGE> 39
JASON INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
14. INTERIM FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial data for 1998 and 1997 are presented
below (in thousands except per share data):
<TABLE>
<CAPTION>
Quarter
--------------------------------------------------------------------------
1998 First Second Third Fourth Total
- ---- ------------- ------------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 90,665 $ 99,402 $ 98,141 $ 102,645 $ 390,853
Gross profit 19,051 23,383 21,251 23,600 87,285
Income from continuing operations 2,859 3,805 2,475 4,836 13,975
Income from discontinued operations, net
of tax 747 531 -- -- 1,278
------------- ------------- ------------- ------------ -----------
Net income $ 3,606 $ 4,336 $ 2,475 $ 4,836 $ 15,253
============= ============= ============= ============ ===========
Earnings per share - basic
Income from continuing operations $ .14 $ .19 $ .12 $ .24 $ .69
Income from discontinued operations .04 .02 -- -- .06
------------- ------------- ------------- ------------ -----------
Net income $ .18 $ .21 $ .12 $ .24 $ .75
============= ============= ============= ============ ===========
Earnings per share - diluted
Income from continuing operations $ .13 $ .18 $ .12 $ .23 $ .66
Income from discontinued operations .04 .02 -- -- .06
------------- ------------- ------------- ------------ -----------
Net income $ .17 $ .20 $ .12 $ .23 $ .72
============= ============= ============= ============ ===========
<CAPTION>
Quarter
--------------------------------------------------------------------------
1997 First Second Third Fourth Total
- ---- ------------- ------------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 84,815 $ 87,526 $ 80,070 $ 86,255 $ 338,666
Gross profit 17,995 20,102 16,910 18,893 73,900
Income from continuing operations 2,266 3,264 2,088 2,796 10,414
(Loss) income from discontinued operations, net
of tax (31) (13) 158 1,699 1,813
------------- ------------- ------------- ------------ -----------
Net income $ 2,235 $ 3,251 $ 2,246 $ 4,495 $ 12,227
============= ============= ============= ============ ===========
Earnings per share - basic
Income from continuing operations $ .11 $ .16 $ .10 $ .15 $ .52
Income from discontinued operations -- -- .01 .07 .08
------------- ------------- ------------- ------------ -----------
Net income $ .11 $ .16 $ .11 $ .22 $ .60
============= ============= ============= ============ ===========
Earnings per share - diluted
Income from continuing operations $ .11 $ .16 $ .10 $ .14 $ .51
Income from discontinued operations -- -- .01 .07 .08
------------- ------------- ------------- ------------ -----------
Net income $ .11 $ .16 $ .11 $ .21 $ .59
============= ============= ============= ============ ===========
</TABLE>
39
<PAGE> 40
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Jason Incorporated
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 41 present fairly, in all material
respects, the financial position of Jason Incorporated and its subsidiaries at
December 25, 1998 and December 26, 1997, and the results of their operations and
their cash flows for each of the three years in the period ended December 25,
1998, in conformity with generally accepted accounting principles. In addition,
in our opinion, the financial statement schedule listed in the index appearing
under Item 14(a)(2) on page 41 presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule 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.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
January 29, 1999
40
<PAGE> 41
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 12, 1999, 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 12, 1999, 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 12,
1999, under "Security Ownership" is incorporated by reference in this Form 10-K
Annual Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
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
provided in Item 8.
Consolidated Balance Sheets - as of December 25, 1998 and December 26, 1997.
Consolidated Statements of Income - years ended December 25, 1998, December 26,
1997 and December 27, 1996.
Consolidated Statements of Shareholders' Equity - years ended December 25, 1998,
December 26, 1997 and December 27, 1996.
Consolidated Statements of Cash Flows - years ended December 25, 1998, December
26, 1997 and December 27, 1996.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
2. FINANCIAL STATEMENT SCHEDULE:
Financial Statement Schedule for the years ended December 25, 1998, December 26,
1997 and December 27, 1996.
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.
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.
41
<PAGE> 42
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.
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 Purchase and Sale Agreement dated June 28, 1991 for the purchase of
the assets of Sackner
10.15 Purchase and Sale Agreement dated May 31, 1991 for the purchase of
the assets of Lea.
10.16 Purchase and Sale Agreement dated June 21, 1991 for the purchase of
the assets of Schroeder.
10.17 Second Amendment to Lease Agreement between Southgate Eureka
Associates Limited Partnership and Jason Incorporated.
10.18 Lease Agreement between Southview Business Center, Ltd. and
Janesville Products Co.
10.19 Lease between Schroeder Industries, Inc., to be known as SI
Properties, Inc., and Jason Incorporated.
10.20 Lease between Arrowhead Corporation and Jason Incorporated dated
January 23, 1991.
10.21 Lease between Arrowhead Corporation and Jason Incorporated dated
April 1, 1992.
10.22 Credit Agreement by and among Jason Incorporated, The First National
Bank of Chicago and The First National Bank of Boston, as amended.
