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 June 30, 1995 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
August 15, 1995: 93,501.0004
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PAGE 2
FORM 10-Q QUARTERLY REPORT
JORDAN INDUSTRIES, INC.
INDEX
Part I. Page No.
Financial Information
Condensed Consolidated Balance Sheets
at June 30, 1995, and December 31, 1994 3
Condensed Consolidated Statements of Operations
for the Second Quarter and Six Months Ended
June 30, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1995
and 1994 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 13
Signatures 14
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PAGE 3
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
June 30, December 31,
1995 1994
ASSETS
Current Assets:
Cash and cash equivalents $ 22,568 $ 56,386
Accounts receivable - net 60,248 57,589
Inventories 93,879 76,157
Prepaid expenses and other current
assets 7,493 7,053
Total Current Assets 184,188 197,185
Property, plant and equipment - net 78,578 70,403
Notes receivable from affiliates 24,658 7,941
Goodwill - net 87,080 88,345
Other assets 37,491 35,571
Total Assets $411,995 $399,445
LIABILITIES AND NET CAPITAL DEFICIENCY
Current Liabilities:
Notes Payable - line of credit $ 12,803 $ 0
Accounts payable 38,792 42,225
Accrued liabilities 23,724 27,670
Advance deposits 2,294 1,999
Current portion of long-term debt 2,598 1,896
Total Current Liabilities 80,211 73,790
Long-term debt 392,876 380,966
Other non-current liabilities 2,022 2,048
Deferred income taxes 4,939 4,478
Minority interest and other 1,508 5,030
Net Capital Deficiency:
Common stock 1 1
Additional paid-in capital 2,972 2,972
Accumulated deficit (72,534) (69,840)
Total Net Capital Deficiency (69,561) (66,867)
Total Liabilities and Net Capital
Deficiency $411,995 $399,445
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)
SIX MONTHS ENDED
SECOND QUARTER June 30,
1995 1994 1995 1994
Net sales $119,451 $102,761 $219,602 $183,688
Cost of sales, excluding
depreciation 74,150 62,807 136,377 113,742
Selling, general and administra-
tive expenses 28,676 24,004 55,807 45,174
Depreciation 2,987 2,460 5,805 4,815
Amortization of goodwill and other
intangibles 1,823 1,974 3,560 4,021
Management fees and other 667 488 1,301 758
Operating income 11,148 11,028 16,752 15,178
Other (income) and expenses:
Interest expense 10,722 10,112 21,255 20,071
Interest income (394) (207) (871) (501)
Total other expenses 10,328 9,905 20,384 19,570
Income (loss) before income taxes
and minority interest 820 1,123 (3,632) (4,392)
Provision (benefit) for income taxes 277 537 83 (1,067)
Income (loss) before minority
interest 543 586 (3,715) (3,325)
Minority interest (358) (4) (900) 854
Net Income (Loss) $ 901 $ 590 $(2,815)$ (4,179)
See accompanying notes to condensed consolidated financial statements.
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PAGE 5
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
SIX MONTHS ENDED
June 30,
1995 1994
Cash flows from operating activities:
Net loss $(2,815) $(4,179)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 10,133 9,462
Provision for (benefit) from deferred
income taxes 461 (2,824)
Minority interest (900) 1,054
Non-cash interest 5,194 4,638
Changes in operating assets and
liabilities net of effects from
acquisitions:
Increase in current assets (20,821) (9,767)
Decrease in current liabilities (4,077) (3,887)
Increase in non-current assets (3,412) (1,047)
Net cash used in
operating activities (16,237) (6,550)
Cash flows from investing activities:
Capital expenditures (5,467) (3,292)
Note receivable from affiliates (16,717) (4,103)
Acquisition of subsidiaries - (35,516)
Acquisitions of minority interests and other (5,853) (1,227)
Investment in Fannie May Holdings (1,571) -
Other 318 81
Net cash used in investing activities (29,290) (44,057)
Cash flows from financing activities:
Repayment of long-term debt (1,094) (1,620)
Proceeds from line of credit 12,803 -
Deferred financing costs - (195)
Net cash provided by (used in) financing
activities 11,709 (1,815)
Net decrease in cash and cash equivalents (33,818) (52,422)
Cash and cash equivalents at beginning of period 56,386 68,273
Cash and cash equivalents at end of period $22,568 $15,851
Cash paid during the period for:
Interest $15,134 $15,259
Income taxes, net $ 929 $ 508
Non-cash investing activities:
Capital leases $ 7,944 $7,107
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, 1994, which are included in the
Company's Annual Report filed on Form 10-K for such year (the "1994 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:
June 30, December 31,
1995 1994
Raw materials $20,791 $16,695
Work in process 7,928 6,193
Finished goods 65,160 53,269
$93,879 $76,157
C. Notes Receivable from and Investments in Affiliates
At June 30, 1995, 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 $10,158.
