SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 1994 Commission File Number 33-24317
JORDAN INDUSTRIES, INC.
(Exact name of registrant as specified in charter)
Illinois 36-3598114
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ArborLake Centre, Suite 550 60015
1751 Lake Cook Road, (Zip Code)
Deerfield, Illinois
(Address of Principal Executive Offices)
Registrant's telephone number, including Area Code:
(708) 945-5591
Former name, former address and former fiscal year, if changed
since last report: Not applicable.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve (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 ninety (90) days.
Yes X No
The aggregate market value of voting stock held by non-
affiliates of the Registrant is not determinable as such shares
were privately placed and there is currently no public market for
such shares.
The number of shares outstanding of Registrant's Common Stock
as of May 13, 1994: 93,501.0004.
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FORM 10-Q QUARTERLY REPORT
JORDAN INDUSTRIES, INC.
INDEX
Part I. Page No.
Financial Information
Condensed Consolidated Balance Sheets
at March 31, 1994, and December 31, 1993 3
Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1994
and 1993 4
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1994
and 1993 5
Notes to Condensed Consolidated Financial
Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II.
Other Information 12
Signatures 13
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JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
March 31, December 31,
1994 1993
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $31,215 $ 68,273
Accounts receivable, net 44,850 47,786
Inventories 69,198 61,186
Prepaid expenses and other current assets 7,001 5,735
Total Current Assets 152,264 182,980
Property, plant and equipment, net 59,666 57,700
Note receivable from affiliate 8,283 5,535
Goodwill, net 69,593 57,102
Other assets 36,020 35,192
Total Assets $325,826 $338,509
LIABILITIES AND NET CAPITAL DEFICIENCY
Current Liabilities:
Accounts payable $ 27,316 $ 31,806
Accrued liabilities 16,695 26,086
Advance deposits 4,851 1,696
Current portion of long-term debt 1,758 1,902
Total Current Liabilities 50,620 61,490
Long-term debt 363,786 356,981
Other non-current liabilities 2,560 3,649
Deferred income taxes 3,459 6,784
Minority interest 881 31
Redeemable preferred stock 9 243
Net Capital Deficiency:
Common stock 1 1
Additional paid-in capital 2,972 2,972
Accumulated deficit (98,462) (93,642)
Total Net Capital Deficiency (95,489) (90,669)
Total Liabilities and Net Capital
Deficiency $325,826 $338,509
See accompanying notes to condensed consolidated financial statements.
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JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED
March 31,
1994 1993
Net sales $80,927 $69,973
Cost of sales, excluding depreciation 50,935 44,765
Selling, general and administrative
expenses 21,170 16,527
Depreciation 2,355 2,232
Amortization of goodwill and other
intangibles 2,047 2,226
Management fees and other 270 973
Operating income 4,150 3,250
Other (income) and expenses:
Interest expense 9,959 9,168
Interest income (294) (101)
Interest income from affiliate - (113)
Total other expenses 9,665 8,954
Loss before income taxes and
minority interest (5,515) (5,704)
Provision (benefit) for income taxes (1,604) 346
Loss before minority interest (3,911) (6,050)
Minority interest (858) (20)
Net loss $(4,769) $ (6,070)
See accompanying notes to condensed consolidated financial statements.
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JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED
March 31,
1994 1993
Cash flows from operating activities:
Net loss $ (4,769) $ (6,070)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization 4,402 4,963
Benefit from deferred income taxes (3,325) (200)
Minority interest 858 20
Non-cash interest 2,299 -
Changes in operating assets and
liabilities net of effects from
acquisitions:
Increase in current assets (3,527) 1,942
Decrease in current liabilities (11,660) 4,697
Increase in non-current assets (388) -
Net cash provided by (used in)
operating activities (16,110) 5,352
Cash flows from investing activities:
Capital expenditures (2,551) (1,239)
Notes receivable from affiliate (2,748) (800)
Acquisitions of minority interests and other (1,052) (81)
Acquisition of subsidiary (14,016) -
Net cash used in investing activities (20,367) (2,120)
Cash flows from financing activities:
Repayment of long-term debt (521) (118)
Other (60) (365)
Net cash used in financing activities (581) (483)
Net increase (decrease) in cash and cash
equivalents (37,058) 2,749
Cash and cash equivalents at beginning of
period 68,273 8,886
Cash and cash equivalents at end of period $ 31,215 $ 11,635
See accompanying notes to condensed consolidated financial statements.
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JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
A. Organization
The unaudited condensed consolidated financial statements, which reflect
all adjustments that management believes necessary to present fairly the
results of interim operations, should be read in conjunction with the Notes
to the Consolidated Financial Statements (including the Summary of
Significant Accounting Policies) included in the Company's audited
consolidated financial statements for the year ended December 31, 1993,
which are included in the Company's Annual Report filed on Form 10-K for
such year (the "1993 10-K"). Results of operations for the interim periods
are not necessarily indicative of annual results of operations.