10.23 Note Agreements dated as of November 15, 1992 re: $16,000,000 7.65%
Senior Secured Notes due December 1, 2002.
10.24 Stock Purchase Agreement between the Company and the majority
stockholders of Koller Industries, Inc.
10.25 Stock Purchase Agreement between the Company and the minority
stockholders of Koller Industries, Inc.
10.26 Form of Stock Purchase Agreement executed by the Company in
connection with the January 1994 private placement of common stock.
10.27 Lease for the facility at 6800 West Calumet Road, Milwaukee, WI.
10.28 Lease for the facility at 1530 Artaius Parkway, Libertyville, IL.
10.29 Lease for the facility at 140 South Mitchell Court, Addison, IL.
10.30 Lease for the facility at 466 and 468 Diens Drive, Wheeling, IL.
10.31 Lease for the facility at 7842 North Faulkner Road, Milwaukee, WI.
10.32 Purchase and Sale Agreement between the Company and Milsco
Manufacturing Company.
10.33 Form of Convertible Note issued by the Company in connection with the
Purchase and Sale Agreement with Milsco Manufacturing Company.
42
<PAGE> 43
21.1 Subsidiaries
23.1 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney
27 Financial Data Schedule
UNDERTAKING:
Copies of the exhibits to this report will be furnished without charge to
the Company's shareholders upon written request to the Company's Secretary at
the Company's executive office.
(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.
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 25, 1998
Allowance for doubtful accounts $878 $836 $335 $(203) $1,846
YEAR ENDED DECEMBER 26, 1997
Allowance for doubtful accounts $847 $306 $ -- $(275) $878
YEAR ENDED DECEMBER 27, 1996
Allowance for doubtful accounts $825 $202 $ -- $(180) $847
</TABLE>
43
<PAGE> 44
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 1, 1999
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, Chief March 1, 1999
--------- -------------------- Executive Officer and Director
Vincent L. Martin (Principal Executive Officer)
/s/ Mark Train President, Secretary, Treasurer March 1, 1999
------------------------------ and Director (Principal
Mark Train Financial and Accounting Officer)
/s/ Wayne C. Oldenburg Director March 1, 1999
-------- --------------------
Wayne C. Oldenburg
/s/ Wayne G. Fethke Director March 1, 1999
-----------------------------
Wayne G. Fethke
/s/ Frank W. Jones Director March 1, 1999
-----------------------------
Frank W. Jones
/s/ David J. Drury Director March 1, 1999
-----------------------------
David J. Drury
</TABLE>
44
<PAGE> 45
EXHIBIT INDEX
Exhibit Sequential Page
Number Number
- ------ ---------------
3.1 Articles of Incorporation of (1)
the Company, as amended
3.2 Agreement and Plan of Merger (1)
between the Company (formerly
known as Jason Merger Corp.) and its
predecessor, Jason Incorporated,
a Delaware corporation
3.3 By-Laws of the Company (1)
4.1 Specimen Common Stock (2)
certificate
10.1 Lease Agreement, dated (2)
August 30, 1985 between Norwalk
Community Development Corporation
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 (2)
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 (2)
Lease of property located in
Santa Fe Springs, California
<PAGE> 46
dated December 31, 1985 between
AMCA International Corporation
and Jason Incorporated (copy of
lease attached).
10.4 Jason Incorporated Deferred (2)
Compensation Plan for Employees
dated September 26, 1986.
10.5 Jason Employee Savings & Profit (2)
Sharing Plan effective January 1, 1986.
10.6 Jason Incorporated Management (2)
Incentive Compensation Plan
effective January 1, 1987.
10.7 Jason Incorporated (2)
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
<PAGE> 47
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 (4)
dated as of October 1, 1989 re:
$10,000,000 10.60% Senior
Subordinated Notes Due
October 15, 2000.
10.14 Purchase and Sale Agreement dated (5)
June 28, 1991 for the purchase of
the assets of Sackner.
10.15 Purchase and Sale Agreement dated (5)
May 31, 1991 for the purchase of the
assets of Lea.
10.16 Purchase and Sale Agreement dated (5)
June 21, 1991 for the purchase of the
assets of Schroeder.
10.17 Second Amendment to Lease Agreement (6)
between Southgate Eureka Associates
Limited Partnership and Jason
Incorporated.
10.18 Lease Agreement between Southview (6)
Business Center, Ltd. and Janesville
Products Co.
10.19 Lease between Schroeder Industries, (6)
Inc., to be known as SI Properties,
Inc., and Jason Incorporated.
<PAGE> 48
10.20 Lease between Arrowhead Corporation (6)
and Jason Incorporated dated
January 23, 1991.
10.21 Lease between Arrowhead Corporation (6)
and Jason Incorporated dated
April 1, 1992.
10.22 Credit Agreement by and among Jason (6)
Incorporated, The First National Bank
of Chicago and the First National Bank
of Boston, as amended.
10.23 Note Agreements dated as of November 15, (6)
1992 re: $16,000,000 7.65% Senior
Secured Notes due December 1, 2002
10.24 Stock Purchase Agreement between the (7)
Company and the majority stockholders
of Koller Industries, Inc.