On May 15, 1995, the Company purchased $7,500 aggregate principal amount of
Subordinated Notes and 75.6133 shares of Junior Class A PIK Preferred Stock
of Fannie May Holdings, Inc. ("Fannie May") for $9,071.
The Company has the right, and expects to acquire, 151.28 shares of Common
Stock of Fannie May (representing 15.1% of the outstanding Common Stock of
Fannie May on a fully diluted basis) for $151. These shares of Fannie May
Common Stock will be purchased from the John W. Jordan II Revocable Trust.
On June 28, 1995, the Company purchased from The First National Bank of
Chicago $7,000 aggregate principal amount of participation in term loans of
Archibald Candy Corporation, a wholly owned subsidiary of Fannie May, for
$7,000, and agreed to purchase up to an additional $3,000 aggregate principal
amount of such participations, depending upon the financial performance of
Fannie May. The additional $3,000 obligation is secured by a pledge from the
Company with a $3,000 certificate of deposit purchased by the Company.
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PAGE 7
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Fannie May's Chief Executive Officer is Mr. Quinn, and its stockholders
include Mr. Jordan, Mr. Quinn, Mr. Zalaznick, and Mr. Boucher, who are
directors and stockholders of the Company, as well as other partners,
principals and associates of The Jordan Company, who are also stockholders
of the Company. Fannie May, which is also known as "Fannie May Candies", is
a manufacturer and marketer of kitchen-fresh, high-end boxed chocolates
through its 375 company-owned retail stores and through specialty sales
channels.
D. Accounting for Income Taxes
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 June 30, 1995 and 1994 are as follows:
June 30, June 30,
1995 1994
Deferred tax liabilities
Tax over book depreciation $ 7,137 $ 8,960
Other 1,272 496
Total deferred tax liabilities 8,409 9,456
Deferred tax assets
NOL carryforwards 20,323 25,656
Accrued interest on discount debentures 6,326 2,892
Other 2,930 2,731
Total deferred tax assets 29,579 31,279
Valuation allowance for deferred
tax assets (26,109) (25,783)
Net deferred tax assets 3,470 5,496
Net deferred tax liabilities $ 4,939 $ 3,960
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JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Note E. Welcome Home Bank Credit Facility
On May 30, 1995, Welcome Home, Inc. ("Welcome Home") entered into a Loan and
Security Agreement with Shawmut Capital Corporation (the "New Bank Credit
Facility"). The New Bank Credit Facility provides for borrowings of up to
65% of Welcome Home's Eligible Inventory, with a maximum borrowing of $20
million.
At June 30, 1995, Welcome Home has borrowed a total of $12,803 under the New
Bank Credit Facility. The weighted average interest rate on such borrowings
at June 30, 1995 was 8.08%.
Simultaneously with the closing of the New Bank Credit Facility, Welcome Home
amended and restated the Intercompany Credit Agreement with Jordan
Industries. Under the amended Subordinated Credit Agreement, Welcome Home
can borrow up to $10 million for the purpose of financing the repurchase of
its common stock pursuant to its stock repurchase program and for any other
purpose approved by Jordan Industries.
Immediately prior to the closing of the Subordinated Credit Agreement,
Welcome Home repaid to Jordan Industries principal and accrued interest due
under the Intercompany Credit Agreement totaling $12,270. The remaining
principal due under the Intercompany Credit Agreement, $2,500, was rolled
over to the Subordinated Credit Agreement.
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PAGE 9
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 1994 10-K, 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 second
quarter and six months ended June 30, 1995 and 1994. This discussion reviews
the foregoing segment data and certain of the consolidated financial data for
the Company.
SIX MONTHS ENDED
SECOND QUARTER June 30,
1995 1994 1995 1994
Net Sales:
Consumer Products $ 51,594 $49,156 $ 98,628 $ 89,615
Industrial Products and
Equipment 40,111 30,549 75,294 58,137
Specialty Advertising and
Calendars 27,746 23,056 45,680 35,936
Total $119,451 $102,761 $219,602 $183,688
Operating Income (a):
Consumer Products $ 3,570 $ 5,218 $ 5,655 $ 7,854
Industrial Products and
Equipment 8,238 6,133 15,343 11,063
Specialty Advertising and
Calendars 3,473 2,549 3,562 1,490
Total $15,281 $ 13,900 $ 24,560 $ 20,407
Operating Margins (b):
Consumer Products 6.9% 10.6% 5.7% 8.8%
Industrial Products and
Equipment 20.5 20.1 20.4 19.0
Specialty Advertising and
Calendars 12.5 11.1 7.8 4.1
Consolidated 12.8 13.5 11.2 11.1
(a) Before corporate overhead of $4,133 and $2,872 for the second quarter
ended June 30, 1995 and 1994, respectively and $7,808 and $5,229 for
the six months ended June 30, 1995 and 1994, respectively.