B. Inventories
Inventories are summarized as follows:
March 31, December 31,
1994 1993
Raw materials $13,992 $15,000
Work-in-process 7,980 5,868
Finished goods 47,226 40,318
$69,198 $61,186
C. Notes Receivable from Affiliate
At March 31, 1994, the Company had notes receivable from Cape Craftsmen,
Inc., a company that is controlled by the partners, principals, employees
and affiliates of The Jordan Company, of $8,283.
D. Accounting for Income Taxes
Effective January 1, 1993, the Company adopted FAS No. 109, which requires
recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial
statements or tax returns.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
as of March 31, 1994, are as follows:
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JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Deferred tax liabilities
Tax over book depreciation $ 8,960
Other 496
Total deferred tax liabilities $ 9,456
Deferred tax assets
NOL carryforwards $29,000
Other 2,779
Total deferred tax assets $31,779
Valuation allowance for deferred
tax assets (25,782)
Net deferred tax assets 5,997
Net deferred tax liabilities $ 3,459
Note E. Acquisition of Subsidiary
On January 4, 1994, the Company, through its newly-formed wholly-owned
subsidiary, J2, Inc., bought substantially all of the net assets of Valmark
Industries, Inc. ("Valmark"), a manufacturer of membrane switches, graphic
panel overlays, labels, and bar codes.
The purchase price of $18,016, including costs incurred directly related to
the transaction, was allocated to working capital of $2,105, property,
plant and equipment of $1,358, non-compete agreements of $1,500, other
assets of $58, and the assumption of a long-term capital lease obligation
of $4 and resulted in an excess purchase price over net identifiable assets
of $12,999. The acquisition was financed with the issuance of a $4,000
Subordinated Note to a former shareholder, and cash.
Note F. Proposed Welcome Home Initial Public Offering
Welcome Home, Inc., ("Welcome Home"), has filed a registration statement
relating to the proposed initial public offering by Welcome Home of 3.0
million shares of Welcome Home Common Stock (and an additional .45 million
shares issuable upon exercise of an over-allotment option granted by
Welcome Home to its underwriters). In the registration statement, Welcome
Home estimated that the initial public offering price per share will be
between $14.00 and $16.00.
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JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Welcome Home expects that the initial public offering will be completed in
June, 1994. The net proceeds to Welcome Home from the sale of the 3.0
million shares of Welcome Home Common Stock in connection with the initial
public offering, assuming an initial public offering price of $15.00 per
share (the midpoint of the range noted above) are estimated to be
approximately $41.3 million after deducting estimated underwriting
discounts and offering expenses payable by Welcome Home (or approximately
$47.6 million, assuming the underwriters' over-allotment option is
exercised in full). The net proceeds from the initial public offering
(other than from the underwriters' over-allotment option) will be used by
Welcome Home to pay transaction expenses and to repay certain intercompany
indebtedness owed by Welcome Home to Jordan Industries. Any net proceeds
from the exercise of the underwriters' over-allotment option will be
retained by Welcome Home and will be used by Welcome Home for working
capital and general corporate purposes. Jordan Industries expects to apply
the net proceeds received from Welcome Home either to reinvest in its
existing or similar businesses or to repay indebtedness.
Upon completion of Welcome Home's initial public offering, Jordan
Industries would own approximately 57.2% (or 54.3%, if the underwriters'
over-allotment option is exercised in full) of the outstanding shares of
Welcome Home Common Stock. There can be no assurances, however, that
Welcome Home's initial public offering will be completed, or will be
completed in accordance with the timing, pricing and other terms described
above.
In 1986, the Company granted ownership interests to certain members of
management, which vested over five years through 1990. These executives
will be issued stock certificates representing their ownership interest in
the Company as of March 22, 1991, when Jordan Industries acquired the
Company. In the first quarter of 1994, the Company recorded $858 as
minority interest to reflect managements' 7.5% ownership.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
The following discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in the 1993 10-K and the financial statements and the related
notes thereto which are included elsewhere in this quarterly report.
Results of Operations
Summarized below are the net sales, operating income and operating margins
(as defined) for each of the Company's business segments for the first
quarter ended March 31, 1994 and 1993. This discussion reviews the
foregoing segment data and certain of the consolidated financial data for
the Company.
QUARTER ENDED MARCH 31,
1994 1993
Net Sales:
Consumer Products $40,459 $34,483
Industrial Products and Equipment 27,588 25,494
Specialty Advertising and Calendars 12,880 9,996
Total $80,927 $69,973
Operating Income (a):
Consumer Products $ 2,635 $ 1,991
Industrial Products and Equipment 4,931 4,273
Specialty Advertising and Calendars (1,059) (787)
Total $ 6,507 $ 5,477
Operating Margins (b):
Consumer Products 6.5% 5.8%
Industrial Products and Equipment 17.9 16.8
Specialty Advertising and Calendar (8.2) (7.9)
Consolidated 8.0 7.8
(a) Before corporate overhead of $2,357 and $2,227 for the three months
ended March 31, 1994 and 1993, respectively.