10.25 Stock Purchase Agreement between the (7)
Company and the minority stockholders
of Koller Industries, Inc.
10.26 Form of Stock Purchase Agreement executed (8)
by the Company in connection with the
January 1994 private placement of
common stock.
10.27 Lease for the facility at 6800 West Calumet (8)
Road, Milwaukee, WI.
10.28 Lease for the facility at 1530 Artaius (8)
Parkway, Libertyville, IL.
10.29 Lease for the facility at 140 South Mitchell (8)
Court, Addison, IL.
10.30 Lease for the facility at 466 and 468 Diens (8)
Drive, Wheeling, IL.
<PAGE> 49
10.31 Lease for the facility at 7842 North Faulkner (8)
Road, Milwaukee, WI.
10.32 Purchase and Sale Agreement between the (9)
Company and Milsco Manufacturing
Company.
10.33 Form of Convertible Note issued by the (9)
Company in connection with the
Purchase and Sale Agreement with Milsco
Manufacturing Company.
21.1 Subsidiaries
23.1 Consent of PricewaterhousehouseCoopers LLP.
24.1 Power of Attorney (10)
27 Financial Data Schedule
(1) Exhibit incorporated by reference to the Company's Proxy Statement dated
(and filed with the Commission) March 19, 1993.
(2) Exhibit incorporated by reference to the Company's Registration Statement
filed on Form S-1, Registration No. 33-13717, effective June 16, 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 Current Report on Form
8-K filed with the Commission July 12, 1991.
(6) Exhibit incorporated by reference to the Company's Annual Report on Form
10-K for the fiscal year ended December 25, 1992.
(7) Exhibit incorporated by reference to the Company's Current Report on Form
8-K filed with the Commission December 8, 1993.
<PAGE> 50
(8) Exhibit incorporated by reference to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993.
(9) Exhibit incorporated by reference to the Company's Current Report on Form
8-K filed with the Commission January 12, 1995.
(10) Appears on signature page to this report.
<PAGE> 1
JASON INCORPORATED EXHIBIT 21.1
SUBSIDIARIES
10-K
<TABLE>
<CAPTION>
NAME JURISDICTION PERCENT
OWNERSHIP
- ----------------------------------------- -------------------- ------------------------
<S> <C> <C>
Osborn de Venezuela Venezuela 100.00
Jason Industrial Products International Barbados 100.00
Jason Nevada, Inc. Nevada 100.00
Braden Nevada, Inc. Nevada 100.00
Deltak Nevada, Inc. Nevada 100.00
Janesville de Mexico Mexico 79.69
Jason Ohio Corporation Ohio 100.00
JacksonLea de Mexico Mexico 100.00
JacksonLea Canada Canada 100.00
Jason Canada, Inc. Canada 100.00
Jason Components Shenzhen China 100.00
Jason Components Shanghai China 100.00
Jason Holding GmbH Germany 100.00
Jason GmbH Germany 99.98
Brushes International Wennerberg Sweden 99.98
Brushes International Romania Romania 59.99
Jason Holdings UK Limited UK 100.00
Janesville Products Limited UK 100.00
Brushes International UK 100.00
Webb Jarratt Limited UK 100.00
Brushes International Dendix UK 100.00
Forcepass Limited UK 100.00
Brushes International Osborn France 100.00
Beamnatural Limited UK 100.00
Brushes International Portugal 100.00
Lee & James Limited UK 100.00
Brushes International Asberg Brazil 100.00
Dendix Ski Limited UK 100.00
</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
29, 1999 appearing on page 40 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)
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
March 17, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
JASON INCORPORATED CONSOLIDATED BALANCE SHEET AT DECEMBER 25, 1998, AND
CONSOLIDATED INCOME STATEMENT FOR THE TWELVE MONTH PERIOD ENDED
DECEMBER 25, 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> 12-MOS
<FISCAL-YEAR-END> DEC-25-1998
<PERIOD-START> DEC-27-1997
<PERIOD-END> DEC-25-1998
<CASH> 30676
<SECURITIES> 0
<RECEIVABLES> 46558
<ALLOWANCES> 0<F1>
<INVENTORY> 46368
<CURRENT-ASSETS> 133997
<PP&E> 172965
<DEPRECIATION> 80268
<TOTAL-ASSETS> 299181
<CURRENT-LIABILITIES> 88905
<BONDS> 62849<F2>
0
0
<COMMON> 35556
<OTHER-SE> 88387
<TOTAL-LIABILITY-AND-EQUITY> 299181
<SALES> 390853
<TOTAL-REVENUES> 390853
<CGS> 303568
<TOTAL-COSTS> 303568
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6661
<INCOME-PRETAX> 22912
<INCOME-TAX> 8937
<INCOME-CONTINUING> 13975
<DISCONTINUED> 1278
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15253
<EPS-PRIMARY> .75<F3>
<EPS-DILUTED> .72
<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>