(b) Operating margin is operating income divided by net sales.
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PAGE 10
Consumer Products. As of June 30, 1995, the Consumer Products segment
consists of DACCO, Sate-Lite, Riverside, and Welcome Home.
Net sales during the second quarter and first six months of 1995 increased
$2.4 million or 5.0% and $9.0 million or 10.1%, respectively, over the same
periods in 1994. The second quarter sales increase was due to increased
sales at DACCO of aluminum scrap, rebuilt converters, and other parts, $.4
million, $.1 million and $.3 million, respectively, colorants at Sate-Lite,
$.1 million, contract distribution and audio cassettes at Riverside, $1.5
million and $.2 million, respectively, and increased retail sales at Welcome
Home, $1.6 million. These increases were partially offset by lower bicycle
reflector and automotive reflector sales at Sate-Lite, $1.2 million, and $.3
million, respectively, and lower bible sales at Riverside, $.3 million. The
increase in sales for the first six months was due to increased sales of
aluminum scrap, rebuilt converters and other parts at DACCO, $1.5 million,
colorants at Sate-Lite, $.3 million, music, books, gifts, bibles and contract
distribution services at Riverside, $4.5 million, and 44 additional stores
at Welcome Home, $4.1 million. The increase was partially offset by lower
bicycle reflector sales at Sate-Lite, $1.4 million.
Operating income decreased $1.6 million or 31.6% and $2.2 million or 28.0%
in the second quarter and first six months of 1995, respectively, compared
to the same periods in 1994. The second quarter net decrease was due to
decreases at Sate-Lite, $.6 million and Welcome Home, $1.8 million, partially
offset by increases at Riverside, $.1 million, and DACCO, $.6 million. The
year-to-date net decrease was the result of decreases at Welcome Home, $2.7
million, and Sate-Lite, $.4 million, partially offset by increases at DACCO,
$.8 million, and Riverside, $.2 million. Welcome Home's decrease in
operating income was due to operating expenses at 44 additional stores during
their slowest sales period of the year.
The second quarter operating margin decreased to 6.9% in 1995 from 10.6% in
1994, and the six month year-to-date margin decreased to 5.7% from 8.8% in
1994. These decreases were due to Welcome Home having to pay operating
expenses at 44 additional stores during their slowest sales period of the
year.
Industrial Products and Equipment. As of June 30, 1995, the Industrial
Products and Equipment segment consists of Parsons, Dura-Line, Imperial,
Scott, Gear, Hudson, AIM and Cambridge.
Net sales during the second quarter and first six months of 1995 increased
$9.6 million or 31.3% and $17.2 million or 29.5%, respectively, over the
comparable periods in 1994. The second quarter sales increase was due to
increased sales of Innerduct at Dura-Line, $7.5 million, elevator motors at
Imperial, $.2 million, locks at Hudson, $.5 million, connectors at AIM and
Cambridge, $.6 million and $.1 million, respectively, and hot forming and
fabrication sales at Parsons, $.5 million and $.1 million, respectively. The
year-to-date increase was due to an increase in Innerduct sales at Dura-Line,
$13.1 million, permanent magnet motors at Imperial, $.9 million, connectors
at AIM, $1.2 million, locks at Hudson, $1.4 million, job shop sales at Gear,
$.3 million, and hot forming and fabrication sales at Parsons, $.6 million
and $.2 million, respectively. The increase was partially offset by lower
elevator motor sales at Imperial, $.3 million and lower connector sales at
Cambridge, $.1 million.
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PAGE 11
Operating income increased $2.1 million or 34.3% and $4.3 million or 38.7%
in the second quarter and first six months of 1995, respectively, compared
to the same periods in 1994. The second quarter increase was due to an
increase at Dura-Line, $1.0 million, Hudson, $.6 million, Imperial, $.2
million, Cambridge, $.2 million, and Scott, $.1 million. The year-to-date
increase was due to increases at Dura-Line, $2.2 million, Hudson, $1.0
million, Parsons, $.2 million, Cambridge, $.3 million, Scott, $.2 million,
Imperial, $.1 million, AIM, $.2 million, and Gear, $.1 million.
The second quarter operating margin increased from 20.1% in 1994 to 20.5% and
the six month year-to-date margin increased from 19.0% in 1994 to 20.4%.
These increases were due to higher sales and lower operating expenses.
Specialty Advertising and Calendars. As of June 30, 1995, the Specialty
Advertising and Calendars segment consists of JII/SPAI, Beemak, Valmark and
Pamco.