(b) Operating margin is operating income divided by net sales.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Consumer Products. As of March 31, 1994, the Consumer Products segment
consists of Sate-Lite, DACCO, Riverside and Welcome Home.
First quarter net sales increased $6.0 million or 17.3% compared to 1993.
The increase was due to increased sales in rebuilt converters at DACCO,
$1.9 million, self-help books and bibles at Riverside, $1.9 million, and 27
additional stores at Welcome Home, $2.8 million, offset by lower sales of
bicycle reflectors at Sate-Lite, ($.6 million).
First quarter operating income increased $.6 million or 32.3% compared to
1993. Operating income increases at DACCO, $.8 million, and Riverside, $.1
million, were offset by declines at Sate-Lite, ($.2 million), and Welcome
Home, ($.1 million). Sate-Lite's decrease in operating income was caused
by lower gross margins due to plastic wheel sales in 1994. Welcome Home's
operating income decrease was due to the additional stores being opened
during their slowest part of the year. The operating margin for the
segment increased from 5.8% to 6.5% due to the increase in sales and
operating income.
Industrial Products and Equipment. The Industrial Products and Equipment
segment consists of Parsons, Dura-Line, Imperial, Scott, Gear, Hudson, AIM
and Cambridge.
First quarter net sales increased $2.1 million or 8.2% compared to 1993.
Increases in sales of Innerduct at Dura-Line, $1.6 million, elevator motors
at Imperial, $1.1 million, electronic connectors at AIM, $.3 million, and
connectors at Cambridge, $.6 million, are partially offset by a decrease in
machining services at Parsons, ($1.5 million).
First quarter operating income increased $.7 million or 15.4% compared to
1993. Operating income increases at Imperial, $.4 million, Hudson, $.4
million, and Cambridge, $.3 million were offset by a decline at Parsons,
($.4 million). Parsons' operating income decrease was due to its lower
sales. The operating margin increased from 16.8% to 17.9%. This was
primarily due to the higher sales noted above.
Specialty Advertising and Calendars. The Specialty Advertising and
Calendars segment consists of JII/SPAI, Beemak, and Valmark.
First quarter net sales increased $2.9 million or 28.9% compared to 1993.
Without the Valmark acquisition in January 1994, net sales decreased $.3
million or 3.5% from 1993. This was due to the decrease in JII/SPAI's ad-
specialty business, ($1.0 million), offset by an increase in calendars and
school annual sales at JII/SPAI, $.7 million.
First quarter operating income decreased $.3 million or 34.6% compared to
1993 due to the decrease in ad-specialty sales at JII/SPAI. The operating
margin decreased from (7.9)% to (8.2)%.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Consolidated Results: (See Condensed Consolidated Statements of
Operations.) First quarter operating income increased $.9 million or 27.7%
compared to 1993 due to a higher gross profit and lower management fees and
other. First quarter interest expense increased from $9.2 million to $10.0
million due to higher debt levels. First quarter interest income increased
from $.1 million to $.3 million due to higher cash balances. Primarily as
a result of higher operating income, higher interest income, and a benefit
for income taxes, partially offset by higher interest expense, the Company
incurred a net loss of $4.8 million in the first quarter of 1994 as
compared to a net loss of $6.1 million in 1993.
Liquidity and Capital Resources. The Company had $101.6 million of working
capital at March 31, 1994, compared to $121.5 million at the end of 1993.
The decrease in working capital was due to lower cash balances, lower
accounts receivable, and higher advanced deposits, offset by higher
inventories, higher prepaid expenses and other current assets, lower
accounts payable, lower accrued liabilities, and lower current portion of
long term debt.
The Company's net cash used in operating activities for the three months
ended March 31, 1994 increased $21.5 million versus the same period in
1993. This increase was due to lower depreciation and amortization, ($.6
million), higher benefit for deferred income taxes, ($3.1 million), an
increased in current assets, ($5.5 million), a decrease in current
liabilities ($16.4 million), and an increase in non-current assets ($.4
million) offset by a lower net loss, $1.3 million, higher minority
interest, $.8 million, and non-cash interest, 2.3 million.
The net cash used in investing activities for the three months ended March
31, 1994, increased $18.2 million versus the same period in 1993. This
increase was due to higher capital expenditures, ($1.3 million), higher
advances to affiliate, ($1.9 million), an increase in acquisitions of
minority interest of ($1.0 million), and the acquisition of Valmark, ($14.0
million).
The net cash used in financing activities for the three months ended March
31, 1994 increased $.1 million versus the same period in 1993. This
increase was due to higher debt repayments ($.4 million), partially offset
by lower other cash flows, $.3 million.
None of the subsidiaries require significant amounts of capital spending to
sustain its current operations or to achieve projected growth.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JORDAN INDUSTRIES, INC.
May 13, 1994 By: /s/ Thomas C. Spielberger
Thomas C. Spielberger
Vice President, Controller