Net sales during the second quarter and first six months of 1995 increased
$4.7 million or 20.3% and $9.7 million or 27.1%, respectively, compared to
the same periods in 1994. A portion of the increase results from the
purchase of Pamco on May 20, 1994. Without the Pamco acquisition, net sales
for the second quarter increased $2.1 million or 9.8% and net sales for the
six months increased $3.5 million or 10.2% compared to the same periods in
1994. The second quarter increase was due to increased sales of school
annuals at JII/SPAI, $.4 million, POGs at Beemak, $1.5 million, and membrane
switches, shielding devices, and labels at Valmark, $1.0 million, partially
offset by lower calendar and ad-specialty sales at JII/SPAI, $.2 million and
$.4 million, respectively, and lower fabrication and molding sales at Beemak,
$.1 million and $.1 million, respectively. The six month increase was due
to increased POG sales at Beemak, $2.4 million, and higher sales of labels,
membrane switches and shielding devices at Valmark, $1.6 million, partially
offset by lower calendar and ad-specialty sales at JII/SPAI, $.3 million and
$.3 million, respectively. Pamco's net sales were $7.6 million and $1.4
million during the first six months of 1995 and 1994, respectively.
Operating income increased $1.0 million or 36.2% and $2.1 million or 139% in
the second quarter and first six months of 1995, respectively, compared to
the same periods in 1994. Without the acquisition of Pamco, operating income
increased $.2 million in the second quarter, and $.5 million for the six
month period, as compared to 1994.
The second quarter operating margin increased from 11.1% in 1994 to 12.5% in
1995, and the six month year-to-date operating margin increased from 11.1%
to 11.2% in the current year. The increases are due to the inclusion of
Pamco.
Consolidated Results: (See Condensed Consolidated Statements of Operations.)
Operating income for the first six months increased $1.6 million or 10.4%
compared to 1994 due to the increase in sales and lower amortization expense.
Interest expense for the first six months of 1995 increased from $20.1
million to $21.3 million due to higher debt levels. Six month interest
income increased from $.5 million to $.9 million due to higher cash balances
during the period. Primarily, as a result of higher operating income, the
Company incurred a net loss of $2.8 million in the first six months of 1995
as compared to a net loss of $4.2 million in 1994.
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PAGE 12
Liquidity and Capital Resources. The Company had $104.0 million of working
capital at June 30, 1995, compared to $123.4 million at the end of 1994. The
decrease in working capital was due to lower cash balances, higher notes
payable higher advance deposits, and higher current portion of long-term
debt, offset by higher accounts receivable, higher inventory, higher prepaid
expenses, lower accounts payable and lower accrued liabilities.
The Company's net cash used in operating activities for the six months ended
June 30, 1995 increased $9.7 million versus the same period in 1994. This
increase was due to a higher minority interest, $2.0 million, higher increase
in current assets, $11.1 million, a higher decrease in current liabilities,
$.2 million, and a higher increase in non-current assets of $2.4 million,
offset by a lower net loss, $1.4 million, higher depreciation and
amortization, $.7 million, a higher provision for deferred income taxes, $3.3
million, and higher non cash interest of $.6 million.
The net cash used in investing activities for the six months ended June 30,
1995, decreased $14.8 million versus the same period in 1994. This decrease
was due to the absence of acquisitions in the current period versus $35.5 in
the prior period, offset by higher capital expenditures, $2.2 million, higher
notes receivable from affiliates, $12.6 million, higher acquisitions of
minority interest, $4.6 million, and the investment in Fannie May Holdings,
$1.6 million.
The net cash provided by financing activities for the six months ended June
30, 1995 increased $13.5 million versus the same period in 1994. This
increase was due to the proceeds of Welcome Home's line of credit, $12.8
million and lower debt payments of $.5 million.
Management believes that the Company's cash on hand and anticipated funds
from operations will be sufficient to cover its working capital, capital
expenditures, debt service requirements and other fixed charge obligations
for at least the next 12 months.
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PAGE 13
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
27. EDGAR Financial Data Schedule
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PAGE 14
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.
August 15, 1995 By: /s/ Thomas C. Spielberger
Thomas C. Spielberger
Vice President, Controller
and Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet and the Condensed Consolidated Statement of
Operations, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 22,568
<SECURITIES> 0
<RECEIVABLES> 61,854
<ALLOWANCES> 1,606
<INVENTORY> 93,879
<CURRENT-ASSETS> 184,188
<PP&E> 145,498
<DEPRECIATION> 66,920
<TOTAL-ASSETS> 411,995
<CURRENT-LIABILITIES> 80,211
<BONDS> 395,474
<COMMON> 1
0
0
<OTHER-SE> (69,562)
<TOTAL-LIABILITY-AND-EQUITY> 411,995
<SALES> 219,602
<TOTAL-REVENUES> 219,602
<CGS> 136,377
<TOTAL-COSTS> 202,850
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,255
<INCOME-PRETAX> (3,632)
<INCOME-TAX> 83
<INCOME-CONTINUING> (2,815)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,815)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
